The newly developed framework for regional planning of the electricity sector in Ontario appears to be headed into another area that’s potentially rife with controversy.
What started out as a relatively modest initiative to co-ordinate local planning processes has found itself potentially dealing with a variety of issues, arguably much of the unfinished business from other parts of the electricity sector. As such, regional planning could rise quickly in importance as it takes on more and more functions. Whether this is entirely ideal or necessary is a subject for debate.
Regional planning faces the challenge of pulling together planning initiatives that start from very different places: the distributors in a region, the transmitter, proponents of market initiatives including generation, storage and demand management, utility shareholders and municipal governments. Perhaps most challenging, regional planning processes in many cases need to engage their communities and affected stakeholders of all descriptions in much more comprehensive and conclusive forms of communication than has generally been the case in the past.
With modest growth in electricity demand in recent years Ontario’s system of regional planning hasn’t yet been forced to resolve major controversies. But over time, cases will crop up where demand threatens to outstrip supply in areas where the local community is skeptical about major new development. (The Toronto region is arguably there already.) In the past, a clear and present need for new supply would usually trump local objections. However with politicians of all stripes apparently prepared to wade into siting decisions for new power plants, the OPA has been handed an unmistakable new mandate: To make sure there is community support before signing contracts to build new power infrastructure. That may be the new reality but it’s a tall order in some places.
While community engagement for a specific power project is largely the responsibility of the individual proponent, project-specific consultations are often insufficient. Ensuring the adequacy of supply in a region relies heavily on the strength of the broader regional planning process and its perceived level of community engagement. At the end of the day, even the support for individual projects under consideration will depend on having a highly credible regional planning process.
Ensuring adequate supply in a region is no longer a matter of demonstrating to skilled engineers and planners that infrastructure is physically necessary. Now the local community, with all its unique characteristics, must be carefully prepared and consulted before a decision can be reached. This can add years to the development timeline and mega-dollars to project costs. Achieving supply adequacy now depends on comprehensive community engagement just as much as it requires sound engineering. While some regions will experience little or no controversy over new infrastructure, for those where significant contention is a possibility, a well-developed system for regional planning has become an indispensable part of achieving adequacy and community support.
Here is the elephant in the room: There is no guarantee that Ontario’s system for regional planning is robust enough to achieve substantial consensus in all of the province’s communities that need new infrastructure. Only time will tell if the current process is sufficient. We do know that the planning system will need to evolve much further if current processes prove insufficient.
Another area in which regional planning may find itself being pressed into service is in decisions about the deployment of smart grid infrastructure. Although there is widespread agreement on the need to move to intelligent grids, there is little closure on how it will be divided up in terms of cost responsibility. In effect there are three types of smart grid infrastructure: That which is entirely privately-owned, that which is entirely owned by the distributor or transmitter, and common infrastructure that can be owned privately but which requires some central co-ordination to get established and/or some rate-based financing.
If the over-riding objective of the planning process is to deploy smart technology as quickly as possible, you could rely heavily on wires companies building common infrastructure quickly. But that might put too much of the cost on the general rate base. If you want to minimize costs on the rate base, you might rely on the purely private option. But that might mean it takes years longer than necessary to get equipment in place, and result in a fair bit of duplicative infrastructure and/or examples of local market dominance by private service providers. Most likely the middle path will often be preferred, as a compromise with both market forces and some prevention of duplication. But the third option only makes the planning job more complicated: Precisely what types of common infrastructure should be developed to support the growth of an intelligent local grid, what parts of that equipment should be privately-owned, and what parts of that should be eligible to collect costs directly from distribution or transmission customers through their rates? That’s a lot for local planning authorities to think about, even if they come up with very similar conclusions from region to region. But there’s no guarantee that different regions will adopt the same models for development.
With revenue decoupling underway, regional planning may face additional challenges. Wires companies may become more like internet service providers who charge a basic monthly fee to make sure customers have unimpeded access to network services. Considering that there will be costs associated with assuring full network access for everyone, some customers may push for low-intensity and high-intensity rate classes, so that those who make little use of the new capabilities aren’t expected to pay for network upgrades that primarily benefit high-intensity users. Regional planners may decide they need to make distinctions between infrastructure that is essentially compulsory for all consumers to pay for, and infrastructure that is paid for by special classes of customers. Either way, the cost of grid infrastructure is likely to become more visible and more controversial as a result of revenue decoupling. Because of the new transparency, and as a means of ensuring that revenue decoupling moves forward smoothly, planners will need to provide for systematic communication with all kinds of customers on grid costs. Note that this goes well beyond what planners have usually done in the past.
A further reason that regional planning is rising in significance is its relationship to the evolving system of provincial electricity planning. Since the latest version of Ontario’s Long Term Energy Plan was released in 2012 it has become clear that the provincial plan will not go through a regulatory review, at least not anytime soon. This means it is subject to change of any sort at any time. Investors and institutions that need to operate on long term assumptions will therefore look increasingly to the outcome of regional planning processes for indications of direction. In all likelihood regional planning will fill in some of the gaps in provincial planning and be increasingly relied upon as a guide for a wide range of investors and planners in all parts of the economy. Carrying this concept further however, is not straightforward: There is a significant risk that people will look to regional planning for more answers than it was originally intended to provide. If there is no other generally accessible process for public input to energy planning in a given community, there’s no telling what members of the public may call on the regional planning process to consider. The processes designed by the OEB Working Group on Regional Planning were not intended to substitute for an integrated provincial planning process with public input.
Planning often has to struggle with multiple objectives. Ensuring community acceptance for specific solutions is only one of the objectives for regional planning. The overall objective is to find the best solution, taking account of local interests as well as the broader needs of society.
All of the above issues – network expansion, deployment of smart grid infrastructure, and revenue decoupling – have significant implications for generation, at least partly because of their relationship to regional planning. Although the OPA will likely be managing the lion’s share of generation procurement for years to come, there is every indication that they will be taking their lead from local planning processes to a greater degree in the future. The trigger for procurement of new generation will often be when a regional planning process identifies a need for generation in a specific region. (See the background information on regional planning in the articles identified below.)
Regional planning is both an unexpectedly powerful tool for getting things done in an increasingly complex system, and a significant new area of responsibility for just about everyone in the sector. With one challenge after another being tossed into the path of regional planning, it’s almost certain to find itself under stress. Almost everyone with a stake in the outcome will have reason to make sure the scope and objectives are well-defined, both at the level of province-wide standards and in the case of any particular regions with which they have direct involvement.
— Jake Brooks, Editor
Background information on Regional Planning
“Board proposes code changes for regional planning,” IPPSO FACTO, June 2013
“Regional planning: APPrO recommends more explicit transmitter obligations to support scoping process,” IPPSO FACTO, August 2013
“OPA implementing energy project siting recommendations” and “Parallel planning processes proliferate,” IPPSO FACTO, January 2014