As reported recently in the media, John Podesta from the Center for American Progress in Washington DC visited the MaRS Centre in Toronto and presented a compelling case for continued public policy support for and political commitment to green energy in Ontario.

In his presentation, Podesta praised the Green Energy and Green Economy Act (GEGEA) and its pivotal Feed-in Tariff (FIT) program as being the key drivers responsible for $21 billion in investment in Ontario and the creation of about 20,000 jobs since 2009. He credited the program for creating the kind of stable investment climate that manufacturers, financial institutions and entrepreneurs must have to hasten the transition to a low-carbon economy.

Podesta also referred to a recent Brookings Institute report in his presentation. The report indicated that the growing “clean economy” in the US is manufacturing- and export-intensive, with over 25 per cent of its 2.7 million workers in “green” jobs originating in the manufacturing sector. Median “green collar” wages in the US are 13 per cent higher than median wages in general. Between 2003 and 2010, the US clean economy outperformed the overall economy by a factor of two. He added Ontario is now a North American leader in the creation of these higher paying, export-oriented “green” industries.

Podesta provided the cautionary tale of China’s efforts to corner the renewables market, both in terms of technology development and dominating the export market. Recent media reports make it clear that China, as part of its push to become a world leader in green technology, is intent on putting a price on carbon as a component of its transition to a greener economy. I’ve made my position clear on the need for pricing carbon in Ontario in a previous blog. What’s really interesting about China is that it is being supported, in part, by the US Energy Foundation. As Podesta noted, China’s centrally controlled economy and its ability to regulate “at will” means they will increasingly challenge for world market dominance.

So, it’s concerning when a report just released by the Deutsche Bank in July singled out Ontario as a jurisdiction of concern where the outlook for green energy has “deteriorated” in part due to uncertainty over the future of the FIT program. Ontario has to decide where it wants to be in the international green economy in coming years.

The electrical grid is at the heart of our daily activities, yet we rarely think about how electricity is delivered to us. In its simplest form, the grid is made of a series of wires that carry electricity from the source of generation to our homes and businesses, as well as equipment like transformers that regulate the voltage of the power delivered. This is the electricity we use to power almost everything, from computers, televisions and air conditioners, to our traffic lights, hospitals and shopping malls.

In my Annual Energy Conservation Progress Report – 2010 (Volume One): Managing a Complex Energy System, I discussed the importance of a smart grid, which is the next step for our electrical grid.

Tomorrow's Smart Grid, as shown on pg. 45 of Managing a Complex Energy System.

What is a smart grid?

A smart grid involves monitoring and controlling the electrical grid to ensure it remains balanced and reliable. This will allow us to adopt newer and greener technologies, such as electric vehicles, without compromising our electrical grid’s reliability.  This is a simplified diagram of a smart grid, illustrating how the different components of the grid are connected together.

Report highlights

My report highlights some important components of a smart grid, including smart meters, distributed generation and energy storage. For example, smart meters record when and how much electricity is used, allowing consumers to learn more about their electricity consumption habits.

Several Ontario utilities (such as Toronto Hydro) have taken the lead by providing Internet applications that show users their metered electricity consumption data collected from smart meters. At these websites, consumers can monitor their electricity usage to identify sources of electricity waste and shift some of their electricity use to times when the overall demand is lower. This will reduce the strain on our electrical system and help avoid the need for new and costly peaking power plants that are built for use during times of very high electricity demand. I believe that for the smart grid to succeed, one organization must establish the vision and provide overall leadership necessary to guide all participants towards the common goal of modernizing the grid.

Conserving electricity in this province has never been more important. According to Ontario’s Long-Term Energy Plan, provincial electricity consumption will grow by 15 per cent between 2010 and 2030, meaning that we will need more generating stations to provide power. However, if we use what we already have more efficiently, we could decrease the amount of new generation required. Due to the physics of delivering electricity over wires, Ontario loses about 6% of its electricity between the generating stations and consumers. By minimizing these losses, we can get more power from our existing generation stations to the end-users. In fact, my report recommends that the Ontario Energy Board encourage and facilitate smart grid investments that reduce line losses, putting these investments on an equal footing with conservation investments.

Ontario’s existing grid was developed long-ago and, although our electricity needs have increased and evolved, our grid has not changed in a similar way. We expect that our grid will continue to provide us with reliable electricity, and modifications are needed to ensure the grid remains reliable and dependable.

For more information on Ontario’s smart grid, you can visit the websites for Ontario’s Smart Grid Forum and the Smart Grid Working Group. These groups are monitoring and facilitating progress in developing the smart grid.

In my Annual Energy Conservation Progress Report – 2010 (Volume One): Managing a Complex Energy System released earlier this week, I took issue with energy price subsidies, whether in the form of the 10% rebate on electricity bills currently delivered through the Ontario Clean Energy Benefit, or the idea of removing the HST from energy costs.

Removing energy subsidies is always going to be tricky politically, as Adam Radwanski skilfully pointed out in the Globe and Mail. But I still think it’s the right thing to do.

First off, let’s remember that the money for these subsidies doesn’t fall from the sky – it comes from your tax dollars. The Ontario Clean Energy Benefit will cost us 1.1 billion dollars this year. Under the Benefit’s current design, the size of your rebate is tied directly to the amount of energy you use. So if you and I have the same income, but I use twice as much energy, the Benefit will essentially transfer money from your pocket to mine; not very fair, and not an incentive to conserve energy.

As with many goods or services, the amount of energy we use will depend on the price. If we keep the price of energy artificially low through subsidies, we’ll use more of it, and undercut our conservation efforts. One study estimated that the 10 per cent reduction in the price of electricity provided by the Clean Energy Benefit will increase total electricity consumption in Ontario by 1.3 per cent. That will eliminate one-third of the electricity savings expected from utility conservation programs between 2011 and 2014.

It gets even worse in the long term. When deciding whether to invest in conservation measures such as insulation or higher efficiency appliances, most people compare the extra upfront cost they will pay with the savings they will see over time from lower energy bills. Keeping the price of energy artificially low distorts this comparison, making investments in energy efficiency less attractive to the consumer.

People often tell me that removing energy subsidies is unfair to low-income people or to families. There are two ways around this: A government can offer rebates or tax credits to protect vulnerable groups. You could expand these rebates and credits to everyone, but that will likely depend on your political beliefs. From an environmentalist’s perspective, I make just one request: don’t tie the size of the credit to the amount of energy you use!

Secondly, if you want to minimize any tax credits, create programs to help low-income households conserve energy by helping them make home improvements. My report commends the government for the province-wide low-income program it’s recently developed, particularly for encouraging a co-ordinated approach between electric and gas utilities.

This approach can be applied more generally to all consumers. Instead of subsidizing the price of energy, we could use government funds to reduce our energy bills by investing in conservation. That would be a much better idea than cancelling energy conservation programs such as the Home Energy Savings Program, which the Ontario government just did.

So it might not be popular, but I’ll stand by my comments – subsidizing the price of energy is not fair, and it hurts the cause of conservation.

Toronto, June 14, 2011 – Ontario’s Environmental Commissioner says the province’s energy regulator is putting up barriers to increased energy conservation. This is just one of the conclusions from his Annual Energy Conservation Progress Report – 2010 (Volume One), Managing a Complex Energy System, released today.

• Watch the webcast of the press conference live from Queen’s Park
• Watch videos of the Commissioner outlining key points of the report:
  • Overview
  • Electricity pricing
  • Smart Grid
• Click here for more information about the report
• Download the report on your computer (.pdf)
• Download the entire report on your mobile device (.epub)

“The Ontario Energy Board (OEB) plays a valuable role in protecting consumer interests, but this traditional regulatory function is in conflict with its expanded powers over conservation,” says Commissioner Gord Miller. He points to recent decisions by the OEB that have forced both electricity and natural gas distributors to restrict the conservation programs they offer to consumers.

One of the OEB’s key objectives is to promote energy conservation, but the Board recently told Union Gas and Enbridge Gas Distribution to curtail proposed increases in their conservation budgets and instead, freeze them at existing levels for the next three years. “The ‘low-hanging fruit’ in conservation has already been harvested,” says Miller, “but the Board won’t approve the investments that are necessary to accomplish further energy savings. The Board is ignoring the benefits that will come with reduced infrastructure costs and lower greenhouse gas emissions.”

The progress report also says the OEB has established rules that could hinder the Conservation and Demand Management (CDM) programs offered by the province’s electricity utilities. “The Ontario Power Authority has designed province-wide conservation programs, yet it’s the electric utilities who will carry them out. The Ontario Energy Board has given utilities all of the responsibility but none of the freedom to modify or improve programs if necessary.”

Conservation is only one of the areas where the OEB has been asked to take on an expanded policy-making role. The government has also told the OEB to facilitate the adoption of the smart grid – a modernized electricity system that uses information technology to operate more efficiently. Miller believes that “one entity has to be given the responsibility for establishing the vision of an integrated electricity system, and providing the leadership for modernizing our electricity grid.” However, the Commissioner questions whether the OEB would be the appropriate choice to achieve this innovative objective, given its conflicted responsibilities.

For more information, contact:

Maria Leung
Communications and Outreach Coordinator
Environmental Commissioner of Ontario
416-325-3371 / 416-819-1673
1-800-701-6454
Maria.leung@eco.on.ca

For French language release and bilingual support, please contact:
Jean-Marc Filion, 705-492-6997
The report is available for download at www.eco.on.ca

Aussi disponible en français

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The Environmental Commissioner of Ontario is the province’s independent environmental watchdog. Appointed by the Legislative Assembly, the ECO monitors and reports on compliance with the Environmental Bill of Rights, the government’s progress in reducing greenhouse gas emissions and its actions towards achieving greater energy conservation in Ontario.

Toronto, 31 May, 2011 – The Ontario government will not, with its current programs, meet its targets for reducing greenhouse gases (GHGs). This is one conclusion from the Environmental Commissioner of Ontario’s 2011 Greenhouse Gas Progress Report, released today.

• Click to download the full report
• Click to watch videos of the Commissioner outlining key points of the report:
  • Overview
  • Recommendations
• Click for more information about the report

“Recently released federal government data indicate that Ontario’s GHG emissions in 2009 were at the levels the government wants to achieve by 2014,” Miller says. “While the drop in GHGs is encouraging, it is highly likely that emissions have increased each year since 2009 with the return of economic growth. So I expect the government will need to renew its efforts to meet its 2014 reduction target.”

The Commissioner says this highlights the need for governments to break the link between GDP growth and GHG emissions. Miller is convinced the best way to do this is to put a price on carbon. “It is unfortunate the Ontario government recently announced a delay in participating in a regional cap-and-trade system.” Noting that the industrial sector is responsible for 30% of Ontario’s GHGs, Miller says “putting a price on carbon now will guide investment decisions, and help families, businesses and municipalities transition to a low-carbon economy.”

Miller is also concerned with the lack of action in reducing emissions from the transportation sector. “The transportation sector is responsible for almost a third of all emissions, making it the largest contributor of GHGs in the province” says Miller. The Ontario government is cutting back programs it’s using to reduce transportation emissions. It has cancelled a tax credit for fuel-efficient vehicles as well as the Ontario Bus Replacement Program, and frozen funding for the Green Commercial Vehicle program. “The government needs to make a much more concerted effort to control this large and growing source of emissions, if it hopes to meet its near and medium-term reduction targets”

The Commissioner says the government must also begin a serious discussion about tolls and road pricing, in order to lessen traffic congestion. “We have to reduce the number of single-passenger vehicle trips in the Greater Toronto and Hamilton area. They are already at a higher level than in most global cities, and car traffic is expected to increase by another 7% by 2020,” says Miller. “Traffic congestion is more than just an inconvenience; it imposes huge costs on the economy, the environment, and public health.”

For more information, contact:
Hayley Easto
Communications and Outreach Coordinator
Environmental Commissioner of Ontario
416-325-3371 / 416-819-1673
1-800-701-6454
hayley.easto@eco.on.ca

Gloom lifted on solar prices: OPA listens and responds to applicants with its decision on the microFIT rate

On August 13th, the Ontario Power Authority (OPA) released its much anticipated decision on the proposed price cut to Ontario’s renewable energy feed-in tariff (“microFIT”) for ground-mounted solar installations that are less than 10 kilowatts (kW) in capacity.

The new rate will be 64.2 cents per kilowatt-hour (¢/kWh) and will be applied to those who submitted applications as of July 2, 2010. Originally, the OPA had proposed to cut the tariff rate from 80.2 ¢/kWh to 58.8 ¢/kWh – a steep 27 per cent reduction.

The Environmental Commissioner of Ontario, Gord Miller, applauds the OPA’s decision not to make the price cut retroactive. It will not affect the price received by microFIT applicants who submitted an application before a proposed price change was announced. Miller said, “this shows due consideration for the applicants who designed projects and arranged financing based on a price and rules that were agreed to following consultation in 2009.”

“The OPA clearly listened to the advice it received during consultations from the applicants and industry who are the first movers that will help build a green economy, and that is encouraging – the OPA’s consultation process worked”, said Miller.

In future, to ensure predictability and stability for investors watching Ontario’s renewable energy industry, the process must be transparent and open. The decision to establish a program advisory panel is a positive step.

Related:

• Ontario’s solar sector is being harmed by uncertainty around microFIT, July 21, 2010
• Rethinking Energy Conservation in Ontario, first Annual Report on the progress of activities in Ontario to reduce or make more efficient use of electricity, natural gas, propane, oil and transportation fuels.

The Globe’s editorial on the microFIT program (“Beware of solar energy windfalls”, July 26, 2010) misses the point. My big concern is that the Ontario Power Authority (OPA) is going to retroactively penalize individuals and applicants who were simply following OPA rules in setting up small-scale solar projects.

I agree the microFIT prices should be reviewed regularly. However, the OPA waited until approximately 11,000 applications had been submitted, before announcing a cut in the tariff rate that would retroactively apply to those applications. This shocked and angered applicants who had invested their time and money based on the assumption of the higher rate.

Furthermore, the OPA has not provided enough information to determine whether the new rate is fair and appropriate. My request for their financial analysis led the OPA to quietly, and without notice, revise their published rationale for the new rate. The earlier justification had talked about the “return on investment” of a hypothetical project.  Now they are using the term “return on equity,” a subtle but important distinction prompted by my intervention.

A less punitive approach on this issue would have been for the OPA to temporarily freeze accepting any new applications, and then follow up with an open public consultation using the Environmental Registry. This would have minimized cost to the Ontario government, without alienating the very people Ontario needs if it is to develop its renewable energy sector.

Gord Miller
Environmental Commissioner of Ontario

commissioner@eco.on.ca

After the OPA cut the microFIT program rate for ground solar installations, they released a rationale of their reasons. Click here to read their rationale.

I did some back-of-the-envelope calculations on their numbers (at the bottom of the page). For convenience I’ve reproduced them here:

Understanding that calculating return on investment (ROI) is a complicated matter, dividing annual revenue by installation costs can be a good quick-and-dirty measure.  Indeed, using the numbers above for 58.8 cents/kWh, we get:

$9,800 (Annual Revenue) Ă· $90 000 (Cost to Install) = .108 (or 11% ROI)

This is consistent with the OPA’s figures.

However, if we run the numbers at 80.2 cents/kWh, we find a discrepancy.

$13,300 (Annual Revenue) Ă· $90 000 (Cost to Install) = .147 (or 15% ROI).

The OPA got a result of 23% when they did this calculation.

So what I want to know is, how did they get that number?

Gord Miller
Environmental Commissioner of Ontario

Also see: Ontario’s solar sector is being harmed by uncertainty around microFIT

The Ontario Power Authority (OPA) must fully disclose the financial assumptions it used to justify the price cut to Ontario’s renewable energy feed-in tariff (“microFIT”) program, says Gord Miller, the Environmental Commissioner of Ontario. “People will lose confidence in Ontario’s commitment to green energy,” he warned. “We need the full financial details used to justify this price cut.”

On July 2nd, the OPA proposed reducing the tariff rate for solar energy under Ontario’s microFIT program. It said the change would lower the unreasonably high rates of return that project developers receive on their investment. (Click to read their rationale, released July 14.)

Interested parties have until August the 3rd to comment on the proposed changes, but Miller says “you can’t have effective consultations if all the facts are not being released.” Using the powers of investigation given to him by the Environmental Bill of Rights, the ECO requested on July 16th that the OPA fully disclose the financial assumptions and methodology it used to calculate the new lower price. “So far,” says Miller, “I have not received a response.”

With the new rate, ground-mounted solar installations would receive 58.8 cents per kilowatt-hour (kWh) for the electricity they produce. The earlier tariff of 80.2 ¢/kWh would only be paid for rooftop solar installations. This 27 per cent cut in revenue affects installations that generate less than 10 kilowatts (kW) of electricity, and typically are installed on residential properties, farms and small businesses. About 11,000 applicants proposing to install ground-mounted solar power would be affected by this looming cut.
Ontario’s solar industry has hastily called a town hall meeting to discuss the causes, impacts, and solutions to the rate change. It will take place Thursday, July 22 from 7 – 10 pm at the Hilton Garden Inn in Vaughan, Ontario. More than 200 people have already registered for the event.

For further information contact:

Hayley Easto, Communications and Outreach Coordinator
Office of the Environmental Commissioner of Ontario
Tel: (416) 325-3371 / Toll free inquiry line: 1-800-701-6454
hayley.easto@eco.on.ca

We generate our electricity from our nukes, from our hydro facilities and from natural gas.  Ontario’s climate change plans have been based on the expectation that our greenhouse gas (GHG) emissions will be declining every year.  (Click here for our latest GHG progress report.)  We don’t have last year’s numbers yet but I expect that it will be even lower due to both the recession, and the cold wet summer of 2009 which lessened the summer peak electrical demand due to air conditioning.  When the demand peaks, we have to stoke up our coal plants, and that is when the big emissions of GHGs occur.

There is no cold, wet summer in store for Ontario in 2010. We have already exceeded last year’s peak electricity demand and we are just warming up (so to speak). And to make matters worse, this year the warm dry winter in northern Ontario has left us with hydro reservoirs that are far below their operating minimums. The lake levels are so low that many boats are stranded in their cradles in the boathouse with nothing but dry earth beneath them. That means that the hydro electric potential we rely on just isn’t there. And that, in turn, means we will be burning much more coal. As I write this, 91% of our coal capacity is fired up but only 55% of our hydro capacity is producing. When we do see our GHG emission numbers for 2010 I don’t expect to find them encouraging.