As many have noted, the electricity sector is undergoing change now and anticipating potentially much more transformative change in the near future. Twenty years from today, even if most of the current physical infrastructure remains in place, the key players, both large and small, will likely fill different roles than they do today, the consumer interface with energy service providers may be completely different, and the legal/regulatory framework will likely be significantly updated. In the near term, numerous US jurisdictions are rethinking the standard market design, Alberta is considering a market overhaul, and Ontario is pursuing its Market Renewal Project.
With so much change underway, energy consumers will no doubt be asked about their views at critical transition points in the process. People who work in the energy sector will likely be consulted repeatedly about one change after another, possibly to the point of distraction. Although forward-looking discussions are generally positive, they can be chaotic. There will be technical conferences, supplier meetings, regulatory consultations, policy reviews and stakeholdering of all sorts. Each will start with the premise that participants need to prepare for change without having any certainty on what the change or end-state will be. Actively engaged people will be sincerely asking for your views, as a consumer, as an energy professional, and as a citizen of Canada, on whether proposal A, B or C deserves support. It could become bewildering if it hasn’t gotten to that point already.
We can be sure, as many will point out, that the system will not achieve optimal results if market participants make a habit of standing back and waiting for disruptions to work their way through the system before commenting. As members of a democracy, and as consumers with knowledge of the energy sector, we owe it to our fellow citizens to face the turmoil, identify patterns, and try to contribute to sensible resolutions.
It is at times of turmoil that it’s most useful to have a clear idea of your core principles, the key objectives that will guide more specific decisions and help to set directions. The good news is that there is often a relatively high level of agreement and clarity on core principles, compared to the complexity of debates around specific proposals. While few people want to devote huge amounts of time to high level principles, a little extra work on articulating and ranking one’s own views may be timely and helpful when large scale change is underway, to say nothing of helping to deal with any number of upcoming consultations.
Of course much of the same reasoning applies to sectors outside the energy industry. Virtually all of society is undergoing shifts, and analogous dialogues are underway in many fields on how to ensure the coming changes serve the highest and best purposes.
For the energy sector it’s time to open a discussion on what should be contained in a set of principles to guide future development. A proposition, an example, intended to prompt creative interaction, follows.
Guidelines for managing change
Proposals to restructure, renew or re-regulate the electricity sector must respect the following over-arching requirements:
1. Protect consumers from unjust increases in costs, or limitations in service
2. Ensure responsible levels of investment in infrastructure, neither over-investment nor under-investment. In particular try to avoid over-investment in shared infrastructure and under-investment in private infrastructure. (This is not to discount the importance of shared infrastructure but to recognize the distinctions that flow from the fact that some aspects of risk are typically managed more continuously when privately-owned assets are at stake.)
3. Prevent unreasonable impacts on the natural environment
4. Foster a positive business climate: Facilitate the viability and operation of a wide range of business entities active in serving the needs of electricity customers
5. Encourage innovation
6. Avoid passing costs on to future generations
7. Communicate fully with affected stakeholders about all issues of concern, while there is still time to make changes
8. Respect social norms whatever they may be, including high standards of corporate citizenship.
If these principles can be maintained, while the rest of the system morphs in unpredictable ways, consumers and investors should be generally OK.
Big questions remain of course: Are these the right values? Are they in an appropriate sequence? What would each of the major current change proposals look like if it properly adhered to the principles above? Books could be written on the implications. No doubt each of us can think of examples of policies or development proposals that ran into difficulties because one or more principles like those above were not reflected in the early design thinking. It may be that the list above is too long and needs to undergo a prioritization exercise of its own. That’s fair ball.
One of the biggest mistakes to avoid would be to charge ahead into an uncertain future, making choices left and right, without carefully considered guideposts on what it’s all supposed to achieve.
While market design processes, to say nothing of political speeches, often refer to the need to further the development of a reliable, affordable and environmentally responsible energy system, bringing these principles together into an operable framework of principles may be one of the primary challenges for policy makers, and one of the first orders of business for stakeholders sharing their views in public forums.
As an organization, APPrO welcomes comment on questions like these and would be happy to hear readers’ views. APPrO plans to host discussion of this nature in various fora including the annual APPrO 2017 Canadian Power Conference this November in Toronto, and expects to partake in discussions of this nature in all kinds of media.
What are your views? What goals do you think the energy sector should be priorizing as major long-lasting changes are being made?
— Jake Brooks
Note: This editorial was also published on LinkedIn at this location. Readers may post comments and read the comments of others at that location.
Note: This publication contains conjecture and opinion and should not be relied upon as definitive or used as a guide for any kind of investment decision. It represents the views of the author and may or may not reflect the views of APPrO or any APPrO members.