Fixing the energy system is going to be shocking

Recently I attended a session hosted by the Ontario Chamber of Commerce called Shocking the
System: Ontario’s Energy Future Post-Election.  Essentially, the gathered group was asking two questions:

What is the status of the energy file currently?

What should industry and business be asking of the next provincial government in this space?

To answer the first question, there are a number of projects underway including the modernization panel examining the Ontario Energy Board and the Independent Electricity System Operator (IESO) moving forward on a market renewal project that has the goal of finding $2.2 - $5.2 billion in efficiencies over the next 10 years.  As Alexandra Campbell from the IESO told the group, it’s taking a long look at the processes in place and while cleaning up those processes may not lead to immediate results, it will translate into longer term savings.

The new cabinet was announced last week with Greg Rickford installed as the Minister of Energy, Northern Development and Mines as well as Minister of Indigenous Affairs.  There is also a campaign promise by the Ford government to realize a 12 per cent reduction in electricity bills for residential and small business customers.   

We also know that the provincial government under Premier Doug Ford will be dismantling the Cap and Trade regime.

There are fixed costs that limit the flexibility of the system while at the same time flexibility is required to ensure that the system is operating in an efficient manner.

The market doesn’t predict a day ahead and there is currently a two schedule system to determine price, which can lead to uncertainty for larger use customers.

So, given this brief overview of what’s going on, what are the questions business should be asking the government?

As the dismantling of the Cap and Trade program moves forward over the next number of weeks and months, business and industry will be looking for answers as to how currently owned credits (there are about $3 billion worth out there) will be dealt with. If any, what will be the downdraft impact into the economy in exiting some of the current obligations?   Add in the federal government carbon tax regime and it’s a fluid situation.

To accomplish the deep structural changes it was noted that it would require great balance between the tax base and rate base.  Does the government access different funding envelopes to accomplish their goals?

The business community is also looking for balance and a commitment that a reduction for one group doesn’t mean an immediate increase for another group.  What are the existing assets and fixed costs that are part of the equation around energy?  What is the required mix of energy going forward and what will be the forecast demand?

How do local utilities live under the new government?  What decisions will be theirs and will the mandate encouraging consolidation still exist?

The IESO is currently exploring how to move to a day-ahead market to allow for more flexibility and certainty.

Does having the Ministry of Energy combined with others allow for more synergies or will it add to the complexity of the file?

Technology will play a big role in the future of the energy file.  This statement led to a discussion around Distributed Energy Resources (DERs) which are behind the meter options for business.  Is there an appropriate way to coordinate these resources?  What are the options for energy storage?  Will new programs replace those currently under the Cap and Trade regime? If transportation is the sector that will require the most energy in the next two decades how will that be fed?  How can the return on investment for new storage options be fast-tracked?
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Ultimately, the group felt that the time was upon us to disrupt the energy system to recognize that one size fits all rarely applies and that more than ever we must look beyond the poles and wires to
solutions that are creative and sustainable.