Powering the Net-Zero Transition in Canada: A Conversation with Heather Ferguson from OPG
Episode Summary
This week Heather Ferguson, Senior Vice President, Business Development, Strategy and Corporate Affairs with Ontario Power Generation (OPG) joins the podcast. OPG burned its last piece of coal in 2014 and has committed to being a net-zero company by 2040. They have also expanded their generation assets beyond Ontario’s borders into the United States.
Here are some of the questions Peter and Jackie asked Heather: How will OPG achieve net-zero by 2040? Is the regulatory process in Canada a barrier to achieving net-zero? What is the state of OPG’s Small Modular Reactor (SMR) projects? How is OPG’s electric car charging business progressing? Are interconnects across Canada a way to achieve net-zero electricity faster and at a lower cost? Who should pay for zero-emissions electricity and infrastructure – the rate payer or the taxpayer? How are Indigenous voices and concerns represented as OPG proceeds with new projects?
What does netzero mean? That seems a redundant question at first, but truth be told there are a lot of different answers to that.
The federal government is currently conducting consultations with the goal to develop Canada’s Clean Electricity Standard and drive progress toward a net-zero electricity grid by 2035. Ontario Power Generation (OPG), one of the largest electric power generators in Canada, is committed to a goal to be net-zero by 2040. But what does that mean exactly?
“Everybody’s got different views of net-zero,” says Heather Ferguson, Senior Vice-President of Business Development Strategy and Corporate Affairs with OPG. “I think an ideal scenario for net-zero when you get to it, whether it’s 2035, 2040, 2050 is not necessarily driving out every bit of emissions from, say the gas assets. I think they provide huge value to the system and they are what’s going to enable us to use electricity and be able to electrify other parts of the economy like transportation.
“But we can also do a lot to clean up those gas assets. We’re looking at hydrogen and to what extent we can blend hydrogen with the gas that we burn at these facilities to help minimize greenhouse gas emissions.” – Heather Ferguson
“I think an ideal scenario for net-zero when you get to it, is not necessarily driving out every bit of emissions from, say the gas assets. I think they provide huge value to the system, and they are what’s going to enable us to use electricity and be able to electrify other parts of the economy like transportation.”
Whatever the agreed-to meaning of net-zero is, we need to get there quickly – less than 30 years. So, where does OPG see additional opportunities to get there?
“Nuclear’s incredibly important. And I think there’s a growing understanding that as a country, a continent, as a world, we are not going to be able to get to net-zero without nuclear playing a significant role.”
At OPG’s Darlington nuclear facility, they’re thinking smaller. There’s an opportunity to build a 300 megawatts (MW) small modular reactor on site. “We’re fortunate to have a site, but we also have an improved EA and a site prep license.”
See OPG’s Climate Change Plan.
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Episode Transcript
Disclosure:
The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.
Announcer:
This is the Arc Energy Ideas podcast with Peter Tertzakian and Jackie Forrest. Exploring trends that influence the energy business.
Jackie Forrest:
Welcome to the ARC Energy Ideas podcast. I’m Jackie Forrest.
Peter Tertzakian:
I’m Peter Tertzakian. Welcome back. Well, we are recording the day after the Flames won the series so we are in for a very interesting battle of Alberta now, right?
Jackie Forrest:
Yeah. We’re going to have the Edmonton Oilers face the Calgary Flames for round two of the Stanley Cup playoffs. Boy, there’s not going to be a lot of work maybe getting done with a lot of distractions over the next couple of weeks here in Alberta.
Peter Tertzakian:
Yeah. So what does someone from Grande Prairie, who do you cheer for?
Jackie Forrest:
Oh, that’s a tough one. Well, generally I’ve lived in Calgary so long, it has to be Calgary. And besides that, I like to have a little rivalry with my brother in Edmonton, so …
Peter Tertzakian:
Yeah. Yeah. Ditto. I’m schizophrenic. I mean, I grew up in Edmonton, but I’ve been here most of my life. Actually, I grew up during the many battles of Alberta within the Gretzky years, the glory years of the Edmonton Oilers
Jackie Forrest:
Yeah, I was definitely Edmonton Oilers then when I was in living in Alberta.
Peter Tertzakian:
Yeah, it’s going to be fun. Well, and hockey season ends and that’s a precursor to vacation season. Kids get out of school, people travel across the country. And so thinking about that, I pulled from my collection of eclectic postcards this postcard from Ontario, Kakabeka Falls, and it’s … We’ll post this photo. It’s a photo of a power station. One of the first hydroelectric power stations in Canada built in 1906. It’s about 30, 40 kilometres west of Thunder Bay, Kakabeka Falls provincial park. I’m going to read you the back because I don’t know who wrote this, but they wrote it to Ida Warck.
Peter Tertzakian:
And Ida lived at that time in Gladys, Alberta, “We’re having a great time, but have not seen much since we left Winnipeg as they are taking us through the Northern part of Ontario and there’s nothing but bush and rocks.” Well, I think we can say that about much of Canada, this vast country. And because it’s a vast country, I mean, we’ve got a real challenge on our hands in terms of thinking about electrical infrastructure. That’s what we’re going to talk about today in terms of the build out of the next generation of electrical infrastructure, as we think about Net-zero. I mean, it’s a huge challenge, right? I mean …
Jackie Forrest:
Oh, it definitely is. Yeah. I mean, in different parts of the country, the challenge is different because of the makeup of the electrical systems but there’s also the load growth.
Peter Tertzakian:
Yeah. So Kakabeka Falls, 112 years ago, still operating and is operating now under the corporate control of Ontario Power Generation and who best to talk about Ontario Power Generation and the next generation of power issues … We’ve got a lot of questions about electrification. We’ve got with us today our special guest, Heather Ferguson, and Heather is the senior vice president of business development strategy and corporate affairs with Ontario Power Generation. Welcome Heather.
Heather Ferguson:
Good morning. Thank you for having me.
Peter Tertzakian:
Maybe before we get started, why don’t you just tell us a little bit about yourself and how you came to be a senior vice president at, I think probably one of the largest utilities in Canada?
Heather Ferguson:
Yeah, well, really interesting, just to build off a bit about the Kakabeka Falls piece there, and maybe we’ll get into it a bit more … As a teenager, I worked for the Ministry of Natural Resources. They had a really great program called the junior ranger program and they farmed us off all over Northern Ontario. And I actually as a teenager spent a bunch of time at Kakabeka Falls, sort of hanging over the edge of the falls, trimming the foliage as I recall, and probably what was not an entirely safe manner, according to today’s standards, but it was a lot of fun. And many of OPG’s stations are like Kakabeka Falls and are of that vintage, a hundred years old. And so, we’ll probably talk about that because it factors prominently into how we think about building hydro. But, I mean, I’m a biologist by training, which most people find kind of odd, but I ended up in sort of the natural resources sector for a while, engineering, environmental consulting.
Heather Ferguson:
And then I was very fortunate to join OPG 20 years ago, a little over 20 years ago. And it was a very interesting time in Ontario, a lot was happening with, with OPG we had split apart from being the big integrated utility that we were, the old Ontario Hydro into OPG and the various other parts that make up the electricity grid now. And so I joined 20 years ago, largely in the environment function and the risk function, but probably the bulk of my career has been in the business development end, building new generating resources, hydro, most particularly. I’ve had a really great run at OPG and now I have an opportunity to sort of lead the BD portfolio and the strategy portfolio again from a more senior level. And I also lead the corporate affairs team, which is all our stakeholder relationships, our government relationships, really important relationships with our indigenous communities. And that’s sort of been a nutshell what I do.
Jackie Forrest:
That’s a great background for the questions we have for you today. We’re going to have two sections to the podcast. First, we want to talk about Ontario Power Generation, a bit more about your business and your strategy. But number two, we want to talk in general about Canadian policies. As you know, the government has put forward a goal to get to Net-zero electricity by 2035, and we want to talk about some of those plans and policies. But let’s start with section one, maybe give us the thumbnail of your operations, how much do you generate and where? I mean, I think I was surprised actually to understand that you weren’t just in Ontario as I looked into your company.
Heather Ferguson:
Yeah. We are probably one of the largest and most diverse generators in North America. Our generating capacity is roughly 19,000 megawatts, the largest portions of that are made up of nuclear assets and hydro assets. And our nuclear assets, we have two operating stations in Ontario, just outside of Toronto on the east end. And our hydro assets, we have 66 hydro stations and they are scattered all over Ontario everywhere from … We always say from Kenora way up in the west to Cornwall in the east. We also have a solar facility. We have a biomass facility. We have natural gas assets. But we also have U.S. assets. So you’re right, we acquired two companies a number of years ago, not that long ago, I’m going to say four, and they are operating in the U.S. under their subsidiaries name of Eagle Creek Renewable Energy. So a pretty broad portfolio. But I think the main thing to think about is it’s primarily hydro and nuclear, but also quite a bit of other things. And this diversity, I think that that’s really important as we think about electrification.
Peter Tertzakian:
Well, for the purpose of our audience who owns OPG? And I guess as a follow on question to that, to what extent does the province dictate OPG’s direction and strategy?
Heather Ferguson:
Yeah, I mean, our sole shareholder is the province of Ontario. We work and report in very closely with the Ministry of Energy, but I would not say the province dictates our strategy. Obviously, any utility that is owned by the province has, I guess, the rate payers of Ontario or the rate payers of their jurisdiction foremost in their mind. And also, the broader goals of any given jurisdiction or any given government of the day. We work very closely, but we are our own standalone commercial entity. We have an independent board, we develop a business plan, which obviously we share with our shareholder.
Heather Ferguson:
And we do think of those things in mind. And I think every government these days is thinking very closely about climate change and electrification so we have a huge opportunity to work with the province on that. And also, I think for most provincial utilities, including OPG, I mean, we are a bit of an economic engine in the province when it comes to jobs, economic development. Our assets operate in many, many communities. I mentioned 66 hydro stations, many of those in smaller communities, so we’re an important part of, I think, the economy and the fabric of Ontario that way.
Peter Tertzakian:
I mean, it’s curious that Ontario Power Generation as provincially owned utility and economic engine as you called it, would branch out into the United States, is that strategy part of just to get sort of even more scale and reach into the continental grid? Is that the …
Heather Ferguson:
Yeah, I mean, I think you’re right. So the scale, it was a very logical growth for us because we’ve been operating hydro assets, as you said, for over a hundred years. So acquiring hydro assets is a very logical fit, very experienced hydro operators, all the right skill sets and the ability to manage those assets safely, reliably. Affordably. But also you’re right, scale is important. So as we’re looking out, we will be closing one of our nuclear stations in the mid part of this decade, our Pickering nuclear facility. That’s a big change for us as a company. And so we’re looking to grow and to broaden out that way. But part of this growth plan always needs to be foremost in mind is keeping our core operations and our projects that are in Ontario going, and thinking about the rate payers of Ontario and how this will benefit them.
Jackie Forrest:
So Heather, your website, and I would encourage people to check it out, you have a great sustainability report there, and it has a lot of background and it talks about being able to achieve Net-zero by 2040. Now I know the government now is saying 2035, but maybe just explain a little bit about how you’re able to achieve that. I mean, you have some advantages compared to a lot of utilities in North America because you do have a lot of zero-emitting power, but you do have some fossil-based power with natural gas. So maybe talk a little bit about what it’s going to take to achieve that.
Heather Ferguson:
Yeah, I mean, and there’s different … Everybody’s got different views of Net-zero. And so you’re right, the feds have come out with a Net-zero electricity grid by 2035. OPG has made a commitment to be a Net-zero company by 2040, but also to support broader decarbonization of the economies and the jurisdictions in which we operate by 2050. I mean, there’s a whole host of different views on the Net-zero, and there’s also … I’ve not really seen a 100% clear definition of Net-zero, but if you just take it at face value … And you’re right, we have some natural gas assets that operate. I think what we’ve understood, and I think more people need to understand that, is the immense value that those natural gas assets bring in terms of reliability and affordability, and with, relatively speaking, very minimal greenhouse gas impact.
Heather Ferguson:
So when you think about that, I think an ideal scenario for Net-zero when you get to it, whether it’s 2035, 2040, 2050 is not necessarily driving out every bit of emissions from, say the gas assets. I think they provide huge value to the system and they are what’s going to enable us to use electricity and be able to electrify other parts of the economy like transportation. That’s a bit my personal view, and I think the modeling would support that. But we can also do a lot to clean up those gas assets. We’re looking at hydrogen and to what extent we can blend hydrogen with the gas that we burn at these facilities to help minimize greenhouse gas emissions. We’re also considering a lot of things we can do to offset those over time and electrification of transportation. So take our 97% clean grid that we have in Ontario and power transportation with it and the emissions you reduce there are significant. And then what can you also do with other technologies? Carbon capture unquestionably is going to be something that many jurisdictions probably foremost is looking at. I think there’s ways.
Peter Tertzakian:
Well, we’re going to come to transportation here in a minute, but I want to talk about this goal of Net-zero by 2040 because a lot of industries and companies are sort of struggling to wrap their minds around 2050, which is only 28 years away. As I look at the split of your energy mix, 58% nuclear, 24% hydro, 11% renewables, and only 7% natural gas. Just by those numbers, it seems like, okay, there’s only 7% natural gas. It seems like setting Net-zero by 2040 is pretty easy because you have no coal anymore.
Heather Ferguson:
Yeah. Yeah. I mean, we closed our last … We always say we burnt our last piece of coal in 2014, after a decade-long process to close our coal facilities which comprised 9,000 megawatts. So if you think about, I just mentioned OPG as a company with 19,000 megawatts, we took 9,000 megawatts of coal off the grid and it was a decade-long process. And so since 2014 … But that was sort of, I think the impetus behind our climate change plan, it’s like, okay, that’s a fantastic thing for us to have done. It was a lot of heavy lifting and didn’t come out without a fair bit of challenge, but we did it. And so what are we going to do now? We spoke about the 7% gas or the gas that’s in there. As I said, I think we can get to Net-zero. We can stop running gas if that’s the direction things come about through Net-zero 2035 or what comes about our system operators bringing a report forward this fall that’s going to speak to how we decarbonize the grid in Ontario and the role of natural gas. It can be done, but it will come at a price. It will come at a significant price and it will come with some issues around reliability. We all need to think about that.
Peter Tertzakian:
Well, when it comes at a significant price, just to build on that, I mean, removing coal came at a significant price as you substituted it out with renewables and … Well, you can tell us, I guess, presumably a little bit more nuclear and there was a big… A lot of discussion around how the cost of electricity went up in Ontario, especially the rural parts. So to what extent can Ontarians, is that how you say it? Ontarians afford even more or higher electricity prices?
Heather Ferguson:
Well, I think part of what happened in sort of the latter part of last decade was it was a bit of a perfect storm. Around the time, 2008, ’09, ’10, ’11, ’12, around the time the economy tanked. And so we saw an awful lot of load leaving the province at that time. And at the same time were bringing on a fair bit of renewables. And initially these renewables were quite expensive and some of those contracts were more expensive than they would be now because prices have come down for obvious reasons in solar and wind, for example. There was sort of this perfect storm of a lot of load leaving and some more expensive renewables coming on. But what I think we have the opportunity to think about now is as you add more and more users onto the grid, whether it’s in the form of electricity consumers, rate payers, or whether it’s in the form of transportation, industrial load, electrification of those sectors, it actually drives downward pressure on the rates because you’ve got more users, it’s numerator denominator type thing.
Heather Ferguson:
So that’s beneficial as we think about moving forward. But yeah, unquestionably, it’s going to come at some price, but I think the biggest thing we can think about as we move forward is the planning that’s going to be needed around this. And if you want your clean generation to be in the form of hydro and nuclear, which I think is a very wise decision, you need to plan ahead and you need to plan out how you’re going to do this, otherwise we’re going to be caught further behind. It’s going to cost more. And we’re going to have to do things that are not going to be in the best interest of the rate payers. And so it’s really great to see that the province, the system planner and most everyone is thinking about this.
Jackie Forrest:
Heather, you talked about the nuclear there as another option to get to Net-zero. Talk a little bit … I know you’re working very hard around the small modular reactors at OPG, your plans there. And how fast do you think that could scale up to maybe replace some of that fossil fuel generation that you have?
Heather Ferguson:
Yeah, I mean, nuclear’s incredibly important. And I think there’s a growing understanding that as a country, a continent, as a world, we are not going to be able to get to Net-zero without nuclear playing a significant role. Ontario is always been a bit of a leader in the nuclear space. And we’re very fortunate to have a site where our Darlington facility is right now, our Darlington nuclear facility, which is a large, large-scale nuclear facility. We have an opportunity to put a small modular reactor there. So the small modular reactor we’re looking at is about 300 megawatts GE Hitachi is the technology that we are partnering with. And as I said, we’re fortunate to have a site, but we also have an improved EA and a site prep license.
Heather Ferguson:
And this was work that was done over a decade ago to prepare the site and to think about new nuclear there. We’re a little bit ahead of the game in that way. And I think we could see an SMR going there, latter part of this decade. We’re also working with other provinces. So we’re part of an inter-provincial MOU collaboration. We’re collaborating with Saskatchewan, we’re collaborating with Alberta and new Brunswick. And I think a lot of jurisdictions that need to transition off fossil fuels are thinking about what role could nuclear play. And so, given our history in being a nuclear operator, we are we’re partnering and we’re collaborating, and I think we’re working as a Pan-Canadian team to try to think what role nuclear could play.
Jackie Forrest:
We did actually have a pretty detailed podcast on nuclear a couple of weeks ago. And one of the feedback I got from it was the regulatory process is going to be very long and difficult. So maybe could you … You basically implied that because you’re putting on an existing site, it may have been a little bit different than a new greenfield site. Do you think that’s going to be a big barrier for these smaller modular reactors, the regulatory process?
Heather Ferguson:
Well, I think the regulatory process, the Impact Assessment Act, as it’s called now is seen as … Now, we probably don’t have enough evidence because we haven’t put enough things through this Impact Assessment Act to really have hard data on it, but it’s seen as an impediment and a risk. And I guess what I would say is we need to come together as a electricity industry, as an energy industry, as nuclear operators and think about what that process needs to look like, because you do have to wonder if you have the federal government suggesting you need to get to Net-zero by 2035, that’s going to require an awful lot of new build of all kinds of infrastructure, including nuclear. And if no one can get through the regulatory process quickly enough and it poses significant risks in terms of investor comfort than it is a problem.
Heather Ferguson:
I think we’re going to see probably the sector starting to work a lot more closely with the federal government on that. And I mean, the other part of it too is the federal government even ready to start doing all of this? I mean, have they staffed up in a very meaningful way or are they ready to do that? Recognizing these regulatory processes are going to be very, very resource taxing and I think they need to think about that. I think you’re right. I think it’s fair. And I assume that was John Gorman? I think you had John …
Jackie Forrest:
Yes. Yeah. We had John Gorman on the podcast.
Peter Tertzakian:
Yeah.
Heather Ferguson:
Yeah. No. And so we will work with the CNA on that and it’s an important part.
Peter Tertzakian:
Yeah. It seems like the issue is not so much Net-zero by 2050 as the nearer term targets of fairly dramatic reductions in emissions, 30, 40% by 2030, which is only eight years away. And some of these regulatory processes, we know from experience in oil and gas and then pipe infrastructure, I mean, they take anywhere from five to 10 years. So not only will you not get to building the infrastructure by the time you need these emission reductions, you won’t even get a permitted if we don’t sort out the smoothing out of this regulatory stuff. Right? Is that …
Heather Ferguson:
Yeah, I think that’s entirely fair. And that’s a bit what I was saying about at Darlington, we’re very fortunate because we completed the federal EA process and we have a site preparation license from the CNSC, the nuclear safety regulator. So we’re fortunate there, but others aren’t in that position, Alberta, Saskatchewan, elsewhere in Ontario, if we wanted to put additional nuclear, it will have to go through that regulatory process, which I think poses a fair bit of uncertainty,
Peter Tertzakian:
But it’s not just nuclear. It’s the results that … I mean, whether it’s a wind farm, a solar farm, all these sorts of infrastructure projects or transmission lines, it really speaks to the need to be able to permit much faster if we’re going to get to these targets, doesn’t it?
Heather Ferguson:
Oh, it does. And you’re right, it’s everything. And I mean, hydro is in the same boat too, it takes well over a decade to get through these processes and develop and get everything sorted out. And it’s not just at the federal angle, but also at the provincial angle you get stuck in these things. So it’s going to require some thought I think about, how do we actually get to Net-zero 2035 with these [inaudible 00:21:38].
Peter Tertzakian:
Mm-hmm. Well, it’s not only the time factor, a decade. I mean, we know again from experience in pipelines that it takes not millions, but like a couple hundred million dollars just in that regulatory process with no guarantee that you’re going to get the approval that you need at the end of the day. So there’s sort of this reticence amongst companies that build big energy infrastructure to commit to that kind of spending if there’s just a lot of drag and uncertainty,
Jackie Forrest:
Maybe we’ll move on to the Canadian issues since we kind of got into that section. But before we go to that, a big part of the outlook for electrification in Canada is there’s going to be all this load growth and a lot of that is going to come from electric cars. And I know you’ve partnered on a charging network. Can you talk a little bit about this business today? Is it profitable today? What are your expectations for it in the future?
Heather Ferguson:
Yeah, so we actually have a couple electrification subsidiaries, I guess we’ll call them. One of them is this charging network called Ivy. We have another one called Power On that does bus and transit and fleet electrification. But on Ivy, it’s going to soon be, I think, that one of the largest fast-charging network. So when I say fast charging that’s those level three chargers that are sort of akin to a gas station where you can go and get a charge in 20 or so minutes. So we partnered with Hydro One, who is the biggest transmitter in Ontario and we were fortunate to get some funding from EnerCan and built out this charging network. And it’s, I guess I would say predominantly at sort of the 400 series highways in Ontario, which are the main highways that you use to travel from one end of the province to the other, whether it’s east/west or north/south, I think 60 odd charging stations will be built out by the end of ’22.
Heather Ferguson:
In terms of a business, initially we’re not looking at it in terms of it’s necessary for it to be profitable immediately. In the fullness of time, I think it will be. And I think we will also explore ways to get outside of just the fast charging into home charging, charging that’s going to need to be available, across all the roads and at the various facilities where people work and live. But it was really seen as a necessary prerequisite. So no one’s going to go buy an EV if you can’t get from one end of the province to the other reliably. It was something we thought was important to do, get out there, show some leadership and build this fast charging network so that people in Ontario can do that.
Peter Tertzakian:
Once you get this charging network in place, the question always comes up, can the grid handle it? Especially with these very aggressive goals by the federal government to have all new EV cars sold in Canada by 2035, the load goes up dramatically. And if everybody comes home and starts plugging their vehicle in at five o’clock after they get home from work or six o’clock or whatever, turn on the stove and all their other appliances, I mean, we’re going to start blowing circuits.
Heather Ferguson:
Well, I mean, I guess to answer your question, I think the grid can certainly handle it now and can handle it for the foreseeable future, I’ll say five years. But it’s been good to see that the system operator has come out with load growth profiles that reflect a need for significant new generation in the latter part of this decade. And so that was very good for everyone to see, because I think we had surplus base load generation in this province for some time and we’ve come out of that era. And so we need to start planning about how we’re going to grow the grid. I think the work is in place to think about this, so the ISO, the system operators, come out with load growth profiles. They’re going to be updating it again for electrification scenarios. We’re working on SMRs. The Minister of Energy asked OPG to take another look at hydro opportunities. And so I think we’re getting ourselves organized around what needs to be done to grow the system.
Heather Ferguson:
And it’s good that we’re doing it now, because it takes time. I guess I would say that. I think we can have the resources in place to support this, but we need to start moving, which we are. But just on your point that about, if everybody comes home at 5:00 PM and plugs in their vehicle and at the same time that they’re doing everything else in their lives at that time, that won’t be good for the grid. And so there’s some pretty basic principles around some of this and you need managed charging. You need EVs to be charging overnight when there is potentially surplus or certainly the base load on the grid. You’re not trying to charge at the time when your peaking resources or running. And there’s ways to implement things like that. You can incent people to be charging overnight. There’s managed chargers in how you set these things. And so I think the utilities and particularly the local distribution companies are getting themselves organized around that thinking.
Jackie Forrest:
Yeah, there’s lots of ways to incent people to behave differently and any small signals around price can change. Let’s talk a little bit with all this dynamic change that’s coming, you’re talking about OUDs and load growth and Net-zero targets and having to grow your generation. The federal government has also added another element to this, which is talking about a grid council that would work to increase the interconnects across Canada. Now, the Atlantic loop has been a discussion here for a long time, but the idea is we would create these interconnects and that would help create resiliency, and need less fossil fuel backup, potentially, if you could tap into power from other jurisdictions across Canada. Can you talk a little bit about how you think this could help get to Net-zero? And are you optimistic that the provinces can agree on building these when this has always been a very difficult topic?
Heather Ferguson:
Yeah, I think … I mean, let’s also just to sort of set the context, there are interconnections, inter ties, right now between many jurisdictions and we have interconnects with Quebec, interconnects with Manitoba. We have some south of the border as do most provinces. I think the idea will be to leverage those interconnections in a way that makes sense and ensure that they’re there to give some level of reliability, flexibility, affordability, and so on. But I think it’s not probably a ideal principle to be thinking that interconnections are going to support us to get to Net-zero in a hugely meaningful way.
Heather Ferguson:
Because every jurisdiction is going to be facing its own Net-zero pressures and having to supply their own jurisdiction. And it’s not going to have available a whole pile of power to be piping out left right or down. It just isn’t going to be the way things are. So leverage what we do have, but I think you need to think about some level of sustainability and security within each province of powering your own situation. I mean, Quebec we’ve historically gotten some power from, but they’re facing challenges now. I think everyone’s going to be facing these challenges. It’s a bit of a flawed principle to think you can string a transmission line from one end of the country to the other and it’ll all be fine. I don’t think it will be.
Peter Tertzakian:
Mm-hmm. Yeah, there’s a lot of barriers. And so necessarily this sort of now brings us to the subject of who pays for stuff like that? I mean, going back to Kakabeka Falls, that was funded by an entrepreneur from Chicago actually. And in fact, a lot of the structural energy builds in this country have been built out by entrepreneurs and private capital. Now we’re in a situation where there’s a lot of suggestions by think tanks, certainly the climate think tanks and others that public money should be used to build out a lot of this infrastructure. So how do you think about that? Should it be sort of user pay and we bring in entrepreneurial capital, or do we need to have a lot more public capital coming to help build all this stuff out? Because we’re just talking about huge amounts of infrastructure to be able to do this aspirational goal of Net-zero by 2050.
Heather Ferguson:
I mean, I think, it’s going to take probably a bit of both. And there’s always this age old argument rate payer, taxpayer, and we’ve seen various governments in provinces shift things from the rate payer, get it out of rate base, put it in tax base. It’s going to take all of the above. And so it’s going to take a significant amount of private capital as well. And so I think what the provinces can do is think what’s the optimal mix there. And the federal government, think about what are the positive signals they can send so that investors will feel that this is a good place to put their money. I mean, we’ve already talked about the regulatory risks.
Heather Ferguson:
There’s a whole host of other risks that are going to be faced there, but what can the government do to make it seem like a good place to invest, because we’re going to need all of that. The other thing too is … It’s funny, we keep talking about Kakabeka and I think sometimes when we think about hydro in particular, and this is where I go back to my … I’m originally a hydro developer so I like to give a plug for hydro wherever I can. I think people look at hydro and think, “Oh my, that is really expensive.” And it is. It’s expensive because often because you need to build in transmission and it’s just expensive … It’s expensive to build. But these assets will last for hundreds of years. Kakabeka, our Beck facility, are heading into their hundred years.
Peter Tertzakian:
Century.
Heather Ferguson:
Second century. Exactly. And so, the traditional ways of valuing and comparing the different generation forms and this infrastructure don’t really lend themselves to lifelong assets like a hydro facility. So I guess my point is we just need to look at this a little bit differently. I think we need to leverage all the capital that will be available. We need to think about rate payers. Of course, we need to think about the tax base and try to have an optimal solution, I think.
Jackie Forrest:
Well, you can have problems too, if you allow public money to come in and it causes an oversupply of power and then all the people that put their private capital in don’t get a good return. So public money can be really helpful, but it can also kind of kill the economics for private capital come in if it’s done wrongly, right?
Peter Tertzakian:
Mm-hmm. Yeah. If it’s done correctly, the public money is the seed capital for private capital to follow. And I think that’s what we’re going to see, is we’re going to see that. And I really take your point. I mean, yeah, Kakabeka Falls, it’s 1906, so it’s been producing for a 116 years. That’s really quite amazing. And so even nuclear facilities, I mean, you’re undergoing that big refurbishment right now, but I mean that’s … When did Darlington, when did that start?
Heather Ferguson:
Yeah, so it’s been operating for … I always get the year wrong, sort of seventies. And so now we’re adding another 30 odd years of life to that asset. The refurbishment program, and we’re not the only ones doing this, Bruce Power, which operates the facility just sort of west of Toronto, a 6,000 megawatt facility there, and we’ve got our Darlington facility and those are … Each of our refurbishment programs is $13 billion.
Peter Tertzakian:
Yeah. Wow. And I guess the trick is to figure out the financial instruments to be able to amortize these assets over a long period of time so that the financial hit on the current generation of taxpayers and rate payers is not overwhelming.
Heather Ferguson:
Yep, you’re exactly right. We call it smoothing, we’ve got rate smoothing going on with these assets so that there isn’t a rate shock to the customers of Ontario. And that’s a … We commonly think about that.
Jackie Forrest:
All right. Well, Heather, it’s been a fascinating conversation. We’ll wrap up here with a question around Indigenous voices and concerns. How are you making sure that they’re heard? And as you think about your future plans with Net-zero and your nuclear plans as well.
Heather Ferguson:
Yeah. I mean, the Indigenous aspect is hugely important to OPG because Indigenous communities are in the backyards of every asset that we operate in Ontario. And Ontario Hydro, OPG’s predecessor, didn’t have the greatest history with Indigenous communities. At the time when some of these assets were built that were speaking of Kakabeka and others, we did not engage properly as we should have, or we didn’t even consider some of these voices. And so what we did as a company starting about 20 years ago was we engaged in a grievance process where we sat down with each of these communities and settled, and had formal apologies for the things that OPG, well, then Ontario Hydro, had done. And we’re talking about things like flooding. We’ve flooded many of their traditional lands and territories to build these hydro sites. And so we’ve spent probably two decades settling all these grievances and then looking to move forward in partnership with these communities.
Heather Ferguson:
And we’ve done that successfully. We’ve settled over 20 grievances with separate communities and we’ve moved forward in five separate partnerships predominantly on our hydro assets, some hydro redevelopments and greenfield builds in partnership with these communities. And we’re looking to do a lot more of that. As we talk about new generation being needed, I would say there probably isn’t a generation form that we would consider that we would not contemplate a partnership with an Indigenous community. And we’ve developed a reconciliation action plan that commits to investing and … In Indigenous communities to the tune of $1 billion over the next decade. So that’s a significant commitment and it’ll extend beyond sort of equity partnerships. It will include supply chain, procurement opportunities. It will include capacity building. It will include employment opportunities. And we’re looking to really expand our reach there and do better on other parts of this that we’ve not done as well in the past on.
Peter Tertzakian:
Mm-hmm. Well, it’s really a fascinating discussion. I mean, I got out of this that as we think about the next hundred years of where electricity is going to come from, the refurbishment, transition to new types of technologies, construction of new grid, and storage and everything, I mean, Ontario Power Generation has the full spectrum of power generating facilities. So it’s really an interesting utility to watch as we go forward. Thanks very much, Heather, for giving us a lot of thought to think about every time we flip on the light switch, what goes on behind the scenes and what will go on behind the scenes as we think about the future.
Heather Ferguson:
Thanks for having me.
Jackie Forrest:
Yeah. Thanks Heather. And thanks to our audience. If you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.
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