Tyler Hamilton Senior…

Tyler Hamilton
Senior Director, Climate
MaRS Discovery District
100 College St, Toronto
M5G 0A3

Thank you for the opportunity to submit comments related to this public consultation.

MaRS Discovery District works with more than 340 early-stage technology companies across Canada, most of them from Ontario, that are developing economically competitive solutions that reduce our impact on the environment and climate. These businesses are creating jobs, contributing to the economy, and have the potential to scale globally. Many of them are working to reduce our energy use through efficiency or electrify more parts of our economy in a way that maximizes the use of non-emitting sources, such as renewables and nuclear, and minimizes reliance on fossil fuels, including natural gas.

To be clear, we and most of the entrepreneurs we work with are realists. Natural gas reliance cannot be eliminated overnight, and a premature phaseout would certainly hurt electricity consumers and the economy. Indeed, it may never be completely eliminated. At the same time, the trend is clear: the world is moving away from fossil fuels as a primary energy source for electricity generation. The same applies to building heating. To quote the final report of the Ontario government-appointed Electrification and Energy Transition Panel, "There are growing indications that it is unlikely that the natural gas grid can be decarbonized while continuing to deliver cost-effective building heat." Likewise, it adds, "it is no longer clear that natural gas is the cheapest way to heat buildings."

We agree with the Panel that this creates a "real risk of economically stranding the rate-regulated distribution assets used for home heating, with significant risk to customers, investors, and public finances." At the same time, we acknowledge that as we try to electrify more parts of the economy -- including heating -- the strain this will place on the grid may require the province to use natural gas strategically -- amongst other options -- to manage that demand, with the goals of affordability and reliability prioritized.

With that in mind, we recommend that the government adhere to the following principles as it consider the future role of natural gas in Ontario's electricity system, our building stock, and the economy:

1. Resist viewing natural gas as a default for electricity generation or building heating, especially when options such as renewable generation, use of energy storage, or heat pump technology can strike a better balance between affordability, reliability and emissions reductions in a high number of deployment scenarios, particularly in newly planned or low-density communities.

2. Be fair and unbiased when comparing different alternatives. Example: there's often disproportionate political support for options such as hydrogen and RNG (which are heavily promoted by the natural gas industry), and more scrutiny of renewable options and energy storage, despite the fact that clean hydrogen and RNG have proven difficult to scale and less economical when looked at as a commodity fuel for electricity generation and heating. The province's Panel agreed: "There is growing doubt that it will be possible to replace the vast quantities of fossil fuel natural gas used today with clean alternatives, such as renewable natural gas (RNG) or hydrogen, in a cost-effective manner." It is our view that hydrogen and RNG would be better focused on specific hard-to-electrify industrial applications and other high-value, lower-volume applications.

3. Avoid absolutes. Question terms like "phase out" or "sunset," which are more likely to cause paralysis and disagreement than inspire action. There may always be cases where natural gas use is necessary, such as for grid backup -- i.e. an insurance policy. As mentioned, we share the worry that a premature phaseout of a natural gas could hurt the economy. We know that change needs to happen at a pace that allows the consumer, the grid and the economy to adapt. That said, we need a stretch goal. And we need a clear roadmap, which might start, for example, with a declaration at one end that we're not going in reverse (i.e. not expanding our use of natural gas by building out new infrastructure), and a commitment on the other end that natural gas is an insurance policy -- a just-in-case fuel that requires a small percentage in the mix.

4. Strike a balance. The decision by the Ontario Energy Board to reduce the "revenue horizon" of new connections from 40 years to zero was understandably jarring for many key stakeholder. We feel the OEB could have met Enbridge half way by setting the revenue horizon at a more manageable 20 years, with the option to revisit and potentially tighten this horizon every five years. Alternatively, if we are to stick with the status quo of 40 years, then this benefit should also be extended to all infrastructure projects by a regulated utility that bring heating to a community, whether it relies on natural gas or not. In other words, the rules -- the rate base -- should be agnostic to the energy source that's used. Networked geothermal, or thermal energy networks more broadly, are examples of such infrastructure projects that are beginning to gain traction in many U.S. markets, including New York and Massachusetts.

These are just a few thoughts for consideration among the dozens of submissions you will receive. With these in mind, I'd like to build on that thermal energy network example.

For the past five months, MaRS has been working with key industry stakeholders to explore how to bring thermal energy projects (TENs) to communities in Ontario as a way to affordably shift building heating in communities away from a dependence on natural gas. Participants in our working group include LDCs, natural gas utilities, geothermal developers, property developers, power generators, the IESO, municipalities and other experts. A representative from the Ministry of Energy and Electrification is also participating.

Thermal energy networks involve a network of pipes to connect multiple buildings together, often including a large anchor off-taker (e.g., hospital or university campus), and to thermal sources and sinks, such as geothermal, surface water, waste heat, and the air, to provide space heating, cooling and domestic hot water. Heat pumps in each building extract and amplify the heat carried in those pipes (via water). For every unit of electricity needed to operate a heat pump system, it can reliably
deliver at least four units of emission-free energy back in the form or heating (or cooling) delivered through a building ventilation system.

The approach is very similar to how natural gas utilities operate today. A utility finances, owns and maintains the capital-intensive underground infrastructure, getting a return on investment over time (the "revenue horizon") by selling the thermal energy circulating through its pipes to customers, which also pay a monthly fee to connect to the network. All the customer needs is a heat pump, which replaces the need for a furnace and a separate central air conditioner.

Also similar to gas distribution infrastructure today, the pipes and boreholes that make up the thermal energy networks can run through shared public right-of-ways, such as underneath sidewalks and roads, resulting in minimal disruption to private property. The same workforce and expertise utilized by gas utilities to build and operate and maintain this infrastructure can be used for thermal energy networks -- i.e. drillers, pipe layers, HVAC technicians, etc... -- which unions find appealing.

This approach creates the opportunity to reduce GHG emissions, reduce air pollution, bring price stability and affordability to consumers, minimize stress on the power grid (because most of the energy comes free from underground or waste sources), and improve community safety (no risks of explosion or carbon monoxide poisoning), all while giving incumbent gas utilities an energy transition pathway that's realistic and sustainable.

There is still much to learn. MaRS has partnered with HEET, an organization in Massachusetts that for the past seven years has been working with utilities and regulators in the U.S. Northeast to help change regulations and advance pilot projects. Eversource Gas, for example, recently finished installing the first utility networked geothermal system in the United States. In 2023, HEET established a coalition of gas utilities from across the U.S. that are interested in learning more about transitioning to networked geothermal. In just months, that group grew to 26 utilities, representing more than half of all gas customers in the U.S.

HEET has been a co-facilitator of our working group meetings. We have invited guest speakers in from Eversource and National Grid, as well as the Chair of the Massachusetts Department of Public Utilities, the state's energy regulator, to share learnings. MaRS will produce a Roadmap to 2050 report in May that summarizes the work of our Working Group and we would be delighted to present our finding and recommendations to the Ministry at that time.

There is tremendous potential in this approach, but it needs both policy support and regulatory clarity to move forward. We are not suggesting it is the only path forward. Quite the contrary. We are suggesting that networked geothermal and other types of thermal energy networks could produce the right mix of affordability, reliability, safety and sustainability in a large number of communities, old and new, across Ontario. We also feel this is an important opportunity for incumbent utilities, if they were given the mandate to pursue it.

Thank you for your consideration.