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In Ontario, hydro’s future gets murkier as costs of leaving the grid decline

Workers install rooftop solar panels as part of Ontario’s Feed-in Tariff program in partnership with IKEA Canada.

Hand-Out/IKEA CANADA

Technological upheaval is threatening to upend Ontario's electricity sector faster than the government can revamp it.

As the price of rooftop solar panels plummets and large-scale batteries become affordable for the first time, a future where Ontarians produce their own power and cut the cord to the wider grid appears to be approaching.

While few Ontarians were aware of it at the time, Feb. 18 could be seen as the start of the province's electrical transformation. On that Saturday, with the sun blazing and a strong wind powering turbines, demand for electricity from the province's traditional generating stations was actually lower in the busy middle of the day than it had been when most people were sleeping hours earlier. Solar and wind power was flooding the market. Prior to that day, electricity demand on traditional plants had always increased in the morning when people woke up and then spiked around midday. The afternoon slump was a sign of how far renewable electricity and locally produced power had come and how much harder demand for traditional power would be to predict. A similar pattern could be observed on April 8.

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Why does Ontario's electricity cost so much? A reality check

"In the past, the job of a system operator was simple and straightforward," said Leonard Kula, the chief operating officer of Ontario's Independent Electricity System Operator, the agency that controls the power system. Those easy days are now gone and the future promises to be ever more complicated.

Crossing lines

Once an idea limited to isolated cottages and the environmentally zealous, making your own electricity and storing it in your garage could be cheaper than the traditional way of buying power within a decade.

Benoit Laclau, Ernst and Young's adviser on power and utilities, has guidance for politicians and utility leaders around the world who employ the accounting firm: Exercise caution on any big projects that will require more than a decade to pay off.

On a piece of paper, he can draw a graph with two lines. One starts low and represents the slowly increasing cost of electricity provided by a traditional electricity company; the second starts higher but is going down "really rapidly" and reflects the cost of people producing power on their own roof. "Those two lines cross, and they are going to cross soon, a lot sooner than we had expected," he said.

Inexpensive, dependable energy storage is the key and it's coming fast, driven by massive investment in electric cars. Mr. Laclau estimates that residential power will be cheaper than a traditional hydro bill in four to 10 years, depending on the region. "That is pretty troubling for the energy companies when they need to make big decisions about where they'll invest next," he said.

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Most energy talk from Premier Kathleen Wynne's government has centred on recent plans to cut hydro bills, a rebate scheme the province's Financial Accountability Office has warned could cost $45-billion and require nearly three decades to pay off – assuming people stick with current electrical providers for that long.

However, Ontario's Energy Ministry is laying the foundations for the disruptive changes on the horizon. In the province's latest long-term energy plan, released last month, the Ontario government opened the door to neighbours and neighbourhoods producing power and sharing it locally, doing away with the large generating stations and hulking transmission lines that have been the mainstay of electrical systems for over a century.

"We are rebuilding the foundation of our electricity system," Energy Minister Glenn Thibeault said last month. "That new foundation will allow us to adapt and modernize as more and more homeowners and businesses get on new technology." In response to an uncertain future, the province's new strategy for long-term power production is to not plan for new electricity supply in future years as demand continues to grow.

Of course, many Ontarians won't be able to make their own power any time soon – including renters and people living in condo towers who don't have access to a roof for solar panels. Also, in some dense urban areas, the existing system is efficient and could turn a profit for decades to come. However, Mr. Laclau warns utilities that they need to prepare for the coming disruption. He imagines a future where some power utilities install solar panels on residential roofs and collect a monthly rent on the equipment.

"Why wouldn't energy companies invest in their consumers instead of losing them? Instead of investing in big plants, the energy company might have to rethink their model and invest in the house. We're getting to a place now where consumers will have an abundance of choices to make and they'll need to make a choice," he said.

Some skeptics believe this disruption won't happen for decades, if ever. They don't expect storage will become dependable and cheap in the near future. They also point out electricity storage is complicated and even once prices are down, it will cost thousands of dollars to install. The regulatory barriers protecting utilities are high and authorities have been slow to make changes. Finally, consumers may struggle with cutting the cord, worried that a week of grey skies will leave them in the dark.

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Storage challenge

Ontario's IESO is looking at a new tool, with plans to unveil 25 storage projects over the next six months. For the past five years, the government agency has been experimenting with ways of turning lots of electricity into something that can be stored and used when needed.

The province has tried a number of storage pilots. A giant bag under Lake Ontario is filled with air when power is cheap and emptied to turn a turbine when it's expensive. Giant flywheels have been built, where a wheel is spun to high speeds and power is extracted from slowing it down. Numerous flow and lithium batteries have been tried, as well as one of the simplest storage ideas, where water is pumped up a hill and later channelled back down to spin a turbine.

Ontario now expects 2.4 million electric vehicles on the road by 2030 – a number that is hotly disputed by some outside of government.

Officials see both a challenge and an opportunity in that many electric cars. In the province's long-term energy plan, they've expressed a worry that too many cars plugged in at the same time in one neighbourhood could overwhelm a local grid. But in the same document, they also see electric cars as a form of storage the province could tap – effectively musing about using people's cars as giant batteries when they are plugged in, allowing utilities to draw power from them when needed to help even out fluctuations in local power demand.

While the Energy Ministry once planned its coal use decades into the future, officials are not struggling to see how wind and solar will change the world only a few years out. "It's very exciting," Mr. Thibeault said.

Solar car to recharge its batteries using sun's rays (Reuters)
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About the Author
Ontario legislative reporter

Based in Toronto, Justin Giovannetti is The Globe and Mail’s Ontario legislative reporter. He previously worked out of the newspaper’s Edmonton, Toronto and B.C. bureaus. He is a graduate of Montreal’s Concordia University and has also worked for CTV in Quebec. More

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