The report starts from an erroneous premise (one which the Government of Ontario has unfortunately repeated on occasion): that a key purpose of the Green Energy Act was to improve air quality by reducing conventional air pollutants from coal-fired generation. One problem with this is that the Green Energy Act was passed in 2009, years after the government had committed to phasing out coal and initiated other procurements – gas-fired generation, nuclear refurbishment, conservation, and renewables – to take up the slack. Given the several year lead time in bringing new projects online, any contribution to the coal phase-out from the Green Energy Act would be marginal at best.

No, the primary purpose of the Green Energy Act was to reduce greenhouse gas emissions and position Ontario as a leader in developing a low-carbon electricity system. Having more conservation and renewable generation in the system does not (at least at the moment) eliminate the need for some fossil-fueled generation, but it does reduce the amount of energy and greenhouse gas emissions that these units produce. By contrast, adding pollution control equipment to Ontario’s coal plants would have done nothing to reduce greenhouse gas emissions.

The Fraser Institute report then goes into some specific issues with one form of renewable energy: wind generation.

For example, it suggests that 80% of wind output is unneeded, because it is produced at times that Ontario exports power. This is a misunderstanding of how our electricity market operates. In many of these hours, there would be net exports whether or not wind was running, driven by higher power prices in other jurisdictions. In the much smaller number of hours when Ontario actually does have an electricity surplus, why is it always wind that has to take the blame? A glance at the mix of generation will show a large amount of nuclear, gas, and hydro running around the clock (most also with fixed price contracts), with wind almost never making up more than 10% of the total.

The report also suggests that we may need to turn off nuclear plants to accommodate renewables, which could lead to increased use of natural gas in subsequent hours as demand rises, due to the time lag in bringing nuclear units back on-line. This issue has already been dealt with by the Independent Electricity System Operator, by allowing nuclear operators to offer their non-flexible generation into the electricity market at a lower price than wind, ensuring that wind would be turned off first in the event of a surplus.

Let me be clear – wind alone cannot power our electricity system, and I don’t think anyone has ever said that it can. We need a mix of low-carbon options – energy supply, conservation and demand management, and storage – that can work together to meet our electricity needs.

Nevertheless, reducing the amount of carbon emissions produced by our electricity system was and is the right thing to do. The government shouldn’t be afraid to stand up and say so.

Today I released my report on the Environmental Commissioner’s Soil-Carbon Roundtable, entitled “Investing in Soils for a Sustainable Future”, held last year in Guelph. (Click for more information, to watch presentations or to download the report.) It is an intriguing document because it contains a good measure of both hope and of frustration.

Hope arises from its revelation of broad areas of consensus among experts and stakeholders, confirming our common awareness of the vital importance of soil organic matter (SOM) — not only to our food supply, but to our water, our air, our climate, our biodiversity, and our economy. (see “The Roots of Sustainability: Engaging the Soil Carbon Solution” in my 2011 Annual Report.)

Frustration arises, however, from the report’s lack of consensus on how to ensure that SOM levels rise and then stay high.  We run the risk, too common in Ontario these days, of simply letting the status quo continue, while failing to take bold action.

Other jurisdictions have recognized the fundamental connections between sustainable agriculture and food security, soil health and a healthy environment, and soil-carbon levels and climate change. In 2011, Australia introduced the Carbon Farming Initiative, which caps carbon emissions by industry, exempts agriculture from the caps, and then allows farmers to sell the carbon credits they acquire when they adopt management measures that sequester carbon, including those that build SOM.

Here in Canada, Alberta has an intensity-based cap on carbon emissions for its largest businesses – a cap that is reduced each year, therefore requiring constant improvement. One of the compliance options for these businesses is to invest in carbon offsets, which include no-till agriculture, a management practice that raises SOM levels in the dry prairie soils.

Ontario has its own unique soils, climate, and ecology, so we need our own made-in-Ontario soil-carbon policies and protocols. We must get past the arguments about what management practices and incentive systems work best and just get going on this vitally important investment strategy. We must quickly create (or adapt other jurisdictions’) measurement and  incentive tools, protocols, and programs, so that we can measure and monitor our progress. There are many innovative examples upon which to draw, so let’s get started.

Our farmers feed us, but they also have the ability to help us prepare for the future. Their work can mitigate climate change, build ecological resilience, sustain our natural environment, protect our water supplies, guard our biodiversity, and generally enhance our quality of life. However, to do all this they need our help. Like any investment, change always involves some level of cost and of risk. Since we will all benefit from these investments in soil, the costs and the risks should be shared, not borne by farmers alone.

Hourly Ontario Energy Price (HOEP)

One key element in setting the price of electricity is called the Hourly Ontario Energy Price, or HOEP (pronounced “hope”). This price is set on a market, which works like this:

The Independent Electricity System Operator (IESO) predicts the demand of electricity for the next hour. In theory, with this information, generators (for instance natural gas plants, nuclear power plants, or wind farms) competitively bid to supply electricity to meet this demand. Also in theory, the cheapest suppliers would get contracts first. As demand rises, the price would also rise, and more expensive generators would enter the market.

But this is not a free and open market that Adam Smith would recognise. The invisible hands in this market are rummaging in our pockets. Almost all the generators playing in this market have prices that are fixed, guaranteed or subsidized – so they will never lose money, no matter how low the market goes.

So lets look at a graph of the monthly weighted average HOEP from 2005 to 2012 to see how this works.

You can see that the highest HOEP was actually in 2005, where it touched 10¢/kWh. After that, the market levelled off to between 4¢ and 6¢/kWh for a few years. When the economy collapsed in 2009, demand fell and the price dropped, and has fluctuated in the 2¢ to 4¢/kWh range for the last 4 years.

The key point here is that (outside of some of our older large hydro-electric facilities), no generator can afford to sell power at 4¢/kWh. So how is this possible?

Global Adjustment

This magic is done using a marvellous invention called the Global Adjustment (GA). This is an additional hourly charge collected from consumers to pay for those fixed prices, guarantees and subsidies if the HOEP is too low. So let’s plot the Global Adjustment on the same graph as above.

We see that the Global Adjustment displays an almost opposite pattern to the HOEP. With one interesting exception (when it went negative), the GA for 2005 to 2009 varied between zero and 1¢/kWh. But then, when the HOEP price crashed, the GA jumped up to the 4¢/kWh range – and subsequently has crept even higher. So what’s going on here?

Remember that the Global Adjustment is the price guarantor for the generators. It actually went negative in late 2005, when high HOEP meant that Ontario Power Generation’s nuclear and large hydro plants were getting far more from the market price than their guarantee, and they had to kick back money. But for most of the 2005 to 2009 period, the market HOEP was high enough to satisfy the pricing needs of the generators. It is interesting to note on the graph that during that period when the HOEP hits 6¢ the Global Adjustment goes to zero.

But that was a different economy. In 2009, Ontario saw a drop in demand, largely due to the recession, and a large increase in supply (from new gas plants coming into service). The change in the supply-demand balance meant that almost no generator could make their money on the HOEP, so the price guarantees kicked in, and the Global Adjustment became as large and then a larger hourly charge than the HOEP.

So what is the real price of electricity?

So to get the real price of electricity, you have to add the HOEP and the Global Adjustment together. Here is what that looks like on the same graph.

The red line is the real market electricity price for the period 2005-2012. You can see that the price spiked to almost 8¢/kWh in heady days of 2005, but then fell back to the 5¢ to 6¢/kWh range through 2006-200,7 and has been gradually creeping upwards until the 2005 peak was exceeded, and it broke through 8¢/kWh in late 2012.

Confusion reigns

This concept – that the HOEP is not the real market price, because you have to add in the Global Adjustment – is the basis of a lot of confusion in the media and in various public discussions. And this is understandable because of the way the information is presented. Take for example this screen shot of the IESO website:

The site is very informative on a number of levels and you can clearly see the current level of the global adjustment. But the HOEP is presented as the “Hourly Price” and there is no attempt to add the HOEP and the Global Adjustment together. So in this example, the public would conclude that the market price of electricity was 2.5¢/kWh and not the correct 6.27¢/kWh.

I hope you now have a better understanding of the basis of wholesale electricity pricing – but we aren’t at the price on your bill yet. To explain your bill we have to get into the intricacies of Time-of-Use pricing and the Ontario Energy Board. And those will have to be the topic of another blog posting.

CHP in Helsinki, Finland.

The three R’s are well known: reduce, reuse, and recycle.  Not many can dispute the environmental benefits of this mantra. Yet, the concepts of “reuse” and “recycle” seem to be lost within Ontario’s energy planning model.

There are many different types of industrial processes, including electricity generation, and no system is completely efficient.  Many systems produce heat as a by-product, which is often called “waste heat.” I think this characterization of potentially useful energy as a waste by-product of a process is where we start to go wrong.  There is a Japanese term “mottainai” which characterizes the attitude we should have. The term conveys a sense of regret about wastefulness when the value of a resource has not been properly utilized.

There are two options for what we could do with this by-product heat.  One, we can effectively throw it away by releasing it directly to the environment.  Two, we can use it by transferring it to another industrial process or by heating nearby homes or businesses.

Unfortunately, the first option is sometimes taken and we throw “waste heat” away.  Cooling towers, for example, vent excess heat so that an industrial process can continue to run smoothly.  From an energy efficiency standpoint (and in following the three R’s mantra), throwing this heat away is a bad idea.  Reusing or recycling it would be preferable, especially if we are able to put this energy to use and feed it directly into a district energy system.

Through a network of underground pipes carrying hot or cold fluids, district energy systems can heat and cool entire residential and commercial neighbourhoods.  These systems don’t even need new fuel because they can be designed to run on waste heat from industrial plants.  This type of thinking has existed in Europe for many years.

Just look at Gothenburg, Sweden [.pdf], a city that’s been using district heating since 1953.  As of 2011, almost two-thirds of the city’s residential heating needs are met through district heating.  And nearly 80% of the heat fuelling this system is waste heat from industry, electricity production, and waste incineration!  How smart is that?

Recycling energy is also important, and one of the most common forms of energy recycling is referred to as cogeneration, or combined heat and power (CHP).  CHP plants use one fuel (from an environmental perspective, ideally a renewable fuel) to create electricity and heat at the same time.  Because they are able to recycle heat, CHP plants produce more energy for a given amount of fuel than a separate heating and electricity generation system.  They can also be located close to homes or businesses, so you don’t lose a lot of energy transporting the electricity or heat from the plant to the place where it is needed.

It’s easier to see the benefits of reusing and recycling heat when considering overall energy needs. Unfortunately, Ontario’s energy discussions tend to focus on electricity and this narrowed focus results in lost opportunities.

In my most recent energy conservation report, I reviewed the Ontario Power Authority’s progress with acquiring 1,000 MW of CHP projects.  Although repeated attempts have been made over the years to reach this target, less than half of this target has been met.  I worry that the energy planning model is so focused on electricity that it is not properly accounting for the heat that CHP systems produce, which should be viewed as a direct benefit for Ontarians.

Resilient, long-term energy plans should value energy efficient designs, like reusing waste heat, recycling heat through CHP facilities, and installing more district energy systems.   I hope to see the environmental mantra of reduce, reuse, and recycle incorporated into Ontario’s energy infrastructure.

The RCCAO report has a rather jaw-dropping statistic about what’s in store for the GTHA if we don’t do something about this gridlock: today, two million car trips are made daily in the peak morning period and this is expected to rise to three million over the next 18 years. This growth will see the $6-billion cost of congestion rise to a staggering $15 billion! Per year! One of the solutions is to get people out of their single-occupant vehicles and onto rapid transit (with the emphasis on RAPID).

Finding revenue streams to pay for transit has been the holy grail of transportation planners for decades; and, with the kind of deficits governments are facing these days, it’s still as elusive as ever. Metrolinx, the provincial agency charged with implementing the GTHA’s 25-year, $50 billion regional transportation plan – The Big Move – must come up with an investment strategy by this coming June that indicates where the unfunded portion of this $50 billion (80 per cent) is going to come from. Metrolinx is rolling out a major consultation effort to help inform the strategy and engage the public. The City of Toronto is doing likewise. Just about everything is on the table: road tolls, congestion charges, parking policies and fees and other revenue sources such as fuel taxes, regional sales taxes and vehicle levies. I’ve reviewed the majority of these policy tools in my 2010 Greenhouse Gas Annual Progress Report. Both the Metrolinx and City of Toronto public consultations are getting considerable media coverage with reports that the public may be far out ahead of our politicians in terms of readiness to support tolls and taxes to fund public transit.

As I’ve said, “there are too many single-passenger vehicle trips being made” in the GTHA and I’m not alone in making this observation. In addition to the just released RCCAO report, the Toronto Board of Trade [.pdf], the Greater Toronto Civic Action Alliance [.pdf] (formerly the Toronto City Summit Alliance) and the Pembina Institute have made similar observations – and offered up compelling options for addressing the problem.

So, road pricing is once again a front-page issue. It needs to be as we continue to grapple with the social, environmental and public health implications of moving people and goods around the GTHA.

Today I am pleased to announce that all of the ECO’s work on biodiversity is now available in one, comprehensive collection on a new website – Biodiversity Ontario. The site features articles from the ECO’s reports over the past twelve years, on topics such as invasive species, wildlife, endangered species, climate change, protected areas, natural heritage, and the role of government. You can also read ECO special reports on biodiversity: The Last Line of Defence: A Review of Ontario’s New Protections for Species at Risk, containing my review of the Endangered Species Act, 2007; and Biodiversity: A Nation’s Commitment, an Obligation for Ontario, released in 2012 to urge the government to come up with a new strategy to stem the continuing decline in Ontario’s species and natural spaces.

The ECO’s work has played a key role in framing the conversation on biodiversity in Ontario, and has been instrumental in crafting the solutions now being implemented for its conservation. For example, for many years I have been calling on the provincial government to create a strategic plan of action to preserve and protect Ontario’s biodiversity. In December 2012, the Ontario government responded to this call to action, and released its Plan to Conserve Biodiversity, which sets out the government’s commitments to actions to protect biodiversity.

I hope the site will be a valuable resource for Ontarians to learn about the province’s vast biological diversity, as well as the challenges faced in protecting it. I also hope that the site will encourage a dialogue about the role of government and the public in the conservation of biodiversity. The site will continue to grow as the ECO tracks ongoing issues, emerging trends, and government decisions that impact biological diversity.

I invite you to explore the new Biodiversity Ontario site, and look forward to hearing your feedback.

* Photo credit: MNR

Time-of-Use does not mean your bills will go up

Let’s be very clear off the top: time-of-use (TOU) does not mean that you have to pay more for electricity. Let me demonstrate with an actual electricity bill. It is for the Toronto home of one of my staff for the month of October 2012. (We are only considering the price of the electricity, not the price for transmission or distribution or the stranded debt charge, etc., because they don’t vary with TOU.)

Here is the data:

So this consumer paid $57.07 for electricity that month, based on that consumption and those TOU prices. (This does not include the delivery and regulatory charges which I haven’t shown) The ratio between the price he paid at peak times (11.7 ¢/kWh) to the price he paid off-peak (6.5 ¢/kWh) is only 1.8:1. The literature that my staff and I have reviewed says that when there isn’t much difference between peak and off-peak prices, consumers don’t pay much attention to the time they use electricity. For this to happen, the peak/off-peak ratio would have to be greater, perhaps 5:1. So if we increased the ratio, would the ratepayer have to pay more? The answer is no. We can rework the above energy bill at a 5:1 ratio to illustrate this:

Here is the data:

* 4¢ lost in rounding

So you see that it doesn’t have to cost more to increase the TOU ratio, but it can benefit the system and, in the long term, the ratepayer, if load is shifted from peak to off-peak hours. Here is why.

So what is the benefit of time-of-use pricing?

In Ontario, there are two major challenges with our electricity supply system. The first challenge is that during the middle of the day (and especially in the summer months), the demand for electricity peaks, and we have to pay for expensive additional generation to meet peak demand. In October, the peak demand is usually not as high as in summer or winter months. But even in October 2012, the peak hour price on the wholesale market was 15¢/kWh (compared to an average of 2.2¢).

The second challenge is that in the middle of the night, especially in the fall, we often have more generation than we need, and we have to get rid of it.  Because there is inadequate demand, the price on the market goes to zero, and then negative. On the worst night of October 2012 we were actually paying customers, some of them even in other jurisdictions, 12.8₵ to take our power for one hour.

So when we don’t have enough power at peak times, and when we have too much at off-peak times, it is worthwhile to encourage people to switch their electricity use from peak times to off-peak times. And just how difficult is that? Well, if you take our example consumer, and ask him to shave his peak use by 10%, what would that involve? This works out to 0.27 kWh/day to drop peak use 10%. That can be more than accomplished by moving one clothes washing load, or one dishwasher load, or one teenager’s shower from 6 pm until after 7 pm.  Now admittedly, the savings to the ratepayer in this example would not be much, about $1.50 for the month. But the cumulative effect of many thousands of ratepayers shifting electricity demand to off-peak times would be a significant saving to the overall system, because we would not have to build or contract for new peaking facilities, nor have to pay to dispose of surplus generation.

Let me make it clear that I am not advocating for the particular prices used in the example. I also realize that the system of price setting is complicated and that there are some loads that cannot be moved off peak.  But it is worth repeating that in many cases the total electricity cost does not have to increase for many ratepayers if we want to utilize the flexibility available in the TOU pricing system. And over the long term, a more efficient system makes power cheaper for all.

Purchasing electricity?  (I know you are because you’re reading this blog!)  It’s sort of similar to purchasing an appliance.  Every time you turn on a light or computer, you’re making a purchase that can result in unintended consequences – like releasing greenhouse gases (GHGs), a major driver of climate change. At the individual level, there won’t be a significant amount of GHGs released from turning on a light.  But, everyone’s purchases taken together, combined with the electricity used by companies or institutions, can result in large amounts of GHGs being released. This is especially true during peak demand periods, when more fossil fuel-fired generating stations (like gas-fired ‘peaker plants’) are in the mix.

What’s an enlightened, environmentally conscious consumer to do?

One useful tool is an emission factor: the amount of GHGs released per unit of energy produced by suppliers (and ultimately consumed by users.) The Independent Electricity System Operator (IESO) could make the estimated GHG emission factors for Ontario’s electricity consumption publicly available on an hourly basis. In my Annual Energy Conservation Progress Report – 2011 (Volume One), I recommended that they do just that. This was motivated by my desire for electricity consumers to have information that could help them make environmentally conscious decisions about when they consume electricity.

Right now, such information is available from sources like Environment Canada’s Electricity Intensity Tables, which provide an annual greenhouse gas intensity factor for each province’s electricity system. Unfortunately, this annual greenhouse gas intensity factor doesn’t reflect the hourly variation of our electricity system.  Plus, publication of the annual greenhouse gas intensity factor is delayed by a couple of years.

Clearly, an annual emission factor does not accurately reflect the carbon intensity of our electricity system during any given hour of the day. This is inadequate for anyone who would like to reduce their carbon footprint by shifting their electricity consumption.

Why would you be interested in shifting your electricity use? Because Ontario’s sources of electricity supply – and the consequent production of GHGs – vary throughout the day. It is a dynamic system where generators are turned on and off to meet our varying energy needs – and generators rely on different fuel sources and technologies. As energy demand changes hourly, weekly and seasonally, the amount of GHGs emitted to the atmosphere by electricity generators also fluctuates.

I’m not the only person who sees this problem. Last year, my staff met with researchers at Niagara College who published an interesting peer-reviewed approach for calculating hourly emission factors. Other researchers have been exploring similar issues, such as looking at the emission intensity factors for marginal electricity generation.

There’s also momentum from the private sector behind this idea, including the creation of an app to help people see what their hydro bills are paying for.  The Gridwatch (Ontario Edition) app was launched last year for iphone users, and is free to download. It provides users with an easy-to-read interface that shows you how much power is being generated, from what electricity source, and it even calculates its own estimate for Ontario’s hourly GHG emissions from electricity generators.  This helps consumers learn more about their electricity use and the associated GHG emissions.

Wouldn’t it be useful to have an official method that is endorsed by government and industry to calculate hourly GHG emission factors for Ontario’s electricity consumption? I think so. I believe that an official source for real-time GHG emission factors could help industries calculate their emission reductions from load shifting, could help academics studying GHG emissions from our electricity system, and help you, the public, make decisions on when and how to use electricity with the least impact. The generation data is already being collected and it would improve the public’s understanding of our electricity grid and how our electricity use is related to reducing our GHG emissions.  Let’s get an official source of hourly GHG emission data for our electricity system available!

Waste management presents a major challenge in Algonquin Provincial Park. With a turnover of thousands of people every year, there are many visitors to educate and large quantities of waste to manage.

Innovative staff at the Ministry of Natural Resources rose to this challenge by designing and implementing a system which has increased the waste diversion rate in the park from about 20% in 2004 to over 40% in 2011. This amounted to over 200 metric tonnes of waste diverted from landfill last year. The staff’s next goal is to reach a 60% diversion rate.
“It’s encouraging to see how a few dedicated public servants can change the way Ontario’s campers experience our parks, while keeping more waste out of landfills and educating visitors and staff about responsible waste management,” said the Commissioner.

The system facilitates recycling and organic diversion through the placement of separated waste collection containers along the Highway 60 corridor of the Park. These containers are specially designed with wildlife resistant lids and are placed 2/3 underground so the coolness of the ground tempers odours.

The ECO believes this project is important as it will lessen the environmental impact of the more than one million visits that Algonquin receives annually, and demonstrates that waste diversion can be done in any context. Further, if applied across Ontario’s protected area system, improved waste management could help educate park users and lessen the impact of the more than 10 million visits that these special places receive each year.

How much are we are paying for these savings? The cost of either “negawatts” (units saved from electricity conservation) or “megawatts” (units produced from any type of generation) can be calculated and compared as a levelized delivery cost. This measures the total cost to customers of the conservation or generation project, divided by the lifetime amount of electricity produced (or saved).

For example, let’s say that a conservation program provides a $2 incentive for a customer to purchase a high-efficiency light. Over the light’s lifetime, it uses 100 kilowatt-hours less than the standard efficiency light that the consumer would otherwise have purchased. The levelized delivery cost of this initiative would be 2 cents per kilowatt-hour ($2.00 divided by 100 kilowatt-hours).

When you do the math for the entire suite of conservation programs offered in 2011, the levelized delivery cost is 3 cents per kilowatt-hour. That’s what a negawatt in Ontario costs (more precisely, a “negakilowatt-hour”, but, for obvious reasons, that term hasn’t really caught on…). But what is a negawatt worth?

The real value of negawatts is that they can help avoid the need for new generation, which has much higher levelized delivery costs, not to mention other issues involving siting and environmental impact. Look as closely as you want – you won’t find any new electricity supply options cheaper than conservation.

While it’s true that we currently have an excess supply of electricity at certain times of the day and year, this is a near-term issue. The Ontario Power Authority is projecting a “supply gap” peaking around 2020 as the Bruce and Darlington nuclear units go down for refurbishment, and the ageing Pickering plant reaches the end of its life. The size of this gap is estimated at 1000 to 4000 megawatts, and could be even larger, as the analysis assumes that Ontario will meet its current energy conservation targets, which is no sure thing.

Can conservation play a larger role and offset the need for some of this new generation? I believe it can, but it’s not something that happens overnight. The savings from conservation build up slowly year upon year, as customers make changes to their buildings and equipment that often stay in place for decades. To get as many of those savings as possible, we need a long-term commitment to funding electricity conservation within electricity planning.

Let’s put those negawatts to work!