Interview with Ontario’s Energy Minister Todd Smith
On February 16, 2024, Environment and Climate Change Canada (ECCC) announced some proposed changes to the draft Clean Electricity Regulations (CER). Initially released in August 2023, the draft legislation requires electricity production in Canada to be net zero by 2035. Peter and Jackie start the podcast by reviewing the recently proposed changes and discuss whether these changes are enough to win over the provinces that object to the proposed CER, including Alberta, Saskatchewan, and Ontario.
Next, they introduce this week’s guest, the Honourable Todd Smith, Ontario’s Energy Minister and MLA for the Bay of Quinte in Ontario. Since the Conservatives came to power in 2018, Todd Smith has held various cabinet positions.
Here are some of the questions that Peter and Jackie asked Minister Smith: When the Ontario Conservatives first came into power, renewable electricity projects that were agreed to under the Liberal government’s feed-in tariff (FIT) program were canceled, yet now Ontario is procuring new capacity for wind, hydro, biomass, and solar generation, why the change? Is Ontario having a nuclear renaissance? What are the plans to expand nuclear electricity? Where will Ontario source the enriched uranium for the new nuclear power plants? Is it realistic to see nuclear plants operating in other parts of Canada, such as Saskatchewan and Alberta? What is the role of natural gas for power generation and residential heating in Ontario? In November 2023, the Ontario IESO wrote a letter to the Federal Government on the proposed CER, saying, “The CER as drafted is unachievable by 2035 in Ontario…the policy would cause a resource shortfall”; what are your concerns and do the changes announced on February 16th improve the situation? Are you working with any other provinces that oppose the CER?
Content referenced in this podcast:
– ECCC’s Proposed Changes to the CER (February 16, 2024)
– The Ontario IESO’s letter to the federal government on the proposed CER
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Episode 230 transcript.
Disclosure:
The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.
Announcer:
This is the ARC Energy Ideas podcast with Peter Tertzakian and Jackie Forrest. Exploring trends that influence the energy business.
Jackie Forrest:
Welcome to the ARC Energy Ideas podcast. I’m Jackie Forrest.
Peter Tertzakian:
And I’m Peter Tertzakian and welcome back. Well, we’ve said on this podcast before that the energy transition that we’re experiencing is dominantly a policy driven energy transition. In other words, that policy is really trying to force a rapid change in our energy systems in the pursuit of decarbonization. Not a week goes by without some policy news.
Jackie Forrest:
Yeah, we do have some news. February 16th, the federal government, as part of Environment and Climate Change Canada Department, issued an update to those proposed regulations to make our electricity system net zero by 2035. We’ve talked about this quite a bit on the podcast.
Peter Tertzakian:
The Clean Electricity Regulation.
Jackie Forrest:
Yes, yeah, the Clean Electricity Regulation. Of course, the draft was first put forward in August. People put in their feedback, and they’ve proposed some changes. So, I’m just going to quickly go over my take on some of the changes. I’m not going to go over everything. This is just the highlights. Now, the document actually had a summary of what we heard, which is kind of interesting because not everything that was a concern was addressed, but so it’s probably worth reading that, but I’m just going to go over some of the changes. They’re considering slightly extending the end-of-life provision. So, in the original, it said that a unit like a natural gas generating power plant could only run 20 years before CCUS was required. Carbon capture storage. They said it could be slightly longer, but no information about what that means. Like, is it five years, 10 years?
Cogeneration acknowledged that there were concerns that a unit that is… just to remind people, cogeneration unit is one that exists as part of a refinery or in the case of the oil sands, as part of the oil sands and the heat is being generated as part of the process anyway and they just make free electricity off it. The original draft said that if they want to export to the grid, they would have to be net zero around that generation of the electricity if they wanted to do that, which would mean places like Alberta, something like 40% of our power generation is from cogen and I think they would just stop exporting to the grid. So, they said there that they are going to consider different treatment for cogens for a limited period. Again, no details on what that means, but some flexibility. They are going to provide some limited number of offsets. So, before it was just like a hard rule and if you couldn’t make it, you just shut down. Now, there’s some limited amount of offsets if you have to go over.
Peter Tertzakian:
So, you’ve used this word limited about four or five times. Is there any clarification on what that word means, limited?
Jackie Forrest:
I’m glad you mentioned that, Peter, because language does not give me a lot of hope that they’re willing to make big changes. Things like slightly extending the end of life, limited time period, limited of offsets. It’s throughout the draft that these implying kind of small changes. I do want to say one more thing about a major change. They’re talking about pooling emission limits. So before, every different facility had a very strict limit. Now they’re saying at the company level, as long as you stay within your carbon emission allowances, you could have some units go over and others go under, and you can optimize within your own portfolio.
Peter Tertzakian:
Let’s just explore this a little bit more. Pooling by whom? So, if I’m a utility in Alberta, I can pool with another utility or pool within my fleet of power generation assets?
Jackie Forrest:
I think it’s the latter that you can pool. And so, if you have a whole bunch of units, you could optimize a little bit. Now, if you’re someone who just has a couple of facilities, that’s not great and in fact it may give an advantage to the big guys. And the other thing I wanted to quickly say is there was a lot of feedback that the 450 hours a year for a peaker was not nearly enough.
Just so people have some context, I did some research. In Alberta, the average peaker in 2022 ran seven times more hours than that. So, a lot of concerns around that and they didn’t address that they could make more hours for the peaker. Instead, they said it could be part of this pooling thing. So, with lots of devils in the details.
Peter Tertzakian:
Yeah.
Jackie Forrest:
One other change I think that’s positive is they said they would consider for emergency situations that if the electrical system operator says it’s emergency, then the generator can run without worrying about deciding after the fact if it truly was an emergency. So, I think people, that’s one thing that was more clear and I think would be a relief for some people.
The other thing that’s worth mentioning, only three weeks for feedback on this. To me, that’s pretty short. So, when I consider the language and I consider the three weeks for feedback, I’m going to go back to my 2024 prediction podcast, Peter, which was that they’re not going to make many changes to this. That’s my feeling. Now maybe I’m wrong and for sure if they, depending on the numbers-
Peter Tertzakian:
So, what are you saying? Are you saying that the quantification of these vague words like limited is going to happen in three weeks?
Jackie Forrest:
Well, people have three weeks to give feedback on this document, which we will share a link to.
Peter Tertzakian:
Okay, and then-
Jackie Forrest:
But my feeling is that’s not a lot of time. If you wanted to make a bunch of changes, you probably would have a longer time period.
Peter Tertzakian:
It’s not a lot of time because I think as our audience can feel, there’s a lot of jargon. There’s a lot of complexity. I mean, I’ve said this numerous times on the podcast, Jackie, you and I live and breathe this stuff on a day-to-day basis, and it still makes my head hurt and understanding a singular policy, let alone all the policies that work together. So three weeks I think is woefully inadequate for something so consequential to a northern latitude country that really depends in many regions, particularly the Prairies on natural gas fired power generation, but not exclusively the Prairies, including of course the Maritimes and even Ontario. And we’re going to come to Ontario in a minute.
Jackie Forrest:
Yeah. Well, and I mean another question people have is will these changes be enough so that some of the provinces that we’re taking issue with this are going to like it? I think no matter what they do, some provinces are going to see that this is not federal jurisdiction and I think there are still going to be concerns and there’s not enough details here to really know if it will address the concerns.
Peter Tertzakian:
So, shall we phone a friend?
Jackie Forrest:
Yes.
Peter Tertzakian:
Okay. I think we should phone the Honourable Todd Smith who’s a member of the Legislative Assembly, MLA, in the Ontario Bay of Quinte riding in Ontario, and he has been energy minister of Ontario since 2021. So welcome Minister Smith.
Minister Todd Smith:
Thank you, Peter. Hi, Jackie. Great to join you today.
Peter Tertzakian:
Well, let’s talk about the impacts of this proposed Clean Electricity Regulation on Ontario and your thoughts on it. But before we do that, why don’t we just get to know you, have our audience get to know you a little bit. So, tell us about yourself and how you got into politics and how you find your job as an energy minister.
Minister Todd Smith:
We’re going way back, all the way back 2011, that’s when I was elected for the first time to the Ontario legislature. Prior to that, I was working as the news director for a small radio company out of the Belleville Trenton area in Ontario called Quinte Broadcasting. I was hosting newscasts and talk shows and doing play-by-play for Belleville Bulls games in the Ontario Hockey League, but was covering the careers of our local members of provincial parliament and our members of parliament and local council meetings and was very, very engaged with local politics at the municipal and regional level across the Bay of Quinte region. I was approached by the PC Party, Tim Hudak was the leader at the time. I of course was fair and balanced as a newscaster, but some people thought that I had maybe a little bit of a conservative tinge to me, and so they wanted me to run in that riding in 2011 and my wife and I and family made the decision to run in the election and fortunately for me, I won in 2011 and I’ve been representing the Bay of Quinte now since then.
So, four elections and I’ve really enjoyed my time most recently enjoyed as the Minister of Energy. Now, one of the longest serving energy ministers in the country and we’ve been able to make some substantial changes here and plan for the future in Ontario and that includes building all kinds of energy generation but with a real focus on nuclear and it’s been five plus years now that we’ve been the government of Ontario. I spent the first seven years as an opposition member and energy was a big reason why I was elected in 2011. And of course, we had lots to harp about as opposition MPs during that 2011 to 2018 period. And quite honestly, I believe one of the biggest reasons that we won the election in 2018 was because of failed Liberal energy policies here in Ontario.
Jackie Forrest:
Okay, well, we’re going to come to that because a lot of that was around the FIT program and now we’re looking at new renewables in Ontario. But before we get to that, I wanted to quickly ask you about the responsibility of your office. Is it the Office of Electricity? Are you responsible for other sources of energy in Ontario like refined products or natural gas?
Minister Todd Smith:
Yeah, unlike Alberta and some other provinces where there’s been a bit of a separation of parts of the energy sector, I’m responsible for all parts of the energy sector. So we’ve rolled out, as I mentioned, a lot of nuclear plants for the future, but I’m also responsible for rolling out transmission, which we’ve been doing over the last little while. We unveiled a hydrogen strategy and there are many pilots that are underway for hydrogen. I’ve got legislation that I’m going to be introducing here at Queen’s Park on natural gas expansions and ensuring that we do have the natural gas. We need both for generation of electricity to ensure we keep the lights on across the province as a peaking utility, but also for home heating and economic development, which is really happening fast here in Ontario. And part of the reason why we need to be adding these new electricity generation facilities like nuclear, new hydro, new renewables, non-emitting resources across the province.
Peter Tertzakian:
Well, those are a lot of energy related words, electricity, hydrogen, natural gas, nuclear, hydro, and renewable. If you were to summarize Ontario’s energy policy in one sentence, what would that be?
Minister Todd Smith:
It’s got to be reliable, affordable, clean, and safe. The fact that we have a clean grid here in Ontario and it is 90% clean, it’s one of the cleanest grids in the entire world as a matter of fact has been a real selling point for our premier, Premier Ford, for our Minister of Economic Development and Trade, Vic Fedeli, in acquiring a lot of the investment that we’ve seen over the last year and a bit, particularly in the electric vehicle and EV battery sector. Those companies want to set up shop in a jurisdiction that has a clean grid and we have a very diverse and very clean grid here in Ontario.
Jackie Forrest:
Well, let’s talk about people coming to Ontario because they like your clean power, but are you getting concerned with demand growth when you consider the EVs and the industrial load? What’s your expectation and is that a concern when you think about how fast supply can come on?
Minister Todd Smith:
We’ve got a good plan now. I’ve been insured by our Independent Electricity System Operator, the IESO, that we have the power that we need. We’re adding for the future because they’re anticipating electricity demand to continue to grow at a much faster rate than it was previously. We, for 15 years, saw electricity demand either stay the same, flat, or even reduce as manufacturing jobs were leaving for other jurisdictions.
Since really 2022, we, for the first time, have been experiencing electricity demand growth in our province. And that demand growth is expected to continue as people adopt electric vehicles. As some of these large, large investments start to come online, the EV battery facilities use a lot of electricity, electric arc furnaces are going into our steel making facilities in Hamilton and Sault Ste. Marie, Ontario. Those electric arc furnaces are going to be replacing coal-fired furnaces and they’re going to require a ton of electricity. Just an interesting stat for you, the three big EV battery facilities that we’ve acquired, and those two electric arc furnaces are going to increase our industrial electricity demand by 25%. Just those five projects are going to increase our load by that much. So, it’s really important that we continue to build out our system.
Peter Tertzakian:
Over what time period?
Minister Todd Smith:
Those are supposed to come online by about 2028.
Peter Tertzakian:
Wow. So, in the next four years, it’s going to grow by 25%. I mean, can your grid handle that?
Minister Todd Smith:
That’s just the industrial demand, but still, yeah, we have a number of projects that we’ve unveiled. Obviously, the small modular reactor that we’re going to be building at Darlington or we are building at Darlington is going to play a major role, but we have unveiled the largest battery storage procurement in North America here in Ontario to make better use of the non-emitting, the renewables that we have. We’ve got about 5,000 megawatts of wind capacity in the province now that simply isn’t producing at times when we need it, and this will allow us to store that electricity and then use it during peak times, usually in the summer and usually later in the afternoon or evening.
Jackie Forrest:
Well, let’s get to the supply side. We’ll talk about nuclear, but first I wanted to talk to you about renewables. So as you already mentioned that a big part of why your government got in was the Feed-in Tariff Program from 2009 to 2019 and the issues that that had. And then we learned December of 2023, Ontario’s announcing its first major renewable procurement in over seven years with a plan to have five gigawatts of new renewable sources, wind, hydro, biomass, and solar. So why now? Why are you procuring all this renewables considering the history?
Minister Todd Smith:
Yeah, so the previous government had the Feed-in Tariff Program as you’re aware of, which was offering over market price for the generation from wind and solar. It’s not new to anybody listening in Ontario, but solar was coming on the grid for 80 cents a kilowatt-hour, wind was coming on for 22 to 25 cents kilowatt-hour when our hydroelectric facilities were producing green, clean, reliable hydro for 4 cents and our reliable, affordable nuclear power, which is emissions-free as well was 7 or 8 cents a kilowatt-hour. What it did was by bringing on thousands of megawatts of renewables at over market prices caused chaos on our electricity grid and on people’s electricity bills. Our electricity prices tripled here in Ontario during that time period, and one of the first things that we did when we became the government was to cancel 800 more projects that were in the queue to go on the grid at over market prices as well, which only would’ve made the situation worse.
The IESO analysis said that saved electricity customers $800 million on their electricity bills and we were putting those onto the grid at a time when we had an oversupply of electricity. As I mentioned, 300,000 manufacturing jobs had left Ontario for lower cost jurisdictions. I was the economic development minister in 2018 when GM Oshawa, the General Motors plant in Oshawa told us that they were closing after 100 years of building cars in Ontario and they said, “We know it’s nothing you guys did. We have full confidence that you’re going to fix this situation and become a competitive jurisdiction again.” But they closed Oshawa. And I’m happy to say that a few years later, we’re now back producing pickup trucks at the Oshawa GM plant again, and we have expanded mandates including many EV and hybrid mandates at all five of our automakers here in Ontario.
Peter Tertzakian:
Well, I want to get back to relate this by getting back to your one sentence energy policy, which was basically providing cheap, clean, safe and secure energy to the residents of Ontario. And you talked about the historical policies of renewables and how they kicked up the price because at that time they were the marginal supplier of electricity, which was very expensive, but today they’re very cheap. So what is the situation today in terms of your thinking on renewables, how they fit into the supply stack relative to all the other alternatives that we’re going to talk about here, including nuclear?
Minister Todd Smith:
To answer your question, we are rolling out these battery storage facilities across the province. Some of these range from 20 megawatts to almost 300 megawatts of electricity and the ability to dispatch power at four-hour intervals. Having that storage was always seen to be a bit of the holy grail to make the renewables work better on our system. So, by next year, by 2025, we expect to have those couple thousand megawatts of battery storage on the grid, which will enable us to go through a competitive procurement for renewables, which is now underway, those non-emitting resources that are intermittent and work more efficiently on the grid. So those actually won’t start coming onto our grid until later in the decade, but we’re procuring them now so that when the battery storage facilities are up and running, they’ll work better.
Peter Tertzakian:
Yeah, so maybe the question is, and the way to think about it is that renewables on their own, the cost curve has come way down, so they are no longer at the top of the supply stack, they’re at the bottom, but renewables plus batteries are quite expensive from what I understand and the numbers that Jackie even you’ve talked about. So where does renewables plus batteries slot into this whole thing in terms of keeping electricity affordable?
Minister Todd Smith:
Well, we’ve undergone one procurement already for battery storage, which has actually turned out very, very positively for the system operator. They’re very pleased with the number of battery storage facilities that they’ve been able to procure and the price at which they’ve been able to procure them. Don’t want to predict what will happen with the renewable procurement that’s out there, but I can safely say we’re going to get a good deal on wind and solar projects and potentially hydroelectric as well.
Peter Tertzakian:
Yeah, well there’s no question the core renewables, the generation has become really cheap, but it’s the batteries. Jackie, didn’t you have some numbers in one of the recent podcasts about when Alberta had its near blackouts here in the -30s degree weather that the battery, if we were to replace and back up all our generation, it would be super expensive?
Jackie Forrest:
I don’t think that’s comparable. He’s talking about a couple of hours shifting.
Minister Todd Smith:
I was in Alberta when it was -42, when you were going through those electricity conservation bulletins that were coming from your system operator. We were there announcing the partnership with Capital Power and OPG here in Ontario for the small modular reactor project. So I know full well exactly what happened in Alberta. The wind fleet couldn’t turn because it was so cold. They couldn’t produce electricity because it was so cold. So it wouldn’t have mattered really how many batteries you had because they simply weren’t able to store the power because they were unable to produce any electricity because of just how cold it was. So they say timing is everything in politics. I was pleased to be out there with Nathan Neudorf, your electricity minister and Brian Jean, the energy minister, and talk about how a small modular reactor would provide that base load of power that you need.
Jackie Forrest:
Let’s talk about nuclear. There’s been many announcements starting last summer. The idea that Bruce Nuclear Station may nearly double in terms of its output. It’s already the world’s largest nuclear station. We already knew about the one SMR unit. Heather Ferguson from OPG came to talk to us about the first SMR as well as other electricity matters, but now we learned there’s three additional SMR units, each of them 300 megawatts, so the total of 1.2 gigawatts of capacity potentially from OPG. And then we just learned early this year that Pickering, a nuclear site that’s been around for a long time that was going to be decommissioned, is actually going to have refurbishment and not closed down as previously communicated. So some people are saying it’s a nuclear renaissance in Canada. In fact, I was listening to an American podcast that was saying, “Well, you should see what’s going on in Canada. The Canadians are really leading on this.” So tell us a bit about your nuclear ambitions and why investing so much in nuclear now, Minister Smith?
Minister Todd Smith:
We had the governor of Indiana in for a tour at Darlington Nuclear where we are building the small modular reactor. He invited the premier and I to come down for the Indy 500 and I told him that Ontario is in the pool position when it comes to a development of small modular reactors, not just in North America, but in the G7, in the Western world really. So we are building not just one but four SMRs, as you say, Jackie, at that Darlington site, which is enough power for about 1.2 million homes. We have a plan to build 1.5 million homes here in Ontario over the next decade. So those SMRs would look after that issue themselves, and the site is regulated and construction is ready to go.
At Bruce Power, we’re looking at adding almost five gigawatts of new generation there. The expression of interest is out and they’re looking at technologies that could potentially fill that five gigs there at Bruce Power. And then as you mentioned as well refurbishment at Pickering Nuclear while the refurbishments are going on at Darlington and also at Bruce Power as well. I like to travel around the world and tell the world that Ontario is the place where all this is happening, where we’re bringing multi-billion dollar nuclear projects in not just on time, but six months ahead of schedule and on budget or under budget, and it’s happening at Darlington with OPG and it’s happening at Bruce with their major component replacements there. So the world really is watching what’s happening in Ontario, Canada.
Peter Tertzakian:
Well, it’s really exciting because Canada was a pioneer in nuclear power generation in the ’50s, ’60s, ’70s with the CANDU Program. So it’s nice to see that we’re starting to lead yet again. I want to ask about supply of uranium. The Financial Times had an article in January, Hot Uranium Threatens a Meltdown for Western Energy Security, and what it was alluding to was that there’s a high dependence in the West for uranium from Russia, Kazakhstan, even though there are sanctions, Iran as well. Where does Ontario get its uranium from? And if you say from abroad, I’m going to ask you why doesn’t it come from Canada because we are I think the largest producer of uranium in the world, we just don’t refine it here.
Minister Todd Smith:
Yeah, I can tell you it comes from Canada, it comes from Northern Saskatchewan up in Cigar Lake Cameco, which is a great Ontario company and a Saskatchewan company, and a fantastic Canadian success story provides the uranium for the CANDU reactors.
The one sort of new challenge that’s come with the small modular reactors is CANDU, the CANDU fleet that we have in Canada right now uses natural uranium. It doesn’t need to be enriched. For the small modular reactors, the uranium will have to be enriched. And because of the United Nations’ Non-Proliferation Agreement that’s in place, we’re going to have to have our uranium, which comes from Canada, shipped to one of our allies in the UK or France or the United States to be enriched and then sent back to Canada.
When I was at the World Nuclear Expo in Paris in November, there was a fuel agreement that was signed between the companies, like Chemical and others, in those jurisdictions to make sure that we’re sharing that enriched uranium that comes from Canada. Australia is also an ally that has one of the third-largest deposits in the world.
Peter Tertzakian:
But why don’t we enrich ourselves?
Minister Todd Smith:
Yeah, this is something that would have to be changed at the United Nations. It’s something that I’ve asked Natural Resources Canada to look into, just to see how long it would take. I know there are jurisdictions in Canada that would be very welcoming to the idea of having enrichment in small town Canada to make sure there are jobs there and employment. And the one thing about the nuclear sector is that there are very, very good jobs in this sector and jobs that have lasted decades. And you look at Ontario where we have 76,000 people working in our nuclear sector, some of those same companies have been in business supporting the CANDU projects for 50 years.
Peter Tertzakian:
Yeah, I mean, it does seem peculiar that we have to ask the United Nations permission, but that hearkens back to the 1960s and ’70s where we agreed not to develop nuclear weapons and that the United States would be our protector. And well, the world’s changing, I’ll say.
Minister Todd Smith:
Yeah, let’s just say this is a live discussion that is happening between us and our colleagues in Saskatchewan are very interested in this as well because they’re looking to deploy the same small modular reactor that we’re building at Darlington in Saskatchewan as well.
Jackie Forrest:
I wanted to talk a little bit talking about SMRs in Ontario, but there is some early stage studies going on about potentially SMRs in Saskatchewan. In Alberta, we have a study right now in the oil sands and we just learned that capital power and OPG are going to look at a study for Alberta as well. What have you learned so far, and do you think it’s possible that we will see SMRs in other provinces, provinces that don’t have your history, that don’t have a nuclear background, that don’t know the regulatory process? Is it really going to happen and at what pace?
Minister Todd Smith:
Yeah, this is happening. There’s more than just discussions happening. There’s actually a lot of action on the ground. We’ve been able to convince the federal government that they should be supporting the small modular reactor project as well in Darlington and supporting the Canadian Nuclear Safety Commission, the regulator for nuclear in Canada, to putting together a framework for citing SMRs. And they’ve been a world leader as well on the regulatory front at the CNSC, working with other jurisdictions like Poland and Estonia and the Czech Republic and many others, particularly across Eastern Europe that are looking for energy autonomy. So there’s a lot happening on this front.
SaskPower is our partner in Saskatchewan, looking to deploy and with the help of OPG operate these facilities there to replace the coal-fired production that they have for electricity generation now. And then Alberta’s looking at a different way of doing it with Capital Power leading the way and potentially having industrial applications for small modular reactors to lower emissions from places like the oil sand and petrochemical sector that are so important to Alberta’s economy.
Peter Tertzakian:
I want to get back to the 1.5 million homes the nuclear power plants are going to supply, I think you said the equivalent of 1.5 million homes, which sounds like a lot, but we’ve got a growing population, particularly with immigration, 500,000 people a year or something. So it’s not going to be long before this electricity supply is going to be mopped up by consumption. And then we’ve got EVs, other electrification, the electrical intensity of data processing is going up. So my sense is that the 1.5 million home equivalent that these nuclear power plants are going to provide is not that much. So now moving to natural gas, because you mentioned at the beginning of the podcast that you are also procuring natural gas fired power plants. How do you see natural gas fitting into the whole equation, especially in light of everything that’s going on with what we talked about at the front end, which is the clean electricity regulations.
Minister Todd Smith:
So when it comes to generating electricity, for the time being, natural gas is going to play a vital role as the insurance policy to keep the lights on. However, as more storage is added to our system and potentially long duration storage, which has the potential ability to dispatch electricity for 10 to 12 hours at a time will be less reliant on our natural gas fleet over time.
For home heating here in Ontario, there’s well over 70% of our homes that rely on natural gas for heat right now. We have several pilot projects that are underway in municipalities across the province to move to a hybrid electric heat pump, which is being well received in certain communities. But if we were to move, let’s say to all electricity for home heating, we would have to build several more Bruce Powers to make sure that we have the electricity that we need. And our system operator told us that in our pathways to decarbonization report that I asked them to produce for us on what it would take to get to net zero by 2050, and they said it would take 18 gigawatts of nuclear alone, but hundreds of billions of dollars in new transmission and new generation of other types as well.
Jackie Forrest:
All right, well, you did make an announcement that you are going to procure 1.5 gigawatt of new natural gas generation not so long ago, in 2022, and then after that the federal government released this draft legislation for the clean electricity reg. In the summer, we talked about it just earlier that it is definitely, its whole goal is to make producing electricity with natural gas, more difficult, more costly, and the Ontario IESO wrote a letter to the federal government on the proposed policy, that was the August version, and I’m just going to give you a quote from the letter. It said, “The CER as drafted is unachievable by 2035 in Ontario,” and it went on to say, “The policy would cause a resource shortfall.” Tell us about some of your concerns with the CER when you wrote that letter and if this new version has made you think differently about any of these concerns.
Minister Todd Smith:
Yeah, you led off the podcast talking about Minister Guilbeault’s announcement on February 16th. I actually happened to be talking to him earlier that day before the release went out on the new draft of the clean electricity regs. Obviously, the most important thing to us here in Ontario is that we have a reliable and affordable system. We’re very fortunate compared to a lot of provinces across the country that we have a clean system at 90% clean, so we don’t have as far to go as a number of provinces and other jurisdictions do to get to a fully emissions-free system.
Having said that, though, we can’t move too fast and we have to ensure that that gas, which is the insurance policy to keeping the lights on, keeps the lights on and is enabling for further investments in not just the auto sector that we’ve seen, but all parts of our economy here in Ontario. So I think the latest regs have, although there is some wishy-washy words there, and I think you touched on a few of them, Jackie, when you were doing your recap of the latest iteration of the CER from Minister Guilbeault, they have moved and there seems to be a bit of understanding that they can’t move too fast, otherwise the lights go out and the price of electricity will soar as well, which will further reduce electrification across the industrial sector, but also transportation and home heating sector,
Jackie Forrest:
Right, yeah. If it’s too expensive or if it’s unreliable, you’re not going to get industry coming here. Now, numerous provinces have provided feedback and are concerned, we’ve looked through a lot of the letters that were put forward. Are you optimistic that these changes are going to bring over all those provinces and are you working with other provinces together on this or are you working more independently from the Ontario perspective?
Minister Todd Smith:
We’re working on this more independently, I guess. We don’t have as far to go as other provinces do, but I would say in my conversations with energy ministers and environment ministers from other provinces, they all have their own plans to get to a cleaner grid. Some of them can do it quicker like we can here in Ontario, certainly Quebec can, which is also one of the cleanest grids in the world. But all of these provinces have plans to get there. Some are relying on small modular reactors to help them get there in the case of Saskatchewan.
However, if the federal government is saying you have to do one thing in the clean electricity regulations, but then is making it more difficult to get nuclear projects online because of things like the Impact Assessment Act and duplication of what the Canadian Nuclear Safety Commission already does when it comes to environmental assessments and community consultation, then they’re sending mixed messages to jurisdictions like Saskatchewan and others. So, we’ve asked the IESO to look at our situation here in Ontario to ensure that we have that reliable, affordable, clean system that’s really been a marketing tool for our government.
Peter Tertzakian:
You talk about a cleaner grid, but I don’t know, about 20 minutes ago you informed us that 90% of your Ontario grid is already zero emission. So that last 10% costs a huge amount, and actually you get into the last 5% and the last 2%, gets astronomically expensive to decarbonize. Do you think you’re going to get to 100% or where’s the optimum place on this abatement curve? Because like I said, 90% is one of the cleanest grids in the world. I mean, I can think of Iceland, maybe Brazil, other dominantly hydro supplied countries, jurisdictions. You’re right up there. So are you prepared, are Ontarians prepared to pay that much money for that last 10%?
Minister Todd Smith:
No, I think 3% of the province’s emissions come from our electricity sector. That’s it, 3%.
Peter Tertzakian:
Okay.
Minister Todd Smith:
Yeah. So, I mean, there are other ways to reduce emissions, and this is not the way to do it. By ensuring we have that reliable, affordable system, we’ll be able to reduce emissions where the actual emissions are in our transportation, in our electric arc furnaces, in our home heating potentially. And there’s going to be new tech that comes along as well. I mean, they’re already talking about fusion for goodness sakes. I think it’s a long ways off, but they are talking about fusion as well. So, who knows how fast technology continues to evolve in this sector, but I think there are other places where we can reduce emissions that will make a far greater impact. And we’re doing it with things like the electric arc furnaces and our green steel making facilities. Those investments alone are some of the largest greenhouse gas emission reduction policies that have been brought in across the country.
Jackie Forrest:
You said that natural gas is your insurance, it’s going to keep the lights on. Another way to get rid of that last 10% is to build large transmission lines across this country so that you can rely on other jurisdictions when the wind’s blowing and the sun’s shining, or they have extra capacity. But we just learned with this Atlantic Loop how hard it is to build these big projects in Canada. That one was paired back from a huge loop to a short little transmission line between Nova Scotia and New Brunswick. Do you think that we’re going to see big interprovincial transmission lines, and do you think that might be part of the solution for Ontario?
Minister Todd Smith:
Yeah, we’re certainly increasing the number of transmission lines that we have in the province and ensuring that we have better connectivity with our neighboring states and provinces. We’ve announced a number of huge transmission lines down through Southwestern Ontario into Windsor, where a lot of the auto sector operates. We’ve announced massive new transmission lines connecting the north better to the south where most of the growth is, which will actually accommodate the north to participate better in our energy sector in Ontario. So, they can potentially put small modular reactors in the north. They can certainly build out wind and solar and communities that are willing host communities for energy projects. And we have better connectivity with Quebec coming in as well. So, the interties between Ontario and Quebec are improved as part of our Powering Ontario’s Growth plan that we unveiled last summer. So, transmission is a key part of ensuring that all of Ontario can participate in the growth that we’re seeing in the province.
Peter Tertzakian:
Well, it’s been a great conversation, Minister Smith. Thanks for joining us. So, Minister Todd Smith, Minister of Energy in the Ontario government, thank you so much for joining us. I’ve learned a lot about what’s going on in Ontario and it’s certainly impressive, the progress you’re making. Thanks for joining us.
Minister Todd Smith:
Yeah, thanks Peter. Thanks, Jackie.
Jackie Forrest:
Thank you. And thanks to our listeners. If you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.
Announcer:
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