Clean energy, environment-related nuggets from Ontario-commissioned Drummond Report

I’ve been reading through the recently released report from Commission on the Reform of Ontario’s Public Services, also called the “Drummond Report” after commission chair Don Drummond, former chief economist of TD Bank. Drummond was always a big fan of putting a price on carbon, so I was curious to see if he raised carbon pricing in his report.

He didn’t.

He did, however, make several commonsense suggestions and raise some interesting points in the areas of electricity infrastructure, transportation, green energy and the environment. I highlight some of them below:

First, I was pleased to see that Drummond took issue with the unfair distribution of federal support for (green) energy projects across the country. He made his opinion of the federal government’s approach clear on p. 469 of his report, pointing out the disproportionate flow of federal dollars to two unnamed provinces — read: Alberta and Saskatchewan — and the oil and gas sectors, which continue to rake in billions in direct and indirect subsidies.

The federal government has provided little support for Ontario’s move towards green energy. Yet it provides direct and indirect subsidies to Canada’s oil and gas sectors worth $1.4 billion annually, in addition to $2.0 billion in total spending for carbon capture and storage, the Clean Energy Fund and the ecoEnergy Technology program — all of which are primarily spent in two provinces. Even where the federal government has promised support for clean energy, most has been directed to fossil fuels and projects that do not build on Ontario’s strengths. Ontario needs fair and equitable support for its clean energy initiatives.

He makes the following recommendation to the Ontario government: “Advocate for federal greenhouse gas mitigation programs to provide fair and equitable support for Ontario’s clean energy initiatives.”

I’ll second that.

On renewal of infrastructure, with specific mention of water infrastructure (p. 45):

More should be done to keep infrastructure in good condition. The equivalent of about half of the $72 billion of municipally owned water and wastewater infrastructure needs renewal. Full-cost pricing would encourage both stable investment — which is more efficient and fairer on an intergenerational basis — and conservation.

On funding public transit and encouraging its use (p. 46):

The province should pursue a national transit strategy with the federal government, other provinces and municipalities. General tax revenues will surely be part of any revenue solution — whether federal or provincial — but there are alternatives such as congestion charges, comprehensive road tolls, high-occupancy/toll (HOT) lanes, regional gas taxes and parking surcharges.

On the Ontario Clean Energy Benefit, which gives people a 10 per cent rebate on their electricity bills (p. 47):

This program distorts the true cost of electricity and discourages conservation… because the Commission strongly believes the OCEB’s $1.1 billion could be used more effectively, the OCEB should be eliminated as quickly as possible.

On better managing the impact of rising electricity prices (p. 47):

The government should produce a detailed, 20-year blueprint for the energy sector. It should also consolidate Ontario’s 80 Local Distribution Companies (LDCs) along regional lines to create economies of scale; this would result in direct savings on the delivery portion of the electricity bill. Further, the government should mitigate the impact of the FIT program on electricity prices, first by reducing the initial prices offered in FIT contracts and reducing the tariff over time, and second by making better use of “off-ramps” built into existing contracts. Among other measures, the government should seek administrative efficiencies in various electricity sector agencies and restructure the wholesale electricity market so consumers located closer to generation stations can benefit from lower electricity prices.

On moving to full-cost recovery for environmental programs (p. 48):

Full cost recovery is not in effect for all of the government’s environmental programs, and existing fees do not keep pace with the rising costs of program delivery; where possible, the costs of those services should be shifted to the beneficiary. The Water Charges initiative should be expanded beyond high users to medium- and low-consumption industries and put on a full user-pay basis. The Renewable Energy Approval, which consolidates the range of approvals needed for renewable energy projects while recovering about 90 per cent of its direct operating costs, is a good example of a modern approval. The Drive Clean program fully recovers its costs.

On province-funded university campus expansion (p. 256):

Any campus expansions funded by the province should be viewed through a return-on investment lens. Factors such as the increase in productivity for the institution through a better learning experience for students, energy cost reductions through the use of renewable energy sources and energy-efficient building design should be considered. Currently, the principal driver for expansion may be increases in enrolment, and while energy conservation aspects may be part of the building design, they are not integral to the productivity outcomes expected from the expansion.

On new approaches to business support programs (p. 310):

A refocused mandate for business support programs would shift from an emphasis on job creation towards encouraging firms to enhance productivity through innovation; technology adoption and training; improved business practices; and energy conservation and efficiency.

On time-of-use pricing (p. 332):

Make regulated prices more reflective of wholesale prices by increasing the on-peak to off-peak price ratio of time-of-use pricing and by making critical peak pricing available on an opt-in basis.

These are all the nuggets I found interesting in the Drummond Report. There may be more, but the ones I’ve pasted above are commonsense and certainly worthy of serious discussion. Will be interesting to see which ones the province acts on…

5 thoughts on “Clean energy, environment-related nuggets from Ontario-commissioned Drummond Report”

  1. “On time-of-use pricing” To better implement these idea’s the Gov’t’s should implement, and force Ontario Hydro to implement distributed infrastructure financing to cover high up front costs to consumers. An example is the program by Sudbury Hydro found here;

    On inquiring through my MPP why the much larger Ontario Hydro doesn’t implement this I got the reply 1) they weren’t aware of the technology and 2) it may not be cost effective for them to offer it because most of their customers in S.Ontario don’t heat with electricity. Thus the many thousands of residents in N. Ontario are once again relegated to unimportance! Wonder how the south would scream if the Hydro we send down there was cut off.

    Another type of incentive for the technology would be for the customer to share annual savings with the electric company until such time as the hardware is paid for. For example, if the unit is $1000 and cuts heating costs by $100/month the utility would get, say $40/month and the homeowner get $60 in savings per month. The unit is totally paid back in less than 3 years and the homeowner would then get the full $100/mo bill reduction benefit. I’ve seen this type of program frequently on European websites, why not here? And gee, since the cost is paid back it would be … wait for it…. COST EFFECTIVE!!!!!!!!!!

    Implementing a program like time of use needs to consider both the consumer and producer. Right now it looks like a massive cash grab for the utility not even mentioning the highly reported problems with the smart meters! Comments?

  2. Max, the off-peak TOU rate has doubled since the winter of 2007 – including a rise of over 20% since last winter.
    This actually makes some sense in that as more intermittent supply is procured, the demand variance, in a daily cycle, will be less and less meaningful in relation to the variation in supply.
    The wholesale price in Ontario has been annihilated by government supply procurement policies (it’s flattened in adjacent market areas too, as demand seems to have peaked in 2005 in most of the region, and the marginal supply is generally natural gas-fired, with natural gas prices also at very low levels): the market, to the extent that it does exist, dictates TOU pricing should be flattening – so the quoted section of the report, on TOU, is nonsensical.
    The Sudbury Hydro program saved money by shifting demand to lower priced times of the day. Those don’t exist most days now (the average market price in January was about 2.55 cents/kWh).

    Critical peak pricing is a different thing. I’d suggest it shows the error in your statement that TOU “looks like a massive cash grab;” to me it looks like the Auditor General pointed out electricity policy in Ontario looks – implemented without a business case and only a vague outline of a plan.

  3. Always hammering the West & always not quite factual. Same ol’.

    “He made his opinion of the federal government’s approach clear on p. 469 of his report, pointing out the disproportionate flow of federal dollars to two unnamed provinces — read: Alberta and Saskatchewan — and the oil and gas sectors, which continue to rake in billions in direct and indirect subsidies.”

    What subsidies? More than manufacturing in Ontario? NO. More than the Green Industry in Ontario? No. The Green Industry that gets actual subsidies, like 80 cents/kwh?

    Look at what Alberta and Sakatchewan puts into Ottawa & look at what it gets back for money?

    Some fairness and less bloviating is needed.

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