The Future of Electricity

The cost of electricity is “lightening rod” for public anger and frustration in Ontario. It has become a political hot potato with political parties vying to promise lower electricity bills. Yet, regardless of any political promises, the electricity market is going to be dramatically changed in coming decades by evolving technological innovations and economics.

Ontario doesn’t have an abundance of cheap hydro-electric power like Quebec or Labrador. (Or cheap – and dirty – coal power like some US states) It’s questionable whether we would want to flood significant natural areas to create hydro power anyway. Renewable sources (wind, solar and water) make up 36% of Ontario’s total generating capacity. We have put our money on nuclear power as a carbon-free form of energy although it has significant environmental and financial risks as well.

Electricity prices are relatively high because Ontario has ended up with a substantial over capacity of generating resources. The average electricity demand is about half of total generating capacity – that still has to be paid for. Although nuclear generation is about 35% of total capacity, it supplies 65% of our electric demand. Wind and solar make up 13% of capacity but supply less than 7% of demand. And overall demand in Ontario dropped 4% in 2017.

About half, or more, of a typical residential bill consists of an added “Global Adjustment”. This is described as “a total dollar amount for each month based on the difference between market revenues and [a list of] components” (IESO website). The largest of those ‘components’ is related to nuclear power:

  • Nuclear (non-OPG) and natural gas
  • OPG regulated nuclear and hydro

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Cap and Hide

The outcome of this year’s provincial election is worrying when the apparent campaign front-runner is basing his pitch on a bizarre distortion of the truth.

Doug Ford says he will abolish the “carbon tax” although we don’t actually have one. In an ideological twist, the Ontario Liberals enacted a market-driven cap and trade system while the suddenly-gone Conservative leader had pledged to introduce an actual carbon tax. I tend to think this now-abandoned policy led to Patrick Brown’s swift and abrupt political demise. The Conservative party has invested years promoting a narrative that all government spending is wasteful and all taxes are evil. Brown’s platform was an abomination to those that bankroll the party. Here’s how they put it: “Ontario’s expensive cap and trade carbon tax  … makes life harder for Ontario families and our economy more uncompetitive … We will put money back in the pockets of Ontario taxpayers and stand up for our job creators.” (Simon Jeffries, Conservative spokesperson, April 16)

Cap and Trade is designed to internalize the cost of carbon into the cost of production instead of pushing it, by default, onto the public. It’s not a tax since manufacturers can reduce, or avoid, the fee by adopting cleaner, carbon-free methods of production. Their choice. The most efficient businesses become the most competitive. Under cap-and-trade carbon emissions in Ontario are projected to decline by 8 to 10 megatonnes by 2020.

In the end, some form of carbon pricing is coming. The federal policy mandates it by the end of this year. Ford says he will fight it – abolish the existing cap and trade, and fight any alternative federal carbon tax. So, how many millions of public money is he willing to flush away on government lawyers and court fights?

Cap and Trade generated $1.9 billion in revenue in 2017 ($2.4 billion to date). Here’s what’s at stake:

  • $377 million allocated to fund energy conservation for households and small –businesses
  • $657 million allocated over 5 years for improvements to social housing apartment buildings
  • $100 million to support municipal energy efficiency and renewable energy
  • $25 million allocated for a Low Carbon Innovation Fund to commercialize new technologies
  • $8 million allocated for an electric school bus pilot program

So what is the possible Conservative alternative under Doug Ford? We don’t know. Are Conservatives giving up almost $2 billion in provincial revenue and dumping the associated conservation initiatives? Does Ford think corporations will take remedial carbon reduction action voluntarily? Will we have a Catastrophic Weather Recovery Fund* instead? If he’s promising “relief is coming” for the ‘little guy’ (but he’d lower only corporate taxes and block the minimum wage increase), will he attack the “Sunshine” List” payrolls or follow the usual route of slashing all government payroll and programs?  Is he proud that Ontario is one of the highest per capita carbon emitting jurisdictions? If not, what’s the plan?

Can Ontario afford to elect someone who wants to ‘cap’ the truth and hide from the consequences?

* Check out: Climate Scientists Warn Tipping Point Is Near

Our Energy Future is Renewable

It’s not a matter of “if”, but “when”. The world is moving steadily and dramatically toward a renewable energy future dominated by clean electricity. As I mentioned before, the countries with the highest solar incidence are the ones making the most progress. Last year, Costa Rica supplied electric energy for 300 days solely from renewable sources. Some of the largest solar projects are being built in countries like India and China. Renewable energy in the UK increased by 27% in 2017.

Lappeenranta University of Technology (LUT) and the Energy Watch Group (EWG) conducted a study that “simulates a global electricity system based entirely on renewable energy on an hourly basis throughout a whole year. Its results prove that the existing renewable energy potential and technologies, including storage, are able to generate sufficient and secure power supply worldwide by 2050. Under favourable political conditions, a full decarbonisation and nuclear phase out of the global electricity system can succeed even earlier than that.” (my emphasis added)

According to the study, “A 100% renewable global electricity system is also way more efficient. It can reduce global greenhouse gas emissions in electricity sector from about 11 GtCO2 equivalent in 2015 to ZERO emissions by 2050. The total losses in a fully renewable electricity system are significantly lower than in the current system. And, the global transition to a 100% renewable electricity system will create 36 million jobs by 2050 in comparison to 19 million jobs in 2015… The study shows that there is no reason to invest any single dollar in fossil fuel or nuclear power production. It also proves that energy transition is no longer a question of technical feasibility or economic viability, but of political will.” (my emphasis added)

This study comes at an important time as Ontario residents are preparing for an election this summer. With the price of electricity, the future of Ontario Hydro, and the ongoing refurbishment of nuclear generators at issue, determining the political will of our provincial parties is paramount. Unfortunately, one party seems to be entirely in denial about climate change and is paralyzed by its own political dogma. Its political will to form meaningful policy on this topic appears non-existent.

Where is Ontario now? Corporations successfully fought against feed-in tariffs and blamed renewable energy for higher electric rates; billions of dollars have been committed to nuclear refurbishment; the nuclear industry is hyping ‘micro-reactors’ to be scattered across northern remote communities; the bulk of Hydro One has been sold off and has made trans-national investments in pursuit of higher profits; revenue from carbon-pricing is being used to subsidize scattered voluntary conservation programs. We can do better but only if we have the political will.

According to the researchers, “policy makers should adopt favourable political frameworks and instruments, promoting fast and steady growth of renewables on the one hand and phasing out all subsidies to fossil fuel and nuclear power generation on the other hand.” (my emphasis added) This summer’s election may be a ‘watershed’ moment for Ontario, either seizing the leadership opportunity or slipping further behind the global trend.

100% renewable electricity worldwide is a new cost-effective reality, Hans-Josef Fell & Prof. Dr. Christian Breyer, (The Beam, Feb 1, 2018)

The Politics of Power

I’ve written previously about the Ontario government’s Green Ontario Fund ($377 budget), and the accompanying lame* approach to this energy conservation initiative. While I applaud the plan to devote carbon-pricing revenues to energy conservation, I think our governments, national and provincial, are way too timid in their approach.

As an example*, I got a quote to install a new gas furnace ($3,000+); the Green Ontario rebate is $500. This old house could benefit from upgraded insulation in the walls – rough estimate up to $15,000 – possible rebate $1,280, based on total square feet. Still, $200 million more is allocated to school retrofits and $85 million for social housing upgrades.

It’s obvious that countries with greater exposure to solar radiation have recognized that sunlight is literally gold. India and Australia, for instance, are making massive investments in solar energy and battery storage solutions. Canada’s weak and haphazard approach means that we will be importing this technology for decades, as we have already with wind power.

One project that I’ve just read about emphasizes the difference. South Australia, which is already the location of the world’s largest grid-storage battery installation, courtesy of Elon Musk, is proposing an even more spectacular solar project – Continue reading

The ‘Green’ Struggle

In Ontario, carbon trading has led to carbon-trading revenue, which has led to some silly looking ads promoting the Green Ontario Fund. I guess we can’t have the government ordering people to use less carbon–based energy, so we have to put up with the effort at ‘persuasion’.

If only the ads focused on real personal and environmental benefits instead of imaginary tiny feet. Such as:

Contractor truck backing into driveway / unloading materials/equipment etc.
Neighbour: What happening?
Homeowner: I’m installing / upgrading [insert program]
Neighbour: Sounds expensive
Homeowner: It’s worth it. I get a Green Ontario rebate of [insert rebate $] and I will save [insert energy savings] every year. You benefit too because my carbon footprint shrinks [ X ] %

But sadly, I think the tiny feet will prevail and be less than effective. The ads mention the word, “rebate” a lot but judging from what I have seen it may not be enough to motivate much action.

The Green Ontario Fund is a mixed bag of incentives. A rebate of $250 to replace a gas furnace isn’t likely to motivate anyone. Households are being steered toward an air-source heat pump instead with an incentive of “up to” $5,800. A ductless heat pump has a rebate of $1,900 and homes with existing ducting are eligible for amounts ranging from $3,250 to $5,500. I haven’t seen any mention of renewable energy systems except geothermal.

But a rebate of “up to” $5,000 for high efficiency windows ($500 per window opening) may encourage some people to make the leap. Basic upgrade to insulation carries a rebate of “up to” $7,200. I’ve already paid for attic insulation on my own dime some years ago so that drops to a maximum of $3,800 for upgrading insulation in exterior walls and $1,900 for basement walls. The rebate offsets a part of the cost of insulation materials but wouldn’t be enough for contractor labour or the cost of cosmetic restoration to the interior or exterior walls. My guess is this program might cover about 20% of the total actual cost.

I’m not sure what kind of householders these programs are aimed at, but as a senior, I’m pretty sure the up-front cost is too steep and the return on investment is too distant. I imagine we will live in this house more or less “as is” for as long as we can. Eventually whenever we sell, someone else will either renovate or rebuild to a higher efficiency standard. The Green Ontario Fund won’t make that happen any sooner. But brace for some aggressive advertising from ‘approved’ contractors this year!

Wisdom of the Crowd

Believe it or not, “cap and trade” was being debated as an economic policy option way back in my university days. It has only taken a lifetime to implement it in a handful of jurisdictions and the debate still continues.

The real question is what happens with the money, and how effective will it be in addressing the critical climate change issue? (Climate Change Is About to Accelerate Past the Point of No Return, Dec 2016) The opposition party agues for a rebate of a carbon tax directly to households. The current government has taken a different approach.

Now that Ontario has ‘captured’ the revenue from the first auctions of carbon credits the government announced this month that it “will use the proceeds of its cap-and-trade program to establish a fund — called the Green Ontario Fund — through a provincial agency. The program will offer up to a $7,200 rebate for new insulation, up to $5,000 for new windows, and up to $20,000 for new ground source heat pumps.”

Is there a difference to these two approaches? Either way, with cap and trade or a carbon tax, whether or not we see any real change in carbon emissions is still very much up to us. We have to make thousands of individual decisions to do something meaningful in a timely manner.

At least the Green Ontario website presents a menu of funded options for both households and businesses. You’ll notice that some of these programs were previously-existing conservation programs offered by gas distributors and electric utilities (Save on Energy) while others are new provincial programs. Now all conservation programs are grouped together in specific categories: home; small business; organization. But you, the consumer, have to educate yourself about the different opportunities, weigh the relative value of different options (net cost and estimated savings), be motivated to complete an application for your chosen program(s) and select a pre-approved contractor. Hence, I’m giving a little nudge with this free plug for the Green Ontario web site – the government is waving a fist full of dollars your way. They’ve got my attention and maybe yours.

Ontario isn’t the first to tackle carbon emissions. In the UK, a decision was made some years ago to ‘just do it’. An insulation upgrade program simply went street by street, house by house, in a systematic approach that was said to be 90% more efficient than a random installation based on scattered applications. It gave an immediate boost to employment but this approach requires deciding priorities – who’s first and who comes last.

The New Year promises to be a decisive time with a likely tumultuous election in the mix. Will Ontarian homes and businesses be motivated enough by the carbon trade incentives? Will contractors be up to the challenge? Will the total upgrades be good enough and numerous enough to make a meaningful difference in carbon emissions and your payback savings? It’s entirely up to you and the ‘wisdom of the crowd’.