Atikokan Conversion – Another Seat Saver for the Liberals!

In the October 7, 2011 Provincial election, MPP Bill Mauro, Thunder Bay Atikokan, beat out the NDP candidate with 39% of the vote versus 37%. The winning margin—less then 500 votes!

Ahead of that victory by MPP Mauro however, there was a major issue that affected the outcome of the election and it related to a wind development at Big Thunder. The planned development had generated a major push-back by the residents of Thunder Bay who fought their local council on granting the developer, Horizon Wind Inc., rights to access Big Thunder Mountain. The company sued the City for $126 million when the city backed out of their agreement to allow them to erect only 14 turbines (instead of the original 18 the Thunder Bay council had originally approved) on city owned land. Then on September 11, 2011, shortly after the election writ had been dropped; the then Minister of Natural Resources, Linda Jeffrey, refused to issue the developer a permit because it would harm a bird species. Despite the foregoing the developer continues to push ahead on the contract and the eventual outcome, at this point, is still an unknown but Linda Jeffrey has moved on to another portfolio.

By the September 11, 2011 date the Minister of Energy, Brad Duguid, had announced the conversion of the Thunder Bay coal plant to gas in a press release on November 23, 2010 and the Long Term Energy Plan (released on the same day by the Energy Minister) indicated that the 200 MW Atikokan coal plant would be converted to biomass. Since then we have seen other announcements from current Energy Minister Chris Bentley with one on July 19, 2012 and another September 12, 2012. Both announcements promised 200 construction jobs as did the contractor Aecon who won the award for the conversion project at a cost of $170 million. It is worth pointing out that Aecon have contributed in excess of $45,000 to the Liberal Party of Ontario over the past four years and the CEO sat on the Board of Directors of the Ontario Power Authority (OPA) almost since its creation by Dwight Duncan, when he was the Minister of Energy.

It is important to review the contribution of the 200 MW Atitokan coal plant to Ontario`s electricity supply over the past couple of years to determine if it is or was needed. In the last two years it has produced power at 2.6% of it’s capacity which means it hasn’t been needed to support Ontario`s power demands. Had it run at full capacity it could have provided approximately 1.7 million megawatt hours (MWh) annually (enough to power about 175,000 homes) far exceeding the riding’s needs whose population is about 85,000. Additionally the conversion to biomass (which will use wood chips as fuel) will reduce its ability to produce power. In fact according to a filing dated June 30, 2011 by the OPA to the Ontario Energy Board (OEB) the maximum capacity will be 140 GW per year (140,000 MWh) based on fuel availability. That means upon conversion it will operate at a maximum of 8% of capacity.

The foregoing OPA submission also makes the case for expenditures of $600 million to create a new

East West tie line (transmission) at a cost of $600 million in anticipation of activities related to the “ring of fire” and the possibility of some recovery in the pulp and paper sector. Both of these combined with the unknown quantities of hydro electric power; from mainly run of river hydro stations during low water level seasons could cause problems in respect to having sufficient power available to service the region.

Couple the foregoing with the plans for 200 MW of renewable energy (wind and solar) in the region and that will mean excessive volatility. The east/west axis tie line will require the upgrade to ensure reliability and the ability to import (and occasionally export) power from other regions.

What this means is the expenditures caused by adding intermittent wind and solar to the grid and downgrading/converting the Atikokan facility will create spending requirements of close to $1 billion dollars when the subsidies to wind and solar are taken into account.

Ignoring the foregoing expenditures on the East/West tie line and the feed-in tariff (FIT) subsidies for wind and solar the Atitokan facility’s cost of $170 million (capital costs) means that each of those 200 construction jobs promised in the two Provincial press releases and the Aecon announcement will cost Ontario`s ratepayers $850,000 each or $425,000 per employment year (assuming the project is completed by 2014 as the Aecon announcement suggests).

If we examine the amount of energy that Atikokan can produce at 8% of its rated capacity, (outlined in the OPA submission to the OEB) over say a 20 year lifespan it will cost about $61.00 per MWh in capital costs without factoring in fuel costs or the operation, management and administration (OMA) costs. The fuel cost is a big unknown but OPG has put out a “request for indicative prices” for 90,000 tons per year to supply Atikokan. An August 2008 study by Deloitte & Touche LLP indicated the cost per ton of wood pellets at $420., so fuel costs could add almost $38 million per annum to the cost of production of that 140,000 MWh ($270.00 per MWh) if the refurbished plant requires the full 90 thousand tons to produce at 8% of rated capacity. That brings the per MWh cost to $331.00 without inclusion of the operations, management and administration (OMA) costs. Even if OPG is able to purchase the pellets at half the price of the Deloitte forecast amount the cost of production at Atikokan will still be in excess of $275.00 per MWh or more then 12 times the average hourly Ontario energy price (HOEP) to the end of July 2012 (Independent Electricity System Operator). Assuming fuel costs come in at the latter level for the next 20 years; total costs of this conversion will mean Ontarians spent $770 million dollars to ensure MPP Mauro’s seat remains in Liberal hands.

At this juncture the cost to the taxpayers and ratepayers of the Province for each of those slightly less then 500 extra votes that MPP Mauro received (not including the costs of converting the Thunder Bay coal plant to gas or the $600 plus millions being spent to improve the East West tie line) are about $1.5 million for each one of those 500 votes.

On behalf of all of the rest of Ontario`s taxpayers I certainly hope those 500 voters are happy with the outcome because the rest of Ontario’s ratepayers and taxpayers will be paying for the costs of your votes for years to come.

Parker Gallant,
September 22, 2012

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Hmmm…………putting 200 loggers back to work to clear cut our forests for a wood-gobbling generator sounds about right for this “mad as a rat in a coffee can” Government!

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