Planning for electrification and the energy transition

Recommendation 1: To provide clear direction for Ontario’s energy and economic future, the provincial government should develop and communicate a commitment and associated policy principles for achieving a clean energy economy for Ontario by 2050.

This commitment, and policy principles that would define the parameters by which decisions will be made, should be embedded and integrated across all ministries in a manner that ensures policy consistency, alignment of decision-making, and accountability mechanisms.

Recommendation 2: The provincial government should convene an internal clean energy economy planning and implementation body, such as an existing committee of Cabinet.

  1. This body would be responsible for ensuring alignment across sector strategies (such as industrial and economic development strategies, transportation, building/housing, agriculture, mining, and land use planning, including project development processes such as permitting, siting and funding) and ensuring that sector strategies are evaluated through an energy lens.
  2. As part of the shared responsibility across governments to coordinate and contribute to the energy transition, the government should provide all relevant ministries with clear mandates to contribute, in their domains, to a well-coordinated energy transition.
  3. Relevant ministries should develop measurable key performance indicators (KPIs) to align their sectoral strategies and policies with the imperatives of the energy transition in Ontario.

Recommendation 3: The provincial government should continue to seek alignment and coordination of clean energy economy objectives, standards and policies with other governments (within and outside Canada) whenever practical and consistent with the province’s economic and policy interests.

This alignment and coordination should include, but need not be limited to:

  1. Pursuing strategic policy alignment on key priorities for economic and energy development
  2. Engagement with the federal government and taking the necessary policy actions to ensure Ontario can access federal funding opportunities (e.g., federal investment tax credits)
  3. Coordination and collaboration with the federal government to streamline and provide greater clarity, predictability and timeliness of project approvals and clear delineation of responsibilities
  4. Engagement with Canada and neighbouring provinces and states, directly and through agencies, to pursue the mutually beneficial integration of energy systems (including electricity markets and interties) to advance energy transition objectives
  5. Pursuing opportunities to enhance cross-jurisdictional coordination and alignment of energy-related codes and standards with the objective of reducing regulatory burden while maintaining a position of leadership in regulatory innovation
  6. Engagement with municipalities to ensure they are aligned with and supported in the energy transition, including support for Comprehensive Local Energy Planning and requiring local utilities and municipalities to engage and collaborate on energy planning matters

Recommendation 4: To enact the clean energy economy policy commitment, the Ministry of Energy should develop and communicate an energy transition policy vision that is inclusive of Indigenous perspectives and informed by clean energy economy policy principles.

The vision should outline clear strategic priorities, action-oriented objectives, acceptable trade-offs, and policy outcomes for energy production, transmission, distribution, and end-use shifts (such as transportation and buildings) to an electrified and low-carbon economy by 2050.

Recommendation 5: The Ministry should develop and release, on a regular cycle, an integrated long-term energy plan that will guide Ontario’s development of technical energy plans, strategies, and actions to support the transition to a resilient and affordable clean energy economy.

The plan should provide actionable and measurable guidance and policy direction, as well as regulatory recommendations and legislative revisions (as needed) across electricity, natural gas and other fuels on the production, transmission, distribution, consumption, and conservation and demand management of energy.

  1. The plan can be developed within the existing legislative framework and should allow for broad input, while allowing for timely and effective planning and decision-making
  2. The planning process should include support and alignment for reconciliation with Indigenous peoples
  3. The planning process should encourage good communication on policy alignment and regulatory policy
  4. Both the integrated long-term energy plan and subsequent technical planning should be undertaken at pace and be based on dynamic and iterative analyses using scenarios
  5. The planning process should be inclusive and support energy consumers of all types, including vulnerable consumers. It should be participatory and deliberative to build a broad support for the energy transition, a focus on economic opportunity and competitiveness, equity and distributional impacts, and environmental and health benefits

Recommendation 6: In order to provide clarity to utilities, investors and customers, the Ministry of Energy should provide policy direction on the role of natural gas in Ontario’s future energy system as part of its next integrated long-term energy plan.

This policy direction should be consistent with the clean energy economy policy commitment and consider the various roles natural gas plays across the energy system. This policy direction will require thorough technical, policy and regulatory analysis, collaboration among government, sector partners, and provincial agencies and a public engagement process. The outcome should be to manage the system optimization and fuel switching necessary to achieve a clean energy economy at a pace that maintains affordable, reliable and resilient energy service.

Key areas of analysis should include but not be limited to:

  1. Maximizing energy efficiency programs, with an emphasis on cost-effective measures that contribute to the long-term success of the energy transition (e.g., building envelope improvements versus appliance upgrades)
  2. Updating building and construction codes and standards
  3. Evaluating the feasibility of innovative decarbonization solutions for the natural gas system, including renewable natural gas, clean hydrogen, and carbon capture, utilization and storage
  4. Opportunities for gas system optimization, including hybrid heating
  5. Distributional impacts on Indigenous communities
  6. Distributional impacts on labour, the average energy consumer, rural and remote communities, and vulnerable communities
  7. Complexities and challenges of industrial fuel switching and implications for economic competitiveness
  8. Feasibility of alternatives for dispatchable natural gas as reliability and peak power resource
  9. Opportunities, options for, and consequences of strategic decommissioning or right-sizing of natural gas infrastructure in the long term

Recommendation 7: To ensure municipalities, communities and local businesses are in the best position to participate in energy decision-making and take responsibility in pursuing their energy transition objectives, the Ministry of Energy should develop a strengthened framework for local energy planning and decision-making and take steps to facilitate its implementation. The goal should be to develop mature Comprehensive Local Energy Planning processes through which communities can effectively contribute to Ontario’s energy transition in ways that suit their needs and reflect their local strengths, opportunities, and priorities. Developing Comprehensive Local Energy Plans with transparency on cost implications and rate impacts can help to align community planning with provincial policy objectives.

As part of Comprehensive Local Energy Planning, communities should establish a table for aligning and resolving key policy issues and priorities – e.g., housing, transportation, land use planning and energy – in a way that uses municipalities’ leadership role and engages them to take responsibility for their own commitments (e.g., on climate) and within their own domain. The provincial government should ensure that municipalities have the support, capabilities and resources to carry out this work.

Engagement on Comprehensive Local Energy Planning must involve a broad set of local interests and stakeholders, including electric and gas distribution utilities. The outcome of the process will form an important input into technical electricity and gas distribution planning and IESO-led (regional) planning, respectively. This process would not replace the existing IESO-led Regional Planning process, which is very technical and should remain so, albeit with broader input from gas utilities and other local planning entities.

The Ministry of Energy and the Ministry of Municipal Affairs and Housing should coordinate to ensure that the province and municipalities are aligned on land-use planning as it relates to energy infrastructure, and to determine how to best support municipalities in leveraging support/ incentives from the province/federal government to support economy-wide decarbonization.

Recommendation 8: To contribute long-term certainty and orientation to Ontario’s energy transition, the provincial government should establish an external Energy Transition Advisory Council to provide advice, independent of government and on an ongoing basis, on the overall trajectory of Ontario’s energy transition, emerging governance or energy system-level questions and the integration of energy planning and coordination with sectoral strategies.

The Advisory Council should include 10-15 members across industry, Indigenous, consumer/ citizen, academic, finance and other pertinent expert representation, predominantly from Ontario, and select Canadian and international jurisdictions. Government staff, IESO, OEB and representatives from other key entities should be included as observers and to contribute technical expertise.

The Advisory Council would have a long-term mandate and be intended to identify gaps in navigating the energy transition, in a purely advisory function and not duplicative of other planning activities:

  1. Provide thought leadership on planning and coordination across fuels and economic sectors and respond to government requests for advice
  2. Lead transparent engagements, on key questions facing Ontario in the energy transition (asked by government or self-initiated)
  3. Identify areas where research and further coordination are required and commission research to address key knowledge gaps. This could include advising on the development of future energy pathways studies and helping identify the implications of findings for the province. In subsequent iterations, the Advisory Council could take on additional responsibilities, including commissioning pathways studies on behalf of the government.
  4. Advise the government on strategies for educating, informing, and engaging the public on energy choices
  5. Issue reports and provide advice on the future evolution of long-term integrated planning, including how Comprehensive Local Energy Planning can effectively contribute to Ontario’s energy transition
  6. Ensure Indigenous perspectives are adequately reflected in all proceedings and reports
  7. Convene sub-committees and working groups as needed (e.g., on transportation, buildings, equity, rural and remote communities, municipalities, skilled workforce development)
  8. Provide advice on the long-term human capital and financial resource needs of entities involved in planning and regulating the energy system
  9. Issue a progress update on the energy transition in Ontario on a regular basis (e.g., every two years)
  10. Provide an annual report on its activities and advice to the government

Recommendation 9: To ensure energy planning and policy development are supported by the best evidence available, the government should fund, on an ongoing basis, independent whole economy energy pathways studies, in a way that allows for iterative improvement of modelling and assumptions, transparency on costs, and with meaningful input from relevant stakeholders and Indigenous communities.

Governance and accountability

Recommendation 10: To enable the effective evolution of innovative business models in line with clean energy economy goals and to help consumers benefit from electrification and the energy transition, the OEB and IESO should:

  1. Continue encouraging experimentation by utilities, innovators, and new market entrants through platforms, such as the Grid Innovation Fund and the Innovation Sandbox program and ensure appropriate resourcing of these programs
  2. Regularly evaluate and build on these initiatives to advance successful projects beyond the pilot stage to broader adoption when appropriate, proactively identify any legislative and regulatory barriers to government, and ensure sustainable business models
  3. Review opportunities to help consumers through electrification and the energy transition, including business model innovations that provide new products and services that enable consumers to finance the high up-front capital costs for building retrofits and fuelswitching appliances in a fair and affordable manner

Recommendation 11: Safety regulators and technical standards organizations must be included in energy planning and energy sector regulation to enable proactive coordination and the effective deployment of new technical solution.

For example, the Electrical Safety Authority (ESA) and the Technical Standards and Safety Authority (TSSA) play critical roles in product approvals, reviewing plans for new facilities and installations, customer and industry education regarding electrical safety, and, in particular, monitoring, assessing and responding to any emerging public safety risks from electrification and the energy transition (for example, regarding integration/installation of energy storage and vehicle-to-grid installation into homes and buildings).

Recommendation 12: The OEB should employ all tools within its existing mandate to implement activities consistent with the Province’s goals for a clean energy economy and the requirements of the energy transition for Ontario.

The OEB should enhance risk-based approaches to regulatory oversight, consistent with best practice. This would enable more agency resources to be focused on emerging energy areas and economize on traditional regulation.

Recommendation 13: In the years following release of the energy transition policy vision, the province should undertake a review of the OEB’s activities in respect of achieving objectives within the policy vision to determine if potential legislative and/or regulatory changes are needed to implement the vision effectively. These potential changes could include:

  1. Updating the OEB’s policy, mandate, and/or objectives to reflect the clean energy economy transition, including addressing greenhouse gas (“GHG”) emission reductions
  2. Including GHG emissions as an additional factor for the OEB to consider in proceedings, such as transmission leave-to construct applications
  3. Revising objectives related to the natural gas sector to align with government policy direction on the long-term role of the sector
  4. Reviewing other aspects of the OEB’s objectives and legislation as it relates to facilitating the clean energy economy, for example amending the definition of “gas” to include hydrogen blending, if deemed necessary

Recommendation 14: In line with input received during the 2021 review of Ontario’s long-term planning framework, IESO should be empowered, within the broad direction established by government, to independently procure electricity resources and lead bulk-system planning (including potential use of interties) and regional electricity system planning. The OEB should provide regular procedural review of IESO-led planning and procurement, to be set out in legislation.

Recommendation 15: To facilitate development of the clean energy economy, the OEB should conduct reviews of

  1. Cost allocation and recovery policies for natural gas and electricity connections to eliminate discrepancies between how up-front capital contributions are assessed and how they can be collected between the two sources of energy. For example, the review should include, but not be limited to, examining the differences in the economic evaluation period (known as a revenue horizon) to determine capital contributions as well as the ability to collect the capital contribution as a surcharge on rates versus an upfront contribution
  2. How natural gas utility infrastructure and Demand Side Management investments are evaluated to ensure new infrastructure is right sized for forecasted time horizons

Recommendation 16: The Ministry of Energy, working with the OEB, IESO, LDCs, municipalities and gas utilities, should develop a formal and transparent co-ordination framework that sets out the scope and objectives for enhanced planning co-ordination at the bulk, regional, and distribution levels in order to effectively pace and facilitate the fuel-switching, system optimization and enhanced levels of energy efficiency required by the clean energy economy.

The framework should ensure that each party’s technical expertise is respected and utilized appropriately to achieve the desired policy outcomes. This would include any required directives, regulatory changes, oversight mechanisms, and a clear and agreed upon understanding of specific roles and responsibilities for the entities involved. The framework should include the following:

  1. Regulatory requirements via license amendments and codes (for the IESO) and Ministry undertakings or rule making authority under the OEB Act (for Enbridge) to require the IESO and Enbridge to coordinate bulk planning
  2. Regulatory requirements via license amendments and codes (for the IESO and LDCs) and Ministry Undertakings or rule making authority under the OEB Act (for Enbridge) to require the IESO, Enbridge, and LDCs to coordinate regional planning
  3. Development of standardized approaches to gas/electric coordination and demand forecasting at the distribution level, including coordination between Conservation and Demand Management (for electricity) and Demand Side Management (for natural gas) and with Comprehensive Local Energy Planning
  4. OEB adjudicative regulatory processes (e.g., review of system plans, rate cases, and leave to constructs) should require the demonstration of gas/electric planning coordination outlined above via filing requirements on submitted plans and/or applications

Recommendation 17: The OEB and IESO must continue to find ways within their existing mandates and in anticipation of the clean energy economy policy statement to provide proactive and transparent thought leadership on regulatory policy. Energy agencies should work to examine where existing rules and practices disadvantage the cost-effective participation of clean energy solutions, and especially in how distribution resources can participate across the value chain of the entire energy system.

The goal should be to develop an open investment environment that creates a level playing field in which DERs can provide their full value to customers by effectively competing with one another and with bulk-system resources.

  1. To enable distribution-sector innovation, build capacity and encourage reasonable risktaking to maximize customer and community value, the government, IESO and OEB should work with utilities to develop a vision and clear pathway for system-wide application to realize the maximum capability of the distribution system and DERs.
  2. The OEB should support LDC applications in grid modernization, establishing a process and technical threshold to determine which LDCs will be enabled to locally procure and dispatch DERs.
  3. LDCs should be required to enhance their capabilities to procure and actively manage DERs as Non-Wires Alternatives to meet distribution level needs.
  4. The OEB should continue and enhance the requirement for LDCs to file electrification readiness plans (ERPs). ERPs should demonstrate consideration of Comprehensive Local Energy Plans and processes.
  5. The OEB should have a clear and consistent approvals framework for distribution level approaches that can help maximize the value of the distribution sector and reduce barriers to adoption. This should include grid modernization upgrades that enable efficient energy management, such as two-way telemetry, tools for enhanced conservation and demand management (CDM), and non-wires alternatives to traditional distribution infrastructure enhancements. As needed, the OEB should review policies, such as the Affiliates Relationship Code, to enable greater flexibility for LDCs without compromising private sector participation.
  6. The IESO should critically assess and report back on the extent to which its systems, including market rules, dual participation model, and interoperability requirements, can be improved to remove barriers to the effective participation of DERs and innovation in business models.
  7. Accountability frameworks should be codeveloped by IESO, OEB and LDCs to ensure good coordination and to manage any conflicts, real or perceived. To promote interoperability and increase the value of distributed solutions, all work should be undertaken with a view to developing a common platform, or limited number of platforms, on which LDCs can converge. The IESO can play a key role in facilitating this process.

Recommendation 18: The government should regularly assess the need for resources (skills, staff, other supportive resources) across ministries and agencies to steer energy planning and decision-making competently and effectively through the energy transition, and ensure required resources are provided. Agencies should continue to actively forecast their long-term resource needs and communicate those via existing business plan development and approval processes.

True partnerships with Indigenous partners

(Note: There are several other recommendations across the report referencing Indigenous partners and recommending actions to support meaningful Indigenous participation in the clean energy economy.)

Recommendation 19: The government should support meaningful Indigenous participation in the clean energy economy through consistent and larger scale capacity building initiatives, including:

  1. The development and expansion of Indigenous-led and community-driven capacity building initiatives
  2. Stable and flexible capacity funding to facilitate meaningful Indigenous consultation and engagement with the Ministry and proponents on energy planning, and project development
  3. Expansion of the IESO’s Indigenous Energy Support Program (including increase program budget overall, increase funding for designated energy champions, wraparound community supports, and flexible program delivery)
  4. Tailored and accessible learning resources to enhance understanding of Ontario’s evolving energy system, and improve Indigenous participation in community, regional and provincial energy planning, as well as technical planning discussions

Recommendation 20: The government should advance economic reconciliation through flexible financing models and mechanisms that incentivize Indigenous project ownership across small, medium, and large-scale energy projects. This could include:

  1. Expansion of the Aboriginal Loan Guarantee Program and development of other programs, following an assessment of any barriers to program access
  2. Opportunities to align funding and cost-sharing agreements, where possible, with the federal government and other provincial governments in Canada, as appropriate
  3. Explore opportunities to pilot emerging, flexible financing instruments/mechanisms, such as the use of Indigenous-value themed bonds
  4. Review of current energy agency frameworks, including regulatory and procurement policies, to identify opportunities to improve flexibility and enhance Indigenous project ownership

Recommendation 21: To improve embedded governance participation, the government should amend the enabling statutes of the IESO and OEB to ensure Indigenous representation on the Boards of Directors.

Recommendation 22: The Ministry of Energy should review its current resources to enhance the Ministry’s capacity to meet the demand of electrification and the energy transition, including:

  1. Appropriate resources to the Indigenous Energy Policy Unit to support proactive relationship-building and increases to the volume of engagement and consultation with Indigenous communities.
  2. Continued dedicated policy and legal expertise to support the Ministry’s early engagement and consultation work, such as,
    • Responding to and addressing community concerns
    • Understanding the spectrum of engagement and consultation
    • Identifying impacted communities for engagement and consultation
    • Delegating procedural aspects of consultation where appropriate
    • Ensuring that the Ministry has diligently discharged its constitutional obligations under the Duty to Consult

Innovation and economic development

Recommendation 23: Recognizing the key role that clean, affordable and reliable energy will play in the development of globally competitive and future-oriented industries, the ministry should:

  1. Reflect in planning, policy-making and direction to IESO and OEB that in the rapid shift to electrification and the transformation toward a clean energy economy the risk-return balance between proactive build-out of energy infrastructure and reactive planning has shifted
  2. Ensure that planning, permitting and approvals processes are clear, predictable, effective and efficient and lead to timely decisions and project development that has the support of local and Indigenous communities. Engage with other levels of government as appropriate to pursue this objective, as referenced in Recommendation 3
  3. Identify key clean energy value chains, encourage local energy sectoral depth, and strategically kickstart energy innovation.

Recommendation 24: With the commitment to a clean energy economy as the guidepost, the government should consider a mission-oriented approach to economy-wide industrial strategy. Such a strategic approach can provide the necessary focus to align government efforts and mobilize private actors, including finance, in order to develop and scale the key economic sectors that will support a future clean energy economy in a way that uses resources wisely. It would leverage regional clusters and build on various industrial sector strengths and can position Ontario as a key player in select global clean economy value chains.

In the energy sector, the government should consider which existing and emerging technologies and sub-sectors are likely to play a critical role in a future clean energy economy and where Ontario can maintain or develop long-term competitive advantages. This will require realistic assessments of existing and emerging strengths, as well as technological and economic potential. The province’s current Cost-Effective Energy Pathways Study can help inform these assessments.

Recommendation 25: The government should clearly set out a policy vision for how electrification and the energy transition will be funded, including a realistic assessment of the distributional impacts of funding choices on different groups. A comprehensive range of funding options and mechanisms should be considered and used, including taxpayer funding, ratepayer funding, investment subsidies, investment tax credits, as well as leveraging and/or requiring private funding whenever possible. Opportunities to leverage funding from federal and municipal sources should also be pursued to the greatest extent possible.

The key guiding principle should be that the beneficiary pays, with the understanding that the definition of who the beneficiary is in the energy transition is broader. If the developments and investments associated with electrification and energy transition will benefit only the electricity system and those who pay electricity rates, then the costs should be borne by ratepayers. But if electrification and energy transition are expected to carry significant and broad economic, transition and social benefits for the province, then the province should consider shifting some of the cost to the tax base and provide clarity to sector entities on how to consider this in planning and decision-making.

The province should develop its policy vision with a rigorous and transparent accounting of expected costs, benefits and distributional impacts.

Consumer, citizen and community perspectives

Recommendation 26: The government, IESO and OEB should play a key role in engaging with the public and Indigenous partners to ensure transparent access to high-quality information and meaningful opportunities to participate in decision-making in order to build greater support and involvement in the energy transition. As part of other processes or on their own this work should include but not be limited to:

  1. Helping customers, citizens and community members to see themselves in the transition to a clean energy economy and to understand the operational realities of large-scale changes to the energy system for their daily lives (e.g., shifting to different energy sources and ways of consuming energy, the need for new energy infrastructure in their communities, etc.)
  2. Preparing the public for the transformations ahead by providing transparent, ongoing, and comprehensive information about the genuine choices, costs, opportunities and challenges associated with electrification and the energy transition
  3. Strengthening mechanisms for community input and involvement in energy planning and decision-making for new infrastructure. This includes prioritizing public consultations and transparently incorporating community feedback into decision-making processes
  4. Education initiatives that address the benefits, risks and costs associated with new and emerging technologies, climate action versus inaction, and empowering customers to make well-informed decisions
  5. Fostering community-level engagement and empowering local communities to make informed energy planning decisions in support of new energy projects and technologies that best suit their local energy needs

Recommendation 27: The provincial government should explore mechanisms to support broad adoption of fuel switching, decarbonization and supportive technologies such as electric vehicles, storage and heat pumps to support its clean energy economy objectives, foster change at the needed pace and scale, and to ensure that all customers can benefit effectively from the energy transition. This should include active engagement and communication so that customers understand the opportunities, benefits, challenges and risks of decarbonization technologies and can make informed choices. Importantly, the government should also consider mechanisms to help customers manage up-front costs.

  • Any mechanisms adopted by the government should be rigorously analyzed for costeffectiveness and must transparently consider both costs and benefits to individual customers and to the overall system, for example peak electricity demand impacts.
  • The government should co-ordinate with the federal government to seek alignment on these objectives, to understand where federal programs can support provincial targets and where collaboration can maximize value.
  • The Energy Transition Advisory Council should monitor progress on cost-effective and beneficial fuel-switching, identify obstacles and make recommendations.

Recommendation 28: Existing electricity rate mitigation and affordability programs should be redesigned to better target support to those who need it most, and to streamline program application and enrollment processes for increased accessibility.

Any new or redesigned programs should be developed with full participation and collaboration of representatives from remote and rural communities, both Indigenous and non-Indigenous, as well as vulnerable urban households and communities that the programs are meant to serve.

Recommendation 29: The government, IESO and OEB should support capacity building for utilities and communities to conduct assessments of climate change impacts to energy infrastructure and to support effective climate resilience efforts and adaptation planning/ implementation. Any costs borne from investments in adaptation should not unfairly impact on low-income consumers, consumers in specific geographic regions that face higher electricity costs, consumers that rely on medical device(s) requiring a lot of electricity or other vulnerable consumers.