Managing a complex energy system: Introduction
| In June, 2011, the ECO released volume 1 of its 2010 Annual Report on the progress of activities in Ontario to reduce or make more efficient use of electricity, natural gas, propane, oil and transportation fuels. Click here for more information on this report, including videos and communications materials. | |||||
The ECO’s Reporting Mandate and Approach
As required under the Environmental Bill of Rights, 1993 (EBR), the Environmental Commissioner of Ontario (ECO) reports annually to the Speaker of the Legislative Assembly of Ontario on: the results of initiatives in Ontario in reducing or making more efficient use of all major sources of energy; the progress in achieving government-established energy conservation targets; and, the barriers to energy conservation and efficiency. Reports are issued biannually as two separate volumes for each year. The first volume focuses on broader policy developments in energy. The second volume analyzes conservation program data, reviews initiatives undertaken and measures progress toward targets. [1]
Context of the Report
This Volume One report for 2010 focuses on electricity because most of Ontario’s energy conservation policy, as in previous years, has been directed toward reform of the regulatory framework for electricity. In 2010, major reform of the regulatory framework for natural gas conservation was undertaken. It does not receive coverage in this report since the reform is not yet completed. An Ontario Energy Board (OEB or the “Board”) consultation [2] to develop natural gas conservation guidelines – including the issue of increasing conservation budgets of distributors – concluded in late 2010 but the OEB’s decision was not yet issued when this report was written and could not be incorporated. As part of the proceedings, the Board issued a letter in April 2011 advising of its determination that conservation budgets of distributors should not be increased. The ECO will fully review these guidelines in a future report. This report includes only an analysis of the OEB’s denial of increased funding.
As was the case in 2009, little policy development related to the conservation of oil, propane or transportation fuels was evident in 2010, and consequently review of policy for these fuels was not included in this report.[3]
The politics of electricity remain in flux, and are arguably at a crossroads. It is difficult to predict if current policies will prevail or be abandoned. It is uncertain whether the directional shift to green energy (renewable supply and conservation) will be maintained or whether conservation delivery and planned renewable generation will be adjusted or scaled back.
Surveying the policy process and elements of the electricity framework added in 2010, the ECO contends that the key feature has been the creation of an ever more complex regulatory structure. The policy has become more complicted, less linear, less resilient and has produced unexpected outcomes.[4] On occasion, policy implementers have been unprepared to respond to these outcomes, and reacted with solutions that further ignore the connectivity that first caused the unexpected outcome. Developments in electricity pricing policy and solar micro-generation are examples of this.
The institutional structure may be fragmenting. Under current policy and legislation, institutional actors (agencies, the regulator, energy companies and government) are given a broad shared responsibility to advance conservation. Rather than contributing to this co-operative mandate, on occasion, individual actors have interpreted the common mandate from a narrow perspective and ignored the functional needs of other actors. This has resulted in delayed progress. Examples of this fragmentation include: protracted efforts of the Ontario Power Authority (OPA) and Local Distribution Companies (LDCs) to agree on design and delivery of new Conservation and Demand Management (CDM) programs; and, the OEB’s exacting review of Hydro One’s application for CDM programs that require the Board’s approval to implement. A regulatory regime may be developing that sets organizations at cross purposes. Looking ahead, if conservation targets are not met, this may induce another response that again ignores connectivity and leads to unintended outcomes.
Finally, Ontarians need to understand the policy if they are to support it. As complexity has deepened, electricity policy has become increasingly reliant on a small group of technical specialists that has access to information. Less proximate stakeholders and most Ontarians could be better equipped to contribute meaningfully to the policy debate. Misinformed or uninformed, Ontarians may become disengaged, leading to policy failure.[5] The production of this report was sometimes hampered by the need to rely on information guarded by policy makers in the Ministry of Energy and the OPA. In requesting information, the ECO occasionally found them unhelpful. Requests were refused or information was meted out with little background data to assist evaluation. The ECO cannot inform Ontarians and facilitate public debate, per its mandate, without access to detailed information.
It is not clear how or if the province will manage the increased complexity of electricity policy. The ECO’s perspective is broadbased and perhaps unique among observers of the electricity sector, enabling us to compare patterns in energy policy with other issues that fall within our broader mandate such as climate change and waste management. The similarities in approach and limited success in managing the complexities are sometimes startling.
This report focuses on what the ECO considers the key elements currently intertwined in this complex structure: the Long-Term Energy Plan; the impact of electricity pricing policy on conservation; the OEB code governing CDM; and, the building of the smart grid.
References
- ↑ Environmental Commissioner of Ontario, Annual Energy Conservation Progress Report – 2009 (Volume One): Rethinking Energy Conservation in Ontario (Toronto, Ontario: 2010), 6 which contains a full description of the reporting mandate and approach.
- ↑ EB-2008-0346, Demand-Side Management (DSM) Guidelines for Natural Gas Distributors.
- ↑ There was no significant new activity. Most activities reflected implementation of previously committed funding, programs and policies (e.g., transit, electric vehicle rebates, freight trucking) or reduction and rescoping of existing programs (e.g., Green Commercial Vehicle Program, Long Combination Vehicles, Ontario Bus Replacement Program).
- ↑ Environmental Commissioner of Ontario, Annual Report 2008/2009, 4-5 which contains a discussion of resilience. Homer-Dixon, Thomas, Complexity Science and Public Policy, John L. Manion Lecture, May 5, 2010 contains a discussion of the concepts and ideas of complexity theory.
- ↑ Ontarians are told by some groups that conservation is costly even though it can help lower bills; information about the cost of building new nuclear supply is not provided; the possibility of lower costs for renewable energy as the technology matures is ignored; smart grid costs are not put in context of new business opportunities and consumer benefits.
Citing This Article:
Environmental Commissioner of Ontario. 2010. Annual Energy Conservation Progress Report, 2010 (Volume One): Managing a Complex Energy System. Toronto, ON : Environmental Commissioner of Ontario. pp. 7-10
