What is the true value of reliable electricity? Ask someone who is about to be reconnected after a blackout

I have been part of a very interesting listserv discussion lately, on the value of reliable electricity. As I pointed out last article, in Ontario we have a topsy-turvy system for pricing electricity: we pay the least efficient and least-reliable generators the highest per-kWh price. The ones that have literally for decades provided affordable power on demand get the lowest prices. This system threatens to turn the power-at-cost model on its head. I believe that will prove extremely detrimental not just for our economy but for our society.

The listserv discussion involved exactly how to price reliable power. Should ratepayers pay a premium price for reliability? My initial answer to that question is emphatically no. Electricity is a public good, like water, and should be affordable to the poorest ratepayers. (The idea that cheap electricity is bad because it encourages richer ratepayers to “waste” electricity is a red herring. Nobody wastes electricity. Some people just use more of it, just like some people drive more, or use more Internet.)

Still, we need electricity. Things have changed since the first and second waves of electrification in Ontario. In those waves, we used hydropower then nuclear to meet the skyrocketing provincial demand for electricity. We did so because hydro and nuclear were cheap sources, and capable of providing enormous amounts of power on demand. Power on demand is the cornerstone for a modern society and economy.

Today, we have mostly tapped out hydro. This leaves only thermal sources available to meet future demand. (Wind is not thermal, but also is not capable of providing power on demand, so I will leave it out of the discussion.) And of the available thermal sources, only nuclear and natural gas are truly viable.

A power reconnection scenario: which would YOU choose?
You have lived with an electricity blackout for a couple of days, and the power crew finally arrives on your street to hook you back up. But just before flicking the switch, the crew chief presents you with some choices for the technologies that generate the electricity.

You can choose:

  1. Nuclear-generated electricity, 100 percent reliable, at 6 cents per kilowatt-hour and no carbon emissions.
  2. Wind-generated electricity, 30 percent reliable, at 11 cents per kWh and no carbon emissions.
  3. Solar-generated electricity, 17 percent reliable, at 40 cents per kWh and no carbon emissions. (Let’s say the sun has set by the time the crew chief presents you with the choices.)
  4. Gas-generated electricity, 100 percent reliable, at maybe 6 cents per kWh, or maybe 12 cents, depending on the price of gas (which is very volatile), and 500 grams of carbon per kWh.

You have been without power for two days. Which of the above generation technologies would you choose?

Of nuclear and gas, only nuclear makes power-on-demand that is also zero-carbon.

So really, only nuclear can meet our economic, societal, and environmental requirements for electricity.

This is why I support the deals Ontario has made with Bruce Power. Yes, Bruce Power sells electricity to us at a slightly higher price than Ontario Power Generation, the other nuclear utility, does. Yes, Bruce Power uses OPG’s reactors to make electricity. And yes, both companies are equally capable of operating—and refurbishing—nuclear reactors, and thereby providing the lion’s share of reliable, zero-carbon electricity to the province for literally decades at a time.

But the work of operating and refurbishing nuclear reactors is time and capital intensive. OPG is a public company, owned by the province of Ontario and therefore subject to a far higher level of far more politicized scrutiny than Bruce, which is a private partnership. So when politicians decided it was in the province’s best interest to bring the laid-up Bruce reactors back into service, it was politically expedient to privatize the plant and cut a deal with the partnership. In doing so, the province essentially put a price on reliable electricity. That price was what it cost Ontario to make it worth while for the Bruce partners to put up their own capital to pay for the refurbishment. I understand that, and agree with it.

The same exact considerations are being discussed right now, between OPG and the province. OPG owns and operates the Darlington nuclear station, another enormous power provider that the province cannot do without. Darlington’s four reactors are up for refurbishment beginning next year. That is going to cost money, and OPG cannot just put up capital. It has to try to pay with money from its other revenue-generating assets.

For all of this, OPG needs permission, first from the provincial energy regulator. If that permission is not forthcoming, then Plan B is to change the regulatory rules. That draws in the second counterparty, the province. i.e., the provincial elected government. That means that every request for every financing idea to pay for the Darlington refurbishment will be reviewed in a very politically charged environment. Which will be interesting, given the current minority government situation at Queen’s Park, with by elections coming up (tomorrow), whose outcome will determine the timing of a general election.

Again, the Bruce Power deal was easy by comparison. In that deal, the exact same basic issue was discussed: how to get the plant refurbished at a price that ratepayers can afford and that gives those putting up the capital a reasonable return on that investment. Because it was a contracted price, rather than a regulated one, the negotiation was hammered out in a far less politicized environment. Underlying the whole thing was the recognition by both parties that the plant is a vital provincial asset, which provides a vital commodity.

That same recognition underlies the current discussions about Darlington between OPG and the province. This recognition may be spreading to the wider public, in light of the Toronto Ice Storm at the end of 2013. Ontario needs electricity. That electricity has to be 100 percent reliable, and it has to be affordable.

Nuclear is both reliable and affordable, and has the added enormous benefit of coming with exactly zero carbon pollution.

The public is, I believe, not far from recognizing all of these attributes.

To help the public recognize this, nuclear proponents in Canada have to step up and make the point.

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