Topic 1 (Author s Choice): A Sustainable Electricity Policy for Ontario

Transcription

1 Author: Charles (Tae Joon) Park Educational Institution: University of Toronto Student Number: Year of Study: Professional Experience Year (Co-op after Third Year) Category: Undergraduate Competition Topic 1 (Author s Choice): A Sustainable Electricity Policy for Ontario Address: charlestj.park@mail.utoronto.ca Telephone Number: (647) Essay Word Count: 4890 (excludes Title Page, Disclaimer, In-text Citations, Figures, Tables, and References)

2 Disclaimer This paper reflects the author s efforts to explore and comment on the Ontario electricity sector. He integrates the perspective of various industry stakeholders and aggregates public data to prepare supporting visuals, with all resources listed in the References section. For all statements not supported by an in-text citation, this paper does not reflect the opinion of any organization to which the author is affiliated.

3 Introduction Electricity is the lifeblood of our civilization. The generation, transmission, and distribution of electricity for consumption in daily activities mark one of our greatest endeavors in both scale and impact. Ontario s electricity policy should be grounded in sustainability, which balances the social, economic, and environmental consequences of any initiative. Electricity is consumed in a just-in-time manner [1]. It is more expensive to store than to manufacture at a large scale because of the equipment and materials involved and the losses in the energy conversion process [1]. Despite the research into and technological advancements with storage technologies, Ontario s electricity system is primarily planned, designed, and operated to respond to varying requirements of loads (demand) by dispatching various types of generators (supply) at an equilibrium quantity of energy [1] in a provincial energy market. With respect to both the demand side and the supply side of electricity, this paper commences with an overview of Ontario s electricity sector, analyzes the implementation and consequences of related policy initiatives, and then extracts cautionary lessons for future policies. These lessons then form the basis for a commentary about alternative forms of electricity policy implementation that would facilitate a sustainable future for Ontario. Electricity Sector Stakeholders There are several stakeholders in the Ontario electricity sector to which the paper later refers. At the high-voltage grid level, the Independent Electricity System Operator (IESO) dispatches generators to ensure that supply exactly matches demand at the lowest cost, every 5- minute interval of the day. Electricity from generators is transmitted through high-voltage (to minimize power loss) transmission lines primarily owned by Hydro One. The electricity then reaches a distribution station owned by a local distribution company (LDC), which then

4 TWh distributes electricity over a shorter distance to its target communities using low-voltage (for physical safety) distribution feeders. The Ontario Power Authority (OPA), prior to merging with the IESO on January 1, 2015, oversaw power system planning and procurement of electricity supply. The Ontario Energy Board (OEB) regulates electricity rates to promote economic efficiency and cost-effectiveness across the electricity value chain. The Ministry of Energy (Ministry) oversees the regulatory framework and implementation of energy policy. The Demand Side of Ontario s Electricity Sector Overview Figure 1 presents Ontario s aggregated monthly energy demand in TWh from the opening of Ontario s electricity market in May 2002 to December 2014, prepared using IESO data [2] for the high-voltage grid level Figure 1: Monthly Ontario Demand, May 2002 to Dec Ontario Demand Figure 1 indicates that demand has declined since One reason for this trend is the falling energy consumption from the industrial sectors including pulp and paper, mining, iron and steel manufacturing, petroleum products and auto manufacturing [3]. The demand profile

5 from 2011 exhibits no upward trend and rather fluctuates within a 3-TWh consumption range every month. This suggests a less energy-intensive future, as the demand for energy is no longer as closely linked to economic growth [3] due to the government s focus on conservation and demand management. Ontario s Conservation Programs Conservation is at the forefront of the government s plans to meet Ontario s energy needs. It is achieved in several ways including energy efficiency measures, behavioural changes, and demand management [4]. On the energy efficiency side, there have been updates in Ontario s Building Code requiring the construction of more energy-efficient homes, offices, and industrial facilities [3]. Simultaneously, homeowners and business are buying more energy-efficient products like LED lighting to replace existing appliances [3]. The government has incented this behaviour through rebates to consumers who participate in retrofit programs [3]. Behavioral changes are induced in many ways, but it fundamentally relies on providing ratepayers transparency with their energy use to help make more informed decisions. For instance, the Green Button Initiative allows ratepayers secure access to their energy usage information, which enables them to track and control their home energy usage using smart mobile devices [4]. Access to data also takes the form of rating systems for buildings and social benchmarking, which allow consumers to compare the energy efficiency between different project options to make informed investment decisions [4]. Finally, demand management can be achieved through programs that provide financial incentives for program participants to shift away from electricity consumption during peak periods. One such example includes time-of-use (TOU) pricing for ratepayers.

6 Implementation Review Overall, the Ontario government should continue its efforts to promote a conservation culture. Conservation by energy efficiency is the cleanest and most-cost effective resource to meet energy needs, with efficiency program costs ranging anywhere from $30/MWh to $60/MWh as of January 2014 [3], as illustrated in Figure 9 of the 2013 Long Term Energy Plan (LTEP). This is more cost-effective than procuring new generation supply, which ranges anywhere from $70/MWh to over $350/MWh [3]. The benefits of conservation are clear: from 2005 to 2013, up to 8.6 TWh of electricity was projected to be conserved [3]. This reduction in demand commensurately mitigates the need to build more costly generating plants. Smart Metering Initiative While the government has been successful in its conservation efforts with respect to energy-efficiency initiatives, its conservation efforts concerning behavioral changes (via transparency of energy data to inform users about consumption patterns) and demand management (via TOU pricing) merit further consideration. The Smart Metering Initiative (SMI) is an important example to consider because of its relevance to both areas of conservation efforts. It was the large-scale roll-out of 4.8 million smart meters initiated in April 2004 to monitor ratepayer s energy consumption and facilitate time-of-use pricing that encourages shifting electricity usage to off-peak hours [5]. Smart meters are characterized by their digital characteristics. Unlike their analogue predecessors, smart meters allow for a two-way communication between meters and LDCs, measurements with a time stamp, and automated meter reading of data which can be sent to LDCs through a wireless network [5]. Conventional analogue meters crudely capture electricity usage over a billing period of a month, require manual meter reading, and have no communication capability [5]. The operational characteristics

7 of smart meters highlight the relevance of SMI to conservation: smart meters form the basis of any access to consumption data for ratepayers as well as the mechanism for demand management programs like TOU pricing. There were process inefficiencies in the SMI that prevented the province from realizing the net benefits of a basic smart-grid infrastructure. Overall, the smart meter costs to date exceeded project costs by 90%, from an initial projection of $1 billion [5] to $1.9 billion as of May 2014 [6]. The majority of this is attributed to an underestimation of costs for LDC operations concerning capital, (acquiring meters, communication infrastructure, and installation and data system), meter reading and services, and replacement services for scrapping analog meters [5]. According to the 73 LDCs surveyed, 95% of them stated there was no commensurate increase in benefits, while 50% of them reported a higher volume of ratepayer complaints about increased bills with no savings [5]. Redundant operations costed $249 million, attributed to the duplication of data centres both at the provincial and local distribution levels. The Energy Conservation Responsibility Act, 2006 designated the IESO as the Smart Metering Entity with exclusive authority to manage all smart metering data with its collection, storage, validation, estimation, and editing [5]. When the IESO started developing its provincial data centre in 2007, other LDCs already procured their own date centres with identical functions [5]. The program implementation ultimately resulted in many complaints from ratepayers, who had limited understanding and information about TOU pricing which was exacerbated with issues related to billing calculation errors, communication systems (connectivity issues between devices due to physical environment), and cross-metering (mistakenly wiring smart meters into incorrect addresses) [5].

8 Demand-Side Lessons We can draw three general lessons from the previous review. The first lesson is the need for meticulous benchmarking and commitment to cost-benefit analysis prior to project implementation something which the Ministry did not address despite cost concerns raised by the OEB in their implementation plan and the IESO s requests for a business case [5]. The second lesson is the establishment of stronger governance and project-management structures to facilitate the oversight and coordination of all relevant industry stakeholders efforts to minimize redundant and costly operations, as seen in the case of functional overlap between data centres at the distribution and provincial levels. The third lesson is a careful communication to ratepayers about the program structure and related costs, as well as a commitment to customer service. Ratepayers are ultimately the beneficiaries of a government initiative. The Supply Side of Ontario s Electricity Sector Overview As of September 2014, there was 35,467 MW of generating capacity in Ontario. The author derived this number by aggregating data from Table 4.1 in the IESO 18-month outlook report (September 2014 to February 2016) [7] with embedded generation data (energy generation at the low-voltage distribution level) updated for September 2014 on the IESO home page [8]. Figure 2 illustrates two series. The blue-shaded series is an hourly Ontario demand range profile. For each hour of the day from May 2002 to December 2014, the upper and lower limits of the blue region respectively mark the maximum and minimum Ontario demand that the system ever experienced. The horizontal black line indicates Ontario s generating capacity as of September With the blue region falling at least 8 GW below the black line in every hour, this highlights Ontario s strong supply situation as demand has never exceeded current capacity.

9 Hourly Demand or Capacity (GW) Figure 2: Hourly Demand Profile Compared to Existing Capacity Historic Range in Hourly Demand Existing Capacity as of September Hour The author also generated Figure 3 to present the breakdown of Ontario s generating capacity by fuel type as of September In decreasing order, Ontario s energy fleet is composed primarily of nuclear, then oil and gas, then hydroelectric, then wind, then solar, and finally biomass and landfill resources. Figure 3: Ontario's Existing Generating Capacity (MW, %) Oil/Gas, 9920, 28% Wind, 2874, 8% Biomass/Landfill, 302, 1% Solar, 1305, 4% Hydroelectric, 8119, 23% Nuclear, 12947, 36%

10 TWh The IESO orchestrates this fleet of resources to meet demand at the lowest-cost dispatch of resources. Nuclear facilities comprise the majority of Ontario s base-load generation, optimized to provide large quantities of energy at a flat level using lower-cost fuel. The technical characteristics of nuclear plants make dispatching them in step with load variations a very costly procedure. On the other hand, natural gas facilities comprise Ontario s peaking generation and respond rapidly to changing system needs during peak periods of the day. Hydroelectric facilities are highly flexible and can cater to both base-load and peaking needs. Wind and solar facilities are highly flexible within the limits of the availability of wind or sunlight, and thus can either change output very quickly in response to system signals or also function as base-load supply [9] depending on the availability of their respective fuel source. Figure 4 [10] provides the total energy produced by each domestic resource strictly on the IESO-level high-voltage grid from October 2013 to December As monthly embedded generation data for solar and wind farms were not publicly available, this data was not included in Figure 4 in the same manner as Figure 3 does for generating capacity Figure 4: Generator Energy Output by Source Biofuel Wind Gas/Oil Coal Hydro Nuclear

11 Figure 4 illustrates that nuclear energy generates the majority of Ontario s energy in fact 61.5% of all energy generated in Ontario (excluding imports) from October 2013 to December Hydroelectric resources follow nuclear at 24.0% of energy generated, followed by gas and oil, wind, and biofuel all beneath 10.0%. An important observation is that coal is no longer a component of Ontario s supply mix, having been phased out from April 2014 as a result of the Ontario government s efforts. The Green Energy and Green Economy Act (GEGEA) In response to increasing public concerns about the impact of conventional power generation on the environment and public health, the Ontario government enacted the GEGEA in May 2009 to attract investment in renewable energy, promote a culture of energy conservation, create a competitive business environment, increase job opportunities, and reduce greenhouse gas emissions [11]. Renewables generally take four forms: hydro, wind, solar, and bioenergy [11]. Passing this act highlights Ontario s commitment to phasing out coal-fired generators by 2014 and to replace this portion of Ontario s supply mix with renewable energy. By the end of 2025, the government aims to incorporate 20,000 MW of renewable power online, of which 10,700 MW are generated from wind, solar, and bioenergy while 9,300 MW are sourced from hydroelectricity [3]. A key follow-up to the GEGEA was the implementation of the FIT Program. This was first administered by the Ontario Power Authority (OPA) in October 2009 (before merging with the IESO on January 1 st, 2015) to streamline the procurement of renewable energy resources by offering FIT participants highly attractive contract rates to which program participants are entitled for typically 20 years [11]. Table 1 provides the most recent FIT prices as of March 2015.

12 Table 1: FIT Price Schedule [12] The contract price is the guaranteed price to which renewable generators of a certain capacity are entitled for every MWh of energy generation. The escalation percentage indicates what percentage of the contract price is subject to annual escalation to help offset inflation. Implementation Review Ontario s increased subscription to green energy has been instrumental in phasing out coal. This was the single largest climate change initiative in North America and has helped to alleviate up to $4.4 billion in financial, health, and environmental costs [3]. In spite of these reported environmental and social benefits, policy-makers should be wary of rising system costs and potential grid reliability issues that may accompany the wide-spread use of renewables over the next decade.

13 $/MWh Cost of Supplying Electricity A discussion on system costs merits the introduction of two key components comprising the majority of the cost to supply electricity [11]: the Hourly Ontario Energy Price (HOEP) and the Global Adjustment (GA). The HOEP is an hourly market price, determined by the IESO based on supply and demand for electricity, the data of which is communicated by generators and loads across the province. The GA is the difference between HOEP and guaranteed prices paid to administer conservation and demand management programs for loads, regulated rates to nuclear and base-load hydroelectric generators, and contracts to ensure capital cost recovery for natural-gas and renewable facilities and nuclear refurbishments [13]. Otherwise stated, GA is primarily a top up payment when energy revenues from the HOEP fail to cover contracted rates. Figure 5 profiles the cost of electricity from January 2006 to December The blue section of each bar represents the average HOEP for the month [2] (computed by the author), while the red section indicates the calculated GA, which is published at a monthly granularity [14]. Figure 5: HOEP & GA Breakdown by Month GA HOEP

14 $M Since the passing of the GEGEA from May 2009, the cost of electricity has risen to an unprecedented level, with the GA generally comprising a significant portion of the electricity cost. Except for the months of January 2014 to March 2014 unusually cold winter months that drove electricity market demand, and thus HOEP, very high the monthly HOEP has generally experienced a downward trend aligning with that of the Ontario demand profile in Figure 1. Nevertheless, ratepayers are paying more for their electricity due to the prominent increase in GA. In fact, Figure 6 [14] illustrates the total GA payout has increased more than ten-fold province-wide from 2006 to ,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 GA Figure 6: Total GA Payout Procurement of Green Energy The increase in system costs motivates a discussion about process inefficiencies with the past implementation of renewable procurement programs. A necessary qualification is that renewable procurement via FIT programs represented less than 15% of total GA payout from May 2013 to October 2013, based on publicly available information from the 23 rd Market Surveillance Panel Report [15]. While this illustrates that renewable procurement is not

15 necessarily the largest reason for rising electricity prices, examining the process of procurement still sheds invaluable policy insights. One aspect to consider is the interplay between the OPA, the OEB, and the Ministry of Energy. Through the GEGEA, the Ministry has the authority to issue directions to the OPA and OEB on procuring new electricity supply [11] with respect to renewables. This prevented the OPA from operating with the independence required to objectively and proactively develop alternative options [11]. It also limited the OEB s ability to perform its regulatory and oversight role in the interest of consumers for cost-effectiveness in the electricity sector [11]. This allowed the Ministry to proceed with new projects with limited public review and cost analysis. One example of lacking sufficient cost analysis relates to the FIT contract price for solar. A top-priority issue identified by the OPA was whether FIT prices could be reduced to reflect the market conditions for solar panels, which had undergone a significant reduction in cost as the technology matured [11]. As of now, solar contract prices in Ontario still remain the highest in Ontario s energy mix and arguably across the world. Another suggestion from the OPA in 2009 was to introduce a degression structure to the ground-mounted solar contract price; namely, a 9% drop for every 100 MW of power contracted. Such a provision could have reduced system costs by $2.6 billion over the 20-year contract terms with no detrimental loss to investors. Investors would still have been able to recover their capital costs with an 11% after-tax rate of return as opposed to 23% [11]. In spite of the reasonable returns for solar investors and trends in solar panel costs, the Ministry removed this adjustment to avoid the risk of discouraging manufacturing investments and hampering the development of renewable energy [11]. Another example illustrating a lack of public consultation and coordination with other energy stakeholders is when Ontario signed a deal with the Korean Consortium (KC) [11]. Here,

16 MWh, Ontario MWh, Wind the Ministry signed a $7-billion dollar Green Energy Investment Agreement (GEIA) (which entailed a premium to the already generous FIT contract prices) without consulting either the OEB or the OPA, the agents who would have voiced an objective cost-benefit analysis. Supply Mix Challenges Another challenge with wind energy (and other intermittent energy sources like solar) is that its energy output is typically out of phase with electricity demand during certain times of the day. Figure 7, prepared by the author using IESO public data [2], illustrates this relationship by comparing the hourly average Ontario demand to the hourly average wind generator output from September 11, 2013 (when wind was integrated into the generation fleet for dispatch by the IESO [16] ) to December 31, ,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Figure 7: Hourly Average Ontario Demand vs. Wind Energy Output Ontario Wind Hour During the morning from 5 am to 6 am, demand starts to ramp up but wind output continues to decline. During the evening from 7 pm to 9 pm, demand starts to ramp down while wind output continues to increase. The technical limitations of wind require a supplementary form of generation like natural gas or hydro to produce power when wind is not available.

17 Due to wind s energy generation profile relative to Ontario demand, having wind and intermittent renewable generators in general become an increasingly greater component of Ontario s system capacity may exacerbate a power oversupply challenge called surplus base-load generation (SBG). SBG occurs when the electricity from base-load generators is greater than Ontario s electricity demand [11]. In the past, Ontario went from having no SBG days from 2005 to 2007 to having 4 in 2008, 115 in 2009, and 55 in 2010; this increase is attributed to the expansion of wind power and the decline in Ontario s electricity demand [11]. The overall impact of SBG is that external jurisdictions are able to buy Ontario s surplus power, to alleviate the surplus, at a lower price than what it actually cost Ontario to produce this power. Between 2006 and 2013, the total cost of producing exported power was about $2.6 billion more than the revenue Ontario received by exporting power [5] which would still have been the more economic outcome for the grid to operate compared to the cost of not exporting and instead shutting down base-load generators. The issue of SBG will likely be mitigated when nuclear refurbishments take place for Darlington and Bruce stations and when Pickering station closes. The Darlington and Bruce stations will begin refurbishment in 2016 [3] on a station to station basis. Based on the nuclear refurbishment sequence published in the 2013 LTEP, anywhere from 2 to 3 nuclear plants (between the 4 plants Darlington and 8 plants at Bruce) would be inaccessible due to refurbishment from 2016 to 2031 [3], while Pickering is expected to close in 2020 [17]. This is forecasted to result in a capacity shortfall ranging between 1600 MW to 2600 MW from 2016 to 2020, based on the nuclear data provided in the March 31, 2015 IESO Generators Output and Capability Report [18]. When Pickering is taken offline, Ontario will lose another 3100 MW of capacity [17] in addition to the shortfall from refurbishment. The high capacity factor of nuclear

18 facilities means that similar levels of energy generation in MWh will be lost. On the supply side, Ontario aims to mitigate this energy shortfall by leveraging the higher penetration of renewable energy sources over the next decade. A key concern going forward is how cost increases related to renewable procurement can be mitigated for the benefit of the ratepayer. Supply-Side Lessons Based on the roll-out of Ontario s supply-side policies, there are three practical lessons applicable for the future. The first is to have as independent an advisory body as possible to ensure policy decisions are made with sufficient cost-benefit analysis in mind, as seen by the interplay between the OPA, the OEB, and the Ministry during renewable procurement. The second is to implement contract structures that better reflect market conditions (like the OPA s recommendation on degression rates for solar FIT) as a means to encourage more competitive procurement between renewable generators and bring downward pressure on system costs. The third lesson is to engage in public consultation and education prior to policy implementation. This way, the public can have a realistic expectation of the consequences of any policy initiative, green or not, prior to the long-term supply commitment. Looking Forward Ontario s electricity sector will have to undergo many iterations of modernization to address our future needs. By applying the previous lessons from policy implementation on the demand and supply sides, Ontario can work towards a more sustainable electricity policy for the future. The following sections explore promising opportunities to do so. Ontario Capacity Auction Ontario s previous method of procuring supply through long-term (typically 20-year) contracts with generators has been effective in placing us in a strong supply situation, but all too

19 often at the loss of cost-effectiveness as illustrated in the previous review of supply-side policy. Ontario s demand situation also highlights how economic and technological changes influence the consumption of electricity. Long-term contracts as currently structured cannot provide the cost-effective flexibility needed to match yearly changes in demand and supply. A capacity auction would be an innovative way to cost-effectively streamline the energy procurement process. Neighbouring jurisdictions have implemented open auctions that allow supply and demand resources to provide capacity. In such markets, the system operators secure capacity for only 3 to 5 years ahead [19]. This leaner approach to procurement will facilitate greater competition in the existing system. Over the next few years, the IESO will move forward with the design of a capacity auction by engaging various stakeholders in the sector [19]. Strategic Carbon Pricing In line with the GEGEA, pricing carbon to curtail its use is another powerful way to combat climate change. The government could adopt a more market-oriented approach to pricing carbon as opposed to direct taxation, thereby letting the consumers of carbon decide how much they value carbon. For instance, the biggest use of fossil fuels is in the transportation sector and not electricity generation [1]. By capping the total level of GHG emissions and allowing an industry with lower emissions (like electricity sector) to sell their extra allowances to larger emitters (like transportation), emission reductions can take place within a specified target and a true market price [20]. Ideally, revenues from selling carbon credits could then be channelled into investments that spur technological innovation. Opponents to cap-and-trade may argue that the ubiquitous nature of carbon makes it difficult to silo different industries, and thus effectively raises costs for everything. Nevertheless, like the capacity auction, careful design consideration and consultation with affected stakeholders may lead to a more efficient market-based solution.

20 Energy Storage Exploring competitive methods to procure grid-level storage technologies is another potential game changer in future electricity policy on both the supply and demand side. It can smooth out fluctuations of intermittent resources like solar and wind to help mitigate surplus base-load generation, provides critical system reliability services like voltage and frequency support, and can defer the need for long-term supply investment [21]. Currently, the only largescale grid connected storage facility is the 174-MW capacity Sir Adam Beck Pump Generating Station [22] which flows water for energy during peak hours and pumps water to a reservoir during off-peak hours. The IESO plans to procure an additional 50 MW of storage capacity across a wide portfolio of privately-owned technologies including flywheels, hydrogen-fuel powered cells, large-scale lithium ion batteries, and many more [21]. Like any novel technology, there are regulatory hurdles to its widespread adoption in the energy market which must be addressed through effective private-public partnerships and meticulous cost-benefit analysis that is unaffected by a political agenda. Microgrids Microgrids are islanded, small-scale versions of the centralized electricity system that service a local and typically remote community. Microgrids have a limited presence in Ontario, but it is a grid development worth considering for future power system needs. Microgrids have a proven case for reliability, as seen by the case of key buildings at New York University having power despite the onslaught of Hurricane Sandy [23]. Motivating the potential benefits of a microgrid merits a brief discussion about Ontario s transmission system. The increased penetration of renewables in the next decade will require a commensurate investment in updating and expanding transmission and distribution systems to

21 connect loads with remote and widely dispersed renewable energy generators [11]. These investments can soar to several billions of dollars based on cost estimates provided in the 2013 LTEP [3]. Such costs would again be borne by the ratepayer via increased delivery charge an add-on to the steep increase in the costs recovered through the GA. While these grid developments progress, there are three technological innovations, which over a similar time scale, may challenge ratepayers especially in remote communities to consider disconnecting from the grid and subscribing to a potentially more cost-effective microgrid implementation. The first is the declining cost of solar: from 1977 to 2014, solar panels declined in cost from $77 watt to just under $1 per watt, with grid parity in reach within a decade [23]. The second development is cheaper storage solutions. According to Navigant Research, revenue from advanced batteries for utility-scale energy storage applications will grow from $228 million in 2014 to $17.8 billion in 2023 [24]. The third advancement concerns the development of low voltage DC power networks offering alternative ways to distribute home-grown energy sources to household devices [23]. This is seen by USB Alliance, which upgraded its standards to allow USB cables to carry up to 100 watts of DC power [23]. The convergence of these three developments allows for a more consumer-centric paradigm of electricity consumption that may influence the direction of traditional electricity policy which is modelled after centralized generation. As noted in the previous demand-side policy review, these trends relate to the need for future policy implementations to prioritize customer service. Evolution to a Consumer-Centric Smart Grid A consumer-centric paradigm shift aligns with Ontario s efforts to promote conservation and demand management by providing ratepayers transparent access to their energy consumption data, enabling them to monitor and control their electricity demand in a proactive manner. This

22 stance requires Ontario to develop its position as an innovation leader. Through Ministerial initiatives like the $50-million Smart Grid Fund in 2011 and a second round of funding in July 2013, Ontario aims to commercialize smart grid ventures in the areas of data management, grid automation, and behind-the-meter services [23] and to help foster interoperability between communication devices. Another key initiative to further build on is the Green Button. This provides customers with access to their electricity consumption information in a standardized format [3]. This also facilitates third party data access to developers to provide innovative software solutions which add value to the consumer experience. Conclusion Ontario is at a crucial point in time promising many changes to the sector over the next few decades. On the demand-side, we developed a culture of conservation and energy efficiency, which curbed demand levels despite increases in economic activity. The government s implementation of SMI highlights three lessons: future policies should be grounded in meticulous cost-benefit analysis; stronger governance and project-management structures are needed to facilitate the oversight and coordination of stakeholders; and communication to ratepayers about program structures and a commitment to customer service are imperative. On the supply-side, we phased out coal and decided to integrate renewable energy into the generation mix at a large scale. This has contributed to high electricity costs and technical challenges with SBG, which may be mitigated by the shortfall in energy generation through nuclear refurbishment. The government s implementation of supply-side policies illustrates another three lessons: an independent and apolitical advisory body would ensure policy decisions are backed by objective analysis rather than biased political directives; procurement methodologies should reflect changing market conditions and enhance competition between

23 participants; and public consultation and education prior to policy implementation is crucial. The paper noted these lessons to then examine the pursuit of several policy measures including capacity auctions for competitive procurement, strategic carbon pricing via cap-and-trade market, energy storage for supply-side and demand-side support, microgrids as a cost-effective alternative to centralized generation in the future, and the evolution to a consumer-centric smart grid through innovation. Only by the inter-disciplinary cooperation between various fields of expertise in both private and public sectors engineering, economics, social sciences, information technology, business, and law and regulatory development can Ontario survive with a sustainable electricity policy.

24 References [1] J. Carr, "A rational framework for electricity policy," April [Online]. Available: [Accessed 22 March 2015]. [2] IESO, "IESO Data Directory," [Online]. Available: Data/Data-Directory.aspx. [Accessed 22 March 2015]. [3] Ontario Ministry of Energy, "Ministry of Energy - Ontario's Long Term Energy Plan," [Online]. Available: [Accessed 22 March 2015]. [4] Ontario Ministry of Energy, "Ministry of Energy, Conservation First: A Renewed Vision for Energy Conservation in Ontario," [Online]. Available: [Accessed 27 March 2015]. [5] Office of the Auditor General of Ontario, "Smart Metering Initiative," Queen's Printer for Ontario, [Online]. Available: [Accessed 28 March 2015]. [6] Office of the Auditor General of Ontario, "Office of the Auditor General of Ontario - News Releases," [Online]. Available: [Accessed December 2014]. [7] IESO, "IESO Forecasts & 18-Month Outlooks," 4 September [Online]. Available: [Accessed 23 March 2015]. [8] IESO, "IESO Home," [Online]. Available: [Accessed 23 March 2015]. [9] IESO, "IESO Managing A Diverse Supply of Energy," [Online]. Available: Supply-of-Energy.aspx. [Accessed 27 March 2015]. [10] IESO, "IESO Supply Overview," [Online]. Available: Data/Supply.aspx. [Accessed 24 March 2015].

25 [11] Office of the Auditor General of Ontario, "Electricity Sector - Renewable Energy Initiatives," [Online]. Available: [Accessed 21 March 2015]. [12] IESO, "FIT Price Schedule Feed-In Tariff Program - Independent Electricity System Operator," [Online]. Available: [Accessed 26 March 2015]. [13] IESO, "IESO Global Adjustment," [Online]. Available: Power-System/Electricity-Pricing-in-Ontario/Global-Adjustment.aspx. [Accessed 3 April 2015]. [14] IESO, "IESO Global Adjustment - Archive," [Online]. Available: [Accessed 30 March 2015]. [15] Market Surveillance Panel, "Market Surveillance Panel Reports OEB," [Online]. Available: veillance/market+surveillance+panel+reports. [Accessed 3 April 2015]. [16] IESO, "IESO Renewable Integration (SE-91)," 6 September [Online]. Available: Dispatch_of_Variable_Generation_to_begin_on_September_11.pdf. [Accessed 29 March 2015]. [17] OPG, "Ontario Power Generation Pickering Nuclear," [Online]. Available: [Accessed 31 March 2015]. [18] IESO, "Generators Output and Capability Report," [Online]. Available: [Accessed 30 March 2015]. [19] IESO, "IESO Capacity Auctions," [Online]. Available: Power-System/Reliability-Through-Markets/Capacity-Auctions.aspx. [Accessed 31 March 2015]. [20] World Bank, "Pricing Carbon," [Online]. Available: [Accessed 31 March 2015].

26 [21] IESO, "IESO Energy Storage," [Online]. Available: Power-System/Smart-Grid/Energy-Storage.aspx. [Accessed 31 March 2015]. [22] OPG, "Ontario Power Generation Sir Adam Beck Pump Generating Station," [Online]. Available: [Accessed 31 March 2015]. [23] B. Campbell, "Smart Grid in Ontario and Beyond Conference Sessions: Ontario Smary Grid Progress Assessment: What is the Status of Smart Grid in Ontario?," [Online]. Available: [Accessed 1 April 2015]. [24] Navigant Research, "Advanced Batteries for Utility Scale Energy Storage Navigant Research," [Online]. Available: [Accessed 1 April 2015].