Natural Gas

Ontario has become increasingly reliant on natural gas generation for meeting its peak and base-load electricity needs. It is now the second largest installed supply source. Natural gas generation is replacing coal generation for peak needs but is also providing backup for intermittent wind and solar generation, which is needed over 70 percent of the time.

This increasing reliance on carbon emitting, price volatile, import dependent natural gas generation will only get worse when the province loses 3,000 megawatts of greenhouse gas (GHG) emission-free base-load generation in 2020 with the closure of Pickering Nuclear Generating Station. This is not good news for Ontario consumers. Besides compromising Ontario’s ability to meet its greenhouse gas emission targets, this shift exposes Ontarians to higher home heating and electricity costs and reduces the province’s energy security. The latter is not good for job creation and the economic competitiveness of Ontario’s businesses and industries.

For many reasons, natural gas generation should be limited to peak demand as opposed to base load power that is needed 24/7 every day of the year.

 

Converting Ontario’s retired coal stations to utilize carbon-neutral biomass and natural gas could help mitigate these risks while delivering significant environmental and economic benefits to the production of peak electricity supply. Building two new nuclear reactors at the Ontario Power Generation Darlington site would help offset the lost GHG emission-free base-load production from the Pickering station.

According to Ontario’s Ministry of Energy, natural gas accounts for approximately one-third of Ontario’s primary energy use. It is a widely used fuel in the residential, commercial, industrial and electricity generation sectors. Residential space and water heating account for 57 percent of Ontario’s natural gas consumption.

Ontario’s domestic natural gas production meets only about 0.8 percent of the province’s demand with the rest coming from western Canada and increasingly from shale gas deposits in the U.S. 

Hydraulic fracturing or fracking, injects fluid—water, fine particles of clay or sand and an array of chemical additives—under high pressure to release the shale gas from gas bearing rock deep underground.  While these techniques have dramatically increased North American supplies of natural gas and oil, concern is growing about the potential environmental and health risks.

Many Canadian scientists are calling for a slower pace of development of shale gas in Canada and well-targeted science to ensure a better understanding of the environmental impacts of shale gas development.

In January 2014, the European Commission issued a recommendation that sets minimum core principles for hydraulic fracturing and complements existing European Union legislation concerning issues such as strategic environmental and underground risk assessments, well integrity, capture of methane emissions and disclosure of chemicals used in each well. 

Later this year the U.S. Environmental Protection Agency is expected to release a study on the groundwater impacts of hydraulic fracturing.  As well epidemiological studies are under way, such as one Pennsylvania, which is looking at the health records of people who live in areas where hydraulic fracturing has taken place.  

The price of this commodity is set in the North American natural gas marketplace.

Source: National Energy Board

 

In 2005, the Ontario Power Authority’s Supply Mix Advice report recommended that Ontario follow a “smart gas” strategy that maximized the advantages of natural gas while limiting unnecessary exposure to price and supply risk.

In the future about 30 percent of Ontario’s natural gas supply will come from environmentally questionable U.S. shale gas sources. Environmental concerns include: the amount of water required for the fracking process and the potential impact on sources of drinking water; the use of chemicals to facilitate the process; and emissions to the air.

Shale gas developments and new fracking techniques in the U.S. have resulted in several years of low gas prices but recently natural gas prices have begun to increase significantly.

Several factors are cited for the price increase:

  • North America wide fuel switching to natural gas generation that will be further accelerated by U.S. President Obama’s plan to reduce GHG emissions from coal fuelled generating stations;
  • emerging environmental regulations at the state and federal levels (the U.S. Environmental Protection Agency just finalized a new emissions rule for hydraulically fractured wells), and
  • exports of liquid natural gas to jurisdictions where natural gas costs significantly higher than in North America.

Recently, the Ontario Energy Board approved a request from Enbridge Gas to increase its rates by 40 percent.  Enbridge cited the higher costs resulted from colder than normal weather during Ontario’s past winter and higher natural gas prices forecast for next year.  Union Gas and NRG, Ontario’s two other natural gas distributors are also seeking rate increases.
 

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