December 13, 2024

Policy Coordination and Outreach Branch

Ministry of Energy and Electrification

77 Grenville Street

Toronto, ON

M7A 2C1

Re: Integrated Energy Resource Plan Consultation (ERO# 019-9285)

The Clean Air Council (CAC) is a network of 40 municipalities from across Southern and Eastern Ontario that work collaboratively on the development and implementation of clean air and climate change mitigation and adaptation actions. The CAC network represents over 10 million Ontarians. Clean Air Partnership (CAP) is a charitable environmental organization that supports the ambition and implementation of municipal climate action. CAP serves as the facilitator for the CAC network.

Most CAC member municipalities have passed climate emergency declarations, are committed to science-based GHG reduction targets, and are in the process of implementing their climate action plans. CAC municipalities recognize the critical role that energy planning will need to play in advancing our collective GHG reduction commitments.

Below is the consensus-based input from across the CAC municipal network related to ERO posting number 019-9285:

The CAC municipal staff network is supportive of efforts to reduce the silos that have traditionally existed in energy planning in Ontario. Energy planning should consider how electricity, fossil fuel, energy efficiency, district energy, renewables, energy storage and demand management all work together within Ontario's energy system.

Overarching Question:

Question 1: What policy options and actions should the government consider in the integrated energy resource plan to achieve Ontario's vision for meeting growing energy needs, keeping energy affordable and reliable, ensuring customer choice and positioning us to be an energy superpower?

It is encouraging to see the province taking steps to meet projected energy demand growth through an integrated energy resource plan that incorporates sustainability goals, transmission planning, and clean electricity exports. However, it is essential for the plan to prioritize non-emitting energy sources to maintain Ontario's clean energy advantage. Clear strategies for integrating more renewable energy sources onto the grid, along with defined timelines for reducing emissions within the energy sector, will be critical to achieving these goals affordably.

The plan's focus on electrification is a significant move toward reducing emissions, improving air quality, and driving clean economic growth across Ontario. Transitioning to a more electrified economy positions the province to cut its carbon footprint while supporting long-term energy reliability and maintaining Ontario's clean electricity advantage.

Nevertheless, electrification alone cannot achieve the deep emissions reductions required in a cost-effective manner. Energy efficiency must also be a cornerstone of the plan. By prioritizing energy efficiency, Ontario can maximize the impact of electrification while minimizing costs and avoiding unnecessary expansion of electricity and natural gas infrastructure. Pairing electrification with robust energy efficiency measures will help ensure that Ontario meets its energy needs sustainably and cost-effectively.

Planning for Growth

Question 2: Building on the recommendations of the EETP's final report, what actions should be prioritized to enhance planning across natural gas, electricity, and other fuels?

The CAC network recommends that Ontario must prioritize the development and implementation of an Energy Decision Matrix to enhance integrated planning across natural gas, electricity, and other fuels.

An energy decision matrix is a tool to assess and rank alternatives in a decision-making scenario. The process begins by first listing the potential alternatives. For Ontario's energy future, these potential alternatives include the energy pathways identified by the IESO, the Power Advisory, and Municipal Energy Plans and all cost-effective local energy generation and energy efficiency opportunities are advanced.

A list of desired attributes is then created, which serves as the rubric for scoring each alternative. When rating potential energy pathways, the key attributes assessed should be GHG emissions, legal implications, costs, economic and competitive implications, infrastructure requirements, social equity impacts and job creation, among others. These attributes are then weighted based on importance using a numerical rating scale. A diverse group of stakeholders must determine the weight or importance of each attribute. Each alternative is then scored based on how well it achieves the desired attributes and multiplied by weight.

The matrix enables comprehensive comparisons across the following:

● Lifecycle Costs: Evaluating value propositions, payback periods, operational savings, and the risks of stranded assets.

● Infrastructure Impacts: Comparing traditional centralized systems with decentralized and individual generation options and their implications for grid infrastructure.

● Cost-Benefit Analysis: Assessing direct costs and broader co-benefits, such as resilience, local job creation, equity, and climate impacts.

This decision-making framework ensures that Ontario can plan energy investments strategically, balancing costs, emissions, equity, and long-term sustainability while fostering transparency and stakeholder collaboration.

Question 3: The government's priority is to ensure Ontario has the energy resources it needs to support growth. Are there opportunities to enhance the province's approach to procuring electricity generation supply to better serve this priority?

The CAC network recommends that Ontario expand Power Purchase Agreement (PPA) business models to include all sectors-residential, commercial, institutional, industrial, and agricultural and ensure their availability across the province. This expansion would enable all communities to actively participate in energy generation and procurement. Priority should be given to areas with constrained grids to maximize the potential of Distributed Energy Resources (DERs), which can help delay or avoid costly investments in transmission infrastructure while enhancing grid resilience.

Expanding the regulation to cover these sectors would also open opportunities for renewable energy cooperatives, community energy groups, private sector entities, and non-regulated arms of utilities to participate. These stakeholders are essential for advancing DER adoption and enabling customers who might otherwise be excluded to engage in the DER market.

Moreover, activating PPAs and third-party community net metering business models is vital for empowering Ontarians to play a more active role in the energy transformation. These measures not only support energy affordability and reliability but also improve energy literacy within communities, better positioning Ontario for the growing distributed energy transition.

Question 4: What actions should government consider to promote greater access to electricity and accelerate grid-connections that will support economic growth, connecting new homes, and electrifying transportation and heating?

To promote greater access to electricity and accelerate grid connections to support economic growth, connect new homes, and electrify transportation and heating, Ontario must address disparities in how investments in fossil fuel and electricity infrastructure are structured and funded.

Currently, the upfront cost of electricity infrastructure for new developments-approximately $10,000 per home-is borne by developers during construction. In contrast, fossil fuel infrastructure costs are distributed across the broader ratepayer base over a period of 20 to 40 years. This creates an uneven playing field that discourages electrification and incentivizes natural gas connections in the new developments.

The Ministry could consider eliminating the fossil fuel subsidy and instead offer an electricity system subsidy to encourage the electrification of new developments and correct the unequal playing field between how fossil fuel and electricity infrastructure is paid for. If, however, the Ministry insists on maintaining the subsidy, then in all fairness, developers should be able to apply that subsidy either to electrical or fossil fuel infrastructure costs.

Question 5: What policy guidance should the government provide to the Ontario Energy Board (OEB) with respect to the long-term role of natural gas in Ontario's economy and opportunities for low-carbon alternatives in the gas system?

Question 6: What opportunities should Ontario consider to leverage its position as a clean energy leader?

The CAC urges Ontario to discontinue investing in fossil fuel/natural gas expansion subsidies and reallocate these resources towards supporting energy efficiency and renewable energy investments.

Expanding natural gas infrastructure amounts to a costly fossil fuel subsidy on the rate base, greatly undermines Ontario's ability to meet our 2030 GHG reduction targets, and poses significant stranded asset risks that have not been considered thus far.

There are many reasons why further public investment in natural gas infrastructure is counterproductive towards municipal and community-level sustainability objectives.

A. It is a very expensive fossil fuel subsidy, and there are more cost-effective alternatives: While expansion is normally approved by the OEB subject to economic tests, the Natural Gas Expansion Program (NGEP) was authorized by the Legislature because it requires a ratepayer subsidy, which is generally prohibited. Existing ratepayers will continue paying for Phases 1 and 2 (~$281 million) through a $1/month charge until 2026.

Addressing high energy costs for Ontarians is a worthwhile endeavour, but the default assumption of natural gas being a cost-effective approach to addressing their higher-than-average energy costs is inaccurate.

B. A simple cost/benefit analysis of Phase 2 of the NGEP program exposes the burden of this costly decision on the customers: Phase 2 of the NGEP had a budget of $234 million for 8,750 connections, which comes to $26,742 per connection. Estimated savings per customer per year would be in the range of $250-$1500 per year ($2.2 million - $13 million). At $250/year, that comes to a 106-year payback; at $1500, it comes to a 17-year payback. It is unclear from the province's press release how many households are saving $250 versus how many are saving $1500, so we can't calculate where the payback falls between those time frames. Moreover, the expansion of natural gas infrastructure in the province locks existing customers into paying higher costs for a long time. Subsidized on the Ontario-wide rate base, the cost of expanding the gas system to serve new communities is being paid for by a $12-a-year surcharge on the gas rates of Enbridge's 3.6 million existing residential customers and by a $0.23 per cubic metre surcharge on the rates of the gas customers in the new gas communities. At this rate, this additional cost burden is being carried by the existing residential customers for over five years to recoup the costs of Phase 2 only.

There doesn't seem to have been any public and transparent analysis of other options (beyond subsidizing the expansion of fossil fuel infrastructure to new communities) that were considered to help Ontarians address their higher-than-average energy costs. There is a need to apply and share the results with Ontarians of applying an Energy Decision Matrix to Ontario's energy decisions. See the response under Question 2 for more information on one possible energy decision matrix that can advance a more transparent decision-making process, thereby fostering confidence in the government's ability to plan for Ontario's future energy.

C. More households will be locked into fossil fuel dependency for decades: The lifetime of a natural gas furnace is about 15 years, and connecting new homes to fossil fuel heating going forward will lock them into burning fossil fuels until nearly the 2050 net-zero deadline. Continuing the expansion of fossil fuel investments needs to speak to how much GHG emissions these programs are creating, what the stranded asset risk is for Ontarians removing the use of fossil fuels in their properties and the financial implications various fossil fuel drop-off rates will have if they are no longer Enbridge customers due to their decarbonization actions. According to figures from Enbridge Gas, the most significant component (95%) of natural gas is methane, the second biggest contributor to global warming. Impacts from natural gas extraction and processing, including methane leaks, carry significant environmental concerns and fracking for gas is a widely controversial process.

It is also important to consider that natural gas costs are also susceptible to global pricing fluctuations and federal carbon price increases. It must also be noted that as North American liquified natural gas (LNG) export infrastructure expands, it will turn what was once a domestic energy source into an internationally traded commodity, exposing North American households and businesses to higher volatility of natural gas prices set on the global market. It is essential that the province considers alternative options to support households in moving away from a costly natural gas lock-in.

Question 7: How can provincial planning processes be enhanced to support high growth regions, ensure greater coordination between energy resources, and better integrate municipal, distributor and regional planning processes?

Enhancing provincial planning processes requires a detailed, integrated, and bottom-up approach to energy demand and supply. As the boundaries between demand and supply blur in the context of electrification and decarbonization, traditional siloed approaches risk increasing electricity supply costs while missing opportunities to reduce demand effectively.

To address these challenges, Ontario should develop localized, integrated energy systems planning processes involving municipalities, local distribution companies (LDCs), the Ontario Energy Board (OEB), the Independent Electricity System Operator (IESO), and the Province. The following actions are recommended:

a. Establish a shared governance model to coordinate planning among key stakeholders.

b. Define common objectives that align provincial, regional, and municipal priorities.

c. Incorporate community engagement to ensure the planning process reflects local needs and builds public support.

d. Adopt a transparent, evidence-based approach to decision-making.

e. Increase stakeholder awareness, particularly for municipalities, regarding areas where existing distribution systems can support electrification without significant infrastructure upgrades and prioritize those areas for action.

f. Build municipal expertise and capacity in energy systems planning to enhance their role in integrated processes.

g. Strengthen the role of LDCs in supporting municipal Climate Action Plans and energy transitions.

h. Integrate climate impact scenarios into electrical system development policies, operations, maintenance, and services to ensure resilience.

i. Analyze peak demand and demand management strategies at the community scale to optimize energy use under various scenarios.

j. Develop programs, incentives, and funding mechanisms to advance agreed-upon objectives among stakeholders.

In addition, the CAC network recommends the Ministry to direct LDCs to work with municipalities to develop a Distribution System Electrification Readiness Analysis" for the distribution system to meet the electricity supply and reliability needs of Ontario's consumers and communities in the most cost-effective and equitable way. Toronto Hydro and Burlington Hydro have been undertaking an analysis of the readiness of the distribution system and working with their municipal partners to identify the distribution system needs to support the electrification of building heating and transportation. More information on this is available here.

This integrated and collaborative approach will enable high-growth regions to align energy planning with decarbonization goals better, support effective electrification, and create a more coordinated, efficient, and sustainable energy system across Ontario.

Question 8: What types of technical information and forecasts would best support sector participants and energy consumers as the system is built out for growth and the economy increasingly electrifies?

The CAC recommends that Ontario broaden the scope of the Energy and Water Reporting and Benchmarking (EWRB) initiative. While it is commendable that the province has mandated disclosure for most buildings larger than 4,645 m² and is gathering valuable data on energy and water consumption, further efforts are necessary to analyze this data effectively and translate findings into actionable strategies.

One approach is for the province to categorize buildings with similar characteristics and compare their energy and water usage. Operators of the most efficient buildings in each category could then be invited to share their best practices with peers, fostering knowledge exchange and collaboration.

Additionally, prioritizing capacity-building initiatives for building operators will better equip them to optimize efficiency and adapt to the growing demands of an electrifying economy. This focus will not only enhance building energy performance but also support energy consumers as the EWRB framework evolves and expands.

Affordable and Reliable Energy

Question 9: What further steps should the government take to enable households and businesses to manage and make informed decisions about their energy use?

The CAC strongly recommends the Ministry to take steps to advance home energy efficiency disclosure programs. Such programs empower consumers by providing critical insights into a home's true energy use and costs. This initiative would play a pivotal role in enhancing energy literacy across Ontario. This effort is being advanced in British Columbia and Prince Edward Island at the provincial level, and advancing this effort at the provincial level is more cost-effective and efficient than advancing.

Currently, governments and utility providers have limited access to comprehensive energy performance data for the residential building sector. While utility providers may hold data on household energy consumption, this information is rarely shared with key stakeholders, including municipalities, impeding the ability to integrate datasets and gain a holistic understanding of a home's energy usage. There remains an opportunity for the Ontario government to introduce a more effective and consumer-oriented approach to home energy labelling, enabling households to learn about their energy use and make informed decisions.

Question 10: What actions should government consider that would empower customers to install innovative technologies to generate or store energy on-site to reduce costs and improve resiliency?

Municipalities have encountered several barriers related to the need to upgrade the distribution system to connect renewable energy projects to the grid. A significant limitation cited is the lack of capacity, as determined by the LDC, which has hindered the installation of many municipal renewable projects. Municipal staff have also identified necessary distribution system upgrades as a barrier to community installation of renewable projects. While this is not a universal issue, certain areas have faced challenges where utilities have indicated they will not approve renewable grid connections. As such, there is a pressing need for collaboration among municipalities, the IESO, and LDCs to strategically invest in the distribution system, thereby making more locations eligible for grid-connected renewable installations. The CAC recommends Ontario to advance an effort that brings together municipalities, the IESO, and LDCs to develop a longer-term distribution system upgrade plan and invest in distribution system upgrades.

In addition, the advancement of community/virtual net metering regulations would support municipal renewable projects. These regulations would help address the longer-term payback associated with many renewable projects by providing additional business models capable of addressing the upfront capital costs.

Question 11: What actions could the government consider to ensure the electricity system supports customers who choose to switch to an electric vehicle?

With Ontario planning to build 1.5 million new homes over the next decade, it is crucial to proactively integrate electric vehicle (EV) charging infrastructure into multi-unit residential buildings to support the province's EV transition. Promoting EV-ready parking spaces equipped with outlets for future Level 2 chargers will ensure accessible and cost-effective charging solutions for the growing number of EV users in their homes while also minimizing long-term costs to install EV chargers post-construction. CAP's study from 2022 found that installing EV-ready parking at the time of construction is three to four times cheaper than retrofitting later, with costs dropping from $10-20,000 per spot to $2-3,000 per spot. Additionally, the province could ensure that the electricity panels in all new homes to handle the increased energy demands of EV charging can prevent costly future retrofits.

The province should actively support and advocate for municipal by-laws requiring 100% EV-ready parking, using the City of Toronto's policy as a model. By fostering consistent standards across municipalities, the province can significantly enhance EV charging networks and accelerate the transition to electric vehicles throughout Ontario.

The CAC supports the province's introduction of the ultra-low overnight (ULO) rate plan and encourages future innovations to rate design in Ontario to incentivize EV owners to shift their charging schedules to off-peak times and increase utilization of distribution and transmission grid infrastructure.

Question 12: As the need for new transmission infrastructure continues to grow, what steps can government take to ensure that transmitters have the certainty they require to move forward with development work as soon as possible, while also ensuring that competitive pressures keep costs as low as possible?

Question 13: What specific actions could position the integrated energy resource plan to best leverage distributed energy resources (DER) that enhance local and province wide grids to support energy system needs reliably and at the lowest cost?

Question 14: What policy or regulatory changes should government consider to address financial risks and support adoption of DER in the long-term?

In addition to advancing the integration component in energy planning, there is also the need for the planning to level the playing field between energy opportunities, for example, reducing energy demand versus increasing energy supply. Traditionally, there has been a far lower price allocated to energy efficiency in comparison to what it costs the energy system to increase energy supply. For example, the 2019 Achievable Potential Study has considered all cost-effective electricity reductions that cost under 3.9 cents/kWh. However, increasing electricity supply costs far more (with nuclear costs in 2027 estimated at 13.7 cents kWh, new gas-fired plant costs estimated at 22.7 cents kWh and new nuclear at 24.4 cents/kWh ). The price the system is willing to pay for energy efficiency should align more closely with the cost of the new generation. There have been some recent improvements in narrowing the gap in the price we allocate to efficiency in comparison to supply via the IESO's Energy Performance Program, which has increased the incentive rate for energy savings from 4 cents/kWh to 15 cents/kWh during summer peak hours. However, many of the IESO's decarbonization studies have only included efficiency measures priced below the 3.9 cents/kWh rate used in the 2019 Achievable Potential Study. This is a fundamental flaw in the value that efficiency and distributed energy resources (DERs) provide to the overall energy system, especially the electricity system, which needs to be rectified via the proposed updates to the Integrated Energy Resource Planning process.

There is a need for the energy system to place greater emphasis on the value of efficiency and DERs to reduce/delay transmission and distribution system investments. Integrated Energy Resources Planning should consider the system-wide impacts and benefits of energy efficiency, DERS, compare that against larger generation transmission and distribution system investments, and incorporate that value into the value of DER investments. The CAC also recommends provincial support/direction for electrical local distribution companies to streamline the approval process for renewable energy projects to increase transparency on connection process and costs and reduce red tape and administration to increase the ability of Ontarians to make investments in renewable energy. The CAC is also seeking insight from the Ministry of Energy and Electrification on the rationale for why Ontario has not yet advanced a community/virtual net metering business model to unlock opportunities for that business model to increase installations of renewables and reduce the generation and transmission costs on Ontario's electricity system.

Question 15: With the energy sector evolving and distributors considering new roles in serving customers, what barriers exist that limit local distribution companies from taking on new duties that could enable more efficient grid operations, leverage new technologies and further the integration of DERs?

At present, Ontario has a net metering policy in place, enabling property owners to install renewables on their buildings to use the generated electricity. There are significant opportunities to open up the market for DERs by adopting policies in most other jurisdictions, such as community net metering or Power Purchase Agreements. Enabling such policies in Ontario would lead to more cost-effective installation of DERs. In addition, that model should benefit the producer for the electricity they contribute to the grid based on the cost of electricity when they contribute. This recognizes the value of electricity provided to the system during peak electricity times. It would also be of value for the IESO to factor in the value that DERs can provide to the electricity system by eliminating or delaying transmission and generation investments.

Question 16: What actions can the government take to enhance collaboration between the OEB, the IESO, local distribution companies, industry stakeholders, and local communities to support the investment and integration of DER?

In Ontario's energy planning, it's essential to involve municipalities alongside traditional stakeholders in these proposed amendments. The IESO and utilities need to engage with their municipalities on their energy planning efforts and identify the synergies with their community climate and energy plans. These plans place a significant investment in advancing the efficiency and DER opportunities available locally ahead of increasing energy supply. Better alignment with municipal energy plans can play a significant role in increasing resilience and reducing costs related to Ontario's energy system, as described in the Assessment of the IESO's Pathways to Decarbonization Study From the Perspective of Municipal Climate Action Plans.

The CAC appreciates the opportunity to provide additional input and is happy to answer any questions and provide more information related to this letter. The CAC can be engaged by reaching out to Gabriella Kalapos at gkalapos@cleanairpartnership.org.

Gabriella Kalapos

Executive Director
Clean Air Partnership