The electricity policy of Ontario refers to plans, legislation, incentives, guidelines, and policy processes put in place by the Government of the Province of Ontario, Canada, to address issues of electricity production, distribution, and consumption. Policymaking in the electricity sector involves economic, social, and environmental considerations. Ontario's electricity supply outlook is projected to deteriorate in the near future due to increasing demand, aging electricity supply infrastructure, and political commitments, particularly the phase-out of coal-fired generation. Policymakers are presented with a range of policy choices in addressing the situation, both in terms of overall system design and structure, and specific electricity generating technologies.
Ontario finds itself faced with choices that define energy policy debates throughout the western world: the role of markets vs. centralized planning and what Amory Lovins has termed "hard" versus "soft energy paths"; i.e. continued reliance on large, centralized generation, particularly nuclear and coal, or moving towards decentralized technologies, including energy efficiency and low impact renewables.
As of December 2021 the capacity of 18,958 MW is divided up as 30.5% Nuclear, 39.5% Hydro-electric, 1% Biomass, 0.25% Solar, 25.5% Gas.(remainder unspecified). Coal use was phased out in 2014 (1st jurisdiction in North America).
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History of electricity demand planning in Ontario
Early history In 1925, Ontario's public electricity utility, established in 1906, the Ontario Hydro Electric Commission (HEC) (later Ontario Hydro) constructed what was then the world's largest hydroelectric plant, Queenston-Chippawa (now Beck 1). From this early beginning until the postwar economic boom of the 1950s, Ontario Hydro was able to meet growing demand for electricity by expanding its network of hydraulic generating facilities.Ontario (Porter Commission). The Report of the Royal Commission on Electric Power Planning: Volume 1, Concepts, Conclusions and Recommendations, p.27; See also: Ontario Power Authority, Supply Mix Advice Report, Background Report, Volume 3 Planning for Ontario's electricity system was relatively simple for two reasons: 1) electricity was coming almost entirely from hydroelectric power; and 2) the electricity system consisted of several smaller systems, making management considerably easier.
Challenges to the system began to emerge in the 1950s: the accessible waterpower sites were exploited; and the province's electricity distribution system was limited in capacity. To address these problems, the HEC began constructing new coal-fired electricity generation plants near major sources of electricity demand and launched plans to build nuclear power plants across the province of Ontario. Between the early 1970s and early 1990s twenty CANDU power reactors were brought into service at the Pickering (8 reactors), Bruce (8 reactors) and Darlington (4 reactors) nuclear generating facilities.
Electricity demand planning 1970s–1990s The Power Corporation Act required Ontario Hydro, (formerly HEPCO, renamed in 1974) to provide "power at cost". This philosophy became part of the culture and lore of electricity supply in Ontario. The utility did not pay taxes, nor was it intended to generate profits.Dewess, Don. 2005. "Electricity Restructuring and Regulation in the Provinces: Ontario and Beyond", Presented to the Energy, Sustainability and Integration, The CCGES Transatlantic Energy Conference.
Porter Commission Amid growing concern over the cost of nuclear power, coupled with inflation and recessions that reduced the demand for electricity, the Porter Commission (1975–1979) performed a detailed review on the problem of electricity supply. The Porter Commission's conclusions were simple: demand management, not supply planning, must be the focus of Ontario electricity planning.Howard Hampton. 2003. Public Power: The Fight for Publicly Owned Electricity. Toronto: Insomniac Press, p.130.
Demand/Supply Plan (DSP) Report It was not until 1989, however, that Ontario Hydro published its first Demand/Supply Plan (DSP) Report, "Providing the Balance of Power". The plan projected a supply/demand gap would open up in the mid-1990s, reaching 9,700 MW by 2005 and 21,300 MW by 2014. To address this gap, Ontario Hydro proposed building several additional nuclear and coal-fired generation plants.Ontario Hydro. 1989. Providing the Balance of Power: Ontario Hydro's Plan to Serve Customers Electricity Needs. Toronto: Ontario Hydro. In 1992, Ontario Hydro issued a revised Supply/Demand Plan Report.Ontario Hydro. 1992. Providing Balance of Power: Update 1992. Toronto: Ontario Hydro. As a public body, all Ontario Hydro projects, including the DSP, were subject to the province's Environmental Assessment Act. By 1993, however, faced with increasing criticism from the province's independent, quasi-judicial Environmental Assessment Board, a recession and economic restructuring that dramatically reduced industrial electricity demand, and an oversupply of electricity as the Darlington nuclear power plant came into service, the DSP was withdrawn by Ontario Hydro and no additional generating facilities were built.
Ontario's short experiment with competitive retail markets In the 1990s, Ontario Hydro's enormous debt from the building of the Darlington nuclear generating station became a major political issue. Ontario Hydro was becoming financially and operationally dysfunctional. The situation forced Ontario Hydro to dramatically reduce staff and transmission investments. Ontario Hydro also published a document called Hydro 21.Ontario Power Authority. 2006. Supply Mix Advice Report, Background Report, p.6. This report suggested that electricity system in Ontario should be restructured in a more market oriented direction.
The political impetus for restructuring increased with the 1995 election of the Mike Harris government. In that year, Mike Harris commissioned the Macdonald Committee. The committee recommended the elimination of Ontario Hydro's monopoly on managing generation capacity and that the electricity market be opened up to competition. In response to the Macdonald Committee's recommendations, the Ontario government released "Direction for Change: Charting a Course for Competitive Electricity and Jobs in Ontario" in 1997, detailing the government's plans to open the market for electricity supply.
The competitive market did not actually open until May 2002. Participation in the retail market was voluntary, with customers having the option of entering into contracts or rates being set in the five-minute spot market. Retail consumers were also free to enter fixed-rate contracts. For those that opted out of the contract option, electricity rates passed through a smoothed spot market price. When the market opened in May, wholesale prices averaged 3.01 cents per kWh. For a number of reasons, however, including an especially hot summer, a reduction in domestic generating capacity, and an increasing reliance on a limited import capacity, prices began to rise sharply. In July, average wholesale price was 6.2 cents per kWh.Trebilcock, Michael .J. and Roy Hrab. 2005. Electricity restructuring in Ontario. The Energy Journal, 26 (1), 123–146. Under surmounting pressure from consumers, the government adopted the Electricity Pricing, Conservation and Supply (EPCS) Act in December 2002.Legislative Assembly of Ontario. 2002. Bill 210, Electricity Pricing, Conservation and Supply Act. http://www.ontla.on.ca/web/bills/bills_detail.do?locale=en&BillID=1079&isCurrent=false&ParlSessionID=37%3A3. The legislation capped retail prices at 4.3 cents per kWh and Ontario Power Generation (the successor of Ontario Hydro's electricity generation division) was to provide customers with a rebate for 100% of all electricity charges above that mark, retroactive to the market opening and continuing until 1 May 2006. Transmission and distribution rates were also frozen at their existing levels and would remain unchanged until 1 May 2006. The net result was a complete cessation of new investment in generation capacity and a significant cutback in new investment in transmission and distribution.
Concerns regarding aging nuclear plants In 1996, major questions arose regarding the status of Ontario's nuclear plants. The oldest of these plants built in the 1970s were aging and in the early 1990s reliability began to decline significantly. The situation drew the attention of the federal nuclear regulator, the Atomic Energy Control Board of Canada (AECB) (now Canadian Nuclear Safety Commission), and was acknowledged by Ontario Hydro. In 1996, the AECB judged the situation at Pickering A to be particularly critical and issued the plant a six-month operating license. The following year a review board of industry experts concluded that the operations of Ontario's nuclear plants were "below standard" and "minimally acceptable". The Ontario government responded by approving a Nuclear Asset Optimization Plan proposed by Ontario Hydro. The plan had three major objectives: 1) the closure of the seven oldest of the utility's 19 operational nuclear reactors for rehabilitation; 2) the redeployment of staff; and 3) the spending of between $5 and $8 billion to implement the plan.Ministry of Energy. 2007. Ontario Track Record on Nuclear Energy. http://www.energy.gov.on.ca/index.cfm?fuseaction=archives.news1&back=yes&news_id=188&backgrounder_id=214 . Retrieved 10 April 2007. In order to replace the lost capacity by the reactor closures, Ontario Hydro relied on its five coal-fired generation facilities. The result was a doubling of greenhouse gas emissions, smog, and acid rain precursors from these facilities between 1997 and 2001.Gibbons, J. 2003. Countdown Coal: How Ontarian can improve air quality by phasing out coal-fired electric generation. Toronto: Ontario Clean Air Alliance. This development occurred at a time when poor air quality was already a growing public health concernToronto Public Health. 2000. Air Pollution Burden of Illness in Toronto:Summary Report. Toronto: City of Toronto. http://www.toronto.ca/health/hphe/ . Retrieved 5 April 2007. in southern Ontario. In response to the concerns of the public health impacts of increased coal-fired generation, all three major provincial political parties included a coal-phase out plan in their 2003 election platforms. The winner of the election, the Ontario Liberal Party, led by Dalton McGuinty, had committed to a phase-out by 2007.
Electricity Conservation and Supply Task Force The August 2003 blackout in eastern North America reinforced concerns over the future of electricity supply in Ontario. In response an Electricity Conservation and Supply Task Force (ECSTF) was formed, submitting its recommendation in January 2004. The task force concluded that "the market approach adopted in the late 1990s needs substantial enhancement if it is to deliver the new generation and conservation Ontario needs, within the timeframes we need them".Electricity Conservation & Supply Task Force. 2004. Tough Choices: Addressing Ontario's Power Need, Final Report to the Minister, p. 97–98. http://www.energy.gov.on.ca/english/pdf/electricity/TaskForceReport.pdf . Retrieved 5 April 2007. The task force also suggested that a long-term plan for generation and conservation was needed.
Creation of Ontario Power Authority Following the recommendations of the ECSTF, the new provincial government, elected in October 2003, enacted the Ontario Electricity Restructuring Act. The legislation provided for the creation of the Ontario Power Authority (OPA). One of the four mandates of the OPA was to address the power system planning issues.
Green Energy Act