Ontario’s Long-Term Energy Planning Framework Needs Radical Change

On April 27, 2021, OSPE had the opportunity to submit recommendations concerning Ontario’s long-term energy planning framework.

Engineers on OSPE’s Energy Task Force know the current framework is not suited to the new paradigm, structure, technology developments, interdependencies, and market trends happening throughout the energy industry—radical change is required.

“We are now at the dawn of the modernization, transformation and transition of our energy systems.  New energy technologies stand to impact today’s energy systems in a way similar to how the internet, YouTube and digital streaming has changed the music, telco and cable TV sectors,” said Steve Pepper, P.Eng., Chair of OSPE’s Energy Task Force. “The energy planning framework and processes must change to accommodate these transformations and take advantage of the diverse opportunities and advantages they possess, while ameliorating their disadvantages and disruption.”

This includes:

  • Democratization, decentralization and distribution of energy resources
  • Digitization throughout energy systems
  • Decarbonisation to mitigate climate change
  • Interdependence of energy sources, transmission and distribution, and end uses
  • Electrification of the end-uses of energy, particularly in the transportation sector and building heating
  • The changing role of transmission & distribution
  • New technology commercially available and in development 
  • The interruptible nature of renewable resources requiring energy storage 
  • Technical advances and cost reductions for energy storage and renewable energy
  • Customers are both consumers and producers of energy (prosumers)
  • The evolution of transactive and flexible markets

Examples of the shortcomings of the current framework and processes are:

  • There is no one party delegated to the overall integration responsibility to ensure the various energy sub-sectors are meeting the needs of consumers
    • more focus is needed to effectively minimize total energy costs and safety risks for consumers, meet carbon emission targets, and maximize service reliability and value for the consumer
  • There is no responsible party assigned to manage inter energy sub-sector conflicts, competition, and planning so the outcomes are consumer and environmentally friendly in the longer term
  • There is no single authority to ensure wholesale and retail electricity markets are working efficiently with each other  
    • For example, the wholesale market for electricity management by IESO has provisions to sell interruptible electricity (electricity that is not capacity-backed). However, the retail market pricing plans do not recognize interruptible electricity. Consequently, most interruptible (surplus) electricity is sold to neighbouring power systems at very low prices but is not available to domestic consumers at those same prices and conditions. This imposes a competitive disadvantage on Ontario-based companies that compete with foreign companies for the sales of goods and services both in domestic and international markets.
  • There is no single authority to ensure competitive fairness with respect to carbon pricing in Ontario (and Canada), because currently there is no border adjustment for carbon price differences in other jurisdictions relative to Ontario on goods and services that cross the Ontario border in either direction.
  • No party has been delegated the responsibility to continuously search for and implement better energy concepts and architectures as energy and communication technologies change
    • For example, the development of distributed energy technologies, the internet of things (IOT) products, cyber security standards and 5G communication systems may make it possible for consumers to soon choose their energy provider and generation technology rather than have utility entities preselect their energy mix. 

Engineers on OSPE’s Energy Task Forces are recommending that the new energy planning framework and processes for Ontario should:

  1. Address the need to review and change the roles, responsibilities, and accountabilities of the Ministry, the IESO, and the OEB, to address the shortcomings of the current framework.

The new framework must also recognize the role, input and expectations of energy stakeholders and end-use customers. This includes:

  • The Ministry to set high level goals, policy and strategy and leave the detailed planning & execution to the organizations best equipped to do so, keeping politics out of energy planning & execution
  • The OEB and the IESO must work closely and cooperatively together to ensure due integration of the wholesale and retail markets and develop new innovative market options
  • The OEB and the IESO must take lead responsibility for the review and approval of the plans
  • For transparency, the role and input of stakeholders, customers and the Indigenous community must be included in the process 
  1. Be market-driven and competitive to take advantage of the energy opportunities available to provide safe affordable, reliable, and sustainable energy services for the benefit of all end-use customers.

This will require significant market reform and development and recognize the interdependence of the wholesale and retail markets. This will also require close cooperation, coordination, and collaboration between the OEB and IESO. 

  1. Be sustainable to protect the environment and address climate change.

Ontario has made excellent progress in reducing carbon emissions in the electricity sector, and it is important that this be maintained and extended. Further electrification of the transportation and building heating sector is essential to meet Canada’s emissions reduction goals, and the electricity supply needs should account for this.

  1. Consider all technologies available and forecast to be available within the planning period.

Each has their advantages and disadvantages and may have a role to play—even if small—to meet unique situations. This will require detailed analysis of alternatives to establish their affordability, reliability, and sustainability characteristics. The levelized cost of energy (LCOE) should be applied for each technology option. 

  1. Support the ongoing Research and Development (R&D) to improve the performance and cost effectiveness of existing technologies and develop promising new technologies to commercial status.
  1. Apply energy efficiency and conservation throughout the energy industry to reduce the resources required to meet the prevailing growth in demand for energy services.

This avoids new supply, contributes to decarbonisation, can improve industrial productivity and reduces transmission and distribution (T&D) losses.

  1. Recognize the changing role of transmission & distribution and the need for an integrated regional planning approach involving Local Distribution Companies (LDCs) and municipalities. 
  1. Recognize that the existing infrastructure and assets still have value and life and should be part of the planning process.

Stranding assets should be avoided where they negatively affect reliability and rates, and where there are more cost-effective carbon reduction options (e.g. focusing on the electrification of the transportation and building heating sectors). In particular, the proposal to accelerate the closing down of the existing natural gas-fueled generating plants needs to be subjected to detailed analysis in this regard.

  1. Be flexible and dynamic to respond effectively to future uncertainties.

This will require studying alternative scenarios such as growth in the economy and demand for energy services, the timing of commercial availability of new and innovative technologies, the role of existing assets, and progress with the reduction of carbon emissions and air pollution.

  1. Learn from the successes and failures of other jurisdictions with a similar mix of energy resources and industry structure.

The speed of transformation of the energy sector is proceeding faster in some jurisdictions than others. Ontario is not a leader in this regard and can learn and benefit from the successes and failures of other jurisdictions.

  1. Implement the peer review of plans including national and international experts from jurisdictions with a similar mix of energy sources.
  1. Be compatible with federal energy policies and strategies to the extent that is practicable.

 In particular, plans should be tied to Canada’s commitment to the Paris Agreement goals. 

  1. Consider supply chain availability and limitations.

Ontario and Canada are blessed with an abundant availability of materials, resources, know-how and skills to develop and build the assets and infrastructure needed to execute the plans. Preference should be given to Made in Canada solutions.

  1. Address the disruptions resulting from the transformations in the energy industry such as the expected decline in the oil and gas sector and accelerated growth in the electricity sector.

This will require the retraining, reskilling and relocation of employees.

Throughout the planning process the Ministry, the OEB, and the IESO must be willing to foster and be open to innovation. Innovation is the lifeblood of Ontario’s engineers and engineering.

Additionally, there must be better coordination across the energy industry plus oversight from one organization of all energy sources at a high level (not just electricity and natural gas, but also diesel, propane, gasoline, etc.) so that energy planning is truly holistic. 

Government Relations and Next Steps

OSPE and members from its Energy Task Force had the opportunity of meeting with Policy Advisors from the Strategic Network and Agency Policy Division of the Ministry of Energy, Northern Development and Mines. In this meeting we discussed the concerns of the engineering community and the need to adopt these recommendations.

The Strategic, Network and Agency Policy Division provides policy analysis and advice on energy related matters including: the Ministry’s relationship with energy agencies and oversight of shareholder assets; transmission and distribution system; sector structure, and regulatory issues in the electricity and natural gas sectors, among others.

The consultation regarding the province’s Long-term Energy Planning Framework is currently closed and being reviewed after being open for 90 days. Advisors from the Ministry of Energy ensured that they had noted OSPE’s concerns and that they had been hearing similar ones throughout the consultation process. They highlighted the frequent calls to let high level policy direction be given by government officials and to leave the detailed planning and execution to the expert organizations like the IESO and OEB.

Why Should Engineers Care?

The energy industry in Canada and Ontario is a major driver and contributor to the national and provincial economies. This industry employs thousands of engineers.

Currently, the energy sector is facing an extensive transformation in Canada, due to many factors, including the desire to decarbonize, decentralize and digitize energy systems. Such a transition will not come without major change and disruption. The thousands of engineers in the industry in Ontario will play a major role in managing and minimizing the upheaval and disruption and ensuring a smooth and successful transition.

The long-term planning goal of the energy industry in Ontario is to provide a clean, reliable, resilient, affordable and sustainable supply of energy to all customers—residential, commercial and industrial. Professional engineers are committed to protect the public interest and safety. This includes the protection of the environment and respecting the national and provincial emission reduction targets for the mitigation of climate change, as well as ensuring high quality clean air.

Engineers are also tasked in taking a leadership role in the ongoing discussion of sustainability and environmental stewardship. OSPE ensures that engineers take this leading role, and that government officials listen to the expertise that engineers contribute.

The opportunities for the current generation of engineers to contribute to this transformation in the energy industry are virtually limitless. Their professional skills, competencies, creativity and innovativeness will play a major role in the transformation.    

Click here to read OSPE’s full Long-term Energy Planning Framework submission.

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