Energy in Ontario’s economy - Capital investments

Energy has a significant impact on Ontario’s economy. Ontario businesses rely on electricity to produce goods and services and it is essential to our quality of life.

• Ontario’s electricity sector is a $15 billion annual industry.
• Energy accounts for eight per cent of Canada’s GDP.
• Some 95,000 Ontarians are currently directly and indirectly employed in the energy sector.
• More than $10 billion has been invested in Ontario in new clean energy projects that are online or under construction.
• Ontario has attracted more than $16 billion in private sector investments in the energy sector in the past year.

Ontario’s progress in modernizing and upgrading electricity has not only benefited electricity users, it has strengthened the economy by attracting investment and creating jobs. Large infrastructure projects typically have high GDP and employment impacts, and this is also true of the ongoing and planned investments in Ontario’s electricity sector.

Hydroelectric investment

Waterpower has been helping to fuel Ontario’s economic growth for more than 100 years and is the backbone of renewable supply.

Ontario hydroelectric producers spend $250 million annually in operating and maintenance costs and in the past decade alone have made additional capital investments of $400 million to bring new waterpower online. Today, Ontario’s hydroelectric producers directly employ more than 1,600 people and support an additional 2,000 jobs.

Hydroelectric has an even greater impact in Ontario’s north, where it accounts for more than 80 per cent of the electricity generated. Twenty-four of 65 generating stations run by OPG are located in Ontario’s north, representing close to 2,000 MW.

Many older hydroelectric facilities date to Ontario’s early industrial mining and forestry activities and some of these sites are being rebuilt at higher capacity. Recent substantial investments are playing an important economic role in the north. The Lower Mattagami River Hydroelectric Project, Ontario’s largest hydroelectric project in 40 years, will bring a $2.6-billion investment into northeastern Ontario and create up to 800 construction jobs.

In southwestern Ontario, work is underway on the Niagara Tunnel project, the single biggest construction project for the Niagara region since the Beck 2 Generating Station was built 55 years ago. The project means that region will benefit from over 230 construction jobs.

Wind, Solar and Bio-Energy investment

Ontario is creating a new sector for investment and is becoming a global destination of choice for clean energy developers and suppliers. Ontario’s Green Energy and Green Economy Act, 2009 has laid the foundation for economic opportunities throughout the province. In the coming years, over 20,000 people will be employed in renewable energy and development activities including manufacturing triggered by North America’s most comprehensive fit program.

Ontario has already attracted more than $16 billion of private sector investment and over 20 companies have announced plans to set up or expand operations in Ontario. This activity will create or support indirect jobs in areas such as finance, consulting and other manufacturing, service, and development industries.

Many communities that were hard-hit during the recent economic downturn are reaping benefits of Ontario’s growing clean energy economy. According to the Windsor Essex Economic Development Commission, of the 6,000 new jobs created in Windsor in the past 10 months, five to 10 percent are tied to renewable energy.

The Green Energy and Green Economy Act, 2009 has already attracted the single- largest investment in renewable energy in provincial history. The Consortium, led by Samsung C&T Corporation, is investing $7 billion to create 2,500 MW of new wind and solar power in Ontario. The investment will lead to more than 16,000 new clean energy jobs to build, install and operate the renewable generation projects and associated manufacturing. The consortium is also working with major partners to secure four manufacturing plants in the province. This will lead to the creation of 1,440 manufacturing and related jobs to build wind and solar technology for use in Ontario and export across North America.

Plans for the first of the four plants have already been announced. Samsung and Siemens have said they intend to build Ontario’s first wind turbine blade manufacturing plant, creating up to 900 direct and indirect jobs. The supply- chain of Ontario’s new clean energy economy is providing benefits to other sectors of the economy. For example, the Consortium intends to use Ontario steel in its projects, subject to necessary quality standards.

The clean energy sector is also providing new opportunities to people in rural Ontario. Farmers are leasing portions of their land for wind turbines, allowing them to generate income while continuing to farm. For example, in Port Alma, local farmers and landowners are leasing their land to the 44-turbine Kruger Energy wind power project, which produces enough clean electricity to power 30,000 households.

Province-wide, farmers and agri-food businesses received a total of $11.2 million to develop and build generating systems that produce clean energy, reduce electricity costs and contribute to local economies through OMAFRA's Biogas Systems Financial Assistance Program, which ran from September 2008 to March 2010.

Building a clean energy economy is not an issue that splits left from right. It’s about past and future. People of all political stripes who are entrusted in building a modern economy can – and do – look ahead.

Rick Smith, founding partner of Blue Green Canada

Modernization of nuclear fleet

The nuclear sector has contributed a great deal to Ontario’s economy over the past forty years. According to the Canadian Nuclear Association, the sector supports over 70,000 jobs across Canada and injects some $6 billion into the national economy every year. The Organization of CANDU Industries estimates that its 165 members employ over 30,000 people, many of them here in Ontario. Its members supply goods and services for nuclear reactors in domestic and export markets.

Plans to upgrade and refurbish Ontario’s nuclear plants are expected to create and support thousands of jobs and inject billions of dollars into this sector over the next decade. A report by the Canadian Manufactures and Exporters estimates that the refurbishment and operation of the Bruce and Darlington units will create or sustain 25,000 jobs and provide $5 billion in annual economic activity.

The design and construction of two new nuclear units at Darlington will employ up to 3,500 people and support many thousands more indirect jobs. Ongoing operation at the plant will require a further 1,400 tradespeople, nuclear operators, and engineering and technical support staff for the duration of the plant’s life.

Transmission upgrades

Thousands of Ontarians are employed in the province’s electricity transmission sector and billions of dollars in planned upgrades to and expansion of the system are expected to support and create thousands more jobs in the future.

Fully owned by the Province of Ontario, Hydro One is the province’s largest electricity transmission and distribution company. It owns 97 per cent of the transmission facilities in the province and employs approximately 5,400 workers, many of them highly skilled technicians, in communities throughout Ontario.

This Plan includes a commitment to develop five priority transmission projects. Employment on the five priority projects alone will peak at over 5,000 in 2013. This new transmission capacity will enable further generation development, including many new private-sector renewable projects.

The rollout of new transmission projects will also allow communities, including Aboriginal communities, to develop more small-scale renewable generation and, in certain cases, reduce their dependence on polluting forms of electricity generation.

Coal plant conversion

Converting Ontario’s existing coal-fired generating stations to new fuels will create new constructions jobs and support clean energy jobs in operations and maintenance.

For example, the Atikokan biomass conversion project will create up to 200 construction jobs and help protect jobs at the plant. It will also support an estimated 20 to 25 jobs in Ontario related to the production of wood pellets and sustain other jobs in the forestry sector. The project will provide engineering and construction jobs during the conversion as well as ongoing employment in the forestry and transportation sectors to keep the station supplied with fuel. Natural gas conversion at Thunder Bay will provide additional jobs in pipeline construction and ongoing operations.

Conservation

Conservation programs contribute to local and regional jobs, creating employment and new business opportunities in a number of areas, including technology and product development, manufacturing, distribution, marketing, sales, installation and maintenance. For example, Ontario’s $3-billion investment in conservation programs over the next five years is expected to create or sustain about 5,000 jobs annually.

Capital Investments

Ontario’s electricity sector is a $15-billion annual industry. Investments in the electricity system are helping to clean Ontario’s air, improve the reliability of the energy supply and create jobs and economic opportunities in communities across the province. Since 2003, over $10 billion has been invested to bring new supply on line, and over $7 billion has been spent to strengthen the transmission system. Ontario has also attracted more than $16 billion in private sector investment through the fit program.

Investments over the past seven years to build new cleaner generation and modernize electricity infrastructure has increased significantly to make up for years of underinvestment. Needed capital investments in Ontario’s energy system over the next 20 years will be significant, and are in line with the government’s efforts to upgrade and replace aging infrastructure. For example, the ReNew Ontario Infrastructure plan invested $30 billion over four years in capital projects across the province.

This Plan outlines essential capital expenditures to continue building a clean and modern electricity system and to keep the lights on for Ontario families and businesses. The total capital cost in 2010 dollars is estimated to be $87 billion over the life of the Plan. This accounts for new and refurbished energy supply, transmission and distribution infrastructure and conservation investments. This Plan provides more investments over the 2007 Plan due to increased investments in renewables, updated capital cost assumptions, and more certainty on the costs of nuclear refurbishments and new build. These cost estimates will be further refined by the OPA in the coming months and then submitted to the OEB.

Figure 13: Estimated capital cost of long-term energy plan: 2010 to 2030 ($ billions)

The capital investments outlined are through both the private and public sector, and the majority will be paid for by electricity consumers spread over many years, depending on the cost recovery mechanism. (For example, electricity generators typically recover their investment over 20 years, whereas transmission investments may take up to 40 years to be fully repaid). This ensures that the annual costs to consumers, as reflected on electricity bills are spread over a longer period of time.

Conservation expenditures in this Plan include direct program costs and additional capital expenditures driven by higher appliance energy efficiency standards and higher building code efficiency standards.

Overall, renewables account for one third of total expenditures, nuclear just over one third, and natural gas, conservation and transmission the remainder. The breakdown is reflective of the Plan’s objective to deliver a balanced and diverse supply mix that is cost effective, clean and helps create clean energy jobs.