Clean energy plays a critical role in addressing the climate challenge, and Climate Positive Energy (CPE) researchers at the University of Toronto are collaborating with industry experts to advance the clean energy transition. CPE recently announced they will be collaborating on a $250,000 project with the Ontario Energy Board (OEB) — the independent regulator of Ontario’s electricity and natural gas sectors.
The project — led by CPE advisory board member Adonis Yatchew, a professor in the Department of Economics — will carry out a review of benchmarking and its use in performance regulation, as well as identifying new benchmarking methodologies for Ontario’s electricity distributors.
Data standardization and collection play a key role for regulation of electricity distributors. Analysis of this data is used to regulate electricity costs. While the models the OEB relies on to interpret and communicate this data have evolved over time, the methodologies, or systems through which research is conducted, have not been revisited recently. As part of the electricity cost structure research project, Yatchew will be leading a review of these methodologies to assess cost and productivity, as well as reviewing approaches to benchmarking service quality, reliability, customer service, and decarbonization initiatives.
“When you look at how it’s being done across the globe in various jurisdictions, the methodologies that are used by the Ontario Energy Board are still in many ways at the cutting edge,” says Yatchew. “We are seeking an evaluation of potential improvements in these methodologies and answering questions around how to incorporate the changing responsibilities of distributors into the evaluation of distributor costs.”
According to Yatchew, energy regulators are finding themselves facing new challenges in the transition towards adopting cleaner energy systems, many of which come with increasing investment requirements: “As climate change initiatives are increasingly introduced in energy systems, there tends to be upward pressure and costs. Wind and solar for example, are still for the most part, priced above other sources of energy.” Yatchew explains that customers are especially sensitive to price increases, including those for utilities such as electricity. “So, if we’re going to make further progress on the climate agenda, we also need to be able to contain costs.”
Addressing these challenges requires collaboration among energy distributors and producers, government agencies, technology developers, and other stakeholders to create a supportive environment for the transition to a more sustainable and resilient energy system. “Efficient regulation that creates incentives for cost control has to be part of the larger picture of decarbonization efforts.”
“This is an important project that will help put a reservoir of OEB data into service. We’re hoping these benchmarking studies will help us improve competitiveness and encourage continuous improvement by regulated utilities,” said Harneet Panesar, chief operations officer at the OEB. “This is part of the innovative work being undertaken by the OEB to develop future utility business models that reflect a made in Ontario approach to the form and function of utility operations, and a fit for purpose regulatory approach which protects consumers from risk, not from progress.”
As part of the project, Yatchew and his research team will also examine the mechanisms the OEB has in place to deal with capital expenses that are separate from the costs of operating, refurbishing, replacing, or expanding existing distribution networks. A past example of a major capital expense is the introduction of Ontario’s Smart Metering Initiative, which launched in 2004 and required significant investment from the province. The Smart Metering Initiative deployed smart energy meters throughout the province to enhance the efficiency and reliability of energy production and distribution. The meters measure and record the time-profile of electricity usage to encourage consumers to shift their energy consumption to periods of lower demand when electricity is cheaper. The aim was to better match electricity supply with demand patterns while also reducing energy costs for consumers. The initiative continues to serve as a reliable and dependable central database for all smart metering data in the province.
“We are thrilled about our partnership with the OEB, an independent regulator committed to protecting and delivering value to the public while driving innovation and energy transition efforts forward to enable Ontario’s energy advantage,” said Shatha Qaqish-Clavering, executive director of CPE. “Through tapping into CPE’s vast network of researchers, this project aligns well with CPE’s strategy and mandate to support the energy transition in Ontario and help Canada and the world achieve Net Zero emissions by 2050.”
Evolving technologies such as wind and solar power generation, and wider adoption of electric vehicles, are putting new demands on Ontario’s energy distribution systems. Energy storage is also crucial in addressing the intermittent nature of renewable energy resources, and integrating these resources into energy grids requires significant coordinated efforts between government, industry, and researchers.
The research and analysis conducted through this collaboration will identify the strengths and weaknesses of each methodology that has the potential to improve the performance of energy distributors. It will also provide new insights on the regulatory process.
Yatchew will be delivering a final report on the analysis to the OEB to close the project in the summer of 2024.