Parker Gallant: Ontario’s smart grid–expensive, but not ‘smart’
On November 23, 2010, Ontario’s then Minister of Energy, Brad Duguid, issued a directive via an Order In Council to the Ontario Energy Board (OEB), with instructions on the “smart grid”:
“…it is desirable that the Province and the Ontario Energy Board move forward together with a plan to implement the advanced information exchange systems and equipment that together comprise the Smart Grid (“Smart Grid”), as defined in the amendments to the Electricity Act, 1998 made by the Green Energy and Green Economy Act, 2009…”
The Duguid directive was a direct result of the Dwight Duncan directive of 2004 to the OEB instructing them to arrange the installation of “smart meters” throughout the province.
Co-incidentally (noted by Tom Adams), the Duguid directive is dated the same day as the e-mail exchange between Alicia Johnston (formerly a senior political staffer for Energy Minister Brad Duguid, later promoted to the Premier’s Office) and Ben Chin (a senior Ontario Power Authority executive). That e-mail exchange contained Ms Johnston’s suggestion to engage Tyler Hamilton, a contributor to Toronto Star, as an “expert” to counter the Adams and Gallant duo who “are killing me” ; Chin agreed. Shortly after, Hamilton received a contract from the Independent Electricity System Operator (IESO) for a report on the smart grid.
The fact is, the Independent Electricity System Operator or IESO had already started work on the “smart grid” as noted in the Financial Post article on July 6, 2010 — costs of development were estimated at $1.6 billion. IESO had awarded a contract to IBM according to a January 15, 2007 press release; the purpose of the contract was defined as: “the development and operation of Ontario’s Meter Data Management/Repository (MDM/R).”
A culture of conservation
The MDM/R is explained as: “a core part of Ontario’s Smart Metering Initiative to drive a culture of conservation, enabling the billing of Time-of-Use rates and encouraging consumers to shift more of their energy use to off-peak periods.” The initiative would apply to 4.7 million customers of local distribution companies, involving more than “100 million transactions every day.“
More than six years later, that “Repository” has yet to generate reports on either shifting consumer habits or “imbedded generation.” (Embedded or distributed generation is usually a small scale production of power connected within the distribution network and not having direct access to the transmission network. These generators are typically located close to the electricity consumer.)
But that hasn’t stopped IESO from awarding IBM yet another five-year contract for $68.5 million for the same “repository” with an option to extend the contract seven to ten years. With an estimated 100 million data feeds daily from “smart meters” one would expect that data to be accessible to determine what production comes from embedded generators such as rooftop or ground-mounted solar, to reinforce the “culture of conservation” and identify shifts in consumer habits.
Is this a missed opportunity for a cost/benefit analysis?
On July 16 of this year, Energy Minister Bob Chiarelli arranged a press release about conservation and claimed that “Ontario has saved billions of dollars through conservation, and we have a clear opportunity to do more. By investing in conservation before new generation, where cost-effective, we can save ratepayers money and give consumers new technology to track and control energy use.”
What caught my eye in that press release were the endorsements: they were not from the usual climate change chorus such as Environmental Defence, CAPE,or the Ontario Clean Air Alliance. The last one was “Sheldon Levy, President, Ryerson University.” What would possess the President of Ryerson University to jump on this band wagon?
A month later, we have the answer: on August 26, 2013 a news release announced that Ryerson University’s Centre for Urban Energy(CUE) “will build an innovative smart grid laboratory” with support from the province. The press release doesn’t say how much the province is coughing up but does say “Building a smarter grid is an important part of the Ontario government’s plan to modernize the electricity system in the province and provide clean, reliable and affordable power to consumers.” One can assume President levy’s endorsement of the July conservation announcement was sought by the Ministry as a condition of support for the smart grid laboratory. CUE was launched in 2010 with $7 million in grants from taxpayer-owned Hydro One, Toronto Hydro and the Ontario Power Authority.
A Globe and Mail article dated October 17, 2012, called “The tricky business of funding a university” carried the following comments about Ryerson’s CUE:
“Some schools have tiptoed the line successfully. Toronto’s Ryerson University launched its Centre for Urban Energy (CUE) two years ago using $7-million in contributions from three partners – Hydro One, Toronto Hydro and the Ontario Power Authority – and is now hoping to enlist new collaborators such as Siemens and General Electric.”
It appears that President Levy knows exactly how to “tiptoe the line.” CUE’s intentions to collaborate with GE and Siemens are also interesting. An announcement by Minister Chiarelli on July 2, 2013 indicates that the $50-million “Smart Grid” fund has already provided grants to GE, Siemens and IBM.
Just asking: did the grants to GE and Siemens carry a proviso that they collaborate with CUE and did they both seek those grants? It is not clear why IBM would need a grant as they have been awarded two long-term, multi-million dollar contracts from IESO. The press release indicates the IBM grant was to create a centre “that will use and analyze smart meter data” which is what they are already supposed to be doing for IESO under the terms of the contract(s)!
Government grants to huge corporations
So, we hand out grants to multi-billion dollar corporations such as GE, Siemens and IBM and award them government contracts. The first two entities are entrenched in the renewable energy business (turbines and blade manufacturing) so, to an extent they are dependent on commitments to more wind power by the Ministry of Energy. And, IBM won two contracts related to the data analysis of 4.7 million smart meters installed throughout the province.
(I checked the Ontario Lobbyist Registry and could only find GE with registered lobbyists.)
As noted above, the original estimate to create the smart grid was $1.6 billion, to be paid by Ontario’s ratepayers. IESO stick-handled the first smart grid rate application through the OEB and ratepayers have paid for it since May 1, 2013. It is included, but hidden, with the delivery costs charged by your local distribution company (LDC). It is a charge of .79 cents per month and referred to as a “Smart Metering Entity charge.” Your LDC will collect this for the next five and a half years. Doing the math on this rate hike indicates that it will cover $245 million of that $1.6 billion —so be prepared for further “hidden” increases as spending is ramped up.
As noted, the MDM/R definition it is really all about conservation and enabling those 72 LDCs to bill on a Time-of-Use basis. Those “smart meters” and “smart grid” will cost ratepayers $4 billion and will not produce one kilowatt of new power. I suspect that Environmental Commissioner Gord Miller doesn’t consider the above costs or the costs of the smart meters, when he presents his annual report to the Minister of the Environment. The Commissioner’s cost/benefit study uses only the annual spending of the Ontario Power Authority (media advertising, free fridge pickup, coupons to purchase CFL bulbs, etc.) which paints the cost of “conservation” as only three cents per kilowatt hour.
In addition, a posting on Scott Luft’s website indicates that time-of use pricing has shifted consumers’ energy use to what used to be “off-peak” periods (noted as an objective of the MDT/R). As a result, those periods have now become “peak” demand periods for ordinary consumers, beginning at 7 PM, rather than mid-day. Ontario’s ratepayers are now trained to eat our supper and wash our clothes later, not because we want to, but because electricity has become so costly we only use it during the off-peak hours!
Perhaps the Dalton McGuinty government should have simply doubled the price of electricity when they came to power in 2003 and we would have immediately started to conserve. Think of the money we could have saved, the countryside we would not have despoiled with industrial wind turbines, the harm to health not caused, the birds and bats not killed, and the property values that would nothave fallen!
Too bad politicians don’t grasp the simple law of supply and demand.
September 11, 2013
The opinions expressed are those of the author and do not represent Wind Concerns Ontario policy.