APPrO President addresses 4th Canadian German Solar PV conference
Following are the notes for remarks given by David Butters, President of APPrO, to the 4th Canadian German Solar PV conference, on March 2 in Kitchener, Ontario.
NOTES FOR REMARKS
Ensuring a sustainable energy future for Ontario
4th Canadian German Solar PV Conference
March 2, 2011
By David Butters
President & CEO
The Association of Power Producers of Ontario
(Check against delivery)
Your Excellency, head table guests, friends --- thank you very much for inviting me to the 4th Canadian German Solar PV Conference.
It is indeed an honour to be asked to be your keynote speaker on the subject of a sustainable energy future for Ontario.
When I was first approached to do this, I was a bit concerned about speaking to you since I am far from an expert in solar power, unlike all of you.
But I was relived when Suzanne suggested I keep my remarks at a high level, and with a broad perspective. As a generalist that appealed to me. On the other hand, as William Blake once sourly observed, “To generalize is to be an idiot.”
Hopefully, you will not think that of me after this!
I want to cover two topics tonight:
- First, a little bit of information about APPrO; and
- Second, some of the issues and challenges I think we need to consider when we discuss sustainability.
The Association of Power Producers of Ontario works to promote the interests of Ontario electricity generators by means of public advocacy, publications and conferences.
We represent virtually all of Ontario’s large scale commercial generation organizations.
Companies like Bruce Power, OPG, Epcor, TransAlta, Northland Power, Brookfield, GDF Suez and International Power - to name just a few – make up our membership together with many suppliers of various services to the generation sector.
Our generator members make almost all of the electricity Ontario uses and they make it from almost every fuel there is.
This includes nuclear, water, natural gas, biomass, wind energy and solar power, whether for baseload, intermediate or peaking power.
Because electricity is fundamental to human welfare, essential to economic prosperity and at the centre of the climate change debate, our members work with the Ontario system operator, and transmission and distribution utilities, to make sure we have reliable and clean electricity, when we need it, at a price we can afford.
But we do much more than operate existing plants.
We’re also building new plants and refurbishing older ones to make sure we meet the key requirements of Ontario’s Long Term Energy Plan.
In fact APPrO members are responsible for 90% of Ontario’s current renewable projects, and they are similarly active across the country.
Our mission is the achievement of an economically and environmentally sustainable electricity sector in Ontario that supports the business interests of electricity generators and the provincial economy.
Our objectives are to:
· Encourage efficient and timely investment in Ontario’s power system to ensure adequacy and reliability;
· Deliver good value to consumers and to the Ontario economy in the supply of electricity; and
· Be the leading source of ideas, solutions and policy advice in the Ontario electricity sector.
As part of our advocacy work we lobby hard on behalf of our members and their interests.
We also produce a bi-monthly magazine, IPPSO FACTO, and put on Canada’s premier power generation conference, which will be held at the Metro Toronto Convention Centre on November 15 and 16 this year. Please, mark your calendars!
With regard to sustainability, our members are pragmatic businessmen people.
But they believe that we can achieve an environmentally and economically sustainable electricity sector in Ontario: one that both supports the business interests of electricity generators and ensures adequacy, reliability, and the optimal electricity cost for Ontario consumers.
But what do we mean when we talk about sustainability?
It isn’t just about more renewable energy. It’s a lot more than that.
It means having a well-planned and efficiently operated electricity system that relies on a balanced mix of resources at the best cost.
One in which nuclear and hydro will continue to meet the majority of baseload needs.
One where gas will replace coal for intermediate and peak load following, complement and back stop intermittent renewables technology, and be used in applications for local reliability and CHP projects.
One where effective integration of renewables and further evolution of IESO dispatch procedures ensures surplus baseload generation is managed efficiently to maximize the benefit of these resources.
It means having a system which reflects an enduring set of transparent organizing and governing principles such that electricity sector decisions maximize the net benefit to Ontario, taking into account economic and environmental impacts in a transparent and consistently applied process.
It means one where plans for the future -- for plans we must have – are clear, coherent, transparent and analytic.
These plans must be economically rational and cost effective while remaining integrated and flexible. And they must be achievable and measurable.
We know that electricity prices for Ontarians are increasing due to investments in infrastructure and new generation.
So we must ensure the primary goal of our electricity system is to maximize provincial wealth creation within a well-thought-out and widely accepted set of governance principles which articulate provincial aspirations and goals in an economically rational and efficient framework.
If we fail in this basic task, we will not be building a sustainable future, and we will not have the social licence to move forward.
Our plans for a sustainable future also have to be based on sound planning principles: functionality, operability, integration, economic efficiency. The system has to function seamlessly at all times.
In this context our plans also should maximize existing resources: there are billions of dollars in capital already invested in our system.
We owe it to ratepayers to get the most value we can from these assets. After all, ratepayers have and will continue to pay for them.
In any sustainable future scenario, we will also need technological advances. Some are already taking place, like our smart grid initiative; some we cannot foresee and may surprise us, and even be disruptive.
But when added to higher building stock turnover and improvements in efficiency standards this will moderate the growth which will come from the increased electrification of society such as in electric vehicles.
Depending on how electricity price signals are conveyed, businesses will increasingly find ways to conserve energy or load shift.
This is an important point: effective price signals (through the market) can influence the energy demand of families and businesses.
Indeed, it is only through such mechanisms in a democratic society that we can hope to manage the increase in demand that will gradually take place due to immigration, economic growth, urban infill etc.
Conservation and Demand Management (CDM) programs, that provide tools to help manage bills and avoid new system costs, will also be vital to a sustainable energy future.
As I have just noted, our view at APPrO is that price signals are the most effective tool in achieving CDM benefits.
However in the current market situation in Ontario, the natural incentives for load shifting do not exist, or are so badly weakened as to be practically ineffective.
The point here is that all costs that can reasonably be recovered should be captured in the energy price.
This will reduce the non-energy part of the commodity bill, so that consumers who are exposed to the market price have natural conservation and demand shifting incentives.
And it will properly signal to consumers the value of the product they are using, as well as efficiently rewarding generators for producing the most appropriate types of output in each kind of situation.
At the same time, CDM programs should be evaluated fairly and transparently against the the same foundational economic framework as I discussed earlier.
APPrO members know -- probably better than almost anyone except the system operator -- that as we move to a greener and more sustainable energy future we need a balance between variable green energy and reliable, more conventional yet emission-free nuclear and hydro and low-emissions generation such as gas.
To date, Ontario’s electricity sector has been fashioned to achieve the most economically efficient electricity system.
We have tried over the years to create the optimum balance between prices for consumers, reasonable returns on long-term investment in generation and transmission, and the imperatives of reliable system operation.
And we have to recognize that our bulk power system is designed for and must operate to meet customer demand in real time.
This means that supply and demand must be constantly and precisely balanced. This is done by controlling conventional generation to make electricity when needed.
But it is clear that we are at a point where government policy, aligned with citizen aspirations, is reshaping and redefining the objectives for Ontario’s electricity sector - and it’s making them broader.
Electricity policy is being used to address environmental, climate change, health, economic and energy objectives in a more integrated way.
This is an entirely legitimate policy direction - but it is a choice with its own set of outcomes, and those outcomes will incur costs not previously borne by the sector or the electricity consumers of Ontario.
The impact should not be downplayed.
The introduction of more renewable and largely variable generation will also change the way our system operates.
Unlike our current generation fleet, most of the available green fuel sources cannot be controlled or stored.
For example, wind power -- the most abundant variable resource in terms of capacity today -- is just as likely to be running when it’s not required, as when it is. Solar energy obviously has limitations as well.
So moving Ontario to much greater reliance on intermittent resources such as wind and solar requires that there be extra investment to compensate for this variability.
Such investment will have to be on the consumption side, in the way we control the system and through additional facilities like new peaking gas plants, storage or ramping facilities.
We can also improve existing facilities like our current Non-Utility Generators to make them more flexible and responsive to system needs, or as the system operator has proposed, add new renewable energy market products.
Whatever they are, it almost certain that this new system’s overall costs will be higher when compared to the starting point of the existing electricity system.
The challenge as I see it is that the benefits will be dispersed broadly -- extending across many sectors of the economy, across many years and many important societal objectives such as global warming.
But the costs will be increasingly visible on the electricity bill.
The consumer will be purchasing a much broader set of products and benefits than has traditionally been the case: reliability and more variable “green” energy, cleaner air and Ontario jobs, for example.
This is a very different way of doing business and there needs to be better understanding that the consumer’s bill will increasingly reflect this new direction.
Unfortunately, I think we are still a long way from helping ratepayers think through this change.
The current debate around electricity prices which we see in Ontario reflects this reality.
While electricity bills represent a very small part of consumer household costs (around 2% on average) they take on much greater political significance than costs in other areas.
Indeed, if you look at the facts, electricity prices have risen by only 1.2% a year over the past 9 years (adjusted for inflation and not taking into account distribution costs). But this is not widely known or understood.
In fact, many consumers seem to believe rates have been soaring and it’s because of renewable energy. This of course is wrong. But why do they think it? I don’t have the answer but I do know that we must do a far better job of addressing it.
At our conference last year, Tom Mitchell, the president & CEO of OPG, talked about the relationship with the customer, which some take for granted or even ignore. This is at our peril.
Tom said that “we need to focus on how to renew the system…how to maintain it…how to make it cleaner…and do it cost effectively.”
He went on to note that as we move to a more sustainable electricity system we must keep in mind that performance matters, value matters and price matters.
“As an industry, I don’t think we can ignore how important the price issue has become to people. We have to show them that we know this and that we care.
The millions of ratepayers in Ontario who pay for the energy we make demand and deserve value for the prices they pay. They want us to be cost effective and responsible.
They want us to perform well. They want openness, transparency and honesty.
Above all they want us to be an industry that sees things from their perspective.
They want an industry that can tell them specifically what we’re doing to make and deliver reliable electricity – at a fair price – so that their lives can be better.”
In conclusion a sustainable energy future for Ontario is certainly possible.
In fact we are already moving in that direction and have made a huge amount of progress already in getting there:
- investing in nuclear plant refurbishment to take advantage of its emission free power,
- investing in new hydro-electric assets,
- building new clean burning natural gas plants to replace our coal fleet,
- adding thousands of megawatts of wind and solar energy, and
- making investments in new transmission and distribution as well as smart meters and Time-of-Use pricing.
The government’s Long Term Energy Plan lays out a workable framework to achieve this future.
But if we are to continue to make progress, we mustn’t forget ratepayers.
They pay the bills.
They elect our governments.
We need to ensure they are willing and understanding partners in this important work.
If they are not, we will not succeed, and our province will be a poorer place for it.