On January 19, 2024 the report of Ontario’s Electrification and Energy Transition Panel (EETP), Ontario’s Clean Energy Opportunity, was released.
The EETP was first established in April 2022, with the membership finalized in November 2022, as a short-term advisory body to help Ontario’s economy prepare for electrification and the energy transition.
The EETP received input from over 200 parties, including extensive engagement with energy stakeholders and Indigenous partners from March to July 2023 as well as an open call for written comment.
The report states that “The Panel’s key objective has been to develop recommendations that lay out the next steps for Ontario to navigate the transition towards a clean energy economy and to propose principles that should guide this work in the long term.”The result is a 141-page report with 29 recommendations of varying degrees of detail, covering five primary energy transition related topics:
Further to the topic areas and the resulting recommendations the Panel also “suggests” seven principles that “should guide Ontario’s energy transition”:
Some of the key recommendations to the provincial government on energy planning include:
The EETP report is vast in scope. It makes a wide set of recommendations from government planning to industrial strategy, and from distributional impacts to engaging with the public and Indigenous partners. A dominant theme throughout the report and recommendations is the need for much greater Indigenous inclusion, economic reconciliation, and participation and partnership in the clean energy economy.
Implementing all the recommendations in the report would be a massive undertaking and would set in motion a significant change in Ontario’s energy system planning, production, consumption, and funding as well as economic transformation. While the report does not provide a schematic, Power Advisory’s assessment of the EETP’s recommendations indicates significant change to Ontario’s planning framework (as illustrated in the figure below). For example, the framework calls for the establishment of an Integrated Long-Term Energy Plan, prepared by the Ministry of Energy and covering the gas and electricity sector. Existing planning functions, including the IESO’s (i.e., Annual Planning Outlook (APO), Annual Acquisition Report (AAR), Integrated Regional Resource Plans (IRRP)), would be informed by the Integrated Long-Term Energy Plan. Further, new Comprehensive Local Energy Plans would inform both the IESO’s existing IRRPs, as well as new Electrification Readiness Plans to be prepared by LDCs. The LDC’s Electrification Readiness Plans would be considered within the LDC’s existing Distribution System Plan (DSP).
To be clear, the EETP report findings are only recommendations to government. There is no requirement for the government to implement any of the recommendations. As a result, there is significant uncertainty regarding which, if any, recommendations will be acted upon and, more importantly, how they would be implemented. Therefore, as with most policy, the actual implementation details and execution will determine the outcomes.
On this point, the Minister of Energy’s statement accompanying the release of the EETP report stated “Moving forward, I will be working with leaders from Ontario’s energy sector to carefully review the report’s recommendations and advice. I look forward to announcing our next steps towards an integrated energy planning process later this year.”
That said, the EETP’s recommendations are worth examining and a selection of them will be explored here.
Several recommendations will be of interest to, and likely welcomed by Ontario’s LDCs, such as:
Recommendation 10 which encourages the OEB and IESO to have utilities, innovators, and new market entrants continue experimenting through platforms like the Grid Innovation Fund and the Innovation Sandbox program.
Recommendation 17 which asks the IESO and OEB to work proactively to maximize benefits from distributed energy resources (DERs) through, for example, supporting grid modernization, enhancing requirements for LDCs to file electrification readiness plans, and promoting interoperability to enable DER participation in the wholesale market.
Recommendation 29 which asks the government, IESO and OEB to support capacity-building for utilities and communities to assess climate change impacts to energy infrastructure as well as support climate resilience efforts and adaptation planning/ implementation.
Advocates for low income and vulnerable customers will welcome Recommendation 28, supporting redesigning electricity rate mitigation and affordability programs to better target customers that most need financial assistance.
On the other hand, those expecting strong, specific recommendations related to creating foundational statutory obligations, such as an economy-wide net zero mandate, sector targets, fuel-switching targets and interim milestones towards reaching a net zero economy by 2050 are likely to be unsatisfied with the report.
The EETP report includes many references to sub-national jurisdictions implementing net zero visions and/or comprehensive economy-wide energy transition plans; among those referenced are British Columbia, California, Michigan, New Jersey, and New York. These specific jurisdictions (and others mentioned in the report) have underlying legislation (or executive directive/orders) with statutory emission reduction targets, sectoral emissions targets, requirements for comprehensive economy-wide energy planning, and/or mandates for the electrification of transportation and building heat.
The EETP avoids explicitly recommending that the Ontario government follow the example of these other jurisdictions by enacting legislation with a net zero 2050 emissions target, sectoral targets and/or fuel-switching mandates as done in many of these jurisdictions (which include other Canadian provinces, such as British Columbia). Instead, the report opts for less well-defined language such as:
Recommendation 1: “develop and communicate a commitment and associated policy principles for achieving a clean energy economy for Ontario by 2050;”
Recommendation 3: “seek alignment and coordination of clean energy economy objectives, standards and policies with other governments (within and outside Canada) whenever practical and consistent with the province’s economic and policy interests;” and,
Recommendation 4: “develop and communicate an energy transition policy vision that is inclusive of Indigenous perspectives and informed by clean energy economy policy principles.”
The use of relatively ambiguous terms such as “vision,” “commitment,” and “alignment” rather than, for example, recommending the establishment of a legislative framework to reach a net zero economy by 2050, as done in other jurisdictions, leaves a significant degree of discretion to the government.
In contrast to the planning recommendations above, other areas of the EETP make strong, explicit recommendations for the review of, or changes to, legislation or regulations. For example, Recommendation 16a, relating to establishing a framework for greater planning co-ordination of Ontario’s natural gas and electric systems, states that the framework should include “Regulatory requirements via license amendments and codes (for the IESO) and Ministry undertakings or rule making authority under the OEB Act (for Enbridge) to require the IESO and Enbridge to coordinate bulk planning.”
Similarly, Recommendation 21 states “The government should amend the enabling statutes of the IESO and OEB to ensure Indigenous representation on the Boards of Directors.”
Perhaps the most striking example of this disconnect between the planning recommendations and others is Recommendation 13 where the EETP suggests potential future changes to the OEB’s mandate:
a. Updating the OEB’s policy, mandate, and/or objectives to reflect the clean energy economy transition, including addressing greenhouse gas (“GHG”) emission reductions
b. Including GHG emissions as an additional factor for the OEB to consider in proceedings, such as transmission leave-to construct applications
c. Revising objectives related to the natural gas sector to align with government policy direction on the long-term role of the sector
d. Reviewing other aspects of the OEB’s objectives and legislation as it relates to facilitating the clean energy economy, for example, amending the definition of “gas” to include hydrogen blending, if deemed necessary
In the absence of recommendations for underlying foundational legislation on broader provincial emissions targets, mandates and objectives to achieve a net zero economy as well as sector specific emission targets and mandates, it appears incongruous that the EETP recommends such changes be contemplated for the OEB.
A final aspect of the EETP report worth examining is the recommendations dealing with the future the natural gas system. Recommendation 15, which addresses cost allocation and recovery policies for natural gas and electricity connections, specifically recommends the OEB conduct a review of its policies, including “examining the differences in the economic evaluation period (known as a revenue horizon) to determine capital contributions as well as the ability to collect the capital contribution as a surcharge on rates versus an upfront contribution.”
This recommendation is of interest because on December 22, 2023, the Minister of Energy announced that he would pause and subsequently introduce legislation that, if passed, would reverse the OEB’s December 21, 2023 decision that reduced the revenue horizon used by Enbridge Gas for new connections to zero, requiring new residential developments to pay the full cost of their connection upfront. The Minister’s statement on the decision stated “the Ontario Energy Board’s decisions would slow or halt the construction of new homes, including affordable housing. We will not stand for this.”
All eyes will now be on the provincial government’s response to the report and recommendations. Given the breadth and scope of the EETP report it will likely be many months until any concrete next steps are announced; for comparison, around 7 months passed between the IESO’s release of its Pathways to Decarbonization report, subsequent Ministry stakeholdering, and the province releasingPowering Ontario’s Growth: Ontario’s Plan for a Clean Energy Future.
The government’s actions in response to the EETP report will provide tremendous opportunity for leadership not just within the province’s own energy sector, but nationally. All of Canada is grappling with how to simultaneously advance the energy transition while maintaining other crucial objectives such as cost and reliability. Locally, Ontario’s energy market and the broader industry need government’s leadership in developing clear next steps for Ontario’s energy transition. This includes things like laying out clear actions; defining the roles and responsibilities of agencies and other sector participants; and solid delivery timelines for government and industry action. Ontario is fortunate to have high and growing rates of DER deployment, extensive transmission and distribution networks for both electricity and natural gas, well-developed market and regulatory constructs, and a strong vision for power procurement. In light of these strengths, we expect that if well-executed, Ontario’s framework for the energy transition could serve as a model to other jurisdictions even as the shift to a cleaner and more resilient energy system enables economic development and encourages investment within the province.
Please contact Power Advisory if you have any questions or would like any additional information.