Section Four - Electricity

Transcription

1 Newfoundland and Labrador Energy Plan Discussion Paper Page 37 Section Four - Electricity 4.1. Context The electricity industry in Newfoundland and Labrador is an essential component of our energy sector, and virtually every resident of the province depends on it in some way. Without a reliable, affordable electricity supply, we would lead very different lives and have a very different economy. We need electricity for home comfort, to operate office equipment, to run industry, to provide medical care and to secure a safe environment. Most of the changes in people s lives over the last hundred years would not have been possible without electricity. Our electricity industry supplies the needs of approximately 247,000 domestic, general service and industrial customers dispersed over a large geographical area. Almost all of the electrical energy we consume in the province is generated here, most from hydroelectric sources. Additionally, approximately two-thirds of the total electricity generated in the province is exported by Churchill Falls (Labrador) Corporation (CF(L)Co) under a contract established in 1969 and set to expire in Today the electricity sector faces several issues and challenges, including the high cost of fuel, the costs of developing other generating sources and new transmission infrastructure, and increasing requirements to protect the environment. In addition, we must consider how we prepare for the possible integration of our industry with the North American system in the future. For instance, we need to make sure that our industry has the skills and experience to adapt to the quickly changing North American electricity sector. Our Energy Plan will help us meet these challenges. Supply and Demand Modern electricity systems consist of three main parts: generation, transmission and distribution. Most electricity around the world is generated in large power stations, where energy from fossil fuels (coal, oil or natural gas), flowing water (hydroelectricity) or nuclear fission is harnessed to turn generators. Other generating facilities, such as wind farms, small hydroelectric plants, diesel generators, plants burning wood or waste, or gas captured from landfills, also provide electricity in some areas. Transmission networks of power lines operating at high voltage carry the electricity from generating sites to terminal stations (switchyards) near the main centres where it will be used. From the terminal stations, distribution networks move the power to individual customers. Unlike fuels, electricity, once generated, cannot be stored in a large-scale, cost-effective manner. At any moment, the amount being generated must match the amount being used within the entire system. Adjusting to demand is achieved by automatic control of generating units to vary their output as required (known as load following).

2 Newfoundland and Labrador Energy Plan Discussion Paper Page 38 History The province s electricity industry was born in the 1890s and for over half a century was run by private sector investors who generated power locally to serve the main concentrations of people and businesses. Electricity generation was also established by some of the major resource industries and supplied to the paper mill towns of Grand Falls (now Grand-Falls Windsor) and Corner Brook (generated at Deer Lake) starting in the early 1900s. The same occurred in western Labrador beginning in the 1950s with the Iron Ore Company of Canada (IOCC) and Wabush Mines. Communities at any distance from a major population center or company town had no electricity service. In the 1950s, the many communities still without power were demanding service, and those with access wanted additional and more reliable power. To meet these demands, Government created the Newfoundland Power Commission in 1954 with the aim of providing rural electrification. In 1958, it installed a diesel generator in Happy Valley, Labrador and, in 1960, began construction of a major hydroelectric power plant at Bay d Espoir and a transmission grid to link it with the main areas of power consumption. The Power Commission also built a conventional oil-fired generation plant at Holyrood in In 1975, the Power Commission became the crown-owned Newfoundland and Labrador Hydro Corporation (NLH). During this period, the small investor-owned utilities on the Island providing power in towns and cities were combining, eventually forming Newfoundland Light and Power Company, later Newfoundland Power (NP). In Labrador, during the 1950s and 1960s, the communities that had electricity - besides the company towns - were supplied by small independent diesel plants. After construction of the giant hydroelectric project at Churchill Falls in the late 1960s and early 1970s, NLH become responsible for all residential and commercial electricity services in Labrador. The Churchill Falls hydroelectric project was developed by CF(L)Co, which is now owned approximately two-thirds by NLH and the balance by Hydro-Québec. Roughly 90% of its 5,428 MW output is sold to Hydro-Québec under a long-term contract which continues to Under that contract, power is sold to Hydro-Québec at a 0.25 cent per kilowatt hour, declining to 0.2 cents per kilowatt hour in 2016, and remaining at that rate until the end of the contract. There are no provisions for the price to increase to cover inflation or increasing operating costs, or to reflect the real value of the power produced. This has proven to be a vast inequity as overall energy prices have risen significantly since the early 1970s, and its market value to Hydro-Québec has increased enormously. As shareholders, Hydro-Québec and NLH have entered into several agreements increasing CF(L)Co s revenue enough to address the risks to its financial viability for the remainder of the contract. Present Situation Today, Newfoundland and Labrador has three principal electrical systems: the Island Interconnected System (IIS), which supplies about 234,000 customers on the Island of Newfoundland; the Labrador Interconnected System (LIS), supplying 8,900 customers in Upper Lake Melville and Labrador West; and an isolated diesel generator service to 4,300 customers in 16 isolated areas in Labrador and seven on the Island. The IIS has approximately 1,918 MW of generation, from a mix of hydroelectric and oil-fired plants. The LIS has 5,476 MW, and the isolated diesel system supplies 33 MW. These systems are operated by two regulated utilities, NLH and NP.

3 Newfoundland and Labrador Energy Plan Discussion Paper Page 39 NP is the primary retailer of electricity on the Island, selling power to approximately 85% of electricity customers (see Figure 4.1). It purchases about 92% of its supply from NLH and generates the balance itself. NLH provides retail services to customers in areas of the Island not serviced by NP, and all of Labrador. The paper companies based in Grand Falls-Windsor and Corner Brook also generate electricity, as do three other nonutility generators with small hydro and wind plants. Figure Island Electrical Service Territories On the Labrador system, power is available from Churchill Falls, but supplying any new development will be challenging until the Lower Churchill is built. Transmission capacity would also need to be increased in such circumstances. The province is entitled to 300 MW of Churchill Falls power, which NLH purchases to supply residential, commercial and industrial customers in Labrador West and the Upper Lake Melville regions. Any unused portion of this power is resold to Hydro-Québec at negotiated prices. The iron ore companies in Labrador City and Wabush are primarily supplied under a separate contract with the Twin Falls Power Corporation, which has its own entitlement to 225 MW from CF(L) Co). IOCC also buys additional power from NLH. Objectives Some of the major objectives of the Energy Plan in relation to the electricity industry include, but are not limited to: securing future electricity supply; reviewing our regulatory regime and industry structure; balancing electricity costs and reliability; supporting economic development; and protecting the environment. The following sections discuss the issues related to these objectives and highlight areas that will need to be considered in the Energy Plan.

4 Newfoundland and Labrador Energy Plan Discussion Paper Page Structure and Regulation of the Electricity Industry Structure As western society urbanized and industrialized during the 20th century, power demands grew rapidly and utilities were formed to develop the large power stations and transmission networks required. In most Canadian jurisdictions, as well as in Western Europe, this was achieved by nationalizing and merging existing private-sector utilities. In the U.S., federal agencies were created for some of the biggest projects, but the large investor-owned regional utilities were able to undertake most other projects. The difference in the industry structure came about because of the much greater population density in the U.S. and its strong private sector culture. Over the past several decades, the electricity industry in many jurisdictions has undergone significant structural and regulatory changes. In the 1990s, dissatisfaction with the big utilities began to emerge because of the increasing costs of electrical power. These utilities were typically large, vertically integrated monopolies, responsible for the generation, transmission and distribution of power and operating in a fully regulated environment. Critics argued that less regulation and more competition among private companies would result in lower prices while maintaining availability and reliability. In the U.S., some states also mandated the separation of generation functions from transmission operations in the belief that this would increase competitiveness and improve service. By the end of the 1990s, this had become the practice in much of Europe and about half the U.S. states. Canada has moved more slowly toward a restructured electricity industry, partly because of its unique mix of crown-owned and investor-owned utilities. Alberta and Ontario have taken costly actions to restructure their electricity industries. New Brunswick and British Columbia are in the early stages of functionally unbundling their crown-owned utilities (i.e., separating the primary functions of generation, transmission and distribution). Hydro-Québec is functionally unbundled, but is still governed by a single Board of Directors. Nova Scotia Power was privatized in The other Canadian provinces have not made any significant changes to the structure of their electrical sectors in the past decade. In some parts of Canada, there has been growing competition from independent power producers generating electricity using wind-power, biomass (i.e., burning organic material, such as wood or waste) and small-scale hydro operations. In Newfoundland and Labrador, such competition has been very limited. Figure Structure and Regulation of the Provincial Electricity Industry Government Board of Commissioners of Public Utilities Retail Customers Private Sector Generators NF & Lab. Hydro Corporation NF Power General Service Customers (65.8%) CF(L)Co Industrial Customers Legend: Regulation Energy Sales Ownership Retail Customers General Service Customers

5 Newfoundland and Labrador Energy Plan Discussion Paper Page 41 Regulation Except for Churchill Falls generation, export sales and certain related activities, and industrial-own generation, the electricity industry in the Province is regulated by the Board of Commissioners of Public Utilities (PUB). The PUB was established in 1949 and operates primarily under the Public Utilities Act and the Electrical Power Control Act (1994). Its mandate includes ensuring that electricity rates are reasonable, and that service is safe and reliable. Although NP and its predecessors had been fully regulated by the PUB for many years, until 1996 NLH was accountable directly to Government for its capital budget and major decisions, such as the selection of new power projects, while the PUB examined NLH s operating costs and recommended to Government the rates NLH should charge NP and its own retail customers. In 1996, the Electrical Power Control Act (1994) was proclaimed, making NLH a fully-regulated utility under the authority of the PUB. The PUB sets rates based on applications from utilities and evidence presented at public hearings. When the PUB considers the rates that should be charged, it has to balance the utilities need for an appropriate return on the capital invested with the customers need for reasonable prices. If the rates approved by the PUB do not allow the utility to achieve its expected return, the utility can reapply to the PUB for higher rates. While this regulatory approach aims to control prices and utility profits, it provides limited long-term incentive for utilities to become more efficient or to encourage conservation. Some jurisdictions employ different methods to set rates. The most widely-used alternative to our system is performance-based rates (PBR). Although there are many variations in its application, the principle of PBR is that the regulator sets the allowed return on equity (its capital investment) but allows the utility considerable flexibility in setting rates. If the utility s financial results exceed its allowed rate of return, it must reduce rates to share its extra profit with customers. However, the utility is allowed to retain some of its additional earnings as an incentive to become even more efficient. A variation on PBR which has emerged in Canada is the heritage rate. This rate is set for the wholesale level supply of power (i.e., generation) and is fixed for a fairly long-term. This is applied mainly to hydroelectric generation, where the costs are largely fixed once a project is completed. Québec has a heritage rate and British Columbia is in the process of adopting one. Our rate-setting process through the PUB includes judicial-style hearings that are time-consuming, expensive and leave many consumers at a disadvantage because of the detailed knowledge required to participate. Recognizing this, Government provides a Consumer Advocate to represent consumers in general, and the PUB holds special sessions where individuals or groups can present their views under less-formal circumstances. In some instances, however, the cost of participation has been an issue for organizations which have a particular matter to bring forward.

6 Newfoundland and Labrador Energy Plan Discussion Paper Page Cost and Reliability For all residential, commercial and industrial users, the cost and reliability of electricity services are very important issues. The Electrical Power Control Act (1994) states that: All sources and facilities for the production, transmission and distribution of power in the province should be managed and operated in a manner that would result in power being delivered to consumers in the province at the lowest possible cost consistent with reliable service. Most of the Province s generation is hydroelectric, which is relatively inexpensive, reliable and emission free. However, constructing new sources of supply and volatile fuel costs at the Holyrood oilfired thermal generation facility and small diesel stations have recently increased Island electricity costs and pose continuing challenges. Rates are based on expected costs, but if these predictions are not accurate, the utility can recover (or refund) the difference through the Rate Stabilization Plan (RSP). The RSP assists consumers by smoothing rate changes due to sharp fluctuations in generation costs resulting from changes in oil prices and weather factors. Primarily, because of higher than predicted fuel costs in recent years and a lag in applying the RSP, Island system customers are currently paying off an accumulated RSP deficit. The PUB ordered this in 2003 and it is expected to be paid off by mid-2008 (December 2007 for industrial customers). A new methodology has been implemented which is intended to avoid the accumulation of major deficits in the future. Residential rates on the Island system are lower than most Maritime Provinces, although they are somewhat higher than rates in other jurisdictions that have mostly hydroelectric generation. Rates on the Labrador Interconnected System are believed to be the lowest in Canada. For most commercial and industrial customers, the province s electricity rates are competitive compared to the majority of Canadian jurisdictions. Customers on isolated diesel service pay the same as Island customers for basic consumption, but higher charges for additional electricity. The bills paid by these customers cover only about onequarter of the actual cost of supplying the power. This difference - as well as higher costs to provide electrical service to some rural areas on the IIS is absorbed and recovered by the rates charged to Island and Labrador Interconnected customers, excluding large industrial customers. Despite the large rural area serviced, the isolation of the Island system and the extreme weather conditions frequently encountered, the reliability of electricity service throughout the province has been very high over the years. For any electrical system operator, cost and reliability have to be balanced. It may be possible to reduce some operating and maintenance costs, but this may come at the expense of reliability. This trade-off would likely be unacceptable to most customers. Ultimately, consumers must pay the cost of providing electricity. All of the other issues discussed in this section interact in some way with the cost of electricity, either the total cost to produce and deliver it, or how that cost is allocated among various customers.

7 Newfoundland and Labrador Energy Plan Discussion Paper Page Electricity and Economic Development Secure, adequate and reliable power at competitive prices plays a critical role in economic development and maintaining industry competitiveness. This is true throughout the industrialized world: without it, modern economic development would be impossible. Today, new factors are at play and new opportunities may be opening for the province. The traditional approach was to use electricity as a tool for economic development by offering low rates to customers who bring a new industry to a region. In many jurisdictions, the use of this incentive is on the decline, primarily because supplies of lower cost power have been fully utilized. Other factors, such as trade agreements banning subsidies, higher electricity prices for general consumers and the trend toward competitive markets, have contributed further to a sharp decrease in discounted electricity supply. These factors have also led to a growing recognition of the true economic value of electricity. There is still some use of discounting, but this is usually limited to short-term arrangements to facilitate industry start-up. NLH s share of Churchill Falls recall power has a low cost, and approximately 100 MW remain available for development opportunities in Labrador. This power is currently sold to Hydro-Québec at a profit, and the revenue is returned to Government. Increasing our use of this power would reduce Government s revenue, and this has to be considered when formulating policy to use electricity to promote economic development. In addition, Labrador West and Upper Lake Melville region transmission systems would require significant capital investment to handle any significant future growth. On the Island, any sizeable new demand would require building additional generation capacity, and this would be at higher costs than existing NLH sources. If everything else remained the same, this would result in higher costs for all consumers. The best opportunity for securing electricity to assist economic development is hydroelectric power from the Lower Churchill River, together with any available from Churchill Falls. To date, this option has faced several challenges (discussed in Section 4.6). Nevertheless, Government is committed to developing the Lower Churchill to facilitate economic growth in the province, and has recently taken steps to accomplish this goal.

8 Newfoundland and Labrador Energy Plan Discussion Paper Page Electricity and the Environment All forms of electricity production and distribution have some environmental impact. These impacts may be local, regional or global in scope, and can affect land, water and air. Individuals and businesses have become more aware of environmental issues in the last few decades, and as a result legislation has been enacted to protect the environment while still allowing societies and economies to function. Electricity production continues to face increasing standards of environmental regulation, and meeting them almost always increases energy costs. Section 5 of this Discussion Paper discusses the issue of Global Climate Change, which is caused by the release of greenhouse gases (GHGs) into the atmosphere. This is a global issue and will require global solutions. However, all environmental effects begin at the local level, whether they are related to industry or the general public. Since many GHG emissions are the result of burning fossil fuels, they are of direct concern to the electricity industry. Other environmental concerns include other air pollutants or emissions, flooding and water contamination, other disturbance of land and wildlife (including fish) and various other human activities. Because our electricity supply is largely hydro-based, our electricity sector has a relatively low overall emission profile, meaning that we are a much lower contributor to GHG emissions than most others in North America. This is also a very good incentive for more hydroelectric development on the Lower Churchill, whereby we would contribute to improving the global climate change situation. Our largest emitter of GHG is the Holyrood oil-fired generating plant. It has also been identified as a significant Canadian emitter of other pollutants, such as sulphur dioxide (SO2), nitrogen oxides and particulate matter. However, in 1999, Cantox Environmental Inc. concluded that no measurable health effects would be expected to result from predicted future exposure or organic substances in emission from Holyrood. Cantox did conclude that special attention should be given to sources of nickel and vanadium prior to increasing production levels. Although there are environmental impacts from hydroelectric power plants, specifically impacts from large reservoir construction and the resulting generation of some GHG from decaying vegetation, these impacts must be weighed against the overall benefits of using cleaner, renewable hydroelectricity compared to burning various non-renewable fuels. While hydroelectric and fossil-fuel thermal generation are the most common sources in Canada, there are other possibilities for producing electricity, including wind power, burning renewable resources (such as wood) and nuclear generation. Each, however, has its own challenges related to costs, technology and environmental effects. Wind power may have undesirable visual, noise and wildlife impacts. Burning waste wood utilizes otherwise excess materials, but creates air emissions and may cost more than using fossil fuels. Nuclear generation though generally quite safe is not without risk. All these sources need to be compared, on their own merits, to the alternative of burning generally cheaper non-renewable oil, natural gas and, possibly, coal. Another important alternative to creating new generation capacity is increasing energy efficiency and conservation. Relatively, this offers the greatest potential benefit for the environment, and has recently received increased attention from the federal government and several provinces.

9 Newfoundland and Labrador Energy Plan Discussion Paper Page Future Supply Government is committed to developing and utilizing the province s various energy resources to produce electricity for our domestic needs and to take advantage of export opportunities by using energy that is excess to our needs. Ensuring that we have the supply to achieve these goals requires us to consider both our traditional generating sources and other alternatives. Figure 4.3 shows the history and forecast for the Island electricity system. The red line represents the amount of electricity used each year. The total amount of electricity that the system can provide depends on how much rain and snow falls, because much of the generation is hydroelectric. The blue line shows what the system could supply, assuming there had been Figure Comparison of Island System Load and Electrical Energy Capability (GWh), Total Island Load Actual Source: Newfoundland and Labrador Hydro Forecast Firm Energy Capability three years of very low precipitation. This is called the firm energy capability and is the measure that is used in forward planning, because the Island system is isolated and must be self-sufficient. Three very dry years would be an extreme situation. With average rain and snow, the capability of the Island system is significantly higher than the firm amount, which is why the minor discrepancy in did not result in any electricity shortfalls. Significantly, the graph shows that the firm capability as it is today would be less than the forecast requirement from 2009 onward, so additional supply should be implemented by then. From the mid-1960s to about 1990, the Island s electricity supply grew dramatically. Since then, and for the next seven years, growth is expected to be just under 1% annually. At this rate of increase, the current system should be sufficient to supply Island needs until at least In 2012, it is anticipated that Voisey s Bay Nickel will begin operating a full-scale hydromet plant in Argentia, which alone will result in a significant rise in overall demand. Newfoundland and Labrador is fortunate to still have a variety of options for electricity supply. Deciding on which types should be developed and how they should be developed requires consideration of several factors. These include determining: which types of electricity generation should be considered; whether additional generation is required to meet annual total demand, or just to meet peak demand; how different alternatives will affect the stability and reliability of our overall electricity system; if our current system can accept more power from intermittent or non-dispatchable sources (ones that cannot increase or decrease output when needed) such as wind farms and small hydroelectric plants without reservoirs; the current and future environmental effects and constraints of the various options; whether NLH should build all new generation for the general system, or whether the private sector be invited to bid; and how new electricity sources should be regulated. 2022

10 Newfoundland and Labrador Energy Plan Discussion Paper Page 46 Lower Churchill Project The Lower Churchill River has two of the most cost-effective undeveloped hydro sites in North America: the 2,000 MW Gull Island site and the approximately 825 MW site at Muskrat Falls. These sites are approximately 200km and 245km, respectively, downstream from the 5,428 MW Churchill Falls project. Government and NLH have been pursuing the Lower Churchill projects since the mid-1970s, but development options have depended on selling the majority of the output to Hydro-Québec. Though various sets of negotiations have been undertaken, agreement satisfactory to both parties has not been reached. Recently, however, Government adopted a new strategy and requested Expressions of Interest (EOI) from the international community for development opportunities at both sites. The various phases of the EOI process are expected to occur in Phase I ended on March 31, 2005 with 25 submissions received. These were evaluated, and three submissions moved into Phase II, which is a full feasibility study process. As the Province considers its options for the development of the Lower Churchill River, it will not lose sight of the value and importance of Churchill Falls. The use of its excess power could create significant economic opportunities for the people of Newfoundland and Labrador. Its value as a vast renewable hydroelectric resource is likely to be worth many times what we now realize. Other Hydroelectric Potential In general, hydroelectric plants are relatively expensive to build, but inexpensive to operate and last many decades. Several medium-scale hydro sites on the Island have a potential greater than 20 MW, and a total combined capacity of more than 1,200 MW. Small-scale Island hydro projects identified in a 1986 study indicated a combined potential of 710 MW. When NLH requested proposals for small hydro projects in 1992, 26 were received. Today, two of these are producing, at Star Lake (15 MW) and Rattle Brook (4 MW). In Labrador, in addition to the 2,825 MW potential of the Lower Churchill River, there are several potential projects on tributaries and other rivers. Many of the currently identified sites, both large and small, have environmental concerns, and there is presently a Government-imposed moratorium on new small-scale hydro projects on the Island. Whether any of these are preferable to other sources of generation is a question of balancing many factors.

11 Newfoundland and Labrador Energy Plan Discussion Paper Page 47 Thermal Generation Conventional large-scale thermal generation burns oil, gas or coal to make high-pressure steam that turns the generator turbines. There is only one large plant of this type in the province, at Holyrood. This site can accommodate one additional heavy-oil-burning generating unit similar to the existing three, or a more efficient unit fuelled by costlier light fuel oil or natural gas. Thermal generation is limited only by its fuel supply and can be located almost anywhere. In terms of capital cost, thermal facilities are cheaper to build than hydroelectric plants, but operating costs are higher and thermal plants have a shorter economic life. In addition, oil- and gas-fired plants are subject to fluctuating fuel prices and they produce higher levels of GHGs. When the Kyoto Protocol is fully implemented, this will have a significant impact on the overall cost of thermal generation. There are also a variety of other fuel options in the province which could be used for new, smallscale thermal generation. These include wood, peat and municipal waste, collectively known as biomass fuels. Wood products and oil can also be used for cogeneration (the simultaneous generation of power and useful heat) at industrial facilities, such as pulp and paper mills, oil refineries and other manufacturing and processing plants. Other future energy sources might include solar and fuel-cell powered generators. Nuclear generation is currently prohibited by legislation. Wind Power The most rapidly developing renewable energy source is wind power, and this environmentally friendly option has attracted considerable interest throughout the province. The energy output from wind turbines in Newfoundland and Labrador would be higher than in many other areas because we typically have strong prevailing winds in many locations. Strategy options for wind power development have been assessed, and NLH will be issuing a Request for Proposals for wind power very soon. Increasing costs of other forms of generation and advances in wind power technology have improved its competitiveness. Other challenges to be overcome include its non-dispatchability, its lack of load-following capability and potential system impacts (the ability to match rapid changes in demand with changes in supply), and the intermittent nature of wind even in Newfoundland and Labrador. Servicing Remote Communities Fast Facts Dispatchability - The ability of a generating unit to increase or decrease generation, or to be brought on line or shut down at the request of a utility's system operator. Load Following - The ability of generation to adjust to moment-tomoment changes to ensure that the system is producing neither too little nor too much energy to supply the utility's customers. Remote communities throughout the province pose special challenges for the electrical industry. In most cases, it is much cheaper to operate local diesel plants than to interconnect these communities. The same is true for using most alternative energy sources in such locations, where lack of reliability or high capital costs render them unfeasible. There is some interest in developing small wind-turbine projects on some remote systems to supply a portion of the load now delivered by diesel generators. A project in Ramea is currently providing experience with wind/diesel combinations. In the future, fuel cells may become an alternative in remote areas, but present costs are too high.

12 Newfoundland and Labrador Energy Plan Discussion Paper Page Conservation and Energy Efficiency Most of the options discussed in the previous section consider ways to increase our electricity supply to meet current and future needs. Another means of balancing supply and demand is to decrease demand. Conserving energy and using our present supply more efficiently have become attractive options in recent years as electricity prices have increased and environmental effects are more widely recognized. Adding any kind of new generation to our system is expensive and would likely cost more than existing facilities. In addition to reducing the requirement for new projects, increasing energy efficiency would reduce pollution and other environmental impacts, as well as helping to stabilize electricity bills. However, programs to encourage efficiency have had varying degrees of success in the past. On July 13, 2005, the Department of Environment and Conservation released the Provincial Climate Change Action Plan. This Plan contains numerous conservation and energy efficiency initiatives, including: completion of a study of the energy efficiency of the provincial ferry fleet in an effort to reduce fuel consumption and greenhouse gas emissions; promotion of energy efficiency in public and low income housing; and development and implementation of technologies, equipment and vessel design to increase fuel efficiency and safety aboard vessels. One way of increasing energy efficiency is demand-side management (DSM). Most DSM programs aim to shift electricity use from peak times to times when overall demand is lower. Such programs have most impact on systems where increasingly expensive generation is brought on as demand grows during the day or week (e.g. by adding more thermal generation to the system). With its base fleet of hydroelectric plants and one oil-fired generating station meeting all requirements under normal circumstances, the Newfoundland IIS is not currently operated in a manner that would benefit significantly from this type of DSM. On the Island and Labrador systems, there is a great difference between summer and winter electricity consumption, much of which is attributable to the growing use of electric space heating. In the future, increased conservation and improved efficiency, in combination with new projects and new energy sources, are likely to be components of our overall solution for meeting Newfoundland and Labrador s energy needs.