Ontario’s Electrification and Energy Transition Panel (the Panel) has released its final report entitled Ontario’s Clean Energy Opportunity: Report of the Electrification and Energy Transition Panel (the Report). The Panel was established by the Government of Ontario to advise on opportunities for Ontario’s energy sector and identify strategic opportunities and planning reforms to help Ontario’s economy prepare for electrification and the energy transition. The Report provides a comprehensive roadmap for Ontario’s transition to a clean energy economy, emphasizing strategic planning, collaboration, innovation, and the crucial role of Indigenous partnerships.
This bulletin briefly highlights the key findings of the report and outlines the Panel’s key recommendations.
Planning for electrification and the energy transition. The Report underscores the urgent and transformative shift in the global energy landscape, emphasizing the need to address climate change and support technological advancements. For example, the Report notes that Ontario faces a significant challenge regarding the future of natural gas, including increasing uncertainty about the feasibility of decarbonizing the natural gas grid and growing doubt about replacing large quantities of natural gas in a cost-effective way with cleaner alternatives such as renewable natural gas (RNG) or hydrogen. Key recommendations include:
- Recommendation 1 suggests that the provincial government should develop and communicate a commitment and associated policy principles for achieving a clean energy economy for Ontario by 2050 in order to provide clear direction for Ontario’s energy and economic future.
- Recommendation 3 provides that 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.
- Recommendation 6 provides that in order to provide clarity to utilities, investors, and customers, the Ministry of Energy (the Ministry) 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.
- Recommendation 8 supports establishment of 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.
Governance and accountability. The Panel recommends that the Ontario Energy Board (OEB) and Independent Electricity System Operator (IESO) take steps to enable the effective evolution of innovative business models in line with clean energy economy goals and help consumers benefit from electrification and the energy transition. Key recommendations include:
- Recommendation 13 suggests potential legislative and/or regulatory changes, such as including GHG emissions as an additional factor for the OEB to consider in proceedings like transmission leave-to construct applications and revising objectives related to the natural gas sector to align with government policy direction on the long-term role of the sector.
- Recommendation 16 provides that the Ministry, working with the OEB, IESO, local distribution companies (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.
- Recommendation 17 emphasizes that the OEB and IESO should find ways within their existing mandates to provide proactive and transparent thought leadership on regulatory policy and critically review and revise their existing policies and processes with the goal of developing an open investment environment that creates a level playing field in which distributed energy resources (DERs) can provide their full value to customers by effectively competing with one another and with bulk-system resources.
True partnerships with Indigenous partners. The Report emphasizes the importance of true partnerships with Indigenous communities, outlining the current legal framework, including the Duty to Consult and the United Nations Declaration on the Rights of Indigenous Peoples (see our earlier bulletin on Canada’s UNDRIP law here). The Report notes the diversity of Indigenous communities and their distinct energy needs, interests, and governance structures and provides several recommendations aimed at advancing meaningful Indigenous participation and partnerships in the clean energy economy. Key recommendations include:
- Recommendation 19 provides that the government should support meaningful Indigenous participation in the clean energy economy through consistent and enhanced capacity building support.
- Recommendation 20 provides that 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.
Energy innovation and economic development. The Report notes that energy affordability and reliability have been vital to Ontario’s economic growth for over a century. In addition, the province’s ability to provide clean electricity presents significant opportunities for economic prosperity. For example, the global shift towards decarbonization, requires an estimated annual clean energy investment of $4T by 2030, positioning Ontario’s energy industry to capitalize on economic development and export growth. The Panel also suggests that the government, utilities, and the entire energy sector should collaborate on a long-term labour strategy, with the proposed Energy Transition Advisory Council facilitating discussions through engagements and targeted research. Key recommendations include:
- Recommendation 23 provides that the Ministry should, among others, (i) 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 and (ii) identify key clean energy value chains, encourage local energy sectoral depth, and strategically kickstart energy innovation.
- Recommendation 25 provides that 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.
Public support and maintaining affordability. The Report notes that energy affordability is a critical issue in Ontario’s energy sector and that there remain concerns about short-term increases in energy costs, despite potential long-term savings from switching to electric vehicles and home heating. In addition, the transition’s financial impacts are particularly significant for low-income and rural households, who spend a larger portion of their income on energy. The Report emphasizes that public support is sensitive to cost increases, making it crucial for the government to develop supportive policies that balance the immediate financial burdens with long-term benefits of a cleaner energy economy. Key recommendations include:
- Recommendation 27 provides that 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 ensure that all customers can benefit effectively from the energy transition.
- Recommendation 28 provides that 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.