I am delighted to host a second guest post by renewable energy consultant, developer, and National Post contributor Jon Kieran. Jon’s first round argued that it isn’t good enough to simply criticize Ontario’s electricity situation. In this post, Jon proposes a positive vision for the future.
POSITIVE ENERGY
By Jon W. Kieran
Writing a critique about Ontario energy policy is like the Jays playing Texas: success is virtually guaranteed. Sure, much of that is due to the errors, entitlement and arrogance of the other team. But I for one am getting numbed by the grand-slam takedowns of Kathleen Wynne almost every day, and from both left, centre and right sides of the field. The analysis – though fair, informed and accurate – has become too uniformly negative.
We’ve reached a point as observers, commentators and critics of Liberal Party policy where the obvious doesn’t need to be stated anymore. This is a disaster. It’s getting worse. There will be no winners, and Ontario electricity customers will have been royally screwed by the time Kathleen’s Ruinous Rangers are turfed out.
No more dwelling on how the foundations of our power system have been destroyed; let’s explore how to rebuild it. Ergo, let’s try a different game…
My September 21 commentary on this site, available here, offered a different take on Ontario energy. I volunteered to be a “Proactive Purveyor of Positivity”. My thesis was to transcend the “Negative Nabobs of Negativity” commentary that usually goes hand in hand with Ontario’s completely failed electricity market.
A complete failure, you inquire? Yes, I reply. By the time we get a chance to boot this Liberal government out in 2018, Ontario’s power system will be endowed with 40,000 MW of capacity to supply a demand of about 20,000 MW on a typical day. Hydro bills have effectively doubled in the past eight years, annual demand of less than 140 TWh is the same as it was in 1997, renewable curtailment (mostly wind) is racing through 2 TWh and will likely approach 3 TWh by the next election (unlike baseball fans, power consumers should all pray for very cold weather…).
Any doubts or questions about the negativity? Still drinking the purple Kool-Aid that George Smitherman’s Green Energy Act is going to “reindustrialize” Ontario’s economy? Proud of Kathleen Wynne’s LRP 1 procurement going ahead even though Ontario doesn’t need the power? Keen to get a “free” $13,000 government rebate on your new BMW i3? Just Google the term Ontario Liberal energy policy shitshow and you’ll receive more than 1,000 hits. Lots of acute negativity for everybody to share. But, in my view, it’s time we inspired people with a more hopeful sense of the future.
I have a positive vision! Energy is critical to the welfare of our society, and will become more crucial to the well-being of Ontarians as the technologically disruptive 21st century unfolds. We Ontarians can improve our electricity system in measurable and meaningful ways – if we have the patience, determination and resources to fix it. Agreed, it won’t be fast, and it won’t be easy. But there’s lots we can do now to put Ontario on the right path.
My positivity covers three (hierarchical) topics: Ontario’s Energy Mission; Policy Direction; and, Immediate Program Decisions. Let’s look at these topics in sequence…
Ontario needs to innovate a new, believable and achievable energy mission. Out with the stale and dumb ideas as soon as possible: requiring new MW’s to create green jobs at any price; obliging renewable energy developers to fund municipal councils in their project bids; looking on carbon pricing as a $2 billion annual “pool” that funds a litany of government grand plans; picking companies and technologies that various ministries hope/believe will be energy market winners in three or 30 years’ time.
Here’s a mission for you: sustainable prosperity. Every energy decision we make going forward will be evaluated based on a measurable balance between sustainability and prosperity. Not one or the other. Not one at the expense of the other. Both. In measurable and comparable ways.
Inherent in this mission is a prudence of choices based on efficiency, fairness and cost-effectiveness. Going forward we will provide direction to the experts (the IESO or its equivalent) to run the power system in a manner that optimizes the greatest amount of energy generated at the lowest cost while minimizing environmental impacts. The power system will be an autonomous element of society’s infrastructure, which delivers a service to customers at lowest cost. It will not be an institution beset by government to test ideas about social engineering, inter-regional transfers or angel investing in “promising” energy ventures.
Sustainable prosperity. Say it three times, but with a cheerful and positive intention. What will Ontario legislators do in 2025, when energy storage and EV technologies are finally becoming commercially mainstream, and offer the prospect of both materially improving and undermining our power system? They will use the energy mission of sustainable prosperity to determine policies and programs necessary for the IESO to run the power system in a manner that optimizes the greatest amount of energy generated at the lowest cost, while minimizing environmental impacts.
Let’s face it – this mission is not as sexy and multi-faceted as the Frankensteinian raison d’etre that underpins energy decisions in Ontario today. But I guarantee you’re going to love (and better afford) a simpler mission that places electricity customer wellbeing at the centre of energy decision making.
The policy direction that flows from this energy mission is straightforward, and can be summed up in three simple phrases:
– Provide clear governance to experts who manage the system
– Quantify measurable tradeoffs between sustainability and prosperity
– Resist the overpowering temptation to interfere in the system and market
Here’s a bias from me: I actually have an abiding faith in the competence and professionalism of the people who manage Ontario’s power system. I actually think they know what they’re doing, technically and commercially. The policy problem is that they don’t receive clear governance. Going forward, we need a government to issue clear and concise policy direction. Implicitly included in that direction is governance priorities on supply/demand targets, characteristics and performance outcomes. Explicitly excluded from that direction is means to implementation, methodology and social/regional/industrial constructs.
The process of quantifying measurable tradeoffs between sustainability and prosperity falls to government. Only elected representatives with the confidence of the Legislature, and their executive, have the accountability to prioritize energy governance. For example, to determine the legislative agenda for green energy and its costs, carbon emissions and their value, etc. Invariably, these legislative determinations create trade-offs between sustainability and prosperity (i.e. we can burn lots of cheap gas, but exceed climate change goals; we can buy lots of big green energy, but burden the system with it). I guarantee that the experts who manage our electricity system would gratefully seek council from government on what these tradeoffs should be, as long as these experts then have the responsibility and authority – alone – to implement governance decisions in the most prudent and effective way possible.
The final direction will be a seismic shift away from Ontario’s current policy arrangement, whereby the Minister’s Office – dominated by Young Liberal campaign volunteers with three-year poly sci. degrees and two years of work experience – craft letters under the Minister’s signature to the IESO telling our system operator how to manage the power system. Let’s face it, you’d do the same thing under the same circumstances if your worldly 30-year-old chief of staff told you it was a good idea! When given an opportunity to tell the managers of a $20 billion electricity market how to “realize” abstract social, industrial and regional objectives as part of Ontario’s power system operations (and knowing that you’re acting on behalf of the Minister as sole shareholder), tinkerers who’ve been in power for 12+ years just might be tempted to…provide direction and damn the consequences. Lord help us all…
The immediate program decisions that flow from this new energy mission and policy direction are potentially too numerous to count. Let’s focus on three urgent priorities:
+ Do No Harm to Hydro Bills – Government should prudently terminate all program activity currently underway that exacerbates the imbalance between electricity supply and demand in Ontario. As my recent article laid out in the National Post, LRP 1, DSM and DR programs should be terminated today(!) to remove an approximate $5 billion burden from Ontario electricity customers, with virtually no material costs or consequences to the power system or market.
+
Re-Direct Ontario’s Energy Surplus to Get Domestic Industry Moving Again – Government should mandate the IESO to create an incentive for Ontario industries and businesses to consume the power system surplus, rather than export surplus electricity to the US at a loss. The incentive could be tiered, based on expected costs of energy sales to the US, and expected benefits from new Ontario commercial activity.
+
Initiate an Integrated Ministry Program Review to Reduce Hydro Bill Cost Pressures – The inflationary cost pressures currently strangling vulnerable Ontario electricity customers are more pernicious than simply items on your hydro bill. Ontario energy policy has become a multi-disciplinary process, whereby regulations of the Ministry of the Environment, work practices of the ministry of labour, permitting processes of the ministry of natural resources all act to increase the costs of electricity in Ontario. Are all these regulations, practices and processes efficient? Or even necessary? No one really knows, because the quantum of today’s electricity market imbalances (11-cent Global Adjustment charges, 3,000 MW of load vanished and not replaced in the past 10 years, etc.) dwarfs the discussion of how well Ontario’s government delivers an integrated service to the market.
My inescapable conclusion is that we should be getting excited about energy and electricity in Ontario. Not only because the Ontario election is 20 months away, but because we have the strength and vision to build something better than what we have. In the depths of public frustration about current policy choices, the seeds of innovation and alternative thinking can take root.
As I said in my original commentary in the National Post about Ontario renewable energy procurement, “The global renewable energy revolution has just started. Solar energy is increasingly the cleanest, cheapest and most environmentally sustainable option. The advent of battery storage, smart grids and the Internet of Things will catalyze innovative economies that embrace change. Renewables have a bright future in this world, but we need to regain control of Ontario’s failing electricity policies — and do it soon — to ensure we seize the energy opportunities of the 21st century.”