APPrO tabled its assessment of the proposed Green Energy Act with members of the provincial parliament on April 22. APPrO President Dave Butters presented APPrO’s views and comments on the significance of the legislation at public hearings called to examine Bill 150. Speaking to Ontario legislature’s Committee on General Government, Butters said that the GEA “proposes a bold new framework implementing a broad series of coordinated actions designed to make it easier to bring renewable energy projects to life and to make Ontario a green energy leader. From the perspective of the developers of large scale projects, there are many positive elements of Bill 150,” but he noted that there will be outcomes that are difficult to estimate at this stage. He said that the Act will produce a wide range of benefits over a long period of time, but it will also add costs to the power sector, likely increasing the consumer’s cost of electricity.
"Electricity policy is being used to address environmental, climate-change, health, economic and energy objectives in a more integrated way,” he said. “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."
He also noted that, "[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. This is a very different way of doing business, and there needs to be a better understanding that the consumer’s bill will increasingly reflect this new way."
For the full transcript of Mr. Butters remarks, including questions and answers with members of the legislature, please see the following page on the APPrO magazine website: https://magazine.appro.org/index.php?option=com_content&task=view&id=619&Itemid=44
Highlights of APPrO’s presentation to the Ontario Legislature’s Standing Committee on General Government, April 22 2009
Mr. David Butters: Thank you, Mr. Chair. My name is Dave Butters. I’m the President of the Association of Power Producers. … there is no question that Bill 150, which is what we’re talking about, is an innovative, forward-looking and potentially game-changing piece of legislation in terms of its impacts. It does propose a bold new framework, implementing a broad series of coordinated actions designed to make it easier to bring renewable energy projects to life and to make Ontario a green energy leader. From the perspective of the developers of large-scale projects, which is generally APPrO members, there are many positive elements in Bill 150.
We applaud the government’s vision for a “best in class” renewable energy feed-in tariff. As the details of the FIT emerge, the OPA will need to work through the inevitable obstacles associated with implementing a policy initiative of this scope, and those discussions are ongoing. We’re engaged in those with a number of other stakeholders.
One thing that we do need to ensure with regard to the feed-in tariff is that, by providing meaningful incentives under the tariff for new biomass generation facilities, we don’t create the unintended consequence of driving up the prices of an already limited biomass supply in the province. You only have to look at the state of our troubled forestry industry to get a sense of that. So the incentive shouldn’t come at the expense of existing biomass facilities. We already have those. They shouldn’t be forced to close down because they simply can’t compete for the limited fuel supply against FIT-funded generators. That’s a concern of ours. Nor should we lose sight of the fact that Ontario’s experience with competitive procurement is also a well-tried and effective means to get project certainty and low cost and will continue to be necessary for projects outside the FIT envelope.
The bill also takes an impressive step to reduce costly delays for approvals and to provide greater certainty for developers by streamlining the requirements to obtain multiple permits, licences and approvals relating to provincial environmental issues, by reducing duplication and by providing one-stop shopping for renewable energy approvals with a six-month service guarantee. We’ve talked about these in the past. These are well known. Together with other amendments that limit the effect of zoning and demolition control requirements, renewable generators, I think, can look forward to getting their projects online faster, with fewer regulatory hurdles and less opportunity for what we would call social friction.
Now, that’s the good news, and as I said, I think the act is an important step in a very important direction. I want to look ahead now a little bit and outline some of the issues we think a Green Energy Act will force us to pay attention to.
It is clear that the bill 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.
… Ontario needs a balance between variable green energy and reliable emission-free nuclear and hydro and low-emissions generation such as gas.
… Unlike our current generation fleet, green fuel sources cannot presently be controlled or stored. For example, wind power, which is the most abundant variable resource in terms of megawatt value today, is just as likely to be running when it’s not required as when it is.
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. That investment will be on the consumer side—for example, in advanced metering or smart meters; in the way we control the system—for example, in the smart grid and both increased supply and demand management; and through additional facilities, whether that’s storage or ramping facilities or new arrangements for existing facilities like our current non-utility generators to make them more flexible and responsive to system needs.
Consequently, 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 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. This is a very different way of doing business, and there needs to be a better understanding that the consumer’s bill will increasingly reflect this new way.
The bill also enshrines access as of right to the electricity grid for renewables. This should stimulate renewable investment, as desired. However, an unlimited renewable tariff introduces new uncertainty into the future of existing suppliers. As I already noted, a reliable supply will demand a continuing and important need for some amount of the more controllable and more reliable capability. The province will need to assure existing suppliers of such energy that they will not face an unacceptable investment risk as a result of the priority treatment for renewable energy. To take a real example—this has actually happened quite recently—it would be indeed perverse if new and relatively expensive wind energy displaced low-cost heritage baseload hydro or nuclear energy or, for that matter, high-efficiency combined heat and power.
One of the most significant developments under Bill 150, from a generator’s perspective, is the formal recognition that transmission and distribution constraints are a significant obstacle preventing new renewable generation from coming online. This problem has long been an issue for generators, and Bill 150 presents a policy framework designed to address this issue head-on. However, much of the renewable energy potential is in remote locations of the province and will need extensive new transmission to deliver to market. We need to think very carefully about that, how we’re going to make that happen faster. It’s a challenging issue, and it has the attention of policy-makers everywhere, not just here but in the United States as well.
In closing, I want to remark on a few other issues. In reality, it’s the regulations that will give substance to the act, and those remain to be developed. Until they come forward, the clarity and certainty that all parties need will be largely missing. In that regard, it would be helpful for the government to ensure that draft regulations emerge in an open and transparent manner, which will allow for meaningful input and debate.
The provision to allow regulated local distribution companies, or LDCs, to own and operate generation is of some concern to APPrO. This raises questions of confidentiality, risk management, risk allocation and self-dealing. The current statute permits LDCs to do this, with Ontario Energy Board approval, through their unregulated affiliates, which are governed by the affiliate relationships code. There were and there continue to be sound policy reasons for the current approach, and we have seen no persuasive evidence that this needs to change.
Finally, we shouldn’t accept that this initiative won’t be without cost. From the electricity perspective, it will be. That’s why we will need the Ontario Energy Board to be as vigilant as it can be on behalf of energy consumers and taxpayers in ensuring that investments are as economically efficient and as prudently incurred as they can be. We also need a realistic handle on the costs: If it can’t be measured, it’s highly unlikely it can be managed. This is a good reason why the integrated power system plan needs to come back before the OEB as soon as possible.
To conclude, this is a very bold step toward the future. It will change the way we think about the electricity system and its relationship to our society. That’s a good thing, and it will force us all to think not just outside the box but indeed beyond it in order to make it all work. The various agencies of the government involved in rolling this out are all working very hard to make that happen if the bill is approved.
We are well served by their efforts, but we can’t forget that we’re also managing, in real time, a very complex machine every second, every minute of every day, and in some very uncertain and challenging times. I haven’t even discussed the impacts and the complexities of impending climate change legislation, but you layer those on top of this and it gets pretty complicated very quickly.
The future is even more uncertain. Industrial demand is down precipitately, and the trends in this area are not very encouraging. The market price for electricity has been declining relative to the overall bill, and this trend is likely to accelerate over the coming years.
On the other hand, we also know that user-initiated conservation and demand management are the cheapest ways to address climate change. We will need a lot of serious thinking and courage to address the price contradiction if we want people and organizations to respond to price signals. We can’t afford to overwhelm our agencies with trying to make a Green Energy Act work while failing to address these fundamental issues as well.
For a PDF copy of the prepared text of APPrO's presentation, please go to