Chapter 6. Responding to the challenge of climate change

Ontario is taking a leading role in Canada and abroad in the global fight against climate change. The energy sector will play a role in meeting the challenge. The robust supply of electricity will give it a central task in assisting the transition to a clean economy. At the same time, Ontario must strengthen its energy infrastructure and make it more resilient to lessen the damage that climate change can cause.

Ontario’s cap and trade program came into effect on January 1, 2017. The cap and trade program is a flexible, market-based program that sets an annual cap for greenhouse gas (GHG ) emissions, with the targets becoming more stringent over time. The cap will be lowered each year to enable Ontario to meet its GHG reduction targets.

Cap and trade creates a market to provide incentives to reduce emissions. Large emitters must have enough allowances to cover their GHG emissions. Switching from high carbon fossil fuels to lower carbon alternatives, including renewable fuels, is one way for large emitters to reduce emissions.

Putting a price on carbon through cap and trade will also impact the operation of the fuels market. Renewable alternatives do not incur cap and trade costs and, consequently, will become relatively more attractive than carbon intensive fuels. This could increase the adoption and use of fuels like renewable natural gas, ethanol and renewable diesel. Similarly, in the transportation sector, lower carbon alternatives like natural gas may become more attractive compared to diesel.

Some companies are currently allocated free allowances in recognition of their exposure to international trade and/or the amount of energy they need to use. Companies that emit more than their allocation can buy additional allowances through government auctions or from other companies that have more allowances than emissions.

Under the Climate Change Mitigation and Low-Carbon Economy Act, 2016, proceeds from Ontario’s cap and trade auctions will be used to reduce the province’s GHG emissions by helping Ontarians shift away from higher carbon fuels and reduce their energy consumption. Proceeds are projected to be $1.8 billion in 2017-18 and $1.4 billion annually, starting in 2018-19. These funds will help to fight climate change, reduce greenhouse gas emissions and transition Ontario to a low-carbon economy.

Putting a price on carbon through cap and trade will have a significant impact on the operation of the electricity market in Ontario. It will encourage a transition away from generation that uses fossil fuels towards a clean imports and generation that are free of GHG emissions. It will also encourage more efficient natural gas generation. As Ontario moves forward with Market Renewal, the cost of carbon will become increasingly important in the economics of electricity generation. Market Renewal has the potential to create a framework that effectively incorporates emerging clean technologies into our supply mix.

Together, cap and trade and Market Renewal initiatives can help to ensure electricity sector emissions remain well below historical levels, while also helping to meet our climate change and GHG reduction commitments.

Building on a clean electricity system

About 90 per cent of the electricity used in Ontario in 2016 was free of GHG emissions, generated from sources such as water, nuclear, wind, solar and bioenergy. Our investments in these types of clean generation sources, along with the elimination of coal-fired electricity generation, have significantly reduced GHG emissions in the province.

In comparison to neighbouring states such as Michigan, Minnesota, Ohio, Pennsylvania and New York, which still rely heavily on fossil fuel-fired electricity generation, Ontario has a much cleaner electricity system. We have accomplished this without the abundant hydroelectric resources enjoyed by Québec and Manitoba.

Figure 18: Ontario’s clean generation mix

Source: IESO, U.S. Energy Information Administration, Manitoba Hydro, Hydro Quebec

Note: Generation data for US states is from 2015; Ontario, Manitoba and Quebec data is from 2016. Ontario generation data includes both transmission-connected and distribution-connected (embedded generation). Data for Manitoba, Quebec and US states is for transmission-connected generation only.

• Larger version of figure 18
• Accessible description of figure 18
• Data for figure 18

Thanks to these investments, Ontario’s electricity sector is forecast to account for only about two per cent of Ontario’s total GHG emissions in 2017 and the emissions are forecast to be more than 80 per cent below 1990 levels. As shown in figure 19, emissions are expected to remain well below historical levels and to be relatively flat over the planning period. Ontario will continue to look for ways to keep GHG emissions in the electricity sector low, and work with carbon-free market participants to meet the Province’s emissions targets.

Figure 19: Electricity sector GHG emissions outlook

Source: IESO, Environment and Climate Change Canada

• Larger version of figure 19
• Accessible description of figure 19
• Data for figure 19

These investments have significantly decarbonized Ontario’s electricity sector, leaving it well positioned to help the province move towards a low-carbon economy and meet its emission reduction commitments. Ontario’s clean and reliable electricity system gives the province a strong foundation on which to pursue increased electrification, including the use of more EVs.

The province’s robust supply of energy will also allow it to combine different energy sources into integrated energy systems that provide new services for homeowners and businesses. Natural gas will continue to play a critical role in space and water heating, but we must use it as efficiently as possible and supplement it with the next generation of clean energy technologies, such as ground-source and air-source heat pumps. Proceeds from cap and trade auctions will help fund the further application of these technologies. By making the best use of our existing energy sources and infrastructure, a more integrated energy system will allow the Province to chart the most effective course for achieving its goals for reducing GHG emissions.

Renewable energy success

Ontario is Canada’s leader in installed wind and solar power. There is more wind and solar capacity in Ontario than in any other province or territory. When you add hydroelectric generation and bioenergy into the mix, renewables accounted for 40 per cent of Ontario’s electricity supply mix in 2015, up from 26 per cent in 2005. Currently, Ontario has 18,300 megawatts (MW) of wind, solar, hydroelectric and bioenergy generation capacity in operation or under development.

The introduction of the Large Renewable Procurement (LRP) process in 2014 resulted in strong competition between developers of large renewable projects, drove down prices and secured clean, reliable generation. This significantly reduced the costs of wind and solar energy, saving money for electricity ratepayers.

The results of the final Feed-in-Tariff (FIT) procurement were announced in September 2017, with a total of 390 contracts offered for small-scale renewable energy projects representing about 150 MW of clean generation.

A highlight of Ontario’s renewable energy programs has been the success that individuals, schools, municipalities, co-operatives and Indigenous communities have had in participating in clean energy projects. In the FIT 5 procurement, more than 80 per cent of successful applications had Indigenous, municipal, public sector or community participation. From smaller home or farm-sized projects to larger community-scale projects, Ontarians are using renewable energy to help meet their community’s electricity needs and reduce their demand on the provincial electricity grid.

Since 2009, prices paid for new electricity from FIT and microFIT projects have been reduced between 50 and 75 per cent, reflecting the decreasing costs of equipment and ensuring value to ratepayers.

As a result of annual price reviews, revised procurement totals and the introduction of competitive procurement for large renewable energy projects, the FIT, microFIT and LRP initiatives are expected to cost at least $3 billion less than forecast in the 2013 LTEP.

A strong renewable future

The Province’s renewable energy policies have made Ontario’s electricity supply mix cleaner, and are providing real benefits for communities and municipalities. Recognizing this success, Delivering Fairness and Choice is focused more on outcomes rather than specifying targets and technologies. With a solid foundation of electricity provided by renewable energy, Ontario can now focus on new opportunities for innovation, modernization and exporting our expertise. Ontario is poised to take advantage of advances being made in distributed energy resources and smart-grid technologies that can help deliver a more efficient and cleaner electricity system. The government remains committed to having an electricity system where renewable energy generation plays an essential role, supporting the goals of the Climate Change Action Plan.

Wind

Wind power has become an important source of clean electricity for Ontario. There were only 15 MW of installed capacity in Ontario in 2003, compared with 4,800 MW today. That is enough wind energy to power approximately 1.4 million homes each year.

Wind Power is also being produced more efficiently. Turbines use state-of-the-art controls to adjust their blades and orientation to get the maximum output of energy in changing wind conditions. The Independent Electricity System Operator (IESO) has been able to send instructions to renewable energy generators since 2013 to stop producing electricity when it is not required to meet provincial needs. Actively controlling wind energy generation results in the more efficient operation of the electricity system.

Solar

Ontario has become a North American leader in the development of solar photovoltaic (PV) systems with about 2,300 MW of capacity online, enough to power about 300,000 homes each year. Solar power can help the electricity system to meet Ontario’s needs on hot and sunny days when air conditioning use is highest. Advances in solar PV technology have seen improved performance and a significant decline in costs, resulting in more cost-effective solar generation. Solar PV systems also support ongoing modernization of the grid. They can be large or small, and can be located close to where electricity is needed. Solar PV systems can also be paired with other innovative technologies like energy storage. These advantages mean that solar PV will continue to be a valuable asset for Ontario’s distribution systems, and can help improve the operation of the electricity grid in the future.

Hydroelectric

Most of Ontario’s supply of renewable energy continues to come from the province’s hydroelectric facilities, which provided 23 per cent of Ontario’s total generation in 2015. Ontario has approximately 8,800 MW of installed hydroelectric capacity.

Assessments over the years, including the November 2013 Northern Hydro Assessment - Waterpower Potential in the Far North of Ontario, have identified significant remaining waterpower potential in the province. These potential resources are mostly concentrated in Northern Ontario and major transmission enhancements would be required to effectively contribute to Ontario’s electricity supply.

Additionally, there are opportunities to redesign older hydroelectric projects to improve performance by using new, more efficient turbines.

Bioenergy

Bioenergy refers to electricity that is generated by burning biomass, such as plant or animal by-products and wastes. It also describes biogas and landfill gas, which is methane gas produced by the decomposition of organic matter that is then burned in a generator to produce electricity. Ontario currently has about 500 MW of bioenergy generation capacity in operation.

Going forward, the shift toward Renewable Natural Gas (RNG), a low-carbon fuel produced by the decomposition of organic materials, gives biogas producers an additional market opportunity. Bioenergy systems also support the implementation of the Province’s Strategy for a Waste-Free Ontario.

Shifting to lower carbon gasoline and diesel

Delivering Fairness and Choice recognizes the commitment in the Climate Change Action Plan to introduce a Renewable Fuel Standard (RFS) for gasoline. This is an important step towards reducing GHG emissions from the transportation sector. Since it uses the existing fuels infrastructure, an RFS standard is one of the more flexible and cost-effective ways to increase the use of renewable and low-carbon fuels.

The use of renewable and low-carbon transportation fuels can be expanded by:

• Increasing the use of renewable liquid fuels in existing vehicles. Drop-in fuels such as ethanol can be mixed with gasoline to produce blended fuels and can be used the same way as regular gasoline;
• Having existing fuel stations offer higher blends of ethanol and bio-based diesel;
• Making renewable liquid fuels available to more regions of the province;
• Adding biofuels to the crude oil that Ontario refineries process; and
• Lowering the carbon intensity of renewable fuels produced by Ontario manufacturers.

Delivering Fairness and Choice acknowledges there are other ways to achieve deep reductions in emissions and transform the transportation sector. While current outlooks predict an increased electrification of light-duty vehicles and the use of alternative fuels, including bioenergy for long-haul road freight and aviation, technological innovation remains inherently unpredictable. The technology-neutral approach of the RFS lets the alternatives compete on their merits.

Shifting to renewable natural gas

Natural gas remains a reliable and cleaner option for many Ontarians, and will continue to play an important role in the province’s energy supply mix. Homeowners, businesses and industries use natural gas for space heating, domestic hot water, steam and process heat. There were about 3.6 million natural gas customers in Ontario in 2016. Natural gas was also used to generate about 10 per cent of Ontario’s electricity in 2015.

Ontario is looking at using renewable natural gas to lower the carbon intensity of the natural gas that people burn. RNG is a low-carbon fuel produced by the decomposition of organic materials found in landfills, forestry and agricultural residue, green bin and food and beverage waste, as well as in waste from sewage and wastewater treatment plants. Because it comes from organic sources, the use of RNG does not release any additional carbon into the atmosphere. As an added benefit, it can use the existing natural gas distribution system and replace the use of conventional natural gas in today’s stoves and furnaces.

The government will continue to work with industry partners and the Ontario Energy Board (OEB) to introduce a requirement that natural gas contain some renewable content, fulfilling a commitment of the Climate Change Action Plan.

The government is also investing proceeds from the auctions in the carbon market to help introduce RNG in the province. The investment will help consumers with the cost of shifting to RNG, as it currently costs more than conventional natural gas.

Integrated energy solutions

Renewable energy technologies can be the foundation for innovative integrated clean energy systems that provide the space heating, cooling, and energy storage solutions that help to address the climate change challenges facing Ontario.

Power-to-gas

Electrolysis, also known as power-to-gas, uses surplus electricity to break down water molecules into hydrogen and oxygen. The hydrogen can then be stored in the vast storage system that currently exists for natural gas in Ontario and transported in existing natural gas pipelines and used to heat homes and fuel vehicles.

Power-to-gas could potentially become a new and important link between the province’s electricity and natural gas systems. The Independent Electricity System Operator (IESO) recognizes this, and has already awarded a contract to Hydrogenics, an Ontario-based manufacturer of electrolysis and fuel cell technology, which will deliver two MW of storage capacity in the Greater Toronto Area.

Heating and cooling with renewable energy technologies

Ontario aims to reduce greenhouse gas (GHG) emissions by increasing the use of low-carbon technologies, such as solar, air- and ground-source heat pumps, to heat and cool Ontario homes and businesses.

This has the potential to deliver a big payoff in the fight against climate change. Space heating accounts for approximately 75 per cent of the total fuels energy demand in Ontario homes, making it an important area to target for reducing GHG emissions.

The government will continue to work with its agencies, including the IESO and the Green Ontario Fund, to encourage the deployment of thermal and alternative technologies for residential, commercial, industrial and institutional buildings. This will involve planning how to integrate the technologies and the delivery of conservation and low-carbon technology programs into the province’s energy system.

Solar air and hot water heating

A typical residential solar hot water system can supply between 40 to 60 per cent of a home’s hot water needs. Solar air systems capture air warmed by the sun and circulate it to heat buildings.

Ground source and air source heating and cooling

Ground-source heat pumps, also known as geothermal energy systems, use buried pipes to absorb heat from the ground and transfer it to a home or building, and can reduce heating bills by up to 70 per cent. Air-source heat pumps take air from outside, extract the heat and transfer it to the air inside a home or building. A heat pump, running on electricity, concentrates the heat from both sources, and moves it to where it is needed. The same systems can also be used to provide cooling in the summer; and more advanced air-source systems can even provide domestic water heating.

In July 2017, the Save on Energy Heating and Cooling Incentive program began offering incentives of up to $4,000 to help Ontarians who live in electrically-heated homes to purchase and install air-source heat pumps.

District heating and cooling

District energy systems generate and supply heating and cooling, domestic hot water and electricity for blocks or neighborhoods in a community.

District heating and cooling can use local energy resources such as biomass, geothermal energy and mechanical waste heat from industrial operations to reduce GHG emissions.

Implementation can be made easier if underground district energy pipes are incorporated into the initial design of new residential or commercial developments. When used in more densely populated areas, district energy systems can be more cost-effective than providing heating and cooling systems for each individual building.

Near and net zero carbon emission buildings

The Climate Change Action Plan aims to reduce emissions in the building sector by encouraging the construction of near net zero and net zero carbon emission homes and buildings. To help create a pathway to these new building standards, the electricity and natural gas conservation frameworks will continue to support the development and enhancement of high efficiency, low-carbon homes and buildings. New programs will also be offered through the Green Ontario Fund.

New high-performance standards for space and water heating equipment could significantly reduce the energy use, environmental footprint and GHG emissions of new and existing homes and buildings and lower consumers' energy costs.

Working with the federal and other provincial governments, Ontario is exploring opportunities to develop markets for new high efficiency technologies, such as air source heat pumps, supporting the joint aspirational goals on achievable energy performance levels and the transition to a low-carbon economy.

In addition, planned updates to the Ontario Building Code would make a significant contribution to reducing GHG emissions in the building sector and support Ontario’s Climate Change Action Plan.

An important part of transitioning to near and net zero energy or carbon emission buildings is to minimize their energy use. Generally, the most cost-effective way is to first improve their energy efficiency, with increased insulation, advanced air sealing, and high efficiency heating and cooling systems. Once that has been done, some type of on-site renewable energy generation is generally required to achieve net zero energy or carbon emission status. The government is taking steps to expand and enhance its net metering framework, which would give building owners increased opportunities to integrate renewable energy generation and energy storage technologies.

Climate change adaptation

Ensuring a resilient energy supply

Ontarians need to have a reliable supply of energy, not just for for their economic prosperity but for their basic health and safety. In order to provide vital energy services to Ontarians, the province’s energy system must remain resilient and able to withstand a changing climate.

The facilities and equipment that currently generate, transmit and distribute energy across the province can be threatened by the extended heat waves, high winds, severe rainfall and ice storms that come with climate change. Climate change may also lower the flows of rivers and the water levels and temperatures of lakes, possibly reducing the ability to generate electricity.

To address these concerns, Ontario’s energy organizations are taking a number of actions that will ensure the province’s energy system is better prepared to meet extreme weather events:

• Together with several partner organizations, the IESO studied Ontario’s transmission system and found it resilient enough to substantially withstand most extreme weather scenarios. However, the study recommended continued monitoring and refinement of climate scenarios.
• More local distribution companies are making adaptation and system resilience a priority. Both Toronto Hydro and the former Horizon Utilities (now part of Alectra Utilities) conducted vulnerability assessments of their systems. A leader in this regard in Canada, Toronto Hydro is addressing climate change vulnerabilities by improving its engineering practices and tools, such as its load forecasting model, and installing more resilient equipment on its system. In its last rate application, Toronto Hydro identified extreme weather as a driver for its capital and maintenance expenditures.
• Local distribution companies (LDCs) such as Oshawa PUC Networks, Veridian and Whitby Hydro are developing adaptation plans to match the adaptation planning done by their local transit, water and communications authorities.

Building on its current activities, the government will strengthen the ability of the energy industry to prepare for the effects of climate change and integrate its impacts into their operational and infrastructure planning.

The government and its agencies will facilitate the exchange of information and knowledge among utilities and other partners to allow them to share best practices and increase their ability to adapt to climate change. Since these activities are best co-ordinated with other public services, the Province will encourage utilities to work with municipalities and other public and private infrastructure operators. This knowledge-sharing platform will be a key first step to help with the following initiatives:

• The government will help develop a vulnerability assessment of the energy distribution sector so utilities can develop state-of-the-art strategies to manage risk. This will complement the vulnerability assessment done of the transmission system in 2015.
• The OEB will give utilities guidance on cost-effectively integrating climate change adaptation into their planning and operations. The IESO will ensure that climate change adaptation is considered and integrated into the bulk system and regional planning processes.

Summary

• Ontario remains committed to a clean electricity system that includes renewable energy generation and supports the goals of the Climate Change Action Plan.
• The government will encourage the construction of near net zero and net zero carbon emission homes and buildings to reduce emissions in the building sector.
• The government is proposing to expand the options for net metering to give building owners more opportunities to access renewable energy generation and energy storage technologies.
• The government will continue to work with industry partners to introduce renewable natural gas into the province’s natural gas supply and expand the use of lower-carbon fuels for transportation.
• Building on current activities, the government will strengthen the ability of the energy industry to anticipate the effects of climate change and integrate its impacts into its operational and infrastructure planning.

Accessible descriptions

Figure 18: Ontario’s clean generation mix

Figure 18 is a map of Ontario and some nearby U.S. states. Manitoba and Quebec are also shown. On the map, pie charts indicate the generation mix of a number of U.S. states and Manitoba and Quebec. The U.S. states depicted are: Minnesota, Michigan, Wisconsin, Pennsylvania, New York, Illinois, Indiana, Ohio and West Virginia.

Figure 18 shows that Ontario’s generation mix is very clean in comparison to the U.S. states shown. A number of states still rely heavily on coal and/or gas/oil as their primary generation source. Apart from New York and Illinois, all of the states depicted have more than 50 per cent of their generation coming from emitting sources. Some states, such as Indiana and West Virginia, rely on emitting sources for more than 94 per cent of their total generation. In comparison, Ontario has a clean mix, with only 8 per cent of its generation coming from gas/oil. Manitoba and Quebec have very clean generation mixes as well, due to their abundant hydro resources.

Return

Figure 19: Electricity sector GHG emissions outlook

Figure 19 is a line chart showing electricity sector emissions. The vertical axis is labeled "Greenhouse Gas Emissions" in megatonnes CO2e in increments of 5 from 0 to 35. The horizontal axis lists all years from 2005 to 2035. Four lines are shown: Historic, 2013 LTEP Outlook, 2017 LTEP Outlook and 2017 LTEP Low Emissions Outlook.

The historic emissions line begins in 2005 and ends in 2016. The 2013 LTEP Outlook forecast begins in 2013, and projected lower emissions than historic levels from 2014 to 2017. The 2017 LTEP Outlook forecast begins in 2017 and mostly projects lower emissions than the 2013 LTEP Outlook through to 2035. Emissions could come in lower than forecast, and a scenario with emissions maintained at close to 2017 levels is also shown.

Return