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6.0 Energy, electricity restructuring and environmental protection

6.1 Ontario Hydro commitment (1991)—carried on by Ontario Power Generation:

The commitment by Ontario Hydro—now Ontario Power Generation Inc. (OPGI)—to the Anti-Smog Action Plan is to limit emissions of nitrogen oxides to 38 kilotonnes (NO units) in the year 2000 and beyond.

OPGI has made substantial improvements in the emission rate from its fossil units; however, increased demand for fossil power caused by difficulties with nuclear units has resulted in an increase in total NOx emissions. Nitrogen oxide emissions have risen to 55.8 kilotonnes in 1998 from 50 kT in the 1990 baseline year for the Plan, and a low of 29 kT in 1995.

The actions being undertaken by OPGI for the year 2000 are forecast to reduce Ontario Hydro/OPGI's average NOx emissions rate by 28 per cent compared to 1997, when major problems with nuclear units were first identified

Key initiatives in 1998:

• Burner conversions at the Lennox generating station provided the capability to operate two of the station's four generating units on either natural gas or oil.
  
  
• Low NOx burners were installed on three more units at the Nanticoke generating station. Five of Nanticoke's eight units have now been converted. Work is being scheduled for conversion of the remaining three.
  
  

Ontario Hydro (now OPGI) has been an active participant in the Pilot Emission Reduction Trading Project (PERT) since 1996. Ontario Power Generation is expected to utilize NOx emission reduction credits from the PERT program toward its commitment to limit NOx emission to 38 kilotonnes (NO) in 2000 and beyond.

Changes under way in Ontario's electricity market

In November 1997, the Ontario government released a White Paper, A Direction for Change: Charting a Course for Competitive Electricity and Jobs in Ontario, describing the government's intention of moving the Ontario electricity industry from monopoly to competition.

In the White Paper, and in various public statements, the government has committed to maintaining and improving environmental protection in an open electricity market.

In May 2000, the Ontario government intends to require that all electric power generation companies and their facilities in Ontario's electricity sector report annually on their emissions of oxides of nitrogen (NOx), sulphur dioxide (SO2) and a variety of other substances of concern such as mercury and carbon dioxide (CO2). This requirement is designed to ensure that strong environmental protection measures are in place from the beginning of Ontario's competitive electricity market, which is scheduled to open in late 2000.

Generating facilities with a capacity of more than one megawatt, enough to meet the needs of 100 average homes, would have to report, as a minimum, the type of fuel they use and the amount of electricity they generate during a 12-month period.

In practice, cleaner-burning, natural gas-fired generating facilities would only be required to report NOx and CO2 emissions. Oil-fired and coal-fired generating facilities would have to report on these pollutants and on emissions of SO2 and other substances of concern, such as mercury.

The Ministry of the Environment is developing a regulation to cap emissions from the new mix of companies which will be participating in Ontario's electricity market. The new limits will begin January 1, 2001, for the province's electricity sector and will be expanded to cover emitters in other major economic sectors of the province. The proposed net limits would cap total annual emissions from coal- and oil-fired electricity generating stations in Ontario as follows:

• an annual cap for NOx of 36 kilotonnes (kT) per year for the year 2001 (this regulated limit will replace the current voluntary commitment); and
  
  
• an annual cap for SO2 of 157.5 kT per year for the year 2001.
  
  

The government is also proposing emission performance standards to specify environmental requirements for all electricity sold in Ontario. These emission standards would apply to generators in Ontario and to generators outside of Ontario selling into the province. In this way, the government intends to ensure that even imported electricity that is used in Ontario is produced in compliance with the province's new emissions standards.

Progress Highlights—NOx Reductions Work Groups

Within the NOx Emissions Work Group, three sectors are committed to achieving quantifiable NOx reductions:

From 1990 to 2000, Ontario Hydro (now Ontario Power Generation Inc.) is committed to achieving NOx emission reductions from 50 kilotonnes a year (NO units) to 38 kT/yr.

Between 1990 and 1995, Ontario copper and nickel producers reduced their NOx emissions from 53 to 10 kT/yr.

Between 1990 and 1998, Ontario Portland Cement producers reduced their NOx emissions from 13.1 to 11.6 kT/yr

6.2 Gas Combustion Turbines

Combustion turbines, also known as gas turbines, are used in natural gas compressor stations, and in privately owned electricity generation. The Ministry of the Environment estimated in 1994 that a reduction of 29 kilotonnes a year in NOx emissions from combustion turbines will be realized between 1995 and 2015 as guided by Atmospheric Emissions From Stationary Combustion Turbines, MOE 1994, although this reduction could be matched by growth of NOx emissions from new combustion turbines. However, without the implementation of government policies and regulations requiring NOx emission limits, the emissions of NOx to the environment would be significantly greater.

The 1994 estimate for future NOx emissions by combustion turbines was estimated under the assumption that Ontario's electrical base load would be met by Ontario Hydro's nuclear and hydroelectric facilities. However, more recent events have introduced some uncertainty of prediction for Ontario's electrical system. It is possible that in the foreseeable future, all or some of Ontario's nuclear generating stations could be replaced by natural gas-fired combustion turbine generators. For each 1,000 megawatts of "base load" electrical generation removed from nuclear power and instead generated by high-efficiency, combined-cycle, natural gas-fired generation with low-NOx combustion, Ontario's total NOx emissions would increase by approximately six kilotonnes a year. (However, the total would decrease if such high-efficiency natural gas generation were to replace current coal-fired generation.)

6.3 Boilers and Heaters

According to Towards a Smog Plan for Ontario, residential, commercial, institutional and industrial boilers and heaters in the province emitted approximately 60 to 70 kilotonnes a year of NOx in 1990. During summer daytime smog episodes in southern Ontario, large industrial boilers emit significant amounts of NOx.

NOx emissions from boilers and heaters can be reduced by energy conservation, efficiency improvements, fuel substitution, changes in equipment, and combustion improvements.

6.3.1 1998 CCME National Emission Guideline for Commercial/Industrial Boilers and Heaters

In March 1998, the Canadian Council of Ministers of the Environment approved a new National Emission Guideline for Commercial/Industrial Boilers and Heaters. Most provinces and seven major industry associations have now endorsed this guideline for facility use.

In September 1999, the Ontario Ministry of the Environment posted for 60 days on the Environmental Bill of Rights Registry a new, proposed policy to implement in Ontario the 1998 CCME National Emission Guideline for Commercial/Industrial Boilers and Heaters. This guideline imposes limits on emissions of nitrogen oxides by new, large boilers and heaters. The guideline also recommends voluntary partnership activities to reduce NOx emissions from smaller and/or older equipment.

This guideline establishes limits for NOx emissions from new boilers and heaters with fuel energy input greater than 10 million British thermal units (10.5 gigajoules) an hour. These large boilers/heaters are responsible for about 35 per cent of the total boiler energy consumption in Canada and are responsible for emitting about 67 kilotonnes a year (1990 baseline) of NOx, or about 11 per cent of Ontario's total NOx emissions. At forecast rates of growth, this 67 kT/y would increase to 92 kT/y by 2015 if Ontario did not implement any reduction measures.

If Ontario implemented the CCME guideline, the large boilers/heaters affected by the guideline would emit only 63 kT/y of NOx in 2015, including growth of the relevant sectors. The CCME guideline specifies limits in the emission rates for NOx from new, large boilers/heaters, based on the type of fuel and size of burner, with a credit for high efficiency. The permitted NOx emission rates range from 26 to 125 grams of NOx per gigajoule of fuel energy.

The new Boilers and Heaters Guideline also recommends three other measures to reduce NOx emissions:

• A voluntary NOx reduction program for large facilities—Some major Ontario industries (iron and steel, chemicals, petroleum refiners) are already proceeding with such reductions in partnership with the Ministry of the Environment.
  
  
• An inspection and maintenance program for existing boilers/heaters—The ministry's Environmental Partnerships Branch has formed a partnership with Union Gas, Enbridge Consumers Gas and NRCanada to publish and distribute A Guide to Combustion Efficiency and Reduced Emissions (in progress), for owners of boilers/heaters. The guide will be ready for publication in January 2000. The Environmental Partnerships Branch and its partners will use this guide in their efforts to market efficiency, low emissions and energy services to their clients.
  
  
• Development of Canadian Standards Association (CSA) standards to regulate NOx emissions from new, smaller combustion equipment.
  
  

The proposed policy has been harmonized with the ministry's (draft) Standardized Approval Regulations. In addition, two industry associations, the Canadian Steel Producers' Association and the Canadian Petroleum Products Institute, have already endorsed the guideline. Some major boiler operators, including Toronto District Heating Corporation and some members of the Lambton Industrial Society, have already converted their boilers to low-NOx.

6.4 Natural Gas

The Ontario Natural Gas Association (ONGA) reports that a comprehensive restructuring of the association is under way. In 1990, Ontario natural gas transmission and distribution companies emitted 5.1 kilotonnes of nitrogen oxides. These companies are active participants in national programs to reduce emissions of greenhouse gases. Through their participation in these programs, some Ontario natural gas companies have specified year 2000 targets for reduction in emission of greenhouse gases, which will also result in reductions in NOx and VOCs.

Ontario natural gas companies have implemented smog reduction measures which have resulted in 0.2 kT/yr of NOx emission reductions since 1990. At this rate, the 45 per cent reduction target would be achieved by 2015, as planned, but these reductions have not compensated for growth in the pipeline system. ONGA member companies face a challenge to meet their reduction goals as the system expands owing to increased demand for natural gas.

"Enbridge Consumers Gas has a long history of contributing to a healthy environment and is supportive of the ASAP approach in helping to develop a collaborative made-in-Ontario solution to help resolve this environmental problem. By distributing Natural Gas, the environmentally friendly fuel, and by encouraging our customers to use it as efficiently as possible, Enbridge believes that it can play a critical role in helping to reduce smog."

Rudy Riedl
President
Enbridge Consumers Gas

6.5 Emission Reduction Trading

The Energy Competition Act (Bill 35) has provided the powers to write regulations under the Environmental Protection Act allowing the use of economic instruments such as emissions trading to lower the cost of meeting limits on emissions.

A Letter of Understanding (LOU) with the Ministry of the Environment encourages participation in the Pilot Emission Reduction Trading (PERT) Project by providing participating industries with some assurance, but no guarantee, that emission reduction credits created when reductions are made according to PERT criteria, will be recognized when applied toward voluntary commitments.

Emission Reduction Trading encourages companies to reduce air emissions faster than required by regulation or agreement by allowing a company to earn credits from the reductions resulting from the early adoption of emission reducing processes and technologies toward future requirements or going beyond existing requirements. Under PERT trading rules, these credits can be banked for future use or sale in supporting voluntary reduction commitments. It is important to note that when referring to PERT trading rules or criteria, that PERT does not endorse, sanctify, or affirm the credibility or value of the pilot trades that it posts.

On July 8, 1998, the minister signed a Letter of Understanding with the PERT industrial participants. On March 30, 1999, the Letter of Understanding was extended to March 31, 2001.

Participants in PERT are working to identify and resolve stakeholder concerns with trading program design elements and most importantly to evaluate the environmental and economic benefits of using emission reduction credit trading as a tool to improve air quality.

PERT is an industry-led initiative, and participants include: the Ontario steel makers (Dofasco, Stelco); the natural gas companies (Union Gas, Enbridge Consumers Gas); Ontario Power Generation; John Deere; Shell Chemicals; Pollution Probe; the Asthma Society; STOP (a Montreal-based environmental organization); Environment Canada and Industry Canada. The MOE also participates in PERT.

PERT has drafted a set of emission trading rules which will assist stakeholders in better understanding risks and opportunities associated with emissions trading.

There is an evolving global trend toward using a more flexible mix of environmental and economic management instruments, such as emission reduction trading, to complement regulatory protection.

Several demonstration creations and trades of emission reduction credits have already been carried out by industries participating in PERT:

• NOx and VOC credits created from the scrapping of 140 high emission vehicles by ProtectAir Inc. (approximately 0.2 tonnes);
  
  
• Credits created by Environmental Interface through NOx reductions from energy-saving retrofits of school and hospital buildings in Toronto;
  
  
• 400 U.S. tons of NOx credits purchased by Ontario Hydro (now Ontario Power Generation Inc.) from the Detroit Edison Munroe (power) Plant near Detroit;
  
  
• NOx credits created by Ontario Hydro through early installation of low-NOx burners in its fossil-fuelled generating station at Nanticoke;
  
  
• NOx credits sold by Ontario Hydro to two Connecticut utilities to allow those utilities to meet their obligations under a State of Connecticut directive (approximately 500 U.S. tons).
  
  

Ontario Power Generation provides a case in point on the value of reduction trading in the face of unexpected setbacks. It has voluntarily agreed to cap NOx emissions at no more than 38 kilotonnes annually in the year 2000 and subsequent years, but as a result of difficulties with its nuclear stations, emissions have increased, amounting in 1998, to 55.8 kilotonnes (as NO). OPGI has been installing low NOx burners in its coal stations to reduce NOx emissions.

"Ontario Power Generation and its predecessor Ontario Hydro, has a long standing history of working together with government, industry and the community in the development of solutions and policies that are economically and environmentally sustainable. As such, Ontario Power Generation realized the value in the Anti-Smog Action Plan partnership and the approach being taken to achieve improved air quality in Ontario. Ontario Power Generation fully supports this approach and will continue in its efforts to do its fair share to address air quality issues through its partnership with ASAP members."

Bob Kozopas
Senior Advisor
Environmental Affairs, Ontario Power Generation

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