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Current Affairs

Current Affairs: Perspectives on Electricity Policy for Ontario

Doug Reeve
Donald N. Dewees
Bryan W. Karney
Copyright Date: 2010
Pages: 304
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  • Book Info
    Current Affairs
    Book Description:

    Current Affairsbrings together the views of a number of international experts on electricity and environment along with commentators familiar with Ontario's situation to begin a discussion of these issues.

    eISBN: 978-1-4426-9012-7
    Subjects: Business, Political Science

Table of Contents

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  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-viii)
  3. Preface
    (pp. ix-xii)
  4. Abbreviations
    (pp. xiii-2)
  5. 1 The Evolution of Ontario Electricity Policy
    (pp. 3-10)

    If we were not concerned about air pollution and global warming, Ontario’s electricity policy would be simple – burn coal. Coal power costs less than other available new electricity sources, and both Canada and the United States have abundant supplies of coal. However, we are concerned about conventional air pollutants – particulate matter, sulphur dioxide, nitrogen oxides, and toxic metals such as cadmium and mercury that harm human health and damage the environment. We are increasingly concerned about global warming, and coal-fired power plants discharge large amounts of carbon dioxide. Vigorous pursuit of environmental protection calls into question the continuation...

  6. Part One: A Global Perspective on Electricity Policy for Ontario

    • 2 Ontario Electricity Policy: The Climate Change Challenge
      (pp. 13-32)

      This chapter looks ahead, over a time horizon of perhaps fifty years instead of the twenty years of the recently publishedIntegrated Power System Plan(Ontario Power Authority 2007). Issues developing over this longer time period are relevant to near-term decision making because the long lifetimes of capital and infrastructure in the electrical sector mean that long-term uncertainties push back to affect near-term planning and decisions. Over this fifty-year time period, electricity policy in Ontario will face many challenges, but the most serious – or to be more precise, the most serious that we can now foresee – is global...

  7. Part Two: Electricity’s Role in Reducing the Environmental Footprint of Energy Use

    • 3 Introduction
      (pp. 35-39)

      Electricity policy in the province of Ontario is supported by three pillars: reliability, affordability, and environmental sustainability (Norman 2008). This part of the book is focused on the latter pillar, environmental sustainability.

      The environmental sustainability of Ontario’s electricity sector is dependent upon the amount of electricity generated within the province, the mix of fuels and technologies utilized to generate this electricity, and the environmental implications of the province’s demand-management programs. In addition, the sector’s performance is determined by the technologies utilized to generate electricity imported into the province.

      Ontario’s electricity generation installed capacity is expected to evolve by the year...

    • 4 European Low-Carbon Strategies in Liberalized Electricity Industries: Some Lessons on the Efficiency of the Market Paradigm
      (pp. 40-76)

      Socially efficient policies for reducing the environmental footprint of a power system, from generation through to consumption, cannot be developed without taking into account the new market regime in the power industry. There are two reasons:

      In a market regime for a vertically de-integrated system, it is expected that the market price will indicate to producers in a timely way the socially efficient technological choice for generation. However, with a market regime, there tend to be significant investment risks that must be borne exclusively by producers. This discourages the development of clean and non-carbon approaches because they are more capital...

    • 5 Comparing Environmental and Technology Policies for Climate Mitigation and Renewable Energy
      (pp. 77-108)

      The potential for renewable energy to displace fossil-fuelled sources of electricity generation has received considerable attention as a means to reduce emissions of greenhouse gases and other pollutants. In 2001, renewable energy sources (for example, geothermal, solar, wind, tide, and hydropower) provided 5.7% of the total primary energy supply for Organisation for Economic Co-operation and Development (OECD) countries (International Energy Agency 2002). For electricity generation, renewables represented 15% of production worldwide, but only 2.1% if one excludes hydropower. Proposals in the United States aim to increase renewable electricity production to 15% by 2020, and the European Union has a target...

    • 6 A Discussion of Electricity’s Role in Reducing the Environmental Footprint of Energy Use
      (pp. 109-114)

      These comments are organized under three headings: the two contributions to the session entitled ‘Electricity’s role in reducing the environmental footprint of energy use’; Ontario’s electricity supply system and climate change; and electricity’s role in reducing CO₂ emissions.

      Carolyn Fischer and Richard Newell’s chapter explores options for CO₂ abatement by modelling the impact of six policy designs in the U.S. electricity sector. Perhaps unsurprisingly, they find that the lowest cost option for achieving a specified emissions reduction is an emissions price (which could be provided through either a carbon tax or a cap-and-trade system). The higher costs encourage a range...

  8. Part Three: Finding the Right Price

    • 7 Introduction
      (pp. 117-119)

      No discussion of electricity policy is complete without a discussion of the price. Consumers press relentlessly for low, stable prices. Generators insist on prices that cover all costs including a reasonable return on invested capital. Advocates of competitive markets call for prices that reflect supply and demand in order to avoid shortages (brownouts or blackouts) or costly excess capacity. As part 2 shows, price can play an important role in reducing the environmental harm caused by the generation or transmission of power. Part 4 shows that price is an important factor in achieving end-use electricity efficiency goals. Politicians want prices...

    • 8 What Is the ‘Right’ Price for Electricity in Ontario?
      (pp. 120-136)

      What is the right price for electricity in Ontario? The short answer, economically speaking, is the price that brings supply and demand into balance. In practice, of course, things are never quite that simple. The correct price should be determined in the context of broader objectives and policies, especially in times of dramatic change or discontinuity. This chapter is an attempt to provide more sensible and pragmatic approaches to the question in the context of the future of electricity in the province of Ontario.

      Before the discussion begins, however, a few caveats apply and should be spelled out. First, I...

    • 9 The Effect of Price Elasticity, Metering, and Consumer Response on the Right Price
      (pp. 137-141)

      My discussion will attempt to accomplish a couple of objectives. I will provide Ontario evidence to support some of the themes in the previous chapter, ‘What is the ‘Right’ Price for Electricity in Ontario?’ In addition, I will also provide extensions of some of the fundamental ideas pertaining to the ‘right’ price. Historically, Ontario electricity consumers have responded to electricity prices; some empirical supporting evidence will be provided. Recent Ontario experience with some market- and consumption-enabling technologies will be discussed. Furthermore, a refocus from price level to price structure is recommended. The extensions will also emphasize the importance of timely...

    • 10 How Ontario Energy Institutions Set the Price for Electricity
      (pp. 142-152)

      Other chapters in this section (by Sioshansi and by Mountain) provide excellent examples of what one would expect to be intuitively correct: prices influence behaviour, and any attempt to change electricity usage should contain a price signal that is aimed at influencing behaviour. As a result, if it is desirable to have consumers use less electricity, electricity should have a higher price; if it is desirable to have consumers use electricity at off-peak times, then consumers should see time-differentiated prices; if it is desirable to have consumers use electricity produced with lower emissions, then an emissions component should be included...

  9. Part Four: Policy Tools for Increasing End-Use Electricity Efficiency

    • 11 Introduction
      (pp. 155-157)

      Humans have collectively enjoyed remarkable success in increasing the production and use of energy for human ends. Although historically a well-trained and organized set of workers using their own strength could provide enough motive force to gradually transform landscapes and to build impressive monuments, such achievements pale compared to the power that modern society routinely employs. Even the use of animal power, such as horses, is dwarfed by modern machines. A car engine may be equivalent to several hundred horses, and a jet engine to tens of thousands, but to evaluate a major electrical generation facility as equivalent to millions...

    • 12 The Evolution of Electricity Efficiency Policy, the Importance of Behaviour, and Implications for Climate Change Intervention
      (pp. 158-193)

      Significant improvements in the efficiency of energy use will be integral to global efforts to reduce greenhouse gas emissions. Parts of the world have had some success in securing energy efficiency (EE) as a policy goal at the national level, and some regions of North America and Europe have accumulated considerable EE experience. Future policies, programs, and initiatives should be able to benefit from what we have learned over the past thirty years. Nevertheless, the EE policy paradigm, which primarily encourages the proliferation of modified hardware – appliances, buildings, infrastructure – in support of gradual and relatively modest aggregate gains...

    • 13 A Review of the Rebound Effect in Energy Efficiency Programs
      (pp. 194-244)

      To achieve reductions in carbon emissions, most governments are seeking ways to improve energy efficiency throughout the economy. It is generally assumed that such improvements will reduce overall energy consumption, at least compared to a scenario in which such improvements are not made. However, a range of mechanisms, commonly grouped under the heading ofrebound effects, may reduce the size of the energy savings achieved. Indeed, there is some evidence to suggest that the introduction of certain types of energy efficient technology in the past has contributed to an overallincreasein energy demand – an outcome that has been...

    • 14 A Discussion of Policy Tools for Increasing End-Use Electricity Efficiency
      (pp. 245-246)

      The chapters by Loren Lutzenhiser of the United States and Steve Sorrell of the United Kingdom contrast the lessons gleaned from more than three decades of electricity efficiency policies. While both would agree that electricity efficiency policies have not been as successful as originally promised, their chapters nonetheless present different conclusions and recommendations.

      Lutzenhiser represents a school of researchers who suggest that policies to promote electricity efficiency can be greatly improved by focusing more carefully on human choice and behaviour. The design of most efficiency policies has relied all too frequently on a caricature of firms and consumers as simple...

  10. Part Five: Inter-jurisdictional Cooperation in Achieving Energy Policy Goals

    • 15 Introduction
      (pp. 249-254)

      Electricity markets increasingly operate across jurisdictional boundaries, both on the demand and the supply side. Considered analysis of how best to regulate and manage those markets frequently lags behind the actual flow of electricity. The reality of these flows adds an additional layer of complexity to the fundamental challenge that this volume aims to address: how to meet energy demand, in uncertain times, while significantly decreasing carbon emissions.

      In this session of the workshop ‘Current Affairs: Perspectives on Electricity Policy for Ontario,’ contributors presented European and American experiences, both positive and negative, that might provide useful lessons for Ontario as...

    • 16 The Power of Trade
      (pp. 255-264)

      Aging power plants, increasing demand, and the need to replace existing capacity with cleaner sources has lead the countries of the Organisation for Economic Co-operation and Development (OECD) into a new investment cycle. New capacity corresponding to at least 25% of existing capacity will need to be built in OECD countries by 2015. According to International Energy Agency (IEA) reference projections, of the 2,360 Gw of installed capacity in 2004 in OECD, 207 Gw will need to be replaced by 2015 and 466 Gw will need to be added to meet increasing demand (International Energy Agency 2008).

      Environmental constraints are...

  11. Part Six: Policy Challenges and Opportunities

    • 17 Institutions Matter
      (pp. 267-270)

      In analyzing the public policymaking process in almost any context, I have always found it helpful to contemplate the following sequence of steps: (1) institutions, (2) instruments, and (3) objectives. Presumably, in a rational public policymaking process, a given set of institutions would determine collectively the desired policy objectives and would then choose an appropriate set of policy instruments to vindicate those objectives.

      At the Current Affairs conference, both in the address after dinner and in the presentations during the following day, most of the discussion focused on the appropriate choice of policy objectives and the appropriate choice of policy...

    • 18 The Politics of Electricity in Ontario
      (pp. 271-273)

      It is a pleasure to have this opportunity to provide some concluding comments about the timely and important subject of electricity policy for Ontario. Let me say at the outset that my perspective on this topic is that of someone who has spent nearly thirty years of his life in the Legislative Assembly of Ontario. Both as a member of the Opposition and as a Cabinet minister, I devoted a good deal of that time to wrestling with what often seemed to be the endlessly complicated hydro issues. What follows are the observations of the battle-scarred!

      I hope that it...

    • 19 Conclusion: Challenges and Opportunities for Electricity Policy in Ontario
      (pp. 274-288)

      We can identify three realms in which electricity policy for Ontario presents considerable challenges and many opportunities for leadership: the environment, the economy, and politics. These three realms overlap, of course. The political problems would be easier to solve if we were not concerned about the environment and if stakeholders could agree that energy conservation opportunities were either cheap and abundant or costly and limited. Governments have not told Canadians that vigorous environmental protection will impose costs on all of us and will require some lifestyle changes. Therefore, there is a lingering illusion that someone else will pay to green...

  12. Contributors
    (pp. 289-297)
  13. Acknowledgments
    (pp. 298-298)