Fundamentals of success: Principles for Ontario’s energy transition

The energy transition will be a cross-cutting, multi-decade endeavor involving all of government, business and society, including Indigenous communities and all customer groups. This transformation will impact all economic sectors and, in Ontario alone, the investment of hundreds of billions of dollars. Government can play a key role in navigating this transition successfully and ensuring economic prosperity and broad societal support. The Panel suggests the following principles should guide Ontario’s energy transition:

Principle 1: North Star: A prosperous clean energy economy for Ontario by 2050

As the world moves rapidly toward a global net-zero goal, trade and investment are increasingly influenced by climate and clean economy considerations. In this context, there is a generational opportunity for Ontario to build on its clean energy system and industrial strengths to prosper.

To seize this opportunity, Ontario’s energy transition and associated government policies, including industrial strategies, must be guided by a common commitment to achieving a clean energy economy by 2050. Government has an opportunity to make key directional decisions to coalesce social and economic forces and avoid working at cross purposes.

Transitioning to a clean energy economy will only be possible if trust in the energy system and energy fundamentals, namely reliability, affordability and resilience are maintained.

Principle 2: Vision, policy clarity, consistency and adaptability

Government can play a key role in reducing uncertainty for investors and ultimately reducing costs for consumers. Guided by a clear vision for the energy transition and goals regularly communicated through integrated energy plans, energy planning entities will be empowered to work with the energy sector in charting the most effective and supportive path for Ontario, enabling growth and integrated solutions at the right pace and scale.

To ensure an orderly transition when planning and making decisions, government and all sector entities should justify how current decisions align with the long-term commitment to a clean energy economy by 2050.

Planning and navigating a multi-decade transition to a clean and prosperous energy economy requires that learning, adaptability and continuous improvement are built directly into planning processes and governance arrangements.

Principle 3: Effective governance and adequate resourcing

To achieve a clean energy economy, government must put in place robust governance and accountability mechanisms that encourage iterative planning, measurement, verification and tracking of progress and that are sufficiently flexible to adapt to rapidly shifting circumstances.

Decisive action and investments will be needed. To preserve optionality, it will be crucial to focus on careful planning and design (plan carefully) and then executing quickly on well-developed investment plans (act fast).

The transformation of Ontario’s energy system is a multi-decade change management exercise that will require new planning and regulatory responses, supported by well-designed policy and programs, and clarity over the respective roles and responsibilities of government ministries and agencies. Government must invest in the necessary expertise and adequately resource its own operations as well as those of the Independent Electricity System Operator (IESO), the Ontario Energy Board (OEB) and external advisory bodies, such as the Energy Transition Advisory Council, a new entity recommended by the Panel.

Recommendation 18: The government should regularly assess the need for resources (skills, staff, other supportive resources) across ministries and agencies to steer energy planning and decision-making competently and effectively through the energy transition, and ensure required resources are provided. Agencies should continue to actively forecast their long-term resource needs and communicate those via existing business plan development and approval processes.

Recommendation 22: The Ministry of Energy should review its current resources to enhance the Ministry’s capacity to meet the demands of electrification and the energy transition, including:

  1. Appropriate resources to the Indigenous Energy Policy Unit to support proactive relationship-building and increases to the volume of engagement and Consultation with Indigenous communities.
  2. Continued dedicated policy and legal expertise to support the Ministry’s early engagement and Consultation work, such as,
    1. Responding to and addressing community concerns.
    2. Understanding the spectrum of engagement and Consultation.
    3. Identifying impacted communities for engagement and Consultation.
    4. Delegating procedural aspects of Consultation where appropriate.
    5. Ensuring that the Ministry has diligently discharged its Constitutional obligations under the Duty to Consult.

Principle 4: Playing the long game: Ensuring ongoing and durable public support

Ongoing public support for the transition to a clean energy economy requires a reasonable, pragmatic approach with a focus on cost-effectiveness and solutions tailored to local circumstances, not strict adherence to rigid standards.

Governments will have a hard time staying committed to supportive and consistent policy unless Ontarians continue to receive reliable and affordable energy services and feel supported through the unavoidable economic and social transformations that transitioning to a clean energy economy will entail.

Government must engage consistently with individuals as citizens, as customers and as community members, and with Indigenous communities, to build sustained support for the transition and to involve them in energy decisions.

The pursuit of clean energy economy targets must be paced such that energy security and affordability are not compromised. Where structural transformation of the energy economy leads to negative disruptive change to an industry, sector, region or community, government must play a critical role to mitigate and minimize impacts. Affected communities must be involved early in developing transition plans.

Principle 5: Full Indigenous participation

The meaningful inclusion of Indigenous peoples in decision making and governance structures, going well beyond inclusion in project development, presents a significant opportunity to advance reconciliation. It is also a necessity for Ontario to be successful in building a clean energy economy. True partnerships between the province, energy companies and Indigenous communities must go beyond transactional exchanges and include the commitment to building, supporting and maintaining mutually beneficial relationships through ongoing transparency, trust, and collaboration.

Principle 6: Managing uncertainty: Advanced insights and strategic foresight

As the world enters a period of rapidly intensifying technological change, unprecedented investment in clean energy and the widespread electrification of energy services, ongoing anticipatory research and analysis will be required to ensure risks are well-understood and decisions can be taken at the right time using the right mechanisms. In a quickly evolving energy landscape, reactive policy, regulatory and planning actions can mean missing out on important economic opportunities or not being able to respond effectively to emerging risks.

The Ministry of Energy’s Cost-effective Energy Pathways Study is an important first step to understand options in a comprehensive and integrated manner. Moving forward, the government should ensure that whole-economy energy pathways studies are iterated regularly to ensure continuous learning and model refinement, as new evidence becomes available.

In addition, government and sector entities will need to acknowledge and creatively explore uncertainties and potentially disruptive dynamics facing the energy sector. This will require the development of scenarios and evaluating new approaches to meeting energy needs by working closely with Canadian and international partners who are grappling with similar questions and developing solutions.

Both energy modelling and qualitative explorations of uncertainties, opportunities and solutions must systematically recognize the importance of and include broad stakeholder and Indigenous participation.

Recommendation 9: To ensure energy planning and policy development are supported by the best evidence available, the government should fund, on an ongoing basis, independent whole economy energy pathways studies, in a way that allows for iterative improvement of modelling and assumptions, transparency on costs, and with meaningful input from relevant stakeholders and Indigenous communities.

Principle 7: Planning and decisions closer to the customer

Developments in energy technology are leading to new models for balancing energy supply and demand. While in the past, centralized electricity and gas grid infrastructure had an economic edge over distributed solutions, this is no longer necessarily the case. In combination with the need to bring people and communities along in the move to a largely electrified clean energy economy, there is significant promise in broadening the energy planning and decision-making framework to meaningful incorporate customers and local solutions.

Putting customers at the centre acknowledges that customers will be making many of the decisions that will transform the whole energy system. Customer-driven solutions can be nimble and scale quickly. That said, sometimes a local utility or another entity can develop solutions that produce better outcomes for all. As well, overarching regulation is regularly needed to protect customers and ensure individual and system-wide costs and benefits are adequately balanced. And importantly, government policy should establish the broader planning framework and make key decisions that involve the allocation of significant public resources.

On a geographic basis, local decisions and distributed solutions can often be implemented and scale more quickly than centralized approaches, produce co-benefits (such as resilience) and build sustained local support by making communities partners in their energy future. As a result, energy planning and decision-making should always consider local, distributed solutions as potential options. Regional, provincial and interprovincial solutions should be deployed as required and where they can be shown to be more economically efficient.

Moving planning and decision-making closer to the customer does not diminish the role of the government or provincial entities. Overarching policy direction and ongoing support and collaboration across planning levels will be crucial to achieve the alignment necessary for an orderly transition.