Interview: Jan Carr

Jan Carr received a Ph.D. in power systems from the University of Waterloo, as well as an M.A.Sc. in Communications. He also has B.A.Sc. in electrical engineering from the University of Toronto and a diploma in gas technology from Ryerson Institute of Technology. He has more than 30 years experience in the electricity sector and has extensive knowledge of electricity industry restructuring, planning, regulatory affairs, and policy development. In 2005, Jan Carr was named as the first Chief Executive Officer of the Ontario Power Authority, the agency that helps implement Ontario’s long-term energy strategy. He retired from that organization in the summer of 2008. He spoke to the fifth estate’s Bob McKeown about his views on the status and future of Ontario's electricity service. The following are excerpts from that interview.

LET’S GO BACK THREE YEARS WHEN YOU TOOK OVER AS CEO OF THE ONTARIO POWER AUTHORITY.  WHAT WAS JOB ONE?

Job one was getting the system back on a reliable footing.  Every physical requirement to get conservation programs going and get new generating and transmission infrastructure built. There had been sort of a hiatus of about a decade when there had not been any new investment in Ontario’s electricity system. The system was a huge system.  It depreciates and ages annually and so every year you’re not spending on it is a year you’ve fallen behind so it’s basically ten years worth of backlog to catch up.  That’s job one.

AND AS YOU UNDERTOOK THAT, WHAT WAS THE DISTRIBUTION IN GENERATING CAPACITY BETWEEN THE VARIOUS FORMS OF ELECTRICITY?

Well approximately it would be about 25% hydro electric, 50% nuclear and what have we got left?  It would be coal basically.

25%?

… Another twenty-five odd percent, yes.  There’s some other bits and pieces in there but … but close to that.

NOW WHEN YOU ASSUMED THE POSITION YOU EXPECTED THAT PROPORTIONAL DISTRIBUTION WOULD CHANGE?

Oh yes.  Absolutely.

HOW?

Well the government had already made it clear that there was going to be  an increased role for conservation, an increased role for renewables.  In fact one of the purposes of establishing a central planning operation was to … to have the wherewithal to implement government policy which among other things was to phase coal out.  And that would be replaced by a combination of conservation renewables.

AND IN THE THREE YEARS THAT YOU WERE IN THE POSITION, HOW MUCH DID THOSE THINGS CHANGE?

Well, very much.  The … I mean implementing a plan like that is … is a multi-year operation.  So on a year to year basis it’s just a question of making progress on the plan. Now, the initial concern as I said, was the reliability.  There was a declining reliability gap … margin.  In order to bring on renewables there is a need to have … renewables … the problem with renewables from an electricity point of view is the intermittency of them.  The fact that they’re intermittent and the fact that they are not necessarily available as and when needed.

INTERMITTENT MEANING THE WIND IS NOT ALWAYS BLOWING …

Exactly.

… OR NOT ALWAYS AT THE SAME STRENGTH?

That’s right and when it is it’s not necessarily when you need electricity and when you need electricity the wind’s not necessarily blowing and so on. So there’s two issues here.  There’s the fact that it’s not continuous and the fact it’s not available on command. Now, electricity is … is … is a product.  It’s a manmade product, it doesn’t occur in nature.  And it is a product which … which is very, very expensive to store.  Virtually impossible to store.  In large quantities – very expensive to store. Which means that the most economic way of having an electricity system is to make it on demand which therefore puts a premium on peak demand.  You know, because obviously those occur for brief periods of time and a supply has to be available at all times including those brief periods. So in order to accommodate the intermittent renewables in that regime, you need something else to counteract that.  In other words to be there when the renewables aren’t.

THE BACK-UP SYSTEM?

Back-up system.  You call it that but fundamentally in Ontario with coal being phased out in many countries including Germany, Denmark and other places in Europe, the back-up is coal.  50% of the energy in Germany for example comes from coal fired generation.  And 50% in Denmark does. The … in Ontario we’re going to phase coal out.  It’s already only 25% and it’s going down to zero.  So the back-up or the filler-in becomes natural gas.  So, the combination out of the gate leading to close the reliability gap and the eventual need for significant quantities of natural gas for our generation to accommodate the renewables, but the job one was getting gas fired generating stations going.  And that, a lot of progress has been made.

RIGHT.  50% OF THE GENERATING CAPACITY IS NUCLEAR?

Yes, approximately.

DO YOU SEE THAT SUBSTANTIALLY CHANGING ANY TIME SOON?

No.  That … that … that is … that is the sort of a background base load that is needed.  In other words, if you take all use, all hours of the day and night, sort of in perpetuity, you’ll find that something like 35%, 40% so-called is the base load.  In other words, it’s always there. The most economical way of supplying that is either coal or nuclear.

AND GIVEN THAT ONTARIO’S PHASING COAL OUT, THAT WOULD DEEM TO LEAVE ONLY NUCLEAR?

Right.

SO AT THIS JUNCTURE, SITTING HERE TODAY, WHAT’S THE CHOICE THAT ONTARIO HAS BECAUSE THE PROVINCE ISN’T … THE PROCESS OF COMMITTING A LOT OF MONEY …

Yes.

… TO GET US THROUGH THE NEXT 20,30, 40 YEARS?

Yes, yes.

WHAT IS THE FUNDAMENTAL DECISION TO BE MADE?

Well, the fundamental decision is how to most economically maximize the use to renewable energy.  And that’s a combination of moderating the load, in other words what’s in the industry called the demand side initiatives, conservation, load management, time of use type applications. And then developing the renewable resources starting with the lowest cost ones and gradually obviously moving out to the higher cost ones which is the traditional way of … the power system has always been developed. The … gas unfortunate you’d say, the best … First of all, let’s … there’s two broad major forms of renewable energy.  There are other things such as energy from waste, biogas and things like that.  But those are relatively small compared to hydro electric and wind power. Hydro electric the province has a hundred year history of developing that.  The most economical sources and they’re generally the largest ones, are all … have all been developed years ago. There are some more hydro electric resources but they’re relatively few and far between.  Or they’re very remote.  Very remote sources of anything obviously you incur transportation costs in the form of electricity that comes in the form of transmission lines. To give you an idea, the Kanawagha Project in northern Manitoba which has been talked about is something that could be developed and connected to Ontario.  The transmission distance from Kanawagha to Toronto is the same as from Toronto to Miami and no one would conceive of building a transmission line from Toronto to Miami due to the distance.

* * *

SO TELL ME ABOUT NUCLEAR.  YOU’VE SAID AT VARIOUS TIMES THAT NUCLEAR IS, IS THE RATIONAL ECONOMIC CHOICE AND THAT MARKET FORCES MAKE IT SO.  WHAT DO YOU MEAN BY THAT?

Well, the rational economic choice for base load generation is not the rational economic choice for all types of generation.  Electricity generation requires a portfolio of sources.  And what makes nuclear rational for base load is that it has … it’s got … it’s expensive in terms of capital, in other words the initial costs. Then the ongoing operating cost, the fuelling costs are very low.  Let me contrast that with a natural gas fired generator for example, which is relatively cheap to buy, the upfront investment is relatively low. But the fuel costs are enormous.  So if you put those two together working in tandem and you use the nuclear for the base load, in other words they’re running all the time to make use of the fact you get that big capital investment, and it doesn’t cost you much once it’s built and run. And the natural gas you use when you’ve got these intermittent requirements because you haven’t got much capital to write off.  And it costs a lot of money per hour to run it so you’re (unclear) minimize the number of hours.

BUT IS NOT THE HISTORICAL STORY OF NUCLEAR HERE IN ONTARIO AT LEAST, THAT THE COSTS WERE ALWAYS VASTLY UNDERESTIMATED?  AND THAT THERE WERE TREMENDOUS TECHNICAL PROBLEMS THAT KEPT THE SYSTEM DOWN FOR MONTHS, EVEN YEARS AT A TIME?

Well, okay, there’s two issues there.  One is the cost.  I don’t think nuclear costs are as civil physical infrastructure projects are particularly outstanding.  Many physical projects overrun.  Large physical projects when they overrun, great large overruns and therefore they become … they attract attention.

YOU’RE NOT SAYING THE DARLINGTON STORY WAS EXTRAORDINARY?

It was extraordinary, where I was going to was – rather than focusing on the fact it was overruns, who is it who pays for the overruns?  That’s the significance of it.

WELL, TORONTO HYDRO CUSTOMERS STILL HAVE THAT MONTHLY DEBT RETIREMENT.

Yes, that’s right.  Because we built them all under the public money and we built them and in fact one of the reasons for the overruns is the government of the day stopped and started the project about three times. In effect we paid for three projects.  So if you … if you structure it differently that some investor bears the cost of overruns then you and I as customers should not worry about the overruns.  So …

BUT YOU’RE NOT SAYING THAT THE AGREEMENT WITH THE PRIVATE INTERESTS AT BRUCE TODAY, DON’T INCLUDE RISK FOR OVERRUNS ASSUMED BY THE PUBLIC?

It does but it’s a shared thing.  It’s … it’s a sliding scale but it’s a shared thing.  So the investor absolutely has some skin in the game.  Quite a significant difference than 100% publicly funded project. So … and you know, name me one large civil engineering project that has not overrun.  I mean how much did Skydome get built for?  And what is its worth on the market?

WELL, I DON’T THINK IT WAS A DIFFERENTIAL …

Hospitals … hospitals overrun?

… I DON’T THINK THE DIFFERENTIAL WITH THE DOME STADIUM IN TORONTO WAS 700% OR WHATEVER IT WAS?

Oh I think it was.  I think it was. But, as I say, rather than worry about what the percentage is and in the case of Darlington it was not managed in a … in a logical fashion, you or I putting our money into that we wouldn’t have run it that way.  We wouldn’t have stopped and started the project three times.

YOU WOULD … YOU WOULD ACKNOWLEDGE THOUGH MR. CARR THAT THERE WERE TECHNICAL PROBLEMS GETTING THAT PROJECT GOING?

There … yes, it’s .. it’s a complicated technology and there will be technical challenges.  That’s …that’s not unusual.  But it’s also not a … not a … it’s not a unique feature.  There’s a lot of wind projects have had technical problems as well. A lot of natural gas fired projects had technical problems.  Nuclear attracts far more attention than is warranted. Now, the other thing that you talk about was the issue I think of technical problems.  Now I don’t … once again, I’d be far more concerned with who is paying for the experiment.  Who is paying for the learning?  Who is paying for the overrun? Rather than whether or not there is an overrun. With the right motivations and the right cost centres, these things correct themselves or they don’t occur.  So, I don’t think that that’s a distinguishing factor for nuclear frankly.  Any more than it’s a distinguishing factor for any other technology.