Monday, March 13, 2017

Not another Long-Term Energy Plan

The Minister of Energy will produce a Long-Term Energy Plan (LTEP) in the not too distant future. I've offered commentary during the planning period of two earlier LTEPs, in 2011 and 2014, but my advice this time didn't require complying with any official input period because it would be officially rejected anyway.

My advice on preparing 2017's Long-Term Energy Plan is simply this: don't.

I've been asked for thoughts on the new LTEP a couple of times, so I'll present some here primarily for the frequent readers of my work, including some authentic public servants, and hopefully also for a Minister of Energy - although probably not today's.

The primary reason for individuals to avoid the LTEP process is it's been a gimmick - a tool to present Ontario Liberal Party (OLP) policy to the electorate as if it was professionally and independently developed. The connection of professionally developed policy and elections began in 2007. The OLP had come to power in 2003 aided by displeasure over the handling of the electricity file by the previous Progressive Conservative (PC) government. It worked quickly in redesigning the sector to include a professional planning body, the Ontario Power Authority (OPA), which was tasked with producing an Integrated Power System Plan (IPSP):
  1. The initial IPSP was submitted to the Ontario Energy Board for consideration in August 2007, just in time for the OLP to campaign on the document for the October 2007 election,
  2. the first LTEP was put out early in 2011 to be the basis for an IPSP, and the OPA did have a draft IPSP on the minister's desk prior to the election in October 2011, although the OLP never did let that draft into public view,
  3. the next LTEP came out late in 2013, and served as the basis for OLP electioneering on energy in the election that followed in June 2014.
Participating in the development of an LTEP is participation in developing an OLP election platform.

The occupant of the office of the Minister of Energy is currently Glen Thibeault, signalling this LTEP will be as politicized as ever. Last May a report indicated then Minister of Energy Bob Chiarelli, "at loggerheads" with "Environment Minister Glen Murray ...over the possible effect [of carbon costs due to the Climate Action Plan] on electricity prices." At the time Glenn Thibeault was Murray's Parliamentary Assistant, so the introduction of Thibeault as Minister of Energy, in June 2016, was confirmation Chiarelli's concern for electricity pricing had lost the battle. During his first 6 weeks as Minister of Energy Thibeault directed the construction of a $1.4 billion hydro line to service 10,000 distant consumers and refused to recognize electricity pricing as a crisis.

Eight months later, Thibeault sat with the Premier at a press conference due to a crisis. It's unclear if the crisis was electricity pricing or their party's polling numbers, but the actions taken to resolve the crisis don't address the fundamental factors that drove prices higher - so it's probably the polling.

Ontario's next Long-Term Energy Plan is to be produced by a rookie minister three-quarters of the way through his first year in the office, during which he's moved from not seeing a problem with costs to burdening a future generation in order to offer 25% off electricity pricing to 2018's voters.

Fortunately one man does not produce a Long-Term Energy Plan.

Unfortunately the bureaucracy involved in schlepping out the LTEP are further cause for concern.

Late in 2016 the Minister unveiled the themes of the coming LTEP in a speech to the Empire Club - a fitting site as the themes were connected to the current empire builders in Ontario's electricity system - the IESO. I summarized the speech as featuring 3 points:
  1. Nature and style of procurement should be technology agnostic
  2. Ontario's electricity market renewal/reform to provide better value
  3. Empowerment of consumers
Recently the IESO posted a draft Benefits Case Assessment of the Market Renewal Project, which potentially indicates where it is moving on the first two points. The IESO's Market Renewal project contains the obligatory insider group, a.k.a. stakeholders, but the draft report itself is prepared by the reputable Brattle Group. It sees savings. over a 10-year period, coming from another trinity:

  1. improving the energy market by moving to the day-ahead structure along the lines of what the IESO's been muttering about for over a decade while other markets have adopted and improved their implementations
  2. improving the value of connections with other markets by co-ordinating trading opportunities (as the IESO has discussed for some time)
  3. moving to a capacity market.

The envisioned savings from the IESO becoming adept at energy market management and intertie operability are roughly equal to savings that would have occurred if the IESO, instead of executing 2016's Large Renewable Procurement, had done nothing at all last year. The savings that could be realized must be similar to savings avoided by the IESO limiting its past activity to opining on day-ahead market design and better intertie co-ordination.

If these are solutions to a problem, a new vehicle should be found to deliver the solutions.

The Minister signaled the LTEP will be based on the IESO delivering better value, implying the government will replace ordering vast quantities of very specific baubles contracted for no particular purpose with a policy of ordering vast quantities of non-specific baubles for no particular purpose.

Minister Thibeault may not have thought of it exactly that way, but since market demand and pricing dropped sharply in 2008, 1 new-build gas-fired generation facility was contracted as were 3,100 wind and solar facilities, and another 24,000 small-scale solar installations.

I do not view the problems of contracting over the past 8 years as too much specificity about what low-value variable intermittent generator technology should be procured.

The major savings in the Brattle report come from altering procurement methods. Instead of the government arbitrarily directing the trend-of-the-day be purchased in abundance, Brattle sees needs being determined by the system operator, and met by capacity auction, which would ideally be technology agnostic. However, in Ontario the IESO continues to procure Demand Response capacity in a technology specific manner. After the Minister spoke of technology agnostic procurement last November the IESO carried out an auction for demand response capacity, which they perceived as being successful in securing about 450 megawatts of unneeded capacity for less than they'd usually waste procuring unnecessary capacity.

It appears capacity auctions won't replace technology specific procurement, but simply further bloat the IESO.

It is true that the IESO doesn't produce the LTEP - the Ministry of Energy does. People should realize this Ministry has less than 200 employees, which is small both in comparison to other ministries and the IESO which had about two and half times that number of employees on the Sunshine list (of public employees with 6 figure salaries) - which isn't meant to incite a riot over that spending, but to note the imbalance that could prevent a Minister from recognizing the low performance level of the IESO.

I'm not disputing the conclusions in Brattle's prattle, or doubting the Minister's belief in the themes. I am noting the primary problems are the IESO and the government - not the presence or the absence of particular trading structures.

What is to be done?

The first fork in the decision path could be seen as the choice of revolution or evolution - overlooking natural selection being the mechanism of evolution.

I commented on the development of the 2011 LTEP, choosing evolution.
I commented on the development of the 2013 LTEP (I even built a site during the planning period) - choosing evolution.

I could argue my work had influence. With the government's new-found panic to reduce residential electricity rates it would be easy to forget that 2011 forecasts for 2015 costs were 10% higher expense than the too-high costs we actually experienced. Increases would be higher if not for people, outside of the paid sector, doing the math on the government's reckless procurement.

Today I do not choose the complicity of evolution.

I attribute no cost control to the IESO.

I do think there are good people at the Ministry of Energy, but when I went to the session on planning the upcoming Long-Term Energy plan I met nice people, but none capable of discussing the issues important to either the history of planning electricity in Ontario (none were aware of the 1980 Royal Commission Report), nor the important issues of crafting a system in 2017.

I am simply not incented to waste my energy advising people disinterested in advice.

In announcing the election bribe of 25% off electricity the Premier of Ontario, a parliamentary democracy supposedly built on the foundation of responsible government, stated:
 "this generation has been subsidizing not just those who came before, but those who will come next. "
As a father, I am disgusted by this.

I would enjoy working with data and extracting meaning to argue dispassionately for an energy plan, but eventually all things are about people. Electricity in Ontario is expensive not because of market designs or generating technology, but because of irresponsible people.

They need to be displaced.

Tear down the structures.
Drain the swamp.

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