Sustainable electricity in Ontario
I read through the comprehensive conference program and the equally impressive list of guest speakers. This ought to be an important and thought-provoking discussion, and I hope these remarks can contribute to it.
The issues before governments at the federal, regional, state, provincial and municipal levels as they relate to energy require us to either find a way to lead, or face energy shortages that are entirely foreseeable, preventable and unnecessary. I will discuss how Ontario has chosen to do that.
Yesterday, in the Speech from the Throne that began the second session of the 41st Parliament in Ontario, the Province announced an intention to introduce legislation to rebate the equivalent of the provincial portion of the sales tax on electricity to Ontario residential consumers.
Like most policy announcements, the important part in understanding that move is not the ‘who, what, where, when,’ or even the ‘how,’ it is the why.
Ontario does not have the most expensive electricity in North America, or anything close to it. The New England states have that distinction. Indeed, to expand their generation, Massachusetts is building off-shore wind generation. So let’s look at some of the ‘why’ factors.
There are four principal cost drivers for electricity generation and transmission: capital expenses; the cost of people; fuel; and interest rates and inflation.
Nearly identical interest rates and inflation are common to every North American utility and power distributor, and those rates are very low.
The cost of fuel in Ontario is also nearly zero. Wind, sunshine and falling water cost nothing. The uranium used in Ontario’s Candu reactors is, per unit of power generated, very close to zero. Natural gas used during peak power periods also costs very little, in part because the gas plants generally run less than ten percent of the time during a year.
The cost of the people who operate the electricity generation and transmission systems is similar in all jurisdictions in North America. And per unit of power generated, it is also very low.
That leaves capital expenses.
You are either building and renewing your system, or you are not. And if you are, you are incurring costs in the tens of billions that need to be passed through to the rate base. If you are not building or renewing generation and transmission, you are postponing tens of billions in costs now in order make your users to pay more later.
To put this another way, during the past 12 years, Ontario has built tomorrow’s power generation and transmission infrastructure, paid for it with yesterday’s money, and financed it over its useful lifetime at interest rates of nearly zero.
Many of Ontario’s neighbouring jurisdictions have put off this renewal, meaning they must now buy today’s power generation and transmission infrastructure, pay for it with tomorrow’s money, and finance it over its useful lifetime at interest rates that have nowhere to go but up.
Ontario has built a diversified generation and transmission capacity that the rest of North America is scrambling to replicate, now and in the future. And its costs are already on the rate base of residences and businesses.
If you use electricity in Ontario today, you have seen your rates go up because of this forward planning. In other areas, you are about to see your electricity rates go up even more sharply than Ontario’s have, as they also build and renew their power generation and transmission infrastructure.
Last December, every country with an organized government signed on to the Paris Climate Change Accords. One of the biggest contributors to greenhouse gases most places in the world is electricity generation by burning coal to boil water to raise steam and spin a turbine.
Ontario no longer burns coal. A fuel that 13 years ago provided a quarter of Ontario’s base load electricity no longer provides any at all, and the Province generates more – much more – electricity now than it did 13 years ago. Ontario is coal free, and has been for two years. Turning away from coal was, and remains today, the single largest and most successful climate change initiative in North American history.
And it cost money to achieve, money that you pay on your electricity bill. It’s money the rest of the world will all start paying as they also look reality in the eye.
By 2015, Ontario’s electricity generation was more than 90 percent emissions-free. Only natural gas now generates greenhouse gases during the production of electricity. Regular smog days and emissions that were making kids sick are gone, even during this past record-hot summer.
Rolling brownouts and blackouts in Ontario also no longer happen. Ontario’s power system is robust enough to meet its high peak summer demand from a variety of sources. And it cost money to achieve, money that people pay on their bi-monthly power bills.
Ontario businesses and households have done a lot to conserve power. There is even more they still can do. But while the rest of North America’s power rates rise as other jurisdictions do what Ontario has already done, people ask whether there is any little break they can receive for what they have already done.
That is the ‘why’ for the reason Ontario will sustainably reduce electricity costs. Later this week Energy Minister Glenn Thibeault will introduce the Ontario Rebate for Electricity Consumers Act, 2016 which will rebate the provincial portion of the HST directly on the electricity bill for millions of families, farms, and small businesses.
This rebate will take effect January 1, 2017. It will provide the average Ontario family with an eight percent reduction on their bill – or an average of $130 extra in household budgets each year.
For eligible customers the Ministry will modernize the Rural or Remote Rate Protection to more equalize electricity delivery costs between rural and urban communities
These changes will reduce bills for more than 330,000 eligible customers by an estimated 20 percent, and provide savings that average about $540 annually.
Ontario is also focused on growing the economy and creating jobs. Businesses need to benefit from this plan as well. While small businesses will see this new rebate for the HST, larger businesses will also see benefits.
The Province will expand the eligibility of existing programs that empower businesses to reduce electricity costs by one third – allowing more than one thousand new businesses to access the Industrial Conservation Initiative, or ICI.
First started in 2011 for only the largest companies in Ontario – ICI empowers individual businesses to better manage their electricity use. The program rewards them with lower costs for reducing their electricity consumption on the warmest days of summer, and the coldest days of winter.
Expanding this program will help more than one thousand new businesses access this program, and directly benefit job creators across Ontario.
The program has grown as the Province gained experience with the way industry uses it, and saw trends in how much power was both used and saved. Taken together, these actions represent one of the largest single electricity support programs in the Province’s history.
They will help ensure that everyone benefits from a system that’s clean, reliable, sustainable and affordable.
Ontario will refurbish 10 nuclear units at the Darlington and Bruce Nuclear Generating Stations. Two units at Bruce have already been refurbished.
Ontario Power Generation will begin refurbishment of the first unit at Darlington in mid-October. The refurbishment of Ontario’s nuclear fleet will provide an emissions-free source of electricity for decades to come.
And nuclear refurbishment does not just support the economy, it drives it as well, with a multi-billion-dollar investment and continued support of the province’s nuclear industry and its tens of thousands of high-value, high-skill, export-ready jobs.
Looking forward, the Ministry of Energy is developing the next Long-Term Energy Plan It sets out the direction for Ontario’s energy future, and balances the principles of cost-effectiveness, reliability, clean energy, community and indigenous engagement, and has an emphasis on conservation and demand management.
The 2017 Long-Term Energy Plan will build on the success of the 2013 plan, which was the most comprehensive energy consultation and engagement process the Ministry has ever undertaken.
Public consultations will be supported by an electricity technical report already posted by the Independent Electricity System Operator, and a fuels sector technical report being prepared by an expert third party. Both of these documents will be public prior to the start of consultations.
Consultations begin this fall, and include in-person sessions, online consultation tools, and the opportunity for stakeholders to provide submissions through the Environmental registry.
Finally, and most recently, on July 1st this year, Ontario’s Climate Change and Low-carbon Economy Act came into effect. With that step, Ontario is moving forward with a cap and trade program that will limit greenhouse gas emissions, and fight climate change.
Ontario will implement cap and trade January 1, 2017. As the Province’s electricity sector is now more than 90 percent emissions free, Ontario is in a strong cap and trade position from the very outset.
Ontario’s climate change strategy will demonstrate the Province’s clean energy leadership; invest in people, their skills and careers; build modern infrastructure and support a dynamic and innovative world-class business climate.
To download a copy of this speech in Adobe Acrobat format, click here.