Ontario: a microcosm of clean energy
What does 100% clean electricity look like? Ontario is already pretty much there - and we can learn from their example
Grace Meikle | September 2017
In an effort to combat pollution and climate change, Germany, the U.S. states of California and New Mexico, and others have goals to reach 100% renewable electricity generation by sometime this century. Some argue these seem like very aggressive, if not impossible goals that are bound to lead to negative impacts on economic growth.
But what does a clean electricity economy look like in real life? You may be surprised to know that as I’m writing this, the Eastern Canadian province of Ontario, which is home to about 13.6 million people and is Canada’s lead manufacturing province, is getting less than 2% of its electricity from natural gas and oil. Throughout 2016, Ontario received about 9% of its electricity from these sources.
And here’s the zinger: since 2014, Ontario hasn’t used any coal power whatsoever. Economic growth, meanwhile, has continued apace.
So where does Ontario’s power come from? The vast majority is nuclear, at 61%. Hydro also provides a significant portion at 24%. Wind accounts for 6% and solar and biofuels each less than 1%. All of these sources of electricity are low carbon and low pollution over their lifecycle when compared with fossil fuels.
So what? you say. Ontario contributes to only a tiny portion of the world’s population and pollution footprint. Whatever its power mix, it’s not going to make much of a difference on a global scale.
True...but there aren’t any other industrialized places in the world with this extent of a decarbonized electricity mix. Understanding how it happened in Ontario and what difference, if any, it made for the local climate and human health are important objects of our study – especially if governments elsewhere aspire to follow Ontario’s lead.
Ontario’s Energy Policy
To explain how Ontario got to where it is today, it’s necessary to understand how its electricity sector works. Ontario’s electricity market is regulated and the majority of generation and transmission assets are controlled by the provincial government. For decades, the province has owned a strong backbone of nuclear power and hydroelectricity, which remains in place today and likely will for years to come.
Over the past couple of decades, Ontario’s energy sector has undergone a dramatic transformation as a result of several key policies. Most notably, Ontario’s Electricity Restructuring Act in 2004 served to restructure the province’s electricity sector by updating infrastructure, managing supply and demand, promoting energy conservation and clean energy technologies, and most importantly, phasing out coal.
Coal was initially replaced by natural gas and later by increasing generation from existing nuclear assets; and, to some extent, by wind and other renewables under the province’s 2009 Green Energy Act. Throughout this time, hydroelectric generation has remained relatively constant. Moreover, since the effort began, electricity demand in Ontario has decreased. Together, these factors enabled Ontario to nearly eliminate fossil fuel electricity generation over a rapid ten year period.
Also of note, earlier this year, Ontario introduced a carbon cap-and-trade program as part of a federal mandate to regulate emissions. Despite its newness, the program has already influenced private sector decisions to pursue refurbishment of existing nuclear capacity instead of constructing new natural gas. This improves the long-term prognosis that Ontario can maintain its decarbonized electricity mix.
Now that you get the general idea of what’s going on up there, let’s look at how they did this in a bit more detail.
Ontario’s Aggressive Phaseout of Coal
Ontario went from coal supplying 25% of its electricity, or 7587 MW in 2003, to 0% in 2014. This transformation has been accurately described as “the single largest greenhouse gas reduction measure in North America.” They achieved this feat through a tremendously successful public health campaign; broad, sustained political support, due partly to the lack of a coal lobby; and the fact that the government owned the coal plants and was willing and able to shut them down.
At the time of the campaign’s inception, there was not much interest around the issue of climate change. There was, however, great concern given to pollution from nitrous and sulfrous oxide known to cause severe smog, acid rain, and respiratory health problems. Ontario suffered from a record 23 “smog days” in 2001, and Ontarians saw pollution as a real problem.
The movement really gained its momentum when the Ontario Clean Air Alliance joined with the Ontario Medical Association to campaign to phase out coal. Having health experts weigh in on health issues rather than relying on environmentalists gave the campaign enormous credibility in the eyes of Ontarians.
In fact, the movement gained so much popularity that it was supported by all three of the political parties campaigning in Ontario’s 2003 provincial elections. Since Ontario had no domestic coal production, politicians had little to lose in terms of votes by advocating for a total phaseout of coal. The Liberal Party won the election and promised to get rid of coal by 2007. This timeline proved too aggressive and was later revised to 2009, and eventually to 2014. Despite these setbacks, the Liberals were re-elected in 2007, 2011, and 2014. The coal phaseout campaign retained its popularity throughout this period of time.
Sure enough, on April 14, 2014, the Government of Ontario announced that the last of the province’s coal supply had been burned at the Thunder Bay Generating Station, officially marking the end of coal power generation in Ontario.
Balancing supply
The provincial government planned to replace coal using combination of baseload power, intermittent and peaking capacity, and a conservation and demand management approach. Throughout this period, the province added 5500 MW worth of new natural gas facilities; 1500 MW in nuclear power by refurbishing one of its existing plants, which returned to service in 2012; and 5500 MW in wind, solar, and biomass.
The latter was catalyzed by the 2009 Green Energy Act, which introduced a feed-in-tariff system to incentive certain types of “green” energy technology. Small power systems were guaranteed certain price protection and access to the grid, leading to an explosion of growth in the renewable electricity sector.
In part due to decreasing demand, however, much of the new natural gas and renewables were never used. As you can well imagine, this has led to problems today.
When electricity prices spike
If you happen to have been following Ontario news over the past couple of years, you will have caught wind of the dramatic rise in the prices of electricity. Between 2008 and 2015, Ontario’s power prices grew four times faster than inflation and four and a half times faster than economic growth. Now Ontario’s electricity prices are the highest in Canada and projected to continue rising.
Why is this happening? If we are to learn from Ontario’s example, it’s important to understand whether this was an inherent effect of Ontario’s clean energy transformation, or something that could have been avoided through better planning and implementation.
In my research, I encountered a vast spectrum of explanations for the price increases. Ultimately it appears to have arisen from a complex combination of factors centered around how much new capacity was installed and who paid for it, combined with inaccurate predictions of long term electricity demand.
A key insight is that whereas natural gas today provides 9% of Ontario’s power generation, it accounts for over 30% of its installed capacity. In the early 2000s, in exchange for private companies taking the risk of new natural gas construction during the coal phaseout process, the Ontario government offered the natural gas companies long term, fixed-price contracts. When Ontario’s electricity demand unexpectedly decreased, the provincial utility had to sell that power at a lower market price to the northern U.S. states. The price difference was passed onto the utility’s ratepayers in Ontario.
On top of that, the Green Energy Act resulted in over-installation of solar and wind, which Ontario customers must pay for without reaping the benefits. Renewables are said to account for 30% of power price increases over the past several years while accounting for only 7% of new generation.
Others blame the price increases on cost overruns from nuclear refurbishment projects, in addition to the government shifting the cost of shutting the coal plants onto customers.
In 2016, the Ontario government admitted blame for poor planning that negatively impacted the lives of Ontarians. It has since taken action to cut electricity bills. As you can imagine, the issue remains a hot topic for debate and doesn’t appear to be disappearing anytime soon.
While Ontario’s rates are the highest in Canada, however, they remain low compared to global standards. Moreover, proponents of the clean electricity transformation argue that Ontarians are benefiting from the health and economic benefits of clean power generation.
Perhaps this is all just the price of doing business. This leads to the natural question: what exactly did Ontarians get out of all this?
What does it mean to be clean?
Some people, including myself, are inclined to say it’s much too soon to tell what the long term impacts of Ontario’s electricity transformation will be. The first coal plant wasn’t shut down until 2007, and the last in 2014. But that hasn’t stopped a lot of people from arguing about it.
The Ontario Government claims that its phaseout of coal saves $3 billion in public health costs annually out of a $35 billion total budget. The Fraser Institute, a conservative, pro-fossil fuels think tank, argues that in the early 2000s, Ontario’s coal production contributed to a much small portion of particulate emissions then estimated – less than 1% -- making this $3 billion number appear to be a rather ridiculous claim. The Fraser Institute further argues that any health impacts were more likely a result of clean air policies in the United States, rather than Ontario, and new regulations imposed on vehicle emissions in both countries.
On the other hand, shutting down coal plants appears to have had a significant impact on the province’s carbon emissions, even if this wasn’t one of the intended outcomes. Between 2007 and 2014, Ontario’s emissions reduced by 34 megatons, or 17%. Emissions from the electricity sector have decreased by 55%. It’s hard to argue shutting down the coal plants had nothing to do with this.
As for economic impacts, growth appears to have been unaffected and has continued to increase. While some jobs were lost through the coal phaseout, thousands more were replaced by growth in other areas of the energy sector, particularly nuclear and renewables. The province predicts further explosive job growth for nuclear power and renewables in the decades to come.
On top of this, Ontarians benefited from a much-needed update to their electricity infrastructure, increasing the reliability of power supply throughout the province.
Looking to the future
Can Ontario maintain this decarbonized electricity mix in a world where nuclear is increasingly viewed as a dying technology and renewables remain unable to provide reliable baseload power?
We’ll see. But I think they have a good shot.
Starting from 2016, Ontario’s utilities launched an an aggressive, $25 billion refurbishment program for its nuclear plants through 2031. If successful, the program will enable its nuclear fleet to continue operating through the middle of the century, thus maintaining Ontario’s strong nuclear energy backbone. The program is anticipated to create over $10 billion in annual economic benefits and over 50,000 new jobs across Ontario.
If the project cannot be completed on time and on budget, the companies have off-ramps to bring the project to a premature halt. If this is the case, province could either increase generation from natural gas or import hydroelectricity from the neighboring province of Quebec. Uncertainty around the future of carbon pricing has and will continue to impact these decisions.
Meanwhile, the province has aggressive plans to increase renewables generation even further. Ontario now has approximately 6000 MW of non-hydro renewables installed, and hopes to increase this by a further 6000 MW by 2025. While the capacity factor of these renewables remains low, time will tell whether these resources can be used efficiently or will continue to weigh heavily on Ontarians’ power bills without providing the corresponding benefit.
Can others follow Ontario’s example?
Ontario’s power sector, as you have seen, is rather unique. Some aspects of its transformation could likely be replicated elsewhere, whereas others, perhaps not. Sustained political support, the lack of a coal lobby, and government ownership of energy assets all played a vital role in enabling this to happen. Moreover, with current technology, no such transformation could have been accomplished without a strong backbone of nuclear and hydro guiding every step of the way.
Renewables also played a significant role, as did energy conservation. In U.S. states, we can expect these trends to be relatively similar, although we should be wary of increasing capacity too quickly without a corresponding increase in power generation. Furthermore, in order for decarbonization to be sustainable in the long term, it seems the role of carbon pricing is also critical. Carbon pricing introduces a market valuation for emissions and, by extension, pollution.
Still, so long as we have access to cheap natural gas, there needs to be an economically competitive alternative, or natural gas will continue to rule the day. Emissions will be cut by replacing coal with gas – as we are seeing now in the majority of industrialized nations.
The wild card through all of this is the electrification of transportation. In industrialized nations, we face the same dilemma as Ontario: steady or decreasing electricity demand. Electrifying transportation would change that picture dramatically and would incentive investment in riskier, more innovative electricity technologies. If that happens, if the political climate is so inclined, the time would be ripe for a clean energy transformation anywhere in the world.