Guelph's Community Energy Initiative: District Energy

In my previous article about the Community Energy Initiative I outlined the basic economic case for the project on strictly theoretical grounds. Now I'm going to discuss one particular type of project, the district energy plant.

"District energy" is a fairly simple idea, it's that it is more efficient to build a big heating and cooling system for several buildings than it is to install small units in each separate one. It manifests this efficiency in two ways. First, there is just the basic principle of taking advantage of what economists call "economies of scale".  This doesn't just involve saving money---large, centralized facilities can also afford to install better pollution abatement equipment. Secondly, in a large facility there is the opportunity to use the waste heat from specific industrial processes to do other things instead of simply letting it dissipate into the surrounding environment.

District Energy System, Graphic from City of Guelph District Energy Strategic Plan

As far as I know, Guelph has four district energy systems. One has been at the University since the 1960s.

The Recently-Installed Cool Water Storage Tank for the University
District Energy System. Image used under "Fair Use Provision",
From a University Promotional Website

In addition, Polycon (a division of Magna) in Guelph installed a 7 megawatt physical plant in 2015.

Polycon's Combined Electricity and Heat Plant at 65 Independence Place, Guelph
Image used under "Fair Use Provision" of Copyright Act
Photo from the Ellis Don website

These two images raise an important point that readers should understand. There is a certain "fluidity" to district energy projects in that they can take many different forms, follow very different business models, and, do very different things. In the Polycon example, the plant is a "Behind the Meter" electricity generator. This means that it doesn't sell any of the electricity it produces to Ontario's Independent Electrical System Operator (IESO). (This is the crown corporation that manages the electricity spot market in Ontario.) "Waste" heat left over from generating electricity is then used in the Polycon plant. The university system, in contrast, primarily provides both winter heating and summer air conditioning on campus. The tank in the above picture is part of a giant "heat sink" that allows the university to use the difference in temperatures from day to day and day to night, to save energy in it's chilled water air conditioning plant.

&&&&

A second element of a District Energy project involves ownership. The Polycon and University examples are very simple to understand. They are both very big institutions who own their facilities outright and use them exclusively to service their own buildings. In contrast, the Corporation of Guelph owns two systems that are supposed to provide heating and cooling to a wide variety of individual customers who choose to enter into long-term contracts with the city.

One of them is downtown and is situated in the downtown arena (the "Sleeman Centre".) It provides heat and cooling for the arena, the auditorium across Woolwich (the "River Run Centre"), and, the condo tower (the "River Mill" building) built by the Tricar Group.

Here's a promotional map from Tricar that shows where the location of customers
for the downtown district energy system. Image from Tricar, "Fair Use" provision.

A second facility exists in the Hanlon Creek Business Park. It's customers are an office building owned by "M F Property Management" and a warehouse for Wurth Canada. Originally it provided electricity which was sold onto the grid through the Independent Electrical System Operator (IESO), but once the city decided to walk away from district energy, the plant was downgraded to one that just provides heat to its two customers.

The original Hanlon Creek Business Park district energy system---including electricity generation.
Image from the Ellis Don website, used under the "fair use" provision of the Copyright law.

The Current Halon Creek Business Park district energy hub. Doesn't look all that different to me---.
Photo by Bill Hulet with help from Dr. Tim Allman. 

The Hanlon Creek Business Park with the two customers and the district
energy plant locations. Original Guelph promotional map with labels added
by Bill Hulet.

&&&&

As I mentioned in my previous article on the Community Energy Initiative, one of the key "products" that a municipal government offers to the community is planning and co-ordination. Traditionally this involved providing things like the police, the fire department, roads, potable water, sewage treatment, planning, etc. By doing so, it allows home owners and business people the opportunity to focus on their own particular activities without having to worry about finding a way to get all of these essential supports. And, because the city government provides them for everyone, it means that we get the advantages of scale, uniform standards, and, predictability that make all the difference between organization and chaos. Seen from this point of view, providing heating and cooling as a municipal service can be seen as simply the same sort of thing as piping in drinking water and piping out sewage. Some large institutions---like Polycon and the University---are so big that already can have economies of scale. This means that they don't have to have an outside organizing body (ie:  the city) co-ordinating the provision of heating and cooling. In contrast, "small potatoes" like Tricar, Wurth Canada, and, M. F. Property Management aren't big enough to warrant creating their own system.

This is why the city---under the auspices of the Community Energy Initiative---decided to build the two district energy systems: one downtown and the other in the Hanlon Creek Business Park. There are two obvious questions raised by this, however: "Why did the city do this instead of getting a private business to do it?", and, "Why haven't they been as successful as promised?"

&&&&

Enwave steam plant and smoke stack viewed
from Pearl and Simcoe Street, Toronto.
Photo by Saud, c/o Wiki Commons

The first thing to understand is that district energy systems need to be understood on a case-by-case basis because each situation is very different. To give one example, the "Enwave" district heating and cooling system in downtown Toronto takes advantage of the cold water deep in Lake Ontario to provide chilled water during hot summer days. This creates tremendous efficiences when compared to conventional air conditioning systems. It also helps that the downtown is going through a building boom which means that there are a lot of new buildings that have not already invested in heating and cooling infrastructure---which makes signing up for a district energy system a lot more attractive.

Having said the above, there are a few general things about district energy systems that can be said. They do tend to be more efficient than each individual building having it's own heating and air conditioning systems. But they are rather capital intensive, and the rates of returns aren't so high that they can quickly pay off investments. Consider the following figures that come from a paper by Hans-Holger Rogner in a 1993 Paper in Energy Studies Review. What these numbers compare are the figures just for heating (not air conditioning---like Enwave's system, or, dual electricity generation and heat---like Polycon.) Also, the percentage is a comparison between the heat created by burning natural gas versus the heat available to be used by the customer.

• Average new gas-fueled individual building furnace technology: 61.4%
• Best available gas-fueled individual building furnace technology: 65.9%
• District heating based on centralized boilers: 71.3%
• Combined Heat and Electricity using natural gas turbines with heat recovery for district heat: 87.5%

Looking the above, you can see that there is only a 8% improvement in efficiency (ie: [71.3 - 65.9] / 65.9) when you switch from the best available individual furnace technology  to a centralized boiler (like at the university and downtown systems.)  If I do the same calculation with combined heat and electricity (like at Polycon and the original Hanlon Creek Industrial Park site), the efficiency is a much more respectable 33%.

&&&&

I admit that I can be quite pushy about trying to get people to support the "Guelph-Back-Grounder". It is important to understand, however, how much of a disadvantage this news source labours under. Unlike the vast majority of blogs, it is devoted to local news. And that makes a huge difference! If I were writing on subjects of international or even national interest I would have a pool of potential subscribers that would number in the millions. That means that even if I were able to get a tiny fraction of one percent of them as subscribers I'd have a very successful publication. But because I've decided to report local news, I'm limited to a maximum total of about 100,000 subscribers. This means that for local indie news to be a viable business model people are going to have to accept that it will require a higher percentage of paid subscribers and cost more per person than a national or international source. 

If you want local news that isn't just click bait people are going to have to pay for it. So how about ponying up as little as a buck a month for the "Back-Grounder"? It's easy to do on Patreon. You can also toss money in the Tip Jar if you don't want to make a long term commitment. 

&&&&

Please remember that the above numbers refer only to comparative energy efficiency for heating alone. When we are talking about this sort of thing we also have to take into account two other very important issues:  the cost of energy, and, the cost of borrowing money. As near as I can tell, Guelph started to become serious about developing district energy in 2011, so it would be useful to look at changes in both natural gas prices and the cost of borrowing money since then.

First, here's an average yearly natural gas price from Union Gas as quoted by the Ontario Energy Board.

• 2011:  13.3 cents per cubic metre
• 2012:  9.4 cents
• 2013: 10.9 cents
• 2014: 19.4 cents
• 2015: 13.1 cents
• 2016: 9.8 cents
• 2017: 17.6 cents
• 2018: 15 cents
• 2019: 18 cents

Looking at these numbers, you can see that the price of natural gas has gone from a low of 9.4 cents per cubic metre to 19.4 cents: a change of 106%! What this tells me is that the "noise" from fluctuating gas prices (106%) can hide the savings from district energy (8 to 33%). (Please note that I wrote "hide" not "make irrelevant"---the energy price is going to go up even if you don't invest in district energy.)

&&&&

As I mentioned before, district energy systems are very capital intensive. The two systems that Guelph installed cost about $14 million, which isn't a huge price when you consider that if they ran at full capacity they would probably be able to replace more than that in the price of installed physical plant in customer's buildings. (I'm told that combined heating and air conditioning plants in a large condo tower can cost about $1 million.)

But there is a complexity to large human habitations in that it is possible for developers to push the costs of heating and cooling onto the final occupants in a building. For example, it was very common at one time for builders to simply install electric baseboard heaters with separate electrical hook-ups in apartments, which meant that each renter could be charged independently for heating through their electricity bills. I understand that even when more cost-effective systems are used (for example using combination air conditioning and air source heat pumps, or, through radiators attached to a water heater), some condominiums have separate systems installed per unit. In a city where there is a tremendous shortage of housing, like Guelph, where prices have increased by 200 to 300% since 2001, there is precious little incentive for developers to compete with each other on the basis of saving condo buyers or renters money either in initial investment in their own power plants or in long-term operating costs. 

Another complexity comes from realizing that there is more than one place that a capital investment can increase energy efficiency. The figures from Rogner's paper refer to efficiency of physical plant, but there are also important efficiencies that can come from the end use. For example, there are significant savings that can come from things like insulation and tightening up leaks in the building envelope. If you are only working with an 8% increase in efficiency from a District Energy system, then perhaps a better "bang for the buck" would involve increasing the amount of insulation and quality of windows installed in an apartment or condominium tower.

Just to make the evaluation of district energy even more complicated, recent prime interest rates have been at historic lows---averaging between 3% and 3.95%. It's important to understand that this is the lowest that the prime rate has been at since before the Second World War. This means that while it is true that district energy systems are very capital intensive, we are living at a time when capital costs are the lowest they've been in generations. If it only costs 4% to borrow money that will result in an 8% cost saving, it sounds pretty good. But it's important to understand that while efficiency and the cost of borrowing money need to be connected when planning investments in energy efficiency, they are fundamentally a question of "apples and oranges". If the 8% savings in energy amounts of $20 because of the low cost of natural gas, and you have to invest $10 million to save it because the technology is so capital intensive---well, 4% equals $400,000 so you do the math. ;-) On the other hand, if the 8% savings come to $10,000 a year and you only have to invest $20,000 to save that much, then the 4% interest comes to only $800/year---which means that it's a great deal. These are just hypothetical numbers, but I include them to point out the importance of remembering that the calculus involved in setting up a district energy system is really complex and involves numbers that fluctuate for unpredictable reasons---which is why I suspect most private business owners have been loathe to invest in starting them from scratch. 

&&&&

And don't forget the fact that district energy systems involve two things that fall directly under municipal governance: planning and utilities. City planning departments decide whether or not a specific project can be built in a specific place. District energy projects work best with new builds simply because if you are building a tower from the ground up you can save money if you don't have to build an expensive heating and cooling system. In contrast, if you already have an existing building, you've already spent the money to provide heat and air conditioning yourself. If you are a private business that is trying to make a profit off district energy, you have to know that the city is committed to letting developers build the sort of buildings that will sign on as customers.

Secondly, the pipes that connect your heating and cooling facility to new customers are going to be put under the roads. And the process of putting them there is going to be really disruptive to traffic and really expensive. (One of the reasons that Fusion Homes---the condos at the old W. C. Woods site---said that they didn't sign up for the downtown system was the extreme cost of running pipes past the Speed River.) Since the city owns the roads, they are both the experts on doing this sort of thing and the final arbitrar about what does and does not get done.

The diversity of factors determining the economics is further augmented by the fact that the distribution infrastructure of district energy systems is inherently capital intensive with payback periods resembling those in the utility sector. Consequently, utilities are best suited to own and operate district energy systems. (from Rogner's 1993 paper) 

And don't forget the issues that I raised in my first article on this subject. Any increase in the efficiency of any physical plant in the city of Guelph is going to raise the productivity of the city, which will free up money to either be harvested as profits to be reinvested or as wages to circulate through local economy. In addition, a dollar saved through efficiency is a dollar that will not leak out to the company that is providing fossil fuels from out of province or even out of country.

And if all this isn't enough to make your head spin, don't forget that increases in efficiency also have a value in a world where it's government policy to put a price on carbon. Under a cap-and-trade system increased carbon efficiencies can be sold for profit on the emissions market. Moreover, when government programs exist that subsidize capital investment in efficiency, a district energy system can apply for grants from other levels of government. For example, Guelph received a $145,750 grant from the Green Municipal Fund to do the initial research for the municipal district energy project. (And, I might point out the this grant was given under the Stephen Harper government with the then Natural Resources Minister Lisa Raitt doing the photo op.)

So to sum up, there is a case for developing municipal district energy systems. But the math is extremely complicated and based on a variety of important variables. This doesn't mean, however, that district energy system cannot be profitable, or that private businesses will not buy into them---just that they seem to something that businesses will only invest in after municipal utilities set them up and "prove the concept".

Logo used under the "Fair Use" provision,
Image c/o Wiki Commons.

Take the example of the downtown Toronto Enwave district power system. It started out as being the Ontario-government owned power plant for a cluster of downtown Toronto hospitals:  Toronto General Hospital, the Hospital for Sick Children, New Mount Sinai Hospital and Women's College Hospital. Later on, buildings in the University of Toronto and Ontario government were added. In 1998---under the Mike Harris government---it was "privatized" and ended up with shares going to the four founding hospitals, the city of Toronto, the Ontario government, and, the U. of Toronto. After various sales, the city ended up owning 47% of the shares and OMERS (the municipal employees pension fund) the other 57%. In 2012 it was announced that the entire company was sold to "Brookfied Asset Management Inc"---which means that it is now completely privately owned.

&&&&

This is the point where I think I need to stop and break the story into two parts. City Council decided that the district energy hubs were a financial failure and decided to put the project "on ice". Since describing this is a very different process than outlining the back ground, I'm going to make that the focus of another installment. 

&&&&

Furthermore, I say to you---climate change must be dealt with!

Deconstructing My Electricity Bill

Executive Summary:

Some elements of our society have recently been pushing the meme that Ontario electricity rates are far too high and that the reason why is because of a Quixotic attempt by the current Liberal government to support solar and wind power. This article shows the real issue isn't rooftop solar, but rather the need to upgrade our obsolete transmission system into "smart grid" technology. It also suggests that the people who are suffering the most by attempts to make people pay the real as opposed to a subsidized cost for their electricity use are a class of rural poor. As a social policy issue, the author suggests that the rural poor would be much better served by a guaranteed annual income program rather than an immensely expensive subsidy for the entire population's energy use. 

&&&&

Deconstructing My Electricity Bill 

I've been hearing a lot of complaints lately about how much electricity costs. Moreover, the people complaining have been aiming their anger at the attempt by the provincial government to move towards a post-carbon society. On the other side are people who say that electricity isn't really all that expensive in Ontario, and that special contracts that the province has been handing out to encourage solar and wind production have nothing at all to do with what increases have happened. I suspect that a lot of people don't really know what to think about all of this. And frankly, I'm one of them. I thought that I'd put some effort into trying to learn what I can about electricity and share that with my readers.

It occurred to me that the place to start with this inquiry is where everyone else does, my electricity bill.

It should go without saying, but unfortunately some people are confused about exactly what they are paying for, so they confuse the water charges with electricity. So it's important to emphasize that the two are totally separate. (I own a duplex and share with another couple. So this water bill will be cut in half. That means I owe $21.40 for water.)

Remember, subtract the water charges from the bill total!

Electricity bills come in monthly, so this means that I had to pay Guelph Hydro $46.61 for electricity in the month of October.

&&&&

This raises the first issue that comes to my mind when I hear people complaining about electricity bills. I've heard folks say that they pay hundreds of dollars in electrical bills each month. Frankly, I don't understand what they are doing. I am not some sort of hermit living in a cave. I am cautious with energy use, but I do have a very pleasant 1100 square foot home. I have an electric range and cook almost all my meals from scratch. I do have high efficiency electric lights and try to turn them off when not necessary. But I also have an aquarium pump that runs constantly, a pellet stove, and, a gas boiler---all of which run on electricity. My computer runs constantly when I am awake and at home. I also have a new refrigerator that isn't even rated as an "energy star" appliance----but it is only 12 cubic feet in size. I do not have air conditioning, however. And I did spend 15 or so years totally gutting and rebuilding my 100 plus year old home into an R-2000 compliant structure. This means that I can get away without having air conditioning in the summer (or at least until climate change makes summers unbearable without it.) Oh, and I don't have a clothes dryer---I hang stuff up outside in the summer and inside in the winter.

The wild disconnect between my bill and what I am hearing in casual conversation and in public discourse seems to indicate to me that some folks are living very different lives than I am. I heard a phone-in show, for example, where a distraught woman called in and said that she was having a terrible time paying her electricity bills. It came out in the conversation, however, that what she had done was rent a drafty, decrepit old farm house (because the rent was cheap) and then attempt to heat it with electric baseboard heaters.

I remind myself to be compassionate and tell myself that I don't know anything about this woman and what aspects of her life brought her to where she is now, but I am perplexed by someone who moves to a drafty old farm house and attempts to heat it with electricity. When I was a child my family lived in one of those old barns. It got so cold in the winter that some of the bedrooms actually got frost on the wallpaper during especially cold nights. We all wore thermal underwear. When I sat up at night doing homework from school, I sometimes wore long-johns, shirt and jeans, a heavy sweater, a wool hat and gloves while I tried to figure out physics problems.

Generally, those old farm houses were laid out on the assumption that in the winter people spent all their waking time in the kitchen around the wood stove. The kitchens were usually one of the biggest rooms in the house and generally had easy chairs and couches in addition to kitchen tables and counters. As well, farm houses were well supplied with things like Hudson's Bay blankets. We had this old silk and eider-down comforter for one of the beds that was so hot that it was useless except on those nights where the frost was on the walls.

No one in their right mind would attempt to heat a home like this with electric baseboard heaters. Most country folk had a maple bush, chainsaw, cook stove, and, heated with wood.

OK. Now let me get off my "high horse". If someone is going to heat with electricity in a drafty old farm house, is there any especial reason for them to be angry about the price? Well, it turns out there is. Take a look at the actual charges on my bill.

My bill, but not the same bill as someone in the countryside!

More than half of the charge is for "delivery". This is important, because it turns out that the delivery charges for someone who lives in the downtown core of a city are significantly lower than for someone who lives in the countryside. According to HydroOne's own site, there are three different classes of electricity customers. 

• People who live in high-density areas and who have at least 3,000 customers with at least 60 customers for every kilometer of transmission line
• People who live in medium-density areas with at least 100 customers and 15 per kilometer
• Low density areas that lack 100 customers and less than 15 per kilometer

If you live in a low density area, that delivery charge of $22.58 turns into $43.32.  The difference between that woman on the radio's basic delivery charge and mine is $20.74. Moreover, for every kilo Watt hour (kWh) of electricity I use, I am charged 1.60 cents in per use delivery charges, whereas she has to pay 4.27 cents. I cannot see this per unit charge on my bill, so I can only assume that it is included in the gross charge per kWh. I used a total of 148.52 kWh last month, and the difference between the her per use fees and mine is 2.67 cents per kWh. Multiply the difference by the kWhs I used last month, 148.52, and you get $3.96 cents extra to add to my bill. Add these two extra charges to my bill, and you see that if my home were magically transported to a more remote part of Wellington county, the bill would now be $65.95.

(I double checked this information by looking at an electricity bill from a neighbour who has a cottage in the Sauble Beach area. It was a "Hydro One" bill, as opposed to Guelph Hydro. the total electricity charges were $103.80, plus $186.00 for delivery, plus $6.66 "regulatory charges", plus $4.71, plus $39.16 for Harmonized Sales Tax (HST). This brings the sub-total to $340.37. From which $24.76 was subtracted for "Ontario Clean Energy Benefit". The final total owing was $315.61.)

Now let's assume that that woman on the phone was using ten times as much electricity as I am. (I'm just pulling this out of the air, but baseboard heaters draw a lot of juice.) Let's assume that we both used 1500 kwhs, and that all of this came at the priciest fraction of the time of day. In my case the price plus transmission costs would come to $316.58, in her's $377.58.  Now frankly, I don't know if 1500 kWh comes even close to being realistic in describing how much that woman uses to heat her farm house. I do know that when I purchased my home (about 20 years ago), it was a drafty, uninsulated barn that was heated with electric baseboards. The first thing I did was rip them out and replace them with a high-efficiency hydronics system because---growing up in the countryside---I was horrified at what the electricity bills would come to if I didn't. 

&&&&

It would be easy to point fingers at the people who try to heat their homes with crazily inappropriate electrical heating systems. But that would not only be unkind in many cases, it would also often simply be inappropriate. It is possible to find yourself in a situation where you are "stuck" for one reason or another, and it is impossible to claw your way out of it. To illustrate this point, consider the cautionary tale of one of my university room mates.

I met "Dave" in grad school. He was a nice guy, gentle, soft-spoken, articulate, and cultured. He was getting by---like me---on a teaching assistant's stipend and student loans. He lived at the Albion Hotel (it still rented rooms then), but the other folks there were driving him nuts. (The next room had a couple in it and the man beat his partner on a regular basis and Dave hated to have to listen to it.) I was renting a house and subletting rooms to students, so I asked him if he wanted to move in. He was happy to do so.

Eventually, I got to know something about him. It turns out that Dave had come to Guelph to serve time in prison. Yes, Dave had some very interesting history. He'd had a job at a factory in K/W but had got laid off (it was the early eighties and jobs were a lot harder to get then than they are now.) His family had totally disowned him because he had come out of the closet as being gay, and they were all supporters of some flavour of Christianity that translates "Jesus loves you" into "God hates fags". After a fruitless period of time trying to find work, he pretty much lost hope of ever finding a job. At that point he found out that if you moved to a small rural village the rents were a lot cheaper than in the city. So he decided that his unemployment insurance cheques would go a lot farther there than in the city.

Unfortunately, the pogey stopped coming and Dave was starving. He went to the local welfare office, and it told him to go back to the city. (At that time welfare for single, young men in most towns was a one-way bus ticket to the nearest big city.) He also went to the local churches asking for a hand-out. They told him to "bugger off" too. (That whole "God hates fags" thing possibly had something to do with it.)  Eventually, Dave decided that the only way to avoid starvation would be to go to jail, so he broke into a church, set it on fire, and, sat playing the pipe organ until the police arrived.

Dave had psychiatric issues, no doubt about it. But they were dramatically accelerated by poverty and the way society treats people who make bad life choices. And in the same way, that woman who decided to save money by moving to a country house with "cheap rent", is probably equally stuck. And my friends tell me that rural areas are filled with people who are just hanging onto life by their fingernails. And the increase in electricity transmission costs are devastating to them. The thing to remember is that lots of people are standing in water up to their noses. The slightest increase in the depth is enough to drown them.

&&&&

The problem is, however, that there really good reasons why the transmission cost should be higher in the countryside than in the city. Actually there are a lot of good reasons---. First, let's start with a history lesson.

On Thursday, August 14th of 2003 I was at work and the electricity went out. It was a hot, sunny day and a little voice told me "the provincial conservatives just lost the next election---". I was so sure of this that I actually told the other people in the room about it, who probably thought I was being my usual nutty self and brushed it off. Well, I was right. You see their government had refused to reinvest in the electricity infrastructure well past the point where they should have, and what the engineers had warned them could happen, did. We had a catastrophic power outage that lasted a very long time. In my case, the power was off for about a week (my block was one of the longest out of service in Guelph.)

Reporters portrayed the black out as being caused by a "software problem" in an American local utility. But that was just the eventual straw that broke the camel's back. The real problem was that electricity rates had been reduced to a political football and politicians refused to force consumers to pay the real cost of building a safe, resilient, dependable system. Instead, they took the easy route of avoiding expensive upgrades and kicked the can down the road.

This experience taught at least some people that a good electrical system is not just a question of cheap price, but also one of reliability. And for an electrical distribution system to be reliable, it needs to be resilient. And that comes from two things:  distribution of generation and redundancy of distribution pathways. To understand this, consider two different ways of generating electricity, a giant centralized nuclear reactor complex, or, thousands of solar and wind units spread across the entire province. In the former, the entire system collapses if there is a problem at the one site. In the latter, it is hard to conceive of any event that would wipe out all activity across the entire province. Equally important, if there is one centralized power generation place, power transmission will be centralized into a few corridors of high tension wires. Knock out those wires (like what happened during the massive ice storm of 1998), and people can lose their electricity for months.  

Oops! I wish that we'd paid a few extra bucks and put in some solar panels.
NOAA Photo Library, National Weather Service Forecast Office Portland ME

In addition, if you distribute power generation across the entire province you create problems for maintenance. Think of it this way:  before rooftop solar panels, if a lineman wanted to do some work he would just cut off the flow of electricity from the local transformer station and the wires past that point would all be safe to work with. But with the odd house having solar panels, each of those is putting electricity into the grid, so to work on a wire he is going to have to isolate each of those rooftop generating units from the line too.

The way to deal with these issues is something call the "smart grid". Here's a useful YouTube video from the US department of energy that does a good job explaining it. 

As you might imagine, upgrading the electrical system to a province-wide "smart grid" is not cheap. Moreover, it gets more and more expensive per person in rural areas.  This is simply a case of mathematics. It is cheaper, per person, to build a system where you have over 3,000 customers and more than 60 people per kilometer of wire, than where you have less than one hundred and less than 15 per kilometer. This is the same problem that governments face with sewers, telephone lines, water, and, roads. 

Unfortunately, there is a body of opinion in our society that says that government should use tax dollars to prop up unsustainable and grotesquely inefficient lifestyles instead of trying to get people to live more sensible lives. That's why some folks continue to argue for suburban sprawl instead of higher density cities, and, personal automobiles instead of public transit. It's also the attitude that fights tooth and nail against toll roads and raising water rates to the point where we can afford to pay for the cost of fixing worn-out pipes. I suspect that most of the folks who complain about this really don't understand the issues at stake and don't even want to understand what is going on. Instead, they are having a temper tantrum aimed at a world that seems indifferent to the inconvenience it is causing them. Sad to say, there a lot of "big children" in this world who's only response to the unexpected and unpleasant is knot up their fists and start yelling. If a politician decides to pander to their emotions, they can get a lot of votes---but the ultimate results are usually very bad for everyone. (Hence the blackout of 2003.)

It is insane to expect the average tax payer to subsidize ever single person in the province who buys electricity so a small number of poor rural users can still afford to waste electricity in drafty, poorly insulated houses. What does make sense is to charge the real cost of living in the countryside and increase the social safety net to the point where people don't move to the countryside in the mistaken idea that they can "live on the cheap" there. Many people who do have the wherewithal to afford it will probably opt out of the power grid altogether and instead purchase solar panels with a battery back up. Others will probably just "suck it up" and accept the increased costs as just part of living in the boonies. But lots of marginal folks should be encouraged to move to the city where there will be lots more services to help people with whatever problems have led to their living in dire rural poverty in the first place. Ultimately, the only people who really should be living in the countryside are people who work there such as farmers, loggers, etc. All the folks who live in the countryside and commute long distances to work are ultimately being subsidized by other tax payers. Which is why some rural areas have had big fights with people who own winterized cottages and expect the country to plough the snow off their roads in the winter. 

I suspect that the Liberal government understands this point, which is why it has committed to creating an experiment to figure out how well a guaranteed annual income will work. The reasoning is that it makes more sense to give the small number of poor people in our society some money rather than to create universal subsidies that keep the cost of things like electricity artificially low for the entire population. Not only would universal subsidies be an insane misallocation of scarce resources, it keeps people from changing their lives to be more in keeping with the physical reality that we face as a species. We simply can no longer afford this sort of behaviour in the face of the existential threat of climate change.

&&&&

One other thing that I often hear is that the reason why power costs have gone up is because those long term energy contracts that the provincial government awarded to home owners. What they are referring to is the Green Energy Act of 2009 that creates special contracts (called "Feed In Tariffs") that were designed to encourage people to invest in the newly emerging sustainable energy industry. When it was first introduced, the hardy folks who signed the first contracts for roof-top solar panels were promised 80.2¢/kWh! What!!!!!  Why would the province offer to pay such a huge amount of money?  Looking at my electricity bill I only have to pay as little as 8.7 cents per kWh.  Where is the difference coming from?  Those damn, spendthrift Liberals are at it again!!!!

Well, that number that I looked at on my bill is an average, which is why there are three different prices listed on the bill:

• On Peak Summer @ 18.0 cents per kWh
• MidPeak Summer @ 13.2 cents per kWh
• OffPeak Summer at 8.7 cents per kWh

These, in turn, are averages. If you really want to see how much the cost of electricity fluxuates, you have to look at the Ontario spot market. Luckily, you can actually see this on-line at the Independent Electricity System Operator (IESO) website.  (The prices that this website quotes are not a final cost for consumers like you and me, so don't try to compare them to your own bills. All it is necessary to see is that the cost of electricity does fluctuate wildly from one part of the day to another.)

I am told that the absolute highest price for electricity on the spot market happens during hot, sunny days in the summer. That's because the biggest load on the system are air conditioners.  Moreover, when electrical transmission wires get hot (from the sun) they become more resistant. This in turn, makes them heat up. In addition, when they have a lot of power being drawn on them, they also heat up. This leads to a vicious cycle---wires getting hot makes them give off more energy as heat, which makes them tend to give off more heat when heavily used. (See this article that explains this phenomenon.)

There are two things about rooftop solar panels that make them specifically useful to deal with this problem. First, solar power creates the greatest amount of energy exactly when it is most needed to power air conditions. Secondly, because it is being created in residential neighbourhoods, it is being used almost exactly where it is being created. This means that it doesn't have to travel long distances over over-heating transmission lines. What this means is that a kWh or rooftop solar power is actually worth a lot more to our electrical grid system than one from Niagara Falls or a nuclear reactor.

In addition, the feed-in tariff system was never designed to be a permanent part of electrical generation. What it was intended to do was to liberate large amounts of capital sitting in people's retirement savings and use them to build both electrical---and equally important---human capital. I know quite a few people who looked at the returns in the feed in tariff contracts and decided that they were so much higher than what they could get in other investments that they took the risk and put in solar systems. If those guaranteed contracts weren't there, they simply would not have done so. And if the government or Ontario Hydro had wanted to do the job themselves, they would have had to borrow huge amounts of money to pay for it. Moreover, when my friends installed those systems they hired people who had made the significant effort to learn new skill sets and set up companies to install these new rooftop solar systems. If the feed in tariff had not existed, this whole new industry would not have been created. Now that the industry exists, the cost of installed systems has dropped so much that the government has been able to drop the guaranteed price that Ontario Hydro pays for the electricity created by rooftop solar. (The current promised rate for new construction is 28-38¢/kWh.) But without those initial contracts, this would never have happened.

(Addendum:

Since I published this post it has been pointed out to me that I should have emphasized how small a fraction of the entire electrical generation capacity of Ontario solar power continues to be. Looking at the IESO website this morning I saw the following breakdown in generation:  Nuclear 9,859 MW, Hydro 3,713 MW, Natural Gas 1,112 MW, Wind 1,146 MW, and teeny tiny solar comes in at 149 MWs. And this on a bright, sunny day when I don't see a cloud in the sky! It is profoundly dishonest to blame the increased cost of electricity on the feed in tariff system.)

&&&&

Electric policy in Ontario is a huge issue that requires a lot of expertise to really understand. The above only just starts to scratch the surface of the issue. But I am really concerned about the way the political parties and mainstream media have been dealing with this file. They all seem bent and determined on confusing the general public in order to get their support in the next election. And electricity is tremendously important in our race to move towards a carbon neutral society. I never hear anyone talk about the importance of the "smart grid" or the "spot market" or any of other issues I've identified above. Instead, I just hear whining about "electricity is too damn expensive" mixed with weepy stories about some person in a rural area who has to choose between food and paying their bill. I don't know why the debate is so shallow, perhaps it is just too complex for most journalists and politicians to really understand. I fear that at least some of the time these folks do understand and they just don't care because their convenient falsehoods help push their selfish, short term agenda. The result is the same, though. If we cannot think rationally about our electrical policy, it will spell disaster for our province.