Wednesday, January 12, 2011

Much To Do About Nothing: Electricity Policy In Ontario


Something is bad.
Nothing is not.

This was a revelation for me. Nothing is what we all work towards. In the Ontario electricity industry of 2011, nothing drives everything. There are a number of laggards who fail to see the importance of nothing so, politically, the industry has adapted. There are ways to boast of doing nothing – generally by a flurry of feigned activity supported by measuring nought.
3 or 4 years ago I saw the long-term trend in Ontario Electricity consumption, from the Conservation Bureau. That was another revelation for me.

All of the Conservation Bureau documents are now buried after it's website was swallowed up by the OPA (a shame) – but I've since seen the same graph elsewhere, in some cases for other jurisdictions. Figure 2 of an early 2006 critique of the OPA by the Ontario Clean Air Alliance document (on page 2), crudely showed the trend specifically for Ontario, but it's not much different than the more professional trend line I took from the Energy Information Administration's recent Annual Energy Outlook:


An obvious downward trend leading to either a period of more constant usage, or maybe a decline. No big changes in the future. That's all I could see from these graphs of the past 6 decades in North America.
Well, I have been shown to be superficially observant, and completely ignorant of the growth potential of a declining trend. It took a couple of years for me to figure out that nothing was being sold – and being sold very successfully.
One document that made an impact on me, a couple of years ago, was another OCAA production, “Tax Shift: Eliminating Subsidies and Moving to Full Cost Electricity Pricing.” That document claimed subsidies on water royalties, a subsidy of the lack of a sales tax , return on equities, and corporate taxation, being set too low on crown corporations ... this group with the title about clean air seemed far more interested in ensuring all public assets where monetized to fund private organizations (businesses doesn't really describe the paradigm we've developed in Ontario's electricity sector).

I understood the allure of privatization necessitated vilifying public power. What I failed to comprehend was not why private companies might support an attack on the very concept of a public good, but why public utilities would join in a deliberate attempt to artificially inflate the price of electricity.  The document was claiming the falsely identified subsidy dollars be collected by the government, from electricity consumers, to be given out in ways far more wonderful than the electricity consumer would spend them. 

From each according to his consumption, to each according to his political correctness, and/or connections.

A bureaucratic buffet.

Finally the OPA's elevation of the absurd during the ongoing farce of working towards an Integrated Power System Plan, coupled with Minister Duguid's recent propensity for the misleading statement, brought me to my senses. For bureaucracies to do what they do – expand - they needed to grow despite the decades old trend now resulting in declining consumption. The educational bureaucrats in Toronto had already had some success in convincing the Ontario populace – one of the most educated groups on earth – that smaller class sizes were needed to counter a shrinking student population (and later that 4 year-olds require full-day schooling).

But the energy bureaucracies have been awesome in taking it to a whole other level. Price escalations became the course of the day, as Hydro One undertook smart meter/grid programs to better be able to control the escalating usage – which is at the same level it was at 20 years ago (just before we last encountered expensive supply mix problems). In 2003 Hydro One transmitted the 151.7TWh consumed in Ontario – in 2010 that number had dropped to 142TWh. In the recent Ontario Energy Board ruling on Hydro One's rate increase applications for 2011 and 2012, the OEB seemed very concerned that forecasting the outcome of Conservation and Demand Management (CDM) programs was something like forecasting with tea leaves. From that document, this paragraph really sums up a silly Ministry of Energy and a bureaucracy drunk with power:
Over the last number of years utilities across the province, including Hydro One Distribution, have spent very considerable sums of ratepayer or taxpayer money in pursuit of the Government's conservation and demand management goals. Recently, the government has intensified this activity through the establishment of specific CDM targets on a distributor by distributor basis. While each distributor has its own specific target for CDM reductions, these specific goals are derived by allocating a global target to the individual distributors. While the budgeting process for distributors to pursue these CDM goals is not finalized, it is clear that very substantial amounts of money will be required to achieve the targets established by the Government. The Board is concerned that in this environment of increased pressure to pursue CDM, attended as it is with corresponding costs, that there does not appear to be a broadly accepted methodology in place to identify the reasonably anticipated effects of any CDM program on the throughput of the respective distribution or transmission systems.”
I suspect there isn't a methodology to measure the throughput as there isn't a methodology to determine if they are reducing usage at all. If the OEB is concerned about the issue on the distribution system they might look a little harder at whether the programs are impacting the already declining usage. On the Hydro One decision it turned out the OEB weren't that concerned – they agreed to go with the figures anyway, with a serious notation that there is clearly a need for more study, and more money to study, how to grow nothing.

The Ontario Power Authority was formed, in large part, to put together Integrated Power System Plans, to be updated every three years. They still haven't got one through the OEB to the approval stage. The OPA Business Plan for 2011-2013 makes the typical bureaucratic claims of accomplishment for measurements that have little to do with them, or their departments, but more significantly, the very first bullet point on the priorities list, on page 1, is “implementing province-wide conservation and energy-efficiency programs in partnership with local distribution companies and achieving forecasted conservation savings in an efficient manner.”

That sounds familiar.

Strategic Directive 2 has a section of the business plan that starts on page 15 and goes to page 24. They are very serious about this stuff. Page 45 notes 'efficiency metrics' with forecasting of 11 GWh/FTE in 2011, 39 GWh/$M, and a peak reduction of 2390MW -for 2011. 
They are investing heavily in unmeasurable things, or things that the causation is generally the overall economy and the weather, and the expansion in the size of the OPA since 2005 shows they are being very successful at finding unmeasurable things to invest in. As the OEB Hydro One decision noted, much needs to be spent on studying CDM due to all the money we are spending on CDM - only to have bureaucrats take credit for existing trends.
The Long Term Energy Plan recently proposed that 7100MW, of 11000MW, added over the next 20 years, be nothing (demand reduction).

That seems pessimistic to me.

If we added a lot more nothing we’d have way more supply not to consume, allowing our bureaucrats to achieve far greater theoretical reductions.  

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