Submission to ERO: 019-3007
Developing a New Long-Term Energy Planning Framework for Ontario
This response to the Government’s request for feedback on Ontario’s long-term energy planning framework addresses the questions provided by MENDM to help guide feedback in its January 28, 2021 request for feedback. The questions appear to be largely about how to develop the plan and make planning decisions.
It is less clear whether the feedback request solicits input on the processes or market structures used to achieve the plan once it has been determined. For the last decade or so, in the absence of an OEB-approved plan, the government has proceeded largely by issuing Directives. To avoid such detailed intervention, an integrated process for systematically and competitively procuring resources is needed. While market mechanisms, such as capacity markets, and incenting investment with carbon pricing have been explored, it is not clear yet what their role will be going forward. Local Integrated Resource Plans have been prepared which remain to be integrated with provincial plans. Behind the meter resources are increasingly being installed, but may not be transparent at the provincial level. It may in practice require an iterative process, cycling between provincial planning objectives and local procurement expectations to refresh long-term energy plans going forward.
Going forward, Ontario should strive for a long-term plan that both maintains provincial power system reliability and achieves targets for GHG emission reduction in a cost-effective manner. A centralized long-term Ontario planning process is required to address the evolving and complex planning challenges of maintaining reliability while decarbonizing buildings and transportation at the same time as the share of intermittent renewable resources is increasing. Whether energy resources are connected to the bulk transmission system, a local distribution system, or are behind the meter, the appropriate allocation of costs needs to be determined. With comprehensive principles for cost recovery in place, the role of distributed energy resources versus bulk system resources will be clearer, and distributed resource choices should require less provincial involvement.
How can we promote transparency, accountability and effectiveness of energy planning and decision-making under a new long-term energy planning framework?
• Transparency implies that the “information set” created during the planning cycle for making long-term energy system planning decisions would be available in a relatively accessible manner to interested members of the public in Ontario.
• That information set includes:
o historical data for the energy sector, along with the associated environmental attributes, such as GHG emissions;
o the model(s) used to simulate energy/emission futures for the province;
o the assumption sets and the planning goals/targets used to develop alternative futures, including outlooks for energy demand, supply curves for demand reduction and new supply options, as well as transmission and distribution system alternatives, all with their associated emission and other environmental impacts;
o the approach used to integrate local/regional plans, address the range/uncertainty of alternative futures (e.g., alternative scenarios); and, the decision-making criteria for choosing specific investments and/or policies (e.g., appliance standards, carbon pricing) to achieve the selected investment strategy, recognizing the uncertainties inherent in long-term planning.
Accountabilities are to be set in legislation.
• Transparency in the information set used in the planning process is a major assist to holding the entities responsible for long-term energy planning accountable for their various decisions, reviews, approvals, and follow-up.
• A regular Public Hearing/Public Workshop process for developing long-term energy system plans adds significantly to the understanding of investment decisions and the expenditures made as a result, and so is a major contributor to accountability.
• Intervenor funding for the Public Hearing/Workshop process facilitates an even wider and more independent range of perspectives to be brought to bear.
• Holding Public Hearings/Workshops before an independent expert panel adds depth to accountability.
• The effectiveness of the proposed planning process depends on the quality of the information set and its ability to enable clear decisions to be made based on the energy planning process.
• The cost effectiveness and quality of the long-term energy planning process should benefit from being centralized and integrated.
o The required energy (and associated environmental) historical data should be stored in a user-friendly manner within the Ontario Government and be readily accessible to the public.
o The simulation/optimization models used for long-term energy planning should be in the public domain.
The energy model suite should be fully customized for Ontario and its energy trading partners for both electricity and natural gas, capable of testing the operability and reliability of alternative energy plans, and deriving their associated GHG emissions. Energy demands and GHG abatement curves should be thoroughly developed for at least the building and transportation sectors.
o The development of planning scenarios and recommended long-term policies or solutions would take place most effectively in the same entity, as the nature of the plans being considered affects the continuously evolving design of the models.
o Under the existing planning framework, these elements would more naturally and cost-effectively be centralized at the IESO.
• The public hearing process into long-term energy futures should be formalized and streamlined. It should follow a carefully scheduled cycle repeating every 2 to 3 years. Participants in the process would be able to access the energy modeling system (with technical support), so that alternative concepts, technologies and strategies can be assessed on an integrated and relatively consistent basis.
o Hearing participants could submit their own analysis but would be obliged to have their proposals assessed within the full energy system framework.
o It is challenging for proponents of specific demand, supply or storage technologies to assess the total system implications (in terms of cost and emissions) of integrating their preferred option/strategy into the rest of the energy system while maintaining the desired level of system reliability. Indeed, this will be increasingly complex going forward as electric and natural gas load shapes and volumes evolve with electrification of space-heating, transportation and other end-uses, while at the same time, the share of intermittent generation increases. A consistent system-wide analytical framework is essential to effectively compare incremental costs and GHG emission impacts for alternative strategies.
• Procedures from other jurisdictions who use public hearings to support integrated energy planning should be reviewed. The public consultation process should be carefully formalized so that it converges to a result on predictable timelines and does not in itself contribute to inefficiency in planning.
o Under the existing planning framework, the OEB should hold the recommended public hearings/consultations/workshops into long-term energy system planning.
A New Planning Framework?
• A new planning framework in Ontario may be justified because of the increasing complexity as least cost, long-term electricity system planning evolves into integrated long-term energy system planning in the context of climate change. Additional considerations include:
o the focus on meeting long-term economy-wide GHG emission reduction targets;
o addressing gas and electricity transmission and distribution issues as the economy decarbonizes;
o assessments of the decarbonization of private and public transportation; and,
o integration with regional plans and distributed energy resources;
• In this context, establishing a new over-arching entity to assess alternative short-term and long-term energy strategies/plans/projects/market designs for Ontario may be justified - an Ontario Energy Commission (‘OEC’), somewhat akin to the California Energy Commission. The transparency of the IESO/OEB process discussed above would be preserved.
• Embed in the organization an energy system simulation/optimization modelling capability for Ontario. It should be fleshed out by end-use on the energy demand side and by existing and new facilities and technologies on the supply side for electricity, natural gas and oil, including an adequate representation of their major delivery systems. It should draw on the tools used by the major energy suppliers in the province, e.g., OPG, Hydro One, Enbridge, etc.
• As a long-term plan covers a period well beyond the term of any particular government, the objectivity and experience level of the commissioners/board members may be enhanced by staggering appointments (that is, only a portion of the commissioners/board members appointed in any year) and making appointments with relatively long terms (say 5 years or longer).
• The ‘OEC’ hearings or subject matter workshops should be before expert panels composed of relevant disciplines such as energy system planning, environment, economics, science/engineering, law, with some representation from the public at large.
What overarching goals and objectives should be recognized in a renewed planning framework?
• The objective of a renewed planning framework should be to reliably meet the Ontario demand for energy services (e.g., space conditioning, transportation, etc.) within agreed long-term GHG emission limits.
o Past long-term planning processes for the electric power system in Ontario all focussed on reliably meeting forecasted long-term Ontario electric power demand. These included the Royal Commission on Electric Power Planning (RCEPP, 1976-1980), Ontario Hydro’s Demand/Supply Plan (DSP, 1989-1991), the Ontario Power Authority’s Integrated Power System Plan (IPSP, 2006-2008), the OPA/IESO Long-Term Energy Plans (LTEP’s 2010, 2013, 2017).
o A renewed energy planning framework for Ontario should explore how to achieve specific GHG emission reduction targets for key years such as 2030, 2040, 2050 and beyond.
• Demand- and supply-side measures should be incented through market mechanisms where practicable.
o While some sectors/end-uses may be more effectively transformed through regulations, codes and standards, market mechanisms including carbon prices are generally more effective for inducing efficient choices for demand and supply options to meet long-term GHG reduction goals.
o There is, nonetheless, a major role for government to structure and facilitate the transition. For instance, electrification of residential and commercial space and water heating will imply significant adjustments for both the gas and electric distribution systems. Similarly, electrification of personal and public transportation will require substantial enabling infrastructure.
• Maintaining high reliability levels for Ontario’s energy system is vital - at least NERC standards for the electric system in order to retain support from interconnected systems. Ontario’s energy system is vulnerable.
o It has no fossil fuel resources of its own (part of the original rationale for nuclear power in Ontario).
o It has one of the widest annual temperature ranges of any jurisdiction in North America, with both hot summers and cold winters.
Planning for adequate reliability in winter months is critical in Ontario as Ontario is likely to become winter peaking (again) with electrification of space-heating loads.
o Wind and solar in Ontario have distinct seasonal production profiles. Solar is strong in summer and relatively weak in winter. Wind is typically weak at the time of summer peak and is not dependable at the time of winter peak.
• To firm up its intermittent renewables, Ontario should first optimize the use of its own hydro resources, and its transactions with hydro resources in Quebec and Labrador.
o The flexibility of Ontario’s existing hydro resources should be fully enabled through market rules.
o Quebec and Labrador (Churchill Falls) have world class hydro reservoirs that can offer both short-term and seasonal storage, as well as energy. Contracting some of this capability should be rigorously explored while the option is still available.
• A role for some gas-fired electric generation should not be categorically ruled out.
o Its economics for peaking, reserve capacity or other uses should be assessed in the context of the carbon pricing required to achieve GHG emission targets, and against the carbon abatement cost of alternative options performing similar power system roles.
What respective roles should each of the Government, IESO, and the OEB hold in energy decision-making and long-term planning?
• The Government would specify long-term policies, goals, regulations, standards, market structures and other similar high-level direction that the planning agency (or agencies) should investigate in each energy planning cycle. Ideally though, this guidance should be relatively stable over time.
o The Government should be transparent in its desired role, both in the planning process and in the execution of the recommended plans.
• The IESO should be the home for energy system analysis/modelling/planning if a new self-standing entity for developing alternative long-term energy plans for Ontario is not established (an ‘OEC’ as proposed above in the Effectiveness section, A New Planning Framework?). It should be a self-standing group much as the OPA was intended to be in its day at the IESO. That location would facilitate leveraging the power system operations expertise of the IESO, while allowing independent technical support to be offered to all participants in the energy system planning process.
• The OEB should be expanded to manage the public hearing/workshop process for long-term energy plans. The planning document derived from the Hearing process should be prepared by the OEB, with input from the IESO, if a separate entity is not established.
What types of decisions should require government direction or approval?
• The Government would prepare the legislation to define the role of the agency (or agencies) responsible for developing long-term energy plans for Ontario with a view to minimizing the frequency of ministerial directives or the use of regulations to implement major policy changes
• Long-term plans would be approved by the planning agency (or agencies) based on expert findings from the Hearing process.
• The government could establish a new entity to procure energy sector infrastructure not covered by the mandates of existing organizations should such an entity be needed, or it could leverage off existing procurement functions of related organizations such as the IESO, Hydro One, OPG, etc.
• The objective would be to minimize government directives on specific procurements.
• Projects directly implemented by the government or its agencies and using government financial resources would need government approval.
What kinds of decisions should be made by technical planners at the IESO and the OEB as regulators?
• Technical planners and regulators should determine a set of investments and specify energy market rules, regulations and policies that address short-term needs and contribute to longer-term objectives.
o As described above, if the responsibility for preparing long-term energy plans is not centralized in an ‘Ontario Energy Commission’, the roles should be partitioned between the IESO and the OEB.
• The IESO would establish the necessary capability to analyze and model alternative long-term energy demand and supply plans in Ontario and develop or acquire the tools needed to optimize outcomes under various objectives. These would include least-cost strategies to meet particular GHG emission targets by particular dates and the implied carbon price or carbon abatement cost ($/tonne GHG reduction) associated with these options and strategies. Based on the public hearings/workshops and its own investigations, the IESO would issue updated energy resource plans, including both generation and transmission for electricity.
• The IESO would determine how best to acquire the necessary demand and supply resources required to meet long-term targets, as well as how to address the adjustments associated with phasing out GHG emissions.
• Finding the market signals to strike the appropriate balance between Distributed and Grid-connected energy resources in a highly electrified future will be a critical role for the OEB going forward.
o The benefits of Distributed Energy Resources (DERs) may include greater electricity system resilience and flexibility. They must be weighed against the potential for stranded assets should consumers with DERs not adequately pay their share of the costs of the centralized generation, transmission and distribution resources that were, and continue to be, built to backstop the reliability of their energy service demands.
• Based on the OEB’s Hearing Process, the IESO would recommend a long-term energy strategy to meet the desired end-state, recognizing alternative scenarios and risks. The IESO would work with the OEB to develop a shorter-term plan consisting of the actions required in the near-term to enable achieving the desired end state, e.g., reliably meet Ontario’s 2050 energy service demands with the target GHG emission level.
Are there gaps in the IESO and the OEB’s mandates and objectives that limit their ability to effectively lead long-term planning?
• Yes, there are gaps in their mandates. Planning the enabling infrastructure requirements for such a transition will go well beyond the issues currently addressed by the IESO and OEB.
• The IESO had a mandate to prepare an Annual Planning Outlook as input to the Long-term Electricity Plan until the supporting legislation was revoked. The most recent APO, released in December 2020, does not include scenarios designed to achieve long-term GHG emission reduction targets. Rather, to derive alternative electricity demand outlooks it focusses on the extrapolation of economic and technology trends. To support a fulsome examination of Ontario’s long-term energy future, including what would be entailed to meet provincial GHG emission reduction targets for 2050, would require an expansion of the IESO’s current mandate and resourcing. Even though the trend is to electrification, the transition of the energy sector will be complex and lengthy. The challenges introduced by increasing shares of intermittent resources, and additional space-heating, electric vehicle charging and other loads, are significant.
Should certain planning processes or decisions by the IESO, the OEB, or the government receive additional scrutiny, for example through legislative oversight or review by an expert committee?
• Yes. That is the intended extra purpose of the suggested Ontario Energy Commission organization: to centralize and enhance expertise, and provide a longer-term perspective that moves beyond the expediency of short-term political decision-making.
How often and in what form should government provide policy guidance and direction to facilitate effective long-term energy planning?
• As noted above, the government would provide policy guidance and high-level direction to the planning process for each planning cycle, every 2-3 years.
How do we ensure effective and meaningful Indigenous participation in energy sector decision-making?
• Not an area of our expertise, so not offering advice in this important area.
Submitted April 26, 2021 10:43 AM