Thank you to everybody on the committee today. I appreciate the invitation to speak about this topic of Canadian interties. It's an increasingly important and interesting topic.
To give you an introduction, my name is Derek Stenclik. I'm the manager of the power systems strategy team with GE energy consulting. My team and I are power system experts who simulate the transmission grid across North America and globally, and use our simulations and our modelling to evaluate long-term planning in the utility and grid industry. These simulations are really on the interface between engineering and economic and technical analysis, and they mirror the way the power system operators work and dispatch the system.
Recently, my team and I were involved in the pan-Canadian wind integration study and are currently evaluating a few grid simulation studies across Canada: the regional electric co-operation and strategic infrastructure study—the RECSI study—as well as a renewable integration study in Saskatchewan. The analysis performed by GE energy consulting in these studies, the pan-Canadian wind integration study and almost all of our grid studies, indicates that increased transmission interconnections and co-operation between regions, whether those be Canadian provinces east-west across the country or north-south to neighbours in the United States, can be an effective strategy to reduce thermal electric generation, decrease carbon emissions, and increase renewable penetration.
A key finding from many of these studies has been that increased co-operation and increased interconnection between neighbouring power systems, utilities, or markets is a step in the right direction to move towards a low-carbon future and a high-renewable future.
Today it can be challenging at times to economically justify the cost of new grid infrastructure on disparate energy and electricity prices alone. While one region may have low electricity prices and others have slightly higher prices, typically the price differentials are not by themselves enough to justify new transmission capacity being built. It's about layering in several of the benefits, and I'll walk through those here today.
I'll list six benefits that you could see from increasing the strategic interties between the provinces and between the United States and Canada. There are several other benefits that are important, but the six primary ones that I can think of today include, first, energy benefits, meaning more efficient utilization of the generation fleet that's there today—using lower-cost resources in one region to offset more expensive or less efficient generation in other regions, so that there's an energy benefit.
As I said before, that's typically not enough in and of itself to make these investments economic. Other benefits include resource adequacy benefits. Here we're talking about reliability benefits and deferring new capital cost investments that are required on the generation fleet in order to meet peak demand. Having a broader portfolio and more interconnection between the regions allow system reliability to be maintained while using capacity sharing and the sharing of resources from one region to another. In general, as load grows, a reserve margin is maintained, and that's a surplus capacity that's needed. As you start to diversify the resource mix, the total amount of surplus capacity that's needed to maintain reliability can be reduced.
This is for three main drivers. A larger generation portfolio means that at any given point in time you'll have fewer generators on outage, whether for scheduled maintenance or emergency or forced outages. The larger generation portfolio that comes with interconnecting multiple regions benefits from a reliability perspective.
The second reason for the ability to reduce surplus capacity is seasonal load diversity. While some regions or provinces, such as Ontario, are summer-peaking—the highest electricity loads occur during the summer—in many other provinces the peak occurs in the winter.
There is a seasonal and weather-related diversity, the larger you make that footprint. The same is true when looking to the United States and states south of Canada, where most systems are summer-peaking and thus have surplus capacity available during the winter that can be effectively used to meet peak load in many winter-peaking systems in Canada.
Finally, similar to the seasonal load diversity, there is also a time-of-day load diversity. As the grid spans four time zones east to west across Canada, the peak load of the day will not occur at the exact same time in each of those provinces. Even having just a few hours of shifting between provinces can have a capacity benefit whereby surplus capacity needs will be reduced slightly.
A third benefit of the increased interties is grid services. This is not just energy and capacity, but things such as reserves regulation for both the variability and load of wind and solar, to allow the system to go up and down with those resources, and also for contingency events. If there is an emergency in one region, having more interconnections to neighbouring regions will help in contingency or emergency events.
A fourth benefit would be a renewable integration benefit, basically using transmission as a key tool to facilitate increasing the variable renewable generation, whether it be from wind or solar or another renewable. Transmission can be an effective tool for integrating renewables. There are a lot of drivers or reasons for this, but one that comes to mind is short-term balancing. The short-term fluctuations in wind and solar become less extreme the larger the geographic scope you're looking at. While a wind front or a cloud cover may come through one individual region very quickly and cause variability in those resources, the likelihood of this occurring across a large system the size of Canada, or even of portions of Canada, is much lower.
The second driver for the renewable integration benefit would be reduced curtailment. Curtailment occurs when the grid is unable to accept all of the variable renewable generation from wind and solar, and as a result you have to essentially waste what would have been a “zero marginal cost” resource. The inability of the grid to accept wind and solar leads to curtailment.
Increased transmission can help solve parts of that problem because time periods in which one province or region has high wind and solar output can be a time period when they export surplus energy to neighbouring provinces. Again, just balancing the real-time nuances of wind and solar variability can be achieved with interconnections.
A fifth benefit of increased strategic interties would be hydro-renewable coordination, using the vast hydro resources in Canada along with variable renewables to help offset some of the resource diversity. In some years or months when wind and solar output may be lower than others, hydro can be an effective tool for mitigating some of the variability while continuing to achieve renewable targets.
Last is resource diversity more generally. The larger transmission network across Canada will allow hydro-rich regions in some provinces to help offset generation shortages in other regions caused by fluctuations in gas or coal availability, and vice versa. In periods when hydro generation is lower or the hydro resource is low from one year to another or one month to another, surplus generation in other regions can help backstop those regions. Having a more diverse resource mix can be achieved not necessarily by installing new generation resources but just by using what's there more efficiently through increased transmission co-operation.
I won't go through all the details of the pan-Canadian wind integration study. Some of these benefits were addressed in that study; some were not.
At a high level, the pan-Canadian wind integration study showed that the Canadian power system can integrate up to 35% of its annual energy consumption coming from wind generation without the need for significant changes to operating practices or new investment. Given the fleet that's there today, there's no operational or reliability concern to doing that.
Changes will need to be made. One of those changes proposed was an increase in transmission interconnection. That was evaluated for that study both across the different provinces but also to the U.S. One of the big take-aways from the study was that reaching 35% wind penetration across Canada means there's going to be times when there are large amounts of wind export between the provinces and also to the United States.
Curtailment was mitigated with increased transmission, and transmission congestion was mitigated with increased transmission interconnection, and the study proposed that up to 4.6 to 4.8 gigawatts of new inter-area transfer capability, transmission capability, could be implemented at a cost of approximately $2.7 billion in order to facilitate that renewable and wind integration. We showed in all those scenarios that the transmission and wind build-out could be done cost-effectively.
I talked about the benefits of transmission. I want to touch on some of the risks and challenges quickly. I've listed three of them in my work here.
The first is social and environmental. There's always a challenge with any energy asset on the system, and transmission not being excluded, there's a need to balance some of the social and environmental costs that go along with implementing any new infrastructure. That's something that would have to be evaluated on a case-by-case basis moving forward.
A second challenge would be allocating the benefits. Whenever you implement new transmission infrastructure, there are going to be some regions or some areas that benefit more than others, and allocating those benefits equitably is a challenge and a role for legislation and regulation.
Finally, there is stability concern with increased tie-line contingencies. If you move forward to a large interconnected power system, there may be times when, if you operate the system solely on economics and not on reliability, one region may be a large importer of electricity. If there's a contingency or one of the transmission lines goes down during that operation, you risk a stability or reliability concern. With proper engineering judgment, with studying the stability and reliability impacts of transmission, and with operating the system to a secure level, that can be mitigated. That's something that's been done for many years across the power system, both in Canada and globally. It's certainly something that can be done here. When you're moving forward to a new system with increased transmission, it's something that should be evaluated.
Finally, the pan-Canadian study was a great start to looking at the increased strategic interties between the provinces and between the United States, but it wasn't a study designed solely for that purpose. Several other studies should be evaluated or could be evaluated in the future, including production cost studies, more similar studies that look at the economic utilization of the grid, reliability and capacity adequacy studies, and finally, grid stability studies. But—