Working Paper
Do Not Cite or Quote without Permission of Authors
Beyond Smart Meters: The State of Ontario Smart Grid Policy and Practice
Mark Winfield and Scott Weiler
Faculty of Environmental Studies
York University
April 2014
Introduction: The Smart Grid
Electricity systems are undergoing rapid modernization as they transition into the digital
era of the ‘Smart Grid’. This modernization will see the electricity grid shift from a servomechanical, paper driven system, to a modern, highly automated network that
incorporates sensors, monitoring, and communications to improve the flexibility,
security, efficiency, and reliability of the grid.1
The objective of the smart grid is to enhance the grid with digital technologies that can
monitor and manage the flows of electricity and information. It is a system with
embedded intelligence that can integrate advanced metering, sensors, and controls with
the existing grid as well as customer side devices and services.2 From the perspective
of utility or grid regulator, the Smart Grid encompasses the entire electricity
infrastructure from generation to consumption. Within this evolutionary framework, it will
provide a powerful management tool to co-ordinate generation, grid operations, endusers and the electricity market, while minimizing costs and environmental impacts, and
maximizing system reliability, resilience, and stability.3
Some argue that the smart grid is something much bigger than simply a new electricity
system management tool. Through the convergence of information communication
technologies (ICT) and distributed energy technologies, grid modernization may bring
about a revolutionary shift in how energy is created and shared. ICTs are recognized to
be disruptive innovations that are transforming the information landscape from
1
IESO. (2009). Enabling Tomorrow’s Electricity System: Report of the Ontario Smart Grid Forum. Independent Electricity System Operator. P 1.
Knight et al. (2010). How Does Smart Grid Impact the Natural Monopoly Paradigm of Electricity Supply? Part I Knight Brownell.
3
IEA. (2011). Technology Roadmap: Smart Grids.
2
2
centralized and closed to distributed and open, and driving profound social and
economic changes.4 By integrating ICTs with the electricity grid, the smart grid may be
the frontier for a paradigm shift that will transform the energy landscape and disrupt the
natural monopoly of power utilities.5 In essence, this convergence may be laying the
foundation for an Energy Internet6 that would see the 20th century grid, dominated by
large centralized utilities, replaced with a 21st century network of independently-owned
distributed renewable energy generation and energy storage technologies.
Furthermore, by localizing energy, the energy internet would also distribute social and
economic benefits through widely dispersed ownership, and local control over energy
production. 7 However, this revolutionary vision of the smart grid contrasts sharply with
the traditional centralized utility model8 and may be perceived by incumbent energy
institutions as a disruptive force that will erode the dominance of their century old
monopoly.9
Despite the competing visions, it is possible to identify some the key infrastructure
components that make up the smart grid. These are outlined in Table 1.
Table 1
Hard infrastructure
Soft infrastructure
Characteristics of Smart Grid
Smart meters
Interoperability standards
Demand response
Networked devices
Cyber security protocols
Facilitation of distributed generation
Energy storage
1.8 Ghz spectrum
Facilitation of electric vehicles
Smart appliances
Stakeholder engagement
Optimization of asset use
Centralized Generation
Planning Models
Problem detection
Renewable Generation
Information Control
Self healing
Electric Vehicles
Two way flow of information and energy
Smart Chargers
Source: Canadian Electricity Association10
4
Tapscott, D., & Williams, A. D. (2008). Wikinomics: How mass collaboration changes everything. New York: Portfolio.
Collier, S. (2012). A Good Offense Is the Best Defense. The Energy Collective. December 10, 2012.
6
Zeller, T. Jr. (September 26, 2011). Jeremy Rifkin: The 'Democratization Of Energy' Will Change Everything. Huffington Post
7
st
Farrell, J. (2011). Democratizing the Electricity System: A Vision for the 21 Century Grid. New Rules Project.
8
Wall Street Journal. (2012). Renewable Distributed Energy Generation Installations Will Reach Nearly $86 Billion in Market Value by 2017
Forecasts Pike Research.
9
Collier, S. (2012). A Good Offense Is the Best Defense. The Energy Collective. December 10, 2012.
10
Canadian Electricity Association (CEA). (2010).
5
3
Ontario was a relatively early entrant into the question of smart grid development in
Canada, beginning with an ambitious strategy for the rapid deployment of smart meters
in 2004. With the initial phase of smart meter deployment virtually complete, the
province is now moving into a more complex stage in terms of both the goals of its
smart grid initiatives and the range of actors engaged in the process. As such Ontario
probably represents the furthest evolution of smart grid policy agenda-setting,
formulation and implementation in Canada to date.
Ontario Electricity system characteristics
Provincial governments in Canada have near exclusive jurisdiction over the planning
and operation of their electricity systems (Constitution Act, 1982, s.92A). Their cabinetparliamentary systems of government further reinforce the level of executive policy
autonomy with respect to electricity. Historically, provincial electricity systems have
been dominated by large, publicly or privately owned utilities, controlling the generation,
transmission and distribution infrastructure, and subject to formal and informal direction
and regulation by provincial governments.11 The level of national grid integration is
relatively low, and most provinces have stronger system interconnections with
neighbouring US states than with neighbouring provinces.
Jurisdictional background
Ontario is located in the Great Lakes basin of North America. With a population of 13.5
million, an annual gross domestic product in the range of cdn$600 billion and a total
land area in excess of 1 million square kilometres, the province constitutes a jurisdiction
with a population, economy and geographic scope larger than most US states and
member states of the European Union. Ontario accounts for approximately 40 per cent
of Canada’s population and economic output.
Consistent with the high level of jurisdictional authority and policy autonomy exercised
by Canadian provinces related to electricity, the role of the Canadian federal
11
Doern, G.B., & Gattinger, M. Chapter 1: Canadian energy policy and regulation in historical context. In Power switch: Energy regulatory
st
governance in the 21 century. (pp.21 39). Toronto: UPT, 2003); Dewees, D. “Electricity restructuring in Canada.” In G. Bruce, & G.B. Doern
(Eds). Canadian energy policy and the struggle for sustainable development. (pp.128 150). Toronto: University of Toronto Press, 2005).
4
government in smart grid development in Ontario, as in other provinces, has been
relatively marginal. The policy framework, debates, and implementation efforts around
smart grids are fundamentally driven from the provincial level.
In Ontario, the provincial Ministry of Energy is the key policy maker in relation to smart
grids and electricity matters more generally. Legislative developments over the past
decade have provided the Minister of Energy with the ability to provide an exceptionally
high level of specific direction with respect to electricity policy, subject to relatively
limited constraints. The 2004 Electricity Restructuring Act and 2009 Green Energy and
Green Economy Act (GEGEA) give the Minister of Energy extensive powers to issue
policy “directives” to the key institutional actors in the province’s electricity system,
particularly the Ontario Power Authority (OPA), which is responsible for power system
planning, and the Ontario Energy Board (OEB), the province’s economic regulator of the
energy sector. Provincial control is also reinforced by the province’s ownership of other
key institutional actors (e.g. Hydro One, which operates the provincial high voltage
transmission grid and Ontario Power Generation, which controls approximately twothirds of the province’s generating assets) in the system. The province’s Independent
Electricity System Operator (IESO) is somewhat more autonomous, but still ultimately
subject to legislative and policy direction by the province
Historical and Current Supply mix
The province’s electricity system was entirely hydroelectric until the mid-1950s. From
that point onwards first coal-fired, and then nuclear generating facilities were added to
meet growing post-war electricity demand. As of 2014, the electricity system had an
installed generating capacity of nearly 33,000 megawatts. As shown in Figure 1
approximately 40 per cent of this total is nuclear, 24 per cent is hydroelectric, 30 per
cent is natural gas fired, and five per cent is wind power.12
12
(IESO, 2014).
5
Figure 1: Ontario Installed Energy Capacity by Fuel Type (January 2014)
A phase out of coal-fired electricity generation, which as of the beginning of the last
decade constituted twenty-five per cent of installed generating capacity, will be
completed at the end of the current year (2014). The phase-out was propelled by a
combination of smog-related public health concerns, and latterly, efforts to achieve
GHG emission reductions.
Ownership of generation and transmission and distribution assets
Until the mid-1990s the province’s electricity system was essentially a vertically
integrated monopoly that was planned, built and operated by Ontario Hydro, the Crownowned successor to the Hydro-Electric Power Commission first created in 1906.13 The
system was defined by a “supply planning” model that focussed on the continuous
development and expansion of large-scale centralized generating assets – initially
hydro-electric, but later coal-fired and then nuclear facilities.
The Energy Competition and Electricity Acts of 1998 signalled a full-scale shift away
from system planning towards a competitive retail and wholesale electricity market
paradigm, including the break-up of Ontario Hydro into a number of successor
companies. The provincially owned corporation Ontario Power Generation (OPG)
retained ownership of Ontario Hydro’s generating assets (principally nuclear, coal-fired
and hydro-electric). Ownership of the provincial high voltage transmission network was
transferred to another provincially owned corporation, Hydro One Networks. Hydro One
also retained Ontario Hydro’s responsibility for management of the local distribution
13
Freeman, N. The politics of power: Ontario Hydro and its government 1906 – 1995. ( Toronto: University of Toronto Press, 1996).
6
network in rural areas without local distribution companies. A third entity, the
Independent Market Operator (IMO – now the Independent Electricity System Operator
(IESO)) was established to operate the wholesale electricity market. It was intended that
OPG’s portion of the generation market would fall substantially as new, private energy
developers entered the market. Consumers were to be provided with full dynamic
pricing, as determined by demand conditions and the availability of supply through the
competitive wholesale market.
An important feature of the Ontario electricity system is the presence of 76 municipally
owned local electricity distribution companies (LCDs).14 These LCDs provide electricity
distribution services in virtually all of the province’s significant towns and cities. The
LDCs take electricity from the provincial transmission grid and provide supply to
individual homes and businesses. They have also emerged, along with Hydro One,
which due to its rural distribution function is also considered an LDC, as important
delivery agents for Conservation and Demand Management (DSM) programming to
households and businesses. Some municipal LDCs have taken an increasing interest
in distributed generation and local energy planning and networks as well.
Role of Markets vs. system planning
The instability and concerns over security of supply associated with the market model
led to the creation, through the Electricity Restructuring Act of 2004, of a “hybrid”
system with a new entity, the Ontario Power Authority (OPA), mandated to undertake
overall system planning and the procurement of supply as needed.15 All of the new
generating capacity added to the grid since the break-up of Ontario Hydro is privately
owned. It has been acquired through competitive request for proposals (RFP)
processes in the case of gas-fired and some large wind energy projects or, in the case
of renewables (wind, solar PV, and biogas) contracted through the Feed in Tariff (FIT)
program established under the 2009 Green Energy and Green Economy Act.
14
15
http://www.energy.gov.on.ca/en/ldc panel/#e
Winfield, M., & MacWhirter, B. Competing paradigms, Hard path inertia and the search for sustainability in Ontario electricity policy. In G.
Albo & R. McDermid (Eds.) Divided province: Ontario in the age of neo liberalism. Toronto: University of Toronto Press (in peer review).
Working version of paper available at http://sei.info.yorku.ca/files/2013/03/CompetingParadigms 03 12 2013.pdf
7
All of the institutional actors (OPA, IESO, OPG and the LDCs including Hydro One) are
subject to regulation by the Ontario Energy Board (OEB). The board’s primary function
is rate regulation. Specifically it approves what expenses, in addition to the basic cost of
electricity supply, can be carried on the rate base. These expenses may include the
institutional maintenance and operations costs of the provincial organizations and local
LDCs, the costs of delivering CDM programming, and the costs of any capital
investments in transmission and distribution system maintenance and upgrades. OPA,
IESO, and the LDCs make annual rate applications to the OEB for these purposes. The
OPA also provides funding from its own rate base to support some of the CDM
programs delivered by the LDCs.
Interjurisdictional connections and significance
As show in Table 2 Ontario has grid interconnections with all of its neighbouring
provinces and states.16
Table 2: Ontario Interconnection Limits
Flows out of Ontario
Interconnection
Summer
Winter
Manitoba
Minnesota
Michigan
New York
Quebec
288
150
1,900
2,060
2,135
Flows into Ontario
Summer
Winter
300
288
300
150
100
100
1,910
1,600
1,650
2,390
1,620
1,870
2,170
2,775
2,795
Source: IESO, Ontario Transmission System, May 24, 2013
However, the province has no firm supply contracts with any of these jurisdictions.
Despite the reality that many of the primary energy sources for the province’s electricity
system now come from outside of the province (coal and natural gas from US; natural
gas and uranium from Western Canada), electricity self-sufficiency has been a longstanding policy principle in Ontario. During the initial phases of the reintroduction of
system-wide planning efforts by the OPA, discussions were initiated with Manitoba and
Newfoundland and Labrador regarding access to supply from major new hydroelectric
projects being considered in both provinces. However, the combination of the technical
16
Table from http://www.ontarioenergyboard.ca/OEB/_Documents/EB 2004 0205/Wholesale_Electricy_Price_Forecast_Report_20131017.pdf)
8
and political complications associated with the development of long-distance
transmission lines across Northwestern Ontario or Quebec, declining demand in
Ontario, and stronger interest in Manitoba and Newfoundland in US markets meant that
these options were not pursued.
Rather, Ontario participates in regional markets only for contingencies and mutual
assistance (e.g. managing (i.e. dumping) surplus generation, dealing with disasters or
technical failures; and unexpected peaks/problems). There have been modest
reinforcements of the province’s connections with Manitoba and Quebec over the past
decade. The province’s most recent (2013) Long-Term Energy Plan states that
“Ontario will consider opportunities for clean imports from other
jurisdictions when such imports would have system benefits and are cost
effective for Ontario Ratepayers.”17
No specific actions to pursue such options have been taken to date.
Drivers of Smart Grid Development in Ontario
Ontario’s approach to smart grid development has evolved through two/three distinct
phases. The first phase, from 2004-2008, focussed on the rapid and large-scale
deployment of smart meters. Virtually all Ontario homes and small businesses were to
be equipped with smart meters by 2010, with the first 800,000 units to be installed
before the end of 2007.18 Smart meters were seen as being essential to the province’s
ability to move to time-of-use (TOU) electricity pricing. TOU pricing was regarded as a
key component of a demand response (DR) strategy that was needed to address
increasing difficulty in managing summer peaks in demand on the province’s electricity
system. The combination of an aging asset base, the shift from being a winter to
summer peaking jurisdiction largely driven by increasing air conditioning loads, and
anticipated further increases in demand, all combined to create an atmosphere of ‘crisis’
around the system’s ability to meet critical peaks in demand and future demand growth.
Smart meters were also seen as offering the potential to provide the IESO with better
17
18
Long Term Energy Plan 2013, pg.6.
February 2005 Directive to OEB.
9
operational information on what was happening on grid. Such information would enable
more dynamic response to grid conditions.
The smart metering initiative proceeded rapidly. By the beginning of 2012 4.7 million
smart meters had been installed in Ontario, and 3.8 million residents where on TOU
rates. The IESO is responsible for the central meter data repository (known as the
Meter Data Management and Repository (MDM/R)) that manages the consumption data
from smart meters. The rapid roll-out of smart meter deployment before technical and
interoperability standards were fully developed19 has led to ongoing concerns regarding
the potential for future upgrades in capabilities and services.
The adoption of the GEGEA in 2009 opened a second phase in the province’s
development of a smarter grid. The legislation provide an explicit definition of a smart
grid as follows:20
1.3) For the purposes of this Act, the smart grid means the advanced information
exchange systems and equipment that when utilized together improve the flexibility,
security, reliability, efficiency and safety of the integrated power system and
distribution systems, particularly for the purposes of,
(a) enabling the increased use of renewable energy sources and technology,
including generation facilities connected to the distribution system;
(b) expanding opportunities to provide demand response, price information and
load control to electricity customers;
(c) accommodating the use of emerging, innovative and energy-saving
technologies and system control applications; or
(d) supporting other objectives that may be prescribed by regulation.
The legislation provided for the establishment of a Feed-in-Tariff (FIT) program for the
development of renewable energy sources. The legislation also specifically amended
the mandate of the OEB to facilitate the implementation of a smart grid in Ontario, as
well as CDM and the promotion of renewable energy, including the timely connection of
renewable energy projects to transmission and distribution systems. Under the
19
20
Arlett, http://esr.degroote.mcmaster.ca/documents/1A 1.pdf.
GEGEA, Schedule B, s.1(5).
10
legislation transmitters and distributors were required to connect qualifying renewable
energy generation facilities to their systems. By implication the legislation expanded the
province’s goals with respect to the development of a smart grid beyond demand
response, CDM and load management to include the large-scale integration of
potentially intermittent renewable energy sources.
An even broader range of goals for the development of a smart grid were articulated in
a directive issued on November 23, 2010 by Minister of Energy to the Ontario Energy
Board to provide “guidance on the establishment, implementation and promotion of a
smart grid in Ontario”. 21 The Directive provided 10 overarching policy objectives to the
OEB. These objectives included efficiency, customer value, co-ordination,
interoperability, security (cyber and physical), privacy, safety, economic development,
environmental benefits, and reliability. The directive also defined additional parameters
under three major categories: Customer control, power system flexibility, and adaptive
infrastructure. Under the Directive, the OEB was required to take these objectives into
account when creating regulatory policy to guide the activities of regulated entities
including distributors, generators, and transmitters, on how to go about implementing
the smart grid technologies in Ontario. The OEB was also to define its expectations for
smart grid development by licensees and establish criteria to evaluate SG applications
for Rate Base funding.22 The full text of the directive is set out in Appendix 1.
The OEB’s approach to smart grids is crucial to the path of smart grid development in
Ontario. The primary funding source for the installation and use of ‘smart’ grid
technologies is the LDCs’, IESO and OPA’s rate bases, which are subject to approval
by the OEB.
More recent discussions around the development of a smart grid in Ontario, particularly
through the IESO-hosted Smart Grid Forum, have encompassed an even wider range
of smart grid objectives. These have included climate change adaptation, the
development of “smart energy networks” integrating electricity and other energy
21
22
OEB. (2011). Staff Discussion Paper: In regard to the Establishment, Implementation and Promotion of a Smart Grid in Ontario. P.1.
Ibid.
11
supplies, the development of “smart” homes, capable of managing their own energy
use, and the integration of electric vehicles into energy systems.23 However, none of
these themes has been formally adopted as policy goals by the province.
The Current Policy Framework Regarding Smart Grids in Ontario
Ministerial Directives
The formal policy framework in Ontario for smart grids is articulated through the two
directives issued by the Minister of Energy to the OEB. The first, July 2004 directive
dealt with the development of an implementation plan for the achievement of the
government’s smart meter installation targets. The second, November 2010 directive
dealt with a much wider range of objectives for the development of a smart grid in
Ontario.
To facilitate the integration of the second directive’s objectives into the OEB policy, the
Board established a Smart Grid Working Group (SGWG) in February 2011 to “seek
stakeholder comments on the issues to be considered by the Board in providing
guidance on the establishment, implementation, and promotion of the smart grid.”24 The
working group members are summarized in Table 2.
23
24
Smart Grid Forum 2013 report.
OEB. (2011). Staff Discussion Paper: In regard to the Establishment, Implementation and Promotion of a Smart Grid in Ontario. P.1.
12
Table 2: SGWG Member List
Association of Major Power Consumers of Ontario (AMPCO)
Ontario Sustainable Energy Association (OSEA)
Building Owners and Managers Association of the Greater
Toronto Area (BOMA)
Cambridge and North Dumfries Hydro
Chatham Kent Hydro
Cornerstone Hydro Electric Concepts (CHEC)
Independent Electricity System Operator (IESO)
Energate
Energent
ESA
Festival Hydro
GE Digital Energy Smart Substations
General Motors of Canada (part time)
Honeywell
Hydro One Networks Inc.
IBM
Direct Energy
Kinectrics
Measurement Canada
Bell Canada
Powerstream
Telvent
Toronto Hydro Electric System Ltd.
Utilities Kingston
Veridian Connections
Source: Ontario Energy Board, 2011
The board developed its approach to smart grids in the context of the establishment of a
“Renewed Regulatory Framework” that now guides its overall approach to electricity
rate regulation.25 The Renewed Regulatory Framework was a performance-based
approach that emphasized “results rather than activities, and focuses on achieving
outcomes that provide consumers with the value for money.” The Renewed Regulatory
Framework reflected growing political controversies in Ontario over increasing electricity
rates, and sought to take a much more restrictive approach to what sorts of costs could
be carried on the rate base. As a result, the board has refused a number of electricity
and gas distribution company applications related to CDM.26 (OTHER EXAMPLES –
BREMNER, GUELPH) Do you want to write about these?
In February 2013, the OEB released its Supplemental Report on Smart Grid that details
the outcome of the stakeholder consultations with the SGWG and how the board will
proceed in developing regulations for developing the Smart Grid. The board concluded
that the objectives in the Minister’s Directive are aligned with the objectives of its own
Renewed Regulatory Framework.27 This alignment is summarized in Table 3 below.
Table 3: Alignment of Objectives between the Minister’s Directive and the Renewed
25
Ontario Energy Board. (2012). Renewed Regulatory Framework for Electricity Distributors: A Performance Based Approach. October 18, 2012.
ECO, Annual Energy Conservation Progress Report – 2010 (Volume One), Managing a Complex Energy System
27
Ontario Energy Board. (2013). Report of the Board: Supplemental Report on Smart Grid. EB 2011 0004. February 11, 2013. P. 2.
26
13
Regulatory Framework
The Board believes the “objectives in the Minister’s Directive are aligned with the objectives of the
renewed regulatory framework.”28 This alignment is summarized below:
1. Smart Grid: The Board considers smart grid investment to be integral to all utility investment and an
essential part of the broader network planning exercise. 29 Furthermore the Board states that no
distinction will be made for regulatory purposes between “smart grid” and more traditional
investments undertaken by distributors and transmitters.30
2. Data Access: The Board has determined that smart grid activities by regulated entities should
facilitate data access. Near real time data is to be delivered through behind the meter (BTM)
devices (e.g., an in home display) supplied by third party service providers. 31 Additionally, the Board
has ruled that BTM services and applications are a non utility activity to be preformed only by
non regulated entities and concluded that customer control is best served by market
competition.32
3. Flexibility: Power system flexibility objectives align very closely with the Board’s traditional
objective of Operational Effectiveness whereby continuous improvement in productivity and cost
performance is achieved and utilities deliver on system reliability and quality objectives.
Amendments have been made to the Distribution System Code to facilitate distributed generation.33
4. Adaptive Infrastructure: Regulated entities must demonstrate that they have investigated
opportunities for operational efficiencies and improved asset management that could be enabled by
smart grid technology. 34 Investments that support and advance network operation and evolution
(e.g., energy storage, interoperability, forward compatibility, and electric vehicles) are expected to
be pursued when and where appropriate. Furthermore, the Board does not intend to prescribe
specific investments and technological choices for regulated entities.35
5. Coordination and Interoperability: Utility coordination and regional infrastructure planning is key to
the renewed regulatory framework as well as ensuring that the smart grid best serves the interests
of the region. The Board will not prescribe interoperability standards, but expects interoperability. 36
6. Economic Development: Economic development opportunities associated with smart grid are a
central objective of the Directive. However, the Board does not foresee economic development as
being the primary driver for individual projects and will not approve expenditures that are not
otherwise cost effective, prudent, long term investments.37
7. Environmental Benefits: The attainment of environmental benefits is an important objective to the
Government’s energy policy. The Board will consider qualitative and quantitative evidence on
environmental benefits related to clean technologies, conservation, and more efficient use of
existing technologies. However, the Board does not intent to develop a methodology for calculating
and quantifying these benefits. Regardless of these benefits, the Board will not approve
expenditures that are not otherwise cost effective, prudent, long term investments. 38
28
OEB. (2013). Report of the Board: Supplemental Report on Smart Grid. EB 2011 0004. February 11, 2013. P. 2.
Ontario Energy Board. (2013). Report of the Board: Supplemental Report on Smart Grid. EB 2011 0004. February 11, 2013. P. 1.
Ibid. P. 5.
31
Ibid. P. 12.
32
Ibid. P. 5.
33
Ibid. P. 12.
34
Ibid. P. 15.
35
Ibid. P. 15.
36
Ibid. P. 19.
37
Ibid. P. 19.
38
Ibid. P. 20.
29
30
14
The Board has acknowledged that the smart grid is the new way of doing business:
Smart grid planning was to be “an essential part of the broader network investment
planning exercise.” 39 At the same time, no distinction is to be made “between “smart
grid” and more traditional investments undertaken by distributors and transmitters.” 40
The Board’s approach reflects a continued focus on its traditional objectives of costeffectiveness and prudence. Importantly the board has stated that it has no role in the
regulation of the provision of “behind the meter” services and activities.
The Smart Grid Fund
One of consequences of this relatively restrictive approach adopted by the OEB, has
been that LDCs have found it difficult to get smart grid related research, development,
and pilot projects approved for rate base funding by board. In response to this situation
the Ministry of Energy has administered a $50 Million Smart Grid Fund to support such
activities. The fund was established in 2011 with a focus on consumer control, power
system flexibility and adaptive infrastructure; creating economic development
opportunities; and reducing risk and uncertainty in developing, testing, and evaluating
smart grid technologies. There have been two funding rounds so far, the first in April
2011 and the second in September 2013. The funding awards to date have focussed on
such topics as home energy management systems and load control; information and
communications systems for gird operation; microgrid management and integration;
distributed generation integration; distribution automation; and Infrastructure for plug in
vehicles.
The Smart Grid Forum
A third important focal point for policy formation beyond the Ministry of Energy and the
OEB has been the Smart Grid Forum. The forum was first convened in 2008 by the
IESO, along with a number of the larger LDCs. Although it has no formal role in the
energy policy process, the forum has been notable for taking a much broader and
39
40
Ontario Energy Board. (2012). Renewed Regulatory Framework for Electricity Distributors: A Performance Based Approach. P. 47.
Ontario Energy Board. (2013). Report of the Board: Supplemental Report on Smart Grid. EB 2011 0004. February 11, 2013. P. 5.
15
longer-term perspective on smart grid issues than the OEB or the Ministry. The forum’s
current (April 2014) membership is as show in Table 4:41
Table 4: Smart Grid Forum Membership
Bruce Campbell, President and CEO, IESO, and
Chair, Ontario Smart Grid Forum
Michael Angemeer, President and CEO,
Veridian Corporation
David Collie, President and CEO, Electrical
Safety Authority
Jonathan Dogterom, Practice Lead, Cleantech,
MaRS Discovery District
Norm Fraser, Chief Operating Officer, Hydro
Ottawa Limited
Anthony Haines, President, Toronto Hydro
Electric System Limited
Keith Major, Senior Vice President, Property
Management, Bentall Real Estate Services
David McFadden, Chair, Ontario Centres of
Excellence
Terry Young, Vice President, Corporate and
Employee Relations, IESO
Wayne Smith, VP, Grid Operations, Hydro One
Inc.
Joe Van Schaik, Electric Power Market
Manager at Tormont Cat
Jac Vanderbaan, Chief Operating Officer,
Festival Hydro Inc.
Julia McNally, Director, Market
Transformation, Ontario Power Authority
Ken Nakahara, Director of the Transmission
and Distribution Branch, Ontario Ministry of
Energy
Dr. Jatin Nathwani, Professor and Ontario
Research Chair in Public Policy and Sustainable
Energy Management, Faculties of Engineering
and Environmental Studies, University of
Waterloo
Initial 2009 report emphasized from the outset that while new grid infrastructure would
be necessary to connect generation resources, replace aging assets, and address
growth, simply adding wires and equipment without intelligence was not a viable option.
The report called on the provincial government to establish a legislative, regulatory and
policy framework to clarify responsibilities, establish requirements, and create incentives
to accelerate the deployment or enhance the functioning of smart grid technologies in
Ontario. 42
The forum’s second, 2011, report 43 made a number of specific recommendations
regarding the development of a smart grid in Ontario. These recommendations
included:
41
http://ieso public.sharepoint.com/Pages/Ontario's Power System/Smart Grid/Ontario Smart Grid Forum.aspx
Smart Grid Forum, Enabling Tomorrow’s Electricity System (Toronto: IESO, 2009)
43
Smart Grid Forum, Modernizing Ontario’s Electricity System: Next Steps” (Toronto: IESO, 2011)
42
16
conducting surveys to assess consumer interest in smart home technologies;
establishing a smart Grid economic development task force;
tracking electric vehicle registration
developing a framework to promote the deployment of energy storage
dealing with issues related to third party access to electricity consumers and their
consumption information and protecting personal electricity consumption information;
and
promoting greater technological standardization
The forum has been by far the most forward thinking of the formal actors involved in
smart grid development in Ontario. The forum’s most recent (August 2013)44 report
highlighted the role of smart grid as an enabling investment which “opens the door to
new products and services in the customer domain that were never possible before.”
The report included discussions of the role of smart grids as part of the emerging
“internet of things,”45 the emerging of possibilities of “smart homes,” the role of smart
grids in climate change mitigation and adaptation, their potential role in smart energy
networks integrating different forms of energy, and the emerging connections between
between energy, transportation, and environmental policy initiatives. The report
recognized the connections between smart grids and more distributed forms of energy,
and the potential for smart grids to disrupt traditional institutional roles and relationships
in the energy sector as a result.
The Politics of Smart Grids
The only dimensions of smart grid development in Ontario that has received significant
political attention have been moves towards time-of-use pricing and smart meters. The
initial attempt to move to full marginal consumer pricing was a major factor in the failure
of the Progressive Conservative (PC) government led by Premier Mike Harris’ efforts to
move to fully competitive retail and wholesale electricity markets in the late 1990s and
early 2000s. The sudden rises in electricity bills in response to market conditions, as per
the design of the province’s reformed electricity market, were deeply unpopular with
44
45
Ontario Smart Grid Forum, Ontario Smart Grid Progress Assessment: A Vignette. Toronto: IESO. 2013).
Devices, appliances, smart phones that are potentially identifiable and connectable through internet like structures.
17
residential consumers. In response, the government of Harris’ successor, Ernie Eves,
quickly moved to terminate the competitive retail market for consumers and adopted a
fixed consumer electricity price.
The possibility of TOU pricing, a modified version of marginal pricing where electricity
prices vary on fixed schedule by time of day, as opposed to in direct response to the
wholesale market price, was introduced by the succeeding Liberal government led by
Dalton McGuinty. TOU pricing was seen as a critical tool for demand response,
specifically reducing electricity demand during periods of very high consumption. There
were particular concerns over the ability of the system to meet critical summer peaks in
demand, especially in the context of the August 2003 blackout.
The province’s 2005 smart meters initiative was presented to the public as means of
operationalizing the TOU pricing based demand response strategy and as therefore
being essential maintaining reliable electricity supplies in the context of supply
shortfalls. The smart meters/TOU strategy drew substantial media attention. The
coverage was relatively neutral in its framing. Critical coverage tended to focus on the
lifestyle inconveniences potentially associated with TOU pricing, such as seniors and
families with young children having to do laundry during “off-peak” (e.g. evening)
periods, as opposed to the smart meters themselves (Alex M.’s work).
The initiative became the subject to criticism from both legislative opposition parties,
particularly in the lead-up to and during the 2011 provincial election. Progressive
Conservation (PC) party leader Tim Hudak began referring to smart meters as “tax
machines” – a disguised mechanism for raising electricity rates.46 New Democratic
Party (NDP) leader Andrea Horwath, for her part, blamed smart meters for rate
increases without providing any conservation benefits.47
Electricity related issues figured prominently in the 2011 provincial election, which saw
McGuinty’s government reduced to a minority. However, the specific questions of smart
meters and TOU pricing were overshadowed by debates over the cost impacts of
46
47
http://www.thespec.com/news story/2203979 hudak calls smart meters dumb/
http://ontariondp.com/en/new data proves smart meter scheme costing everyone more
18
GEGEA FIT program, local controversies about proposed wind energy projects, and the
government’s high profile cancellation of proposed gas-fired power plants that had been
the target of strong local opposition in Liberal-held ridings in Mississauga and Oakville.
Public, legislative opposition and media attention to smart grid issues beyond smart
meter/TOU pricing issues has been limited to a few specific issues, typically raised by
legislative officers. The Ombudsman has recently highlighted issues related to Hydro
One’s residential billing practices and handling of billing complaints. Some of these
issues have been attributed to billing errors involving smart meters.48
The province’s Information and Privacy Commissioner (IPC) began to raise questions
about privacy protection and the possibly of third party access to household and
business information collected through the province’s smart metering initiative from
2009 onwards.49 These concerns flowed in part from discussions about the possibility of
LDCs marketing this information to third parties as has happened in the United States,
and also the risks of smart meter data being “hacked.” The issue was addressed by the
Smart Grid Forum as well. It had initially strongly supported third party access to
facilitate the development of “smart” homes.50 The IESO and LDCs are subject to the
Freedom of Information and Protection of Privacy Act (FOIPPA). A protocol to secure
compliance with the act in the handling of smart meter data was eventually agreed to
between the IPC and IESO. 51 Following the principles of Privacy by Design,52 the
framework is designed to provide for strong data security and protection of personal
information. It effectively prohibits the marketing of such information to third parties by
LDCs and the IESO.
The Green Button initiative was developed through a collaboration among the Ministry
of Energy, OEB, OPA, IESO, LDCs, the IPC and MaRS Discovery District to enable
LDC customers to download their own energy consumption data, gathered through
48
http://www.ombudsman.on.ca/Newsroom/Press Release/2014/Hydro One investigation update Complaints to Ombu.aspx
http://www.ipc.on.ca/images/Resources/smartgrid faq.pdf, http://www.ipc.on.ca/images/resources/pbd smartpriv smartgrid.pdf.
50
http://www.ieso.ca/documents/smart_grid/Smart_Grid_Forum_Report Data_Access_Vignette.pdf.
51
http://www.ipc.on.ca/images/Resources/pbd ieso.pdf
52
http://www.ipc.on.ca/images/Resources/7foundationalprinciples.pdf
49
19
smart meters.53 The Green Button standard puts the data into a standard format, which
customers can then use with energy management tools and applications available from
third party providers. In effect, the Green Button model lets consumers decide how and
with whom they share their consumption data themselves.54
The larger questions about the longer term evolution of the smart grid have received
little political or mainstream media attention. Discussions of these topics have tended to
be limited to the electricity/energy policy community itself.
Within that community the LDCs and IESO have tended to be the most enthusiastic
supporters of moving towards a smart grid and of expanding the scope of the smart grid
discourse. Allied industries providing smart grid and energy storage technologies have
also been strong supporters. These groups are strongly represented in the Smart Grid
Forum. The IESO see advantages in smart grid technologies in grid management and
resilience. The larger LDCs in particular perceive advantages in CDM program delivery
and in a smart grid’s capacity to facilitate larger roles for distributed generation, in which
they wish to play a more significant part.
Although outside of the core policy network around smart grids as represented by the
Smart Grid Forum, environmental non-governmental organizations (ENGOs), renewable
energy developers (commercial and community based), some municipalities (e.g. the
Cities of Guelph, Toronto, Hamilton and Markham) and institutional actors (e.g. York
University) have all been enthusiastic supporters smart grid development. In addition to
the potential to enhance CDM, these actors see a potential for smart grids to enhance
the role of distributed as opposed to centralized generation, and facilitate large-scale
integration of renewable energy sources. There is also growing interest in the
development of smart energy networks and community energy plans,55 particularly as
mechanisms to enhance community resilience, address climate change impacts, and
adaptation and energy security.
53
http://greenbuttondata.ca/about/
http://greenbuttondata.ca/consumers/
55
QUEST, Bahareh Paper.
54
20
Residential and industrial consumer interests have tended to take a narrower view for
smart grid development. They have focussed on the economic costs and benefits of
smart grid investments from the perspectives of their constituencies. These
perspectives have strongly informed the OEB’s approach to approving smart grid
investments through the electricity rate base.
New Entrants
In many ways the smart meter represents the boundary of the regulated electricity
sector,56 as emphasized by the OEB’s decision not to regulate activities ‘behind the
meter.’ Although these ‘behind the meter,’ distributed energy resources like home
energy management and metering devices, net-metered renewable or conventional
generation and energy storage, may interact with the grid, they are not regulated or
coordinated by the LDCs or the IESO either. They fall outside of the requirements of the
FOIPPA as well. Behind-the-meter resources are expected to be the largest growth
segment in smart grid development as they generate internal synergies. Home energy
management systems, for example, can integrate solar PV, energy storage and DR
signals to optimize energy consumption and costs for homeowners. Similar systems are
emerging for commercial and industrial facilities.57 Many of these services are being
provided by new entrants into the energy management market. In Ontario, for example,
third parties like Rogers Communications (cable TV, internet, wireless and home phone,
and home monitoring services), are effectively providing home energy management
services, with the potential to “move a lot of load around” outside of the system
controlled by the LDCs, IESO and regulatory oversight by the OEB.
The LDCs had anticipated being the providers of load management services to the
IESO through their DR and CDM activities. However technological change in terms of
the availability of wireless internet services, energy consuming devices capable of
communicating with other devices and systems (“the internet of things”) and home
energy management software means that there is no natural monopoly behind the
56
57
Klemun. (2013). Grid Edge: Utility Modernization in the Age of Distributed Generation. Greentech Media Inc. GTM Research.
Ibid.
21
meter, and that smart meters themselves may be bypassed as a means of providing
energy management services.
The implications of these developments for the traditional roles of LDCs, IESO and OEB
itself have begun to be recognized by the Smart Grid Forum. However, discussions
about these issues with potential service providers outside of the smart grid policy
community, such as conventional, centralized suppliers of electricity, as well as the
telecoms, gas utilities, and non-utility third parties who might be involved in the provision
of energy management services, have been very limited. No policy or regulatory
frameworks exist around these activities. In combination with the growth in distributed
generation, these developments are seen to have the potential to shift the role of the
grid from being a primary energy source to that of a provider of backstopping services
for distributed generation.
Conclusions
Ontario was initially focussed on smart meters, specifically as instruments for
implementing TOU pricing as a DR strategy in the context of difficulties meeting
summer peaks. The initial roll-out of smart meters and TOU pricing is essentially
complete. The rapid roll-out of smart meter deployment has led to ongoing concerns
regarding interoperability and potential for future upgrades in capabilities and services.
The adoption of TOU pricing and smart meters was the subject of some political
controversy. However, these issues have subsequently been overwhelmed by larger
political debates about the government’s management of the energy file, particularly
around the economic impact of the GEGEA, and the siting of new natural gas-fired and
wind energy facilities.
In the meantime, the province has developed a relatively comprehensive policy
framework for the overall development of the smart grid. The framework, as articulated
in the GEGEA and Minister of Energy’s 2010 Smart Grid Directive to the OEB, reflects
the substantial expansion of the scope of the province’s goals with respect to the
development of a smart grid. They now include the large scale integration of renewable
22
energy resources, improved grid efficiency and system reliability, enhanced electronic
and physical security, and economic development. A protocol regarding the protection
of the privacy of consumer information gathered through smart meters has been agreed
to between the IESO and IPC.
Rate based financing for the LDCs, IESO, and OPA, subject to approval by the OEB, is
the primary means of funding smart grid development in Ontario. The OEB, under
political pressure to minimize rate increases, has taken, in the eyes of some observers,
an increasingly restrictive approach to what kinds of activities and investments it will
allow to be carried on the rate base. The board’s approach to smart grid related funding
applications emphasizes its traditional focus on “cost-effective, prudent, long-term
investments.” The Ministry of Energy has supplemented rate-based funding with a
Smart Grid Fund specifically to address the need for support in investments in new
technologies and practices.
Although the province has attempted to develop a proactive policy framework around
smart grid development, new technological and market developments, particularly in the
area of ‘behind the meter’ energy production and management, may overtake these
efforts. The potential for these developments to more profoundly affect the functions of
traditional actors in the electricity sector are increasingly recognized within the smart
grid policy community, particularly as represented by the IESO-hosted Smart Grid
Forum, and some NGOs, municipalities, academics, and smart grid technology
providers.
The province has yet to begun to grapple with these questions in a formal way. In fact,
the OEB has declined to engage with them. The Green Button initiative presents the
most significant effort to date to deal with these ‘behind the meter’ activities, although it
is specifically focussed on privacy and information access issues. More broadly,
‘behind the meter’ developments may outstrip the capacity of the province’s existing
institutional and regulatory structures to oversee and coordinate. The end result may be
more revolutionary than evolutionary than ever anticipated.
23
24
Appendix 1: Minister’s Directive to the Ontario Energy Board. November 23, 2010.58
On November 23, 2010, the Minister of Energy issued a Minister’s Directive to the
Ontario Energy Board to provide “guidance on the establishment, implementation and
promotion of a smart grid in Ontario”.59 Under the directive, the board was given
several policy objectives that are outlined in Tables 2 through 5:
OEB Directive Objectives60
1. Efficiency
Improve efficiency of grid operation and consider cost-effectiveness
2. Customer value
The smart grid should provide benefits to electricity customers
3. Co-ordination
Establish regionally coordinated Smart Grid Plans for implementation
4. Interoperability
Adopt recognized industry standards and common protocols to exchange
information.
5. Security
Cybersecurity and physical security should be provided to protect data, and
the overall electricity grid from unauthorized access and malicious attacks
6. Privacy
Respect and protect the privacy of customers. Integrate privacy requirements
into smart grid planning
7. Safety
Maintain, and in no way compromise, health and safety protections and
improve electrical safety wherever practical
8. Economic
Development
Encourage economic growth and job creation within the province of Ontario
9. Environmental
Benefits
Promote the integration of clean technologies, conservation, and more efficient
use of existing technologies
10. Reliability
Maintain reliability of the electricity grid and improve it wherever practical.
Table 2
58
MEI. MINISTER’S DIRECTIVE TO: THE ONTARIO ENERGY BOARD.November 23, 2010.
OEB. (2011). Staff Discussion Paper: In regard to the Establishment, Implementation and Promotion of a Smart Grid in Ontario. P.1.
60
MEI. MINISTER’S DIRECTIVE TO: THE ONTARIO ENERGY BOARD. November 23, 2010
59
25
Appendix “A” of the directive sets out some customer control objectives for the purpose
of providing customers with increased information and tools to promote conservation
through demand response, price information and load control.
Appendix A: OEB Customer Control Objectives61
1. Access
Enable access to data by customer and authorized parties to enhance ability to
manage consumption
2. Visibility
Improve visibility of information to customers: consumption, generation, price
3. Control
Enable better customer control of conservation and load management.
4. Renewable
Generation
Create opportunities for electricity consumers to provide grid services like smallscale renewable generation and storage.
5. Customer
Choice
Enable more consumer choice and improve channels through which customers
can interact with electricity service providers
6. Education
Educate consumers about opportunities to participate in generation and
conservation enabled by smart grid.
Table 3
Appendix “B” in the directive outlines some objectives to achieve power system
flexibility in order to enable the increased use of renewable energy sources.
Appendix B: Power System Flexibility Objectives62
1. Distributed
Renewable
Generation
Enable flexible distribution infrastructure to promote increased levels of
distributed renewable generation.
2. Network Visibility
Improve network visibility of grid conditions for grid operations.
3. Control and
Automation
Improve control and automation to promote distributed renewable
generation. Automate for self-healing grid infrastructure to anticipate and
respond to disturbances.
4. Quality
Maintain or improve power quality delivered by the grid.
Table 4
61
62
MEI. MINISTER’S DIRECTIVE TO: THE ONTARIO ENERGY BOARD. November 23, 2010
MEI. MINISTER’S DIRECTIVE TO: THE ONTARIO ENERGY BOARD. November 23, 2010
26
Appendix “C” sets out objectives designed for accommodating the use of emerging,
innovative and energy-saving technologies.
Appendix C: Adaptive Infrastructure Objectives63
1. Flexibility
Provide flexibility in smart grid implementation to support future innovation such
as electric vehicles and energy storage
2. Forward
Compatibility
Protect against technology lock-in to minimize stranded assets and investments.
Promote modularity, scalability, and extensibility into smart grid planning
3. Innovation
Actively encourage innovation in technologies, energy services, investment &
business models
4. Maintain Pulse
on Innovation
Encourage information sharing for innovation in the smart grid and be aware of
best practices and innovations in Canada and around the world.
Table 5
63
MEI. MINISTER’S DIRECTIVE TO: THE ONTARIO ENERGY BOARD. November 23, 2010
27
Appendix 2: Assessment of Jurisdictional Conceptualization of Smart Grid on Septhen,
Wilson, Peterson and Meadowcroft matrix.