Perspective adjustment

In previous posts, I’ve talked about the problem with the Ontario Green Energy Act (GEA): Around 40,000 FIT or MicroFIT applications have been submitted, but less than 5,000 contracts have been actually executed. In any FIT or MicroFIT project, three key players must give approval – the local municipality, Hydro One, and the Ontario Power Authority (OPA). The application-execution disconnect has arisen because the priorities of these three players are not aligned with those of the GEA. However, with just a slightly wider perspective, their priorities are much better aligned than they appear at first glance.

First, let’s take a look at municipalities. In some parts of Ontario, the building permit is a rubber stamp. In others, applicants encounter a huge headwind during the permitting process. The National Building Code of Canada, as the name suggests, is national. Ditto the Canadian Electrical Code. These governing rules don’t vary from one town to the next. Each municipality has its own bylaws, but none of these are likely to account for much of a difference in permitting. So what it comes down to is the permitting office, and the inspectors.

If these parties are conservative (or, dare I say it, lazy), they will be sceptical of new ideas, new practices, and new technologies. They will scrutinize applications for solar panel installations in a way they wouldn’t dream of for, say, a homeowner building a new deck on the back of her house. They will drag their feet. They will resist.

Where a fly-by-night installer is involved, one that has never contracted in the municipality before, and one whose work may be of suspect quality, this approach is prudent. It is the responsibility of the municipal bureaucrat to protect the homeowner, present and future, from the depredations of such swindlers. However, where the installer is reputable, experienced, and has a demonstrated track record in the area, this nitpicking approach is not warranted. By making a judicious distinction between new and established installers, and focusing scrutiny on the newbies, the municipality can actually provide a higher level of care and ensure closer compliance to code than if they treat everyone the same. So it is in the best interests of the municipality to fast-track the low risk cases.

Now, let’s discuss Hydro One. Their mandate is “the safe, reliable and cost-effective transmission and distribution of electricity to Ontario electricity users”. The key word is “reliable”. Currently, all indications are that Hydro One does not welcome the migration from centralized to distributed power, and views it as detracting from, rather than adding to, reliability.

If the folks at Hydro One believe that centralized power is inherently more reliable, they’re forgetting their training in failure mode analysis. Reliability comes from redundancy. Conversely, the single point of failure is the anathema of reliability. In our legacy centralized system, we have a very small number of generation facilities. Each of these is then connected to the grid via a small number of transmission and distribution lines. The chain is only as strong as its weakest link, and where there are single points of failure, a seemingly innocuous event can have catastrophic consequences. For example, the northeast blackout of 2003 was caused by a tree being too close to transmission lines somewhere in Ohio. The failure affected 55 million people across nine states and provinces.

In distributed generation, the electricity is produced and consumed at the same location. If there is also on-site energy storage (for example, in the form of the battery in an electric car), any excess electricity can stored for later use. Drawing power from the grid becomes the exception rather than the rule. If there’s a failure, it affects one site rather than millions.

If you multiply that many times over, the purpose of the grid gets turned on its head. Instead of being the primary power source (and one so failure-prone that many customers are forced to buy diesel backup generators to ensure they don’t get left in the dark), the local generation system is the primary, and the grid is the backup. Customers are generally self-sufficient, and even sell a bit of their excess to help out neighbours when there’s a temporary problem.

In other words, a distributed power system is far more fault-tolerant and reliable than a centralized one ever could be. If Hydro One faces this reality head-on, they will recognize that to fulfill their mandate, they must take immediate steps to ensure they are geared to embrace as many FIT contracts as possible, as quickly as possible.

Finally, there is the OPA. According to their website, their mission is to “ensure that electricity needs are met for the benefit of Ontario both now and in the future.” In other words, their job is to make sure there is enough electricity supply to meet demand. And one source of electricity supply is core to the OPA mindset: nuclear.

This is not fiscally prudent. Nuclear has the technical capacity to meet Ontario’s energy needs, no mistake. But the financial aspects of the technology are hugely off-putting. The down-payment, which you and I are obliged to pay, is huge. It is also virtually guaranteed to rise (by up to 250%, given past experience). All this before the plant produces its first watt of power. Once the plant is in production, there’s the risk of accident, and the huge attendant cost of damages and cleanup (the bill for Fukushima is expected to top $130 billion). And finally, there’s the long hangover after the party is over, where nuclear waste has to be stored and protected for generations to come. This cost profile has scared off most potential private sector investors and insurers, meaning that the work will have to be funded from, and ensured by, the taxpayers.

Contrast this with renewable energy. You and I don’t pay a cent until the system starts generating power. The costs of any repairs and maintenance are well-established, and in any case it’s the supplier that pays, not you and me. The systems (at least in the case of solar) are guaranteed to supply power reliably for decades. And we’re not beholden to one corporate giant that can threaten to shut off the juice if we don’t ante up – instead, there would be a vast number of individual suppliers, any one of which could disappear without leaving a ripple.

US oil billionaire J. Paul Getty once said, “I’d rather have one percent of the efforts of 100 people than 100 percent of my own efforts.” If the OPA hedges its bets and vigorously builds out a robust, small-scale renewable energy infrastructure, underwritten not by the taxpayers of Ontario, but by the suppliers themselves, the result will be a much more reliable, long-term energy supply with lower cost and lower risk.

In renewable energy, Ontario municipalities, Hydro One, and OPA all have the means to fulfill their mandates. They just need to adjust their perspective.

P.S. BrighterTomorrow was a day late this week, as I was working mightily to clear out my house before the closing date. That’s all done now, so we’ll be back on schedule henceforth! Thank you for your patience.

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