• “Achieving Balance” Ontario’s Long-Term Energy Plan 2013
  • December 11, 2013
  • Law Firm: Borden Ladner Gervais LLP - Toronto Office
  • After extensive public and stakeholder consultation, the Ministry of Energy released its much anticipated Long-Term Energy Plan entitled “Achieving Balance” (LTEP). The LTEP is shaped by five principles: cost-effectiveness, reliability, clean energy, community engagement, and an emphasis on conservation and demand management. An Ontario Energy Report will be issued annually to provide the public with an update on changes in supply and demand and on progress in implementation of the LTEP. Highlights of the LTEP include the following:

    Cost Reduction

    The Ministry has made cost-reduction a priority. The 2013 LTEP cost and price forecasts are lower than previously forecasted in the 2010 Long-Term Energy Plan:

    • The LTEP expects to reduce previously projected cost increases by $16 billion in the near term (2013 - 2017), and $70 billion in the long-term (2013 - 2030). These cost reductions will be realized even as Ontario keeps its commitment to phase out the last of its coal-fired generation by the end of 2014.

    Ratepayers are expected to experience significant electricity bill savings in costs previously projected as a result of: reduced Feed-in-Tariff (FIT) prices, the ability of the Independent Electricity System Operator (IESO) to dispatch wind generation, the amended Green Energy Investment Agreement (the contract with the Korean Consortium was reduced by $3.7 BN) and the decision to defer new nuclear construction. These measures are expected to translate into the following savings compared to projections in the 2010 Long Term Energy Plan:

    • Residential customers can expect to pay about $520 less than previously projected over the next five years and $3,800 less to 2030; and
    • Industrial consumers can expect to pay $3 million less than previously projected over the next five years and $11 million less to 2030.

    Conservation

    The LTEP focuses on conservation and demand response as key elements in the supply mix and the Ministry of Energy will work with its agencies to put conservation first in their planning, approval and procurement processes and will also work with the Ontario Energy Board (OEB) to incorporate conservation into distributor planning processes for both electricity and natural gas utilities. The LTEP includes conservation programs and standards which aim to decrease the need for new supply investments so as to offset the growth in electricity demand over the next 20 years. The IESO is to continue to study the possible benefits of a capacity market where different generation and demand resources compete to address capacity needs.

    • The LTEP includes a conservation target of 30 TWh by 2032 - which is expected to represent 16% of Forecasted Energy Production (TWh) by 2032.

    The LTEP seeks to expand Demand Response programs to help achieve a 10% reduction in peak demand by 2025.

    The Ministry of Energy also plans to make new financing tools available to consumers starting in 2015, including programs to incent energy efficient retrofits to residential properties. On-bill financing will be made available to help with the upfront cost of energy efficiency retrofits to conserve electricity and natural gas. The LTEP states that the Ministry will work on new conservation initiatives, significantly increase Demand Response capability and give Local Distribution Companies (LDCs) a greater role and more flexibility to address local conditions. A new six-year Conservation and Demand Management Framework will begin in January 2015 which will provide long-term, stable funding for conservation providing certainty to customers and LDCs and provide LDCs with the means to meet their assigned conservation goals.

    Supply Mix

    Nuclear - is expected to represent 42% of energy production (TWh) (20% installed capacity) by 2025:

    The LTEP includes plans to defer the construction of two new nuclear reactors at the Darlington Generating Station but will move ahead with nuclear refurbishment at both Darlington and Bruce Generating Stations, beginning in 2016.

    Renewable Energy - 20,000 MW of renewable energy will be online by 2025, representing about half of Ontario’s installed generating capacity. Targets for wind, solar, bioenergy and hydroelectricity will be reviewed annually as part of the Ontario Energy Report.

    • Wind is expected to represent 11% of energy production (TWh) (15% installed capacity) and Solar PV is expected to represent 3% of energy production (TWh) (8% installed capacity) by 2025.
    • Extending the phasing-in of wind, solar and bioenergy for three years longer than estimated in the 2010 LTEP, with 10,700 MW online by 2021.
    • Hydroelectricity is expected to form 29% of energy production (TWh) (21% installed capacity) by 2025 reaching 9,300 M
    • Annual procurement targets of 150 MW and 50 MW for small Feed-in Tariff (FIT) (less than 500 kW) and microFIT (less than 10 kW) respectively, starting in 2014.
    • Annual competitive renewable energy procurement targets for projects larger than 500 kW are set at:
      • Wind 300 MW for 2014 and 2015;
      • Solar 140 MW for 2014 and 2015;
      • Hydro 50 MW for 2014 and 45 MW 2015;
      • Bioenergy 50 MW for 2014 and 2015

    Capacity not procured in any year would be reallocated to 2016. The Ministry expects to launch this competitive procurement process in early 2014. This competitive procurement process will be dependent on local electricity needs and considerations.

    Natural Gas/Combined Heat and Power (CHP) - is expected to represent 12% of energy production (TWh) (23% installed capacity) by 2025. The Ontario Power Authority (OPA) will undertake targeted procurements for CHP projects that focus on efficiency or regional capacity needs and there will be a new program aimed at greenhouse operations, agri-food and district energy. The LTEP states that the government will not require new natural gas procurement to fill province-wide needs over the near term but natural gas will still be an essential element of Ontario’s flexible electricity system. Ontario’s natural gas fleet may fill energy needs during the nuclear refurbishment period.

    Non-Utility Generators (NUGs)

    The LTEP notes that the Ministry has directed the OPA to negotiate new contracts with NUGs as  their existing contracts expire but only if the new contracts result in cost and reliability benefits for Ontario’s electricity consumers. The LTEP states that the new NUG contract structure is intended to reduce NUG costs and NUGs contribution to surplus baseload  generation.

    Storage

    As part of the government’s focus on innovation, storage technologies will be included in procurement processes by the end of 2014 starting with 50 MW. The new competitive procurement process for renewable projects greater than 500 kW will consider proposals that integrate energy storage with renewable generation.

    Transmission

    Hydro One is to begin planning new bulk transmission for the area west of Thunder Bay and to work with Infrastructure Ontario on cost- effective procurement processes. Upgrades and investments necessary to improve reliability and support growth will also be undertaken as needed around the Province. Connecting remote First Nation communities to transmission in northwestern Ontario will continue to be a priority for the Ontario government working with the Federal government.

    Distribution

    As noted above, LDCs will play an important role in the conservation and demand response initiatives announced in the LTEP. The LTEP references the Distribution Sector Review Panel report as having identified the potential for significant savings and recommending consolidation of LDCs and notes that, as a result, “the government expects that LDC will pursue innovative partnerships and transformative initiatives to drive efficiencies that will result in ratepayer savings.” No changes to the transfer tax and taxation of LDCs were included in the LTEP.

    First Nation And Métis Communities

    The Ministry will continue to encourage First Nation and Métis participation in transmission and renewable energy projects through the following programs:

    • Aboriginal Transmission Fund;
    • Aboriginal Energy Partnerships Program and Aboriginal Community Energy Plans;
    • The FIT program and future competitive procurements; and
    • Aboriginal Loan Guarantee Program;

    The LTEP also makes connecting remote northwestern First Nation communities to the electricity grid a priority including the construction of:

    • a transmission line to Pickle Lake;
    • the New East-West Tie;
    • Northwest Bulk Transmission Line; and
    • connecting 25 Remote First Nation Communities that are not connected to the grid.

    Regional Planning

    The Ministry will adopt all of the recommendations from the IESO - OPA joint report entitled: “Engaging Local Communities in Ontario’s Electricity Planning Continuum” focusing on:

    • reaching out to local communities early and often so that they may participate in the planning of their region’s energy needs;
    • linking local and provincial planning;
    • giving greater consideration to local priorities in the siting of generating facilities; and
    • enhancing community education and energy programs.

    Agencies

    The Ministry will encourage Ontario Power Generation (OPG), Hydro One, the IESO, the OPA and OEB to develop business plans and efficiency targets to reduce agency costs. The LTEP is silent as to any future merger of the OPA and the IESO which had been previously proposed by the Ministry.

    The government will encourage its wholly-owned corporations, OPG and Hydro One, “to explore new business lines and opportunities inside and outside Ontario.” In his recent directive to the OPA to establish a competitive procurement process for renewable generation over 500 kW, the Minister stated that OPG would be able to participate in such a process.

    Conclusion

    The revised LTEP reflects the government’s goals to cut costs across the electricity sector, scale back procurement of new generation while continuing to support renewables, continue to emphasize conservation and demand management, consult with regional and local governments and support the involvement of First Nations and Métis in the electricity sector. With the release of the LTEP, the government has sought to balance the various forces at play in the Ontario electricity sector while reducing projected electricity cost increases for residential and industrial consumers.