CARDINAL -- Here's an Ontario community that actually embraces their local gas-fired power plant -- a facility whose provincially-compelled reconfiguration now threatens to take the steam out of both Cardinal and the Eastern Ontario corn economy.
For two decades, Capstone Infrastructure Corporation's co-generation plant has supplied economical steam and electricity to the neighbouring corn syrup factory that is synonymous with Cardinal.
Ingredion -- formerly known as Casco and Canada Starch -- employs 200 people. Steam from the 156-megawatt plant also heats nearby Benson Public School, situated a little more than a stone's throw from the plant's silver stack on the St. Lawrence River.
And yet, Cardinal's beneficial arrangement will come to an end at the conclusion of 2014, a casualty of the province's pursuit of green energy projects amid a general oversupply of electricity wrought by economic decline.
Publicly-traded Capstone managed only to negotiate a new 20-year OPA contract for a "peaking" type gas plant -- one that can be turned on and off rapidly to fill in when renewable power sources on the grid abruptly come up short. The design change will end Ingredion's stable steam supply, currently generated as a byproduct of baseload power produced around the clock.
In its existing form, the co-gen facility netted the owner $33.4-million in 2013, running nearly 100 per cent of the time. But once revamped for "dispatchable" production, that's expected to drop to just $7- to $9-million annually, under the new OPA contract announced March 26, and then only after a considerable capital investment to effect the change sometime over the next 18 months or so.
Capstone's Sarah Borg-Olivier, senior vice-president of communications, offered a positive take on the new contract -- not all that surprising given the company's involvement with wind and solar projects elsewhere in Ontario. She emphasized the "certainty" the impending new contract delivers to her firm's shareholders and 18 employees at the Cardinal power plant -- not the expected whopping loss of revenue at the same operation.
"The existing contract, which expires at the end of 2014 was signed in 1994, so the dynamics in the power market are obviously very different than they are today," Borg-Olivier told The AgriNews in April. "We began negotiations with the OPA in 2011 and we've always known that the facility, under a new contract, would operate on a dispatchable basis rather than baseload, and that changes the economics, and that there would be some capital expenditure involved as well.
"And all of that has been planned for and budgeted. We're pleased with the certainty we were able to achieve. It provides certainty for our investors. It's been a big question in the minds of our shareholders and an area of risk for the business, frankly, so resolving it is very positive."
She acknowledged a connection to Ontario's controversial rollout of "intermittent" wind and solar power on the grid. "So what really has been needed here is more flexible [backup] generation. And gas is really the technology that can provide that, and with gas prices being where they are right now, it's certainly an attractive area. And in the case of Cardinal, from the province's perspective, maximizing existing electricity infrastructure is a lot more efficient and cost effective than building new. From a ratepayer agreement, I think this is quite a balanced agreement we've struck with the OPA," enthused Borg-Olivier.
But Leeds-Grenville MPP Steve Clark pointed out the impending conversion of the efficient baseload power plant spells only uncertainty to Ingredion, which can't rely on recycled steam from a facility rendered idle much of the time.
Clark said he was disappointed with the March contract announcement, having hoped for an extension of the current arrangement that would allow existing infrastructure to function as it always has. "They will lose their steam, and that will put the plant in jeopardy," he said of Ingredion in April. "I think this is something that everybody acknowledges that this government over the last several years has created."
Re-elected last month, the Progressive Conservative MPP said that Ingredion, as one possible option, faces the prospect of building a replacement 15-megawatt co-gen plant of its own at a potential cost of $30-million.
"Why would you make it so difficult to change this to a peaking plant when the economic benefits of having the plant supply Ingredion with power gives us an economic advantage...? To me, I can't understand why that would happen," said Clark, who has been working on the file for two years and earlier this spring demanded action in a letter fired off to the premier, minister of energy and other key cabinet ministers.
Why, indeed, should Ingredion's Chicago-based board of directors be handed on a platter any excuse to close down its 155-year-old factory in Cardinal? (Still, a Liberal partisan opined to this writer that if Ingredion shutters the operation, the decision will have everything to do with the factory's age and nothing with the Green Energy Act.)
Drawing attention to the irony of this situation in a province riven by gas-plant cancellations, Clark added, "Let's face it, we had a gas-fired plant in that community where we had letters of support. We had letters of support for expanding that plant from the school board, from the municipality, from the Grain Farmers of Ontario, from municipalities. So there was a lot of support in Eastern Ontario to extend that power plant's contract, which would have served all those parties extremely well. I think the government needs to give us a chance to retain those jobs in Cardinal."
Capstone itself is holding out some hope of running the revamped power plant on a more constant basis at some point after conversion. Should the province take nuclear reactors offline for refurbishment or see a surge in demand for electricity, "facilities like Cardinal will be able to spring into action to meet that need," noted Borg-Olivier.
But there are no guarantees, thus leaving Ingredion -- which did not return calls -- with a continued question mark about its steam supply.
The Ingredion factory was the first processor to purchase corn directly from Eastern Ontario growers in the 1960s, ushering in grain corn as a crop staple in this region. Today, it remains one of only two end-user buyers of corn, consuming about 20 million bushels of the crop here annually.
In light of recent developments, keeping the place open is a key topic of concern near the top of the agenda at every recent meeting of the Grain Farmers of Ontario, says GFO Eastern Ontario District 1 representative Markus Haerle, a chicken and corn producer from St. Isidore.
A quarter to a third of the Eastern Ontario corn crop ends up at the Ingredion site, estimated Haerle. "That plant is one of the main plants here in the area, and we can't afford to lose that plant, it's as simple as that. That corn has to go somewhere, and the only other place it could go is across provincial lines to Quebec or be funnelled down more toward Southern Ontario." Ingredion's closure, he added, "would create a chain reaction in the whole movement of corn in Ontario."
Growers would face increased transportation costs to ship their corn, said Haerle. "If it has to go further away, the farmer has to cover that off, and that can never be reflected back into the price."
The corn gluten feed byproduct created at Ingredion would also be lost to local dairy, hog, poultry and beef producers, he pointed out.
Recounting a March lobbying session at Queen's Park, Haerle said the GFO and Ingredion have been working together to find a "solution to the problem" with the provincial government.
"The whole energy situation is an unfortunate one. Hopefully it can be rectified to keep the plant operating," remarked Morrisburg corn producer Arden Schneckenburger. Also alluding to increased transportation costs, he said the Eastern Ontario price basis for corn would take a hit if Ingredion ever shut down.
"With ever increasing yield ... we need all the markets we can get," Schneckenburger explained, suggesting Ingredion's longtime presence in the region has been integral to the success of growers. "We're extremely fortunate in Eastern Ontario," he said, also noting the more recent arrival of GreenField's Johnstown ethanol plant. "While Casco (Ingredion) was basically the first, we need them all to keep our prices. Because we don't have a big chicken or pork or beef industry in Eastern Ontario. Our corn industry is those two end users, high fructose sugar and ethanol."
Capstone does have an agreement to supply Ingredion with operations and maintenance support should the latter firm opt to invest the millions required to keep the steam flowing in Cardinal.
For now, a farming region awaits an answer on tenterhooks. Will one of the oldest corn processors in North America continue to find fertile ground in Ontario and Cardinal -- and shell out millions it wouldn't have otherwise had to invest? Or will it leave behind an empty green' husk?