Canadian Commentary

Ontario's Electricity Crisis can be Solved (Without Nukes)

March 2004

In response to the ongoing energy crisis, the Government of Ontario has a remarkable opportunity to make a brilliantly innovative gesture, or else a dramatic mistake.

The government is proposing that, as part of its energy conservation measures, it will distribute new hydro meters to all Ontario residences. In an effort to avoid surges in demand and get consumers to move their energy use to off-peak hours, these meters will charge different rates depending on the time of day, charging more during peak hours.

This measure might make a small difference in balancing consumption. But there is a far more useful, innovative possible use for new meters. They could also measure energy generated by households. Any surplus energy generated by, for instance, a rooftop solar panel would flow into the electricity grid and be credited to the household against their hydro costs.

Once such meters were installed, every household in Ontario would become a potential hydro generator. By putting solar panels on roofs, and to a lesser extent windmills and small hydro generators where properties permit, all Ontarians could produce energy and save on their hydro costs.

The beauty of installing these meters in all Ontario households would be that it would instantly create a huge free market in simple renewable energy generation systems. Once they were installed, a market in mass-produced renewable energy generating systems and installers would quickly develop, leading to economies of scale and new technical innovations through competion that would quickly create a virtuous circle.

Within a few years, renewable energy generated by households could produce an important portion of energy generated in Ontario, perhaps enough to enable the elimination of coal-fired plants.

Hydro distribution companies are often opposed to such "net metering" systems because they point out that, if kilowatts generated are deducted on a one-to-one basis from kilowatts used, the Hydro company gets no funds to maintain its infrastructure. This problem could be solved by allowing a deduction from credited kilowatts - for instance, they would only count against 90% of a kilowatt used. The incentive to generate is still great, but the Hydro company would get a premium to support its infrastructure costs. If this solution is too technically complicated, other solutions such as a small flat monthly fee could be used.

In most cases, it would not be necessary for the meters to be able to record a surplus in generation. There would be no danger of the Hydro company having the administrative hassle of having to pay householders for energy. Property owners who believe they can generate a surplus of electricity would be able to purchase more sophisticated equipment and enter into their own arrangements with their Hydro distributor.

New smart meters could even calibrate the credit according to the time of day, so that energy generated at peak times received peak credits. In the heat of summer, on the highest usage days of the year, solar power generation would also be at its peak.

It is vitally important that any new hydro meters distributed in Ontario be two-way and capable of measuring hydro generation as well as consumption. To not do so would be one of the greatest missed opportunities in Ontario's energy history.

There is another important measure the Ontario government could implement to alleviate the energy crisis. It has become clear that Ontario will need to either increase production or reduce consumption of energy. The Manley commission has proposed the building of new and expensive nuclear generating plants, a deeply unattractive prospect given their known maintenance problems, potential dangers, unresolved radioactive waste disposal issues, and enormous cost.

There is a much better way to spend this money.

What the Ontario government needs to do is calculate the cost per kilowatt of building these new plants (including their eventual repair and decommissioning costs). Then, it needs to offer to pay this amount for every kilowatt anyone in Ontario reduces their energy consumption (thereby eliminating the need for this generating capacity). So, for instance, a energy-efficient retrofit of a building would be paid the price-per-kilowatts saved during year, multiplied by the estimated life of the building. Anyone who exchanges an old appliance for a new energy-efficient one would receive a rebate calculated from the total number of kilowatts the new appliance will no longer need during its lifetime.

Furthermore, any new building that is built beyond the regulated energy efficiency standards would get a rebate according to the amount of energy it would save above and beyond the standards - the same would go for appliances. Companies that engaged in energy-usage reduction measures would also get paid for every kilowatt they no longer used.

The government would not have to fund these energy savings out of its budget - instead, they would be funded exactly the same way a new power plant would be funded, out of hydro bills. A surcharge would be added to every kilowatt used - thus creating a double-incentive for energy conservation.

Finally, these two programs would be combined together. Everyone who created their own renewable energy generator would be paid the same sum per kilowatt it would have cost to build that generating capacity. Combined with the two-way meters, this would create a massive incentive for every property owner in Ontario to invest in creating their own clean, renewable generating capacity.

These two programs would not cost any more than it would cost to build new generating stations, yet they would be enormously safer and environmentally cleaner, while re-distributing the potential for energy generation and conservation to all Ontarians.

March 2004

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