Who stands to benefit from building a transmission line under Lake Erie?

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Lake Erie and Nanticoke Power Generating Station. Image credit: JasonParis/Flickr

Canada's mainstream media have been remarkably silent about the Lake Erie Connector project since it was made public. The Canada Infrastructure Bank (CIB) announced on April 13 that it has signed an agreement-in-principle to provide at least $655 million for the underwater transmission line. Another $1.05 billion is coming from Fortis/ITC Investment Holdings.

The Lake Erie Connector (LEC) is a proposed 117-kilometre, 1,000-megawatt, high-voltage direct-current transmission line under Lake Erie. It would connect Ontario's Independent Electricity System Operator (IESO) with the PJM Interconnection -- the largest electricity market in the U.S.

The connector would extend from Nanticoke, Ontario to Erie, Pennsylvania. Fortis/ITC will fully own the LEC upon completion.

In announcing funding for this public-private partnership (P3), Minister of Infrastructure Catherine McKenna stated:

"With the U.S. pledging to achieve a carbon-free electrical grid by 2035, Canada has an opportunity to export clean power, helping to reduce emissions, maximizing clean power use and making electricity more affordable for Canadians. The Lake Erie Connector is a perfect example of that."

But others aren't so sure.

Gas-fired electricity

On April 14, the Ontario Clean Air Alliance (OCAA) released a bulletin, "Infrastructure Bank looking like a climate bust," stating that the Lake Erie Connector "will further tie Ontario to the fossil-heavy power generation system in the United States, and will also allow Ontario to ramp up exports of gas-fired electricity."

The Canada Infrastructure Bank "really could not have picked a worse transmission system project to support," the OCAA noted.

"Instead of focusing on how to get more low-carbon electricity into Ontario by improving connections with Quebec, the bank is supporting a project that is all about short-term carbon-heavy imports and exports that will further undermine the emission gains Ontario made by phasing out dirty coal."

OCAA Chair Jack Gibbons told me by email:

"Ontario's grid operator, the Independent Electricity System Operator, exports and imports fossil fuel electricity to and from the U.S. on a daily basis. Exports and imports are dispatched based on the financial fuel and operating costs of the fossil generators, not total costs including the costs of greenhouse gas pollution. A new transmission line to the U.S. will facilitate more imports and exports of fossil electricity."

A CIB backgrounder about the project makes no mention of gas-fired power plants, but states that because of the Lake Erie Connector, customers in 13 more U.S. states "will have access to energy from non-emitting wind, solar, hydro and nuclear resources during periods of surplus generation in Ontario."

But this, too, is being questioned by critics of the project.

Surplus energy?

Energy system consultant Roger Bryenton told me by email that only wind and solar should be considered "truly clean" energy. "Exporting electricity based upon the lie of 'clean,' even if it is surplus (overbuilt) power, is likely only to appease regulatory agencies," and "may well be subsidized by residents to enable the exports."

After being elected in 2018, the Doug Ford government cancelled all remaining renewable energy contracts in Ontario. Then, on April 15, the government proposed to repeal provisions in three provincial acts that prioritize renewable energy projects, stating that "Prioritizing renewable generation is no longer appropriate."

This prompted an angry response from the Green Party of Ontario:

"Ford is taking us backwards by embracing high-cost dirty sources of electricity including ramping up gas power plants -- a move that will increase climate pollution by 300 per cent."

There are a dozen natural gas-fired power plants in the province. Ontario Power Generation's new subsidiary, Atura Power, owns four, while TC Energy has investments in six Ontario gas-fired power plants and the Bruce Power nuclear facility.

Dr. Mark  Winfield, an energy expert and environmental studies professor at York University, told me by email that the Lake Erie Connector "makes no sense except for U.S. exports to Ontario, or running Ontario gas plants solely for the purpose of exporting to the U.S.," especially with changes coming in Ontario's nuclear industry by mid-decade. "Once Pickering closes and Bruce and Darlington start to go off-line for refurbishment," Winfield noted, "there will be no surpluses in Ontario to export."

The CIB decision     

It's hard to see why Fortis Inc. needs financial help from the Canada Infrastructure Bank. Fortis is the largest investor-owned gas and electricity distribution utility in Canada, with subsidiaries in at least five provinces.

Fortis/ITC also already owns utility/transmission systems in New York state, Arizona, and in seven Midwest states. Fortis Inc. currently has $55 billion in assets and $8.9 billion in annual revenues.

The infrastructure bank is in the process of a policy change whereby the Treasury Board will no longer have an oversight role regarding infrastructure bank projects and spending. But Felix Corriveau, CIB's senior director of media relations, told me that the Lake Erie Connector project "is part of the $10-billion Growth Plan we announced in October 2020, that has been approved by the Treasury Board." In that Growth Plan, the Lake Erie Connector is categorized as "clean power."

Nonetheless, the April 13 announcement from the infrastructure bank stated that the $655-million "investment commitment is subject to final due diligence and approval by the CIB's Board."

Dr. Winfield told me the Lake Erie Connector "doesn't seem to make much sense to anyone following electricity issues in Ontario. It may well raise questions about CIB's project assessment and decision-making processes."

Ontario's energy minister Greg Rickford has touted the "advantages" of this P3 and claimed that it would "promote cost-savings for Ontario's electricity consumers."

But in a 2018 analysis of the Lake Erie Connector, a company called JCM Power noted, "Due to differences in resource mix and other market dynamics in the Ontario and PJM [energy] markets, energy price differentials have been large and volatile, demonstrating significant market opportunities" from the connector project, including "approximately $100 million/year from arbitrage opportunities."

I asked Dr. Winfield if this sounds like players would be gaming the system. He answered, "I agree, it sounds like all it is about is gaming the system at the margin."

The infrastructure bank expects to close the financial deal late in 2021, with construction commencing soon after. That means the public still has time to weigh in on the Lake Eric Connector and the P3 funding. As Dr. Winfield told me, "I'm not sure I see any environmental advantages or gains for Ontario ratepayers" from the project.

Canadian freelance writer Joyce Nelson is the author of seven books. She can be reached via www.joycenelson.ca

Image credit: JasonParis/Flickr

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