The launching of Ontario’s Feed-in Tariff program on October 1, and the other changes represented by the Green Energy and Green Economy Act, mark the beginning of a new era. Ontario, and perhaps other jurisdictions as well, will never be the same again.
The GEA, as it’s known, is not just an emboldening of the province’s renewable energy programs, but a new way of doing business. The organizing principles for the major agencies in the sector have been fundamentally altered, and their duties are now more focused on the implementation of government policy in general and renewable energy in particular. A new outlook is needed from the industry, not just in responding to the Feed-in Tariff program, but in assessing and responding to public policy.
For example, the Ontario Energy Board is now responsible for promoting the generation of electricity from renewable energy sources “in a manner consistent with the policies of the Government of Ontario.” Although the Board has always been cognizant of government policy, this change will mean a new level of coordination between policy and regulation. The many provincial agencies that play roles in the approval system are now expected to provide clear and simplified paths forward for renewable energy projects, in addition to meeting all their previous responsibilities. Hydro One, the largest transmission company in the country, is now embarking on its most ambitious expansion in decades, primarily to facilitate renewable energy in accordance with government policy. The Ministry itself is now responsible for promoting a broad range of energy initiatives including those to increase the availability of renewable energy in Ontario, as determined by the Minister.
These are not modest adjustments to the business plans of government agencies or incremental changes like those of the last 10 years. You have to go back to Bill 35, the Electricity Competition Act that ended the effective monopoly of Ontario Hydro and established a market system for power in Ontario, to find anything so fundamental.
The Green Energy Act is about more than simply affording more protection for the environment. It is also a major change in the principles that govern the power sector, and in how the agencies that oversee the power system will work together. For example, in the past the primary factors that would usually be considered before implementing a new policy would have been the impacts on reliability, economic efficiency, consumer prices, the investment climate, and the physical environment. Now it’s clear that environment has moved almost to the top of the list, right next to reliability. Building new power infrastructure has moved from being largely an economic decision to being treated more like an essential public service. The Feed-in Tariff program is the strongest example of this change in outlook. Ontario wants as much renewable power as it can realistically develop, and it is prepared to move aside many obstacles to get there quickly. In addition, a new consideration seems to have been added to the list – the creation of green jobs and the growth of environmentally-oriented economic activity in Ontario. Aside from the occasional use of Ontario Hydro as an economic development agent in the period before 1995, these are entirely new priorities for the power system and its regulator.
The Act also seems to significantly change the role of the Ministry of Energy and Infrastructure, particularly in relation to other arms of government. The Ministry is now responsible for coordinating activity amongst government agencies that are working on energy-related matters, and the Minister himself has a wide range of new directive powers. The Ministry can now give binding instructions to other agencies to establish programs to procure energy services, to connect renewable generators, to facilitate Aboriginal participation in the energy sector, and many other things. As mentioned above, agencies like the Ontario Energy Board are now more explicitly accountable for ensuring their actions align well with government policy. A new group of stakeholders is being added to the picture, with direct encouragement for community and Aboriginal organizations to become active in the generation sector.
All this change has been accomplished with little or no apparent conflict, using the same staff people in all the agencies who were there before, and with very little resistance. Some people are probably viewing it as a quiet revolution.
People with a professional connection to the power sector may consider themselves lucky to be standing at the crux of a turning point in history, being able to play a part in such memorable, significant and long-lasting changes. As any observer of history knows, the ultimate degree of success of any sweeping initiative of this nature will be determined in large part by the ability and willingness of the participants to pull together, to reconcile the new principles and objectives with all their existing duties and expectations – and to deal with potential problems before they become more serious.
The Feed-in Tariff program, with its prices well above anything that’s gone before, and no upper limits on total procurement, will be controversial within the power sector. But for most of the public these are questions of “inside baseball.” Much revolves on simply how well the program is rolled out and how well the industry responds to it.
The importance of the undertaking can be viewed in big picture terms. Minister Smitherman has made the large-scale adoption of renewable energy and energy efficiency into primary objectives for the province, and it appears that Premier McGuinty would like green energy to be seen as a hallmark of his administration. While the coal phase-out initiated in the McGuinty government’s early years seemed to be designed to facilitate improvement in the regional airshed, the GEA and FIT could make Ontario one of the global leaders in renewable energy. If Ontario, with its reputation for being traditional and cautious, can implement a major acceleration in clean energy, there’s no telling how quickly the rest of the world might move down a similar path.
No doubt many people will credit Minister Smitherman’s work on this file as an example of decisive leadership, and of putting the vision of a cleaner future into concrete actions. However, the broader test is how enduring the change will be. For true success there needs to be consistency amongst the many internal components of the initiative, especially because a Feed-in Tariff is not a single simple mechanism like it sounds. There needs to be long-term cohesion across the many branches of government, persistence over a significant period of time, and constructive collaboration between many players. After the big priorities are set, many smaller decisions need to be made about implementation and how to resolve issues where the program comes into conflict with other ongoing public priorities. Many people in the sector may wonder if another initiative after the GEA could oblige government agencies to adopt further new priorities in a sweeping way, to abandon old ways of doing business, possibly affecting even the primacy of today’s initiatives. When change is sweeping enough to affect even the context in which it is being made, there is often need to button down some of the moving parts.
APPrO President Dave Butters said that the GEA contains “many positive elements” for project developers, but noted that its outcomes are difficult to estimate at this stage. “Electricity policy is being used to address environmental, climate-change, health, economic and energy objectives in a more integrated way,” he noted. “(T)his 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 across many important 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.”
There are a number of difficult issues that remain to be resolved in the power system: Surplus baseload generation, issues of price formation, price fidelity and a growing global adjustment, curtailment policies, load following capability, and so on. While the Feed-in Tariff represents an aggressive way of bringing renewables onto the system, and a significant contribution in the global effort to slow climate change, it needs to be integrated with solutions that will address the full set of challenges facing the power system.
Whether the GEA is a modest success, a major transformation, or something else entirely, remains to be seen. The old measures of success may not be adequate any more. Everyone in the power sector will have a part in the actions that will ultimately determine outcomes. There are few initiatives more timely or relevant than this one. Welcome to the new era!
– Jake Brooks