Canada: Ontario Renewables In The Age Of Donald Trump: Can The Great Lakes States' Policy Light The Way?

The Vancouver Declaration resulting from the First Ministers' Meeting in March 2016 saw the beginning of a co-ordinated national approach to carbon risk mitigation. Buoyed by support from high-profile business groups (including key oil and gas sector leaders), the First Ministers' Meeting on Dec. 9, 2016 in Ottawa saw the adoption of the Pan-Canadian Framework on Clean Growth and Climate Change, which included several significant announcements regarding federal investment in green infrastructure, public transit, and clean technology and innovation.

Canada's industrial powerhouse, Ontario, is ahead of the pack when it comes to low-carbon electricity policy, and has been for quite some time. Ten years after the launch of the province's early procurement programs for wind, solar, hydro and other forms of renewable energy, the province enjoys a vibrant renewable energy sector with leading-edge manufacturing capabilities, a coal-free electricity system, and a project development and finance sector that is active around the globe.

Across the U.S. border, things have changed somewhat recently, at least, at the federal level.  

Donald Trump has stated categorically on several occasions that he does not accept the science of climate change. He campaigned on a pledge to get fossil fuels burning again in the United States in order to boost American industry, and has also promised to tear up the Paris Accord. He also appointed Scott Pruitt, a noted climate change denier, as head of the Environmental Protection Agency (EPA). All of this represents a sea change for federal American energy policy. From an Ontario renewables perspective, how much does it matter?

In practical terms, a U.S. retreat from assertive renewable energy policies at the federal level will slow down the world's progress on the declining cost curve for solar panels. The price of solar photovoltaic modules drops 20% for every doubling of global manufacturing output volume, so, with less aggregate global demand, progress down the production cost curve will slow.

A broad U.S. retreat from renewable energy technology may also reduce the scale of available of capital available for renewable energy projects to a minor extent. But what is interesting to note about U.S. energy sector policy and, particularly, U.S. power sector policy, is that state-led initiatives are more important than those led at the federal level.

Furthermore, at this particular juncture in history, a U.S. retreat from technological innovation in the power sector would actually create a window of opportunity for innovative Canadian, European and Asian companies active in distributed generation, e-transportation, storage, smart grid and demand response technologies.

Tipping point crossed: The momentum of innovation

Will the U.S. go back to 19th-century energy technologies? No.

The distributed energy resource (DER) industry transformation is underway and the tipping point on levelized energy costs has, for the most part, already been crossed. In simple terms, whether you operate a home or a business, there is money to be saved by putting solar panels on your roof in Ontario today.  

In slightly more complicated terms, Ontario's power transformation is proceeding apace because renewables now have the lowest levelized cost per kWh, even without taking into account the social and environmental externality costs of competing generation technologies.

According to Lazard, the levelized cost of generating a kWh of electricity from utility-scale PV technologies was down approximately 11% in 2016 from 2015, and rooftop residential PV technologies were down 26% year over year.1 The cost of generating renewable power from technologies other than solar, such as wind, hydro, geothermal, and biomass, also declined in 2016, though at a slower pace.

Viewed differently, the amount of global electricity produced by solar power installations has doubled seven times since the year 2000, while wind power output doubled four times over the same period. For the first time ever, renewable energy technologies began competing directly with legacy energy technologies on both price and annual investment levels in 2016.2 This reality creates a quandary for federal U.S. policy makers if they really intend to back away from renewables altogether.  

That being said, although renewable energy technologies are cost-competitive and storage technologies hold great promise, renewables alone will not be capable of meeting the baseload demand in Ontario in the near future – particularly in urban centres. As a result, what is evolving both in Ontario and around the globe is a highly complex, distributed-but-connected system of two-way electricity flows where legacy plant and DER assets complement each other in a highly diversified, complex and integrated system: the energy cloud.

There are and will be significant opportunities for industrial economies that are able to adapt and take advantage of both the declining cost and rapid expansion of renewable and DER technologies, and the attendant development of energy cloud technologies. Although a U.S. pullback from all innovation in the space (no more electrification of transportation, no more consumer solar or microgrid development, no more smart thermostats) would certainly create breathing room for other centres of innovation worldwide, the prospect seems unlikely. Part of the reason for this, aside from the momentum of the energy system transformation that is underway around the world, is U.S. state policy.

State solicy vs. federal policy and the scale of our U.S. state relationships

While a Trump administration will likely be less supportive of renewable energy development, a lack of federal support does not itself spell the end of opportunity in the American renewable power industry. As is the case in Canada, the reality is that in the United States, subnational governments hold most of the authority when it comes to determining U.S. energy policy. The American states define net metering policies, renewable portfolio standards, community solar rules, and many other key aspects of electricity regulation.

What is important for Ontario going forward, then, is the prevailing attitude toward renewable energy and solar in the neighbouring Great Lakes Basin states. Two points to keep in mind in this analysis are: (a) the scale of the U.S. state economies themselves, and (b) the highly integrated nature of our trading relationship with the Great Lakes Basin states.

Clearly, the Canada-U.S. trading relationship is critically important to Canada and, particularly, to Ontario. What is less well-known is the size of the U.S. state economies when compared to some of our leading trade partners around the world. In this regard, we can think of Michigan as having an economy the size of Poland's, New York's being the equivalent of South Korea's, and Ohio being comparable to Sweden. Then, we must remember that these giant economies are located directly next to our own, linked by intricate energy and transportation networks, not to mention deep historical and cultural ties.

Ontario actually trades more with the state of Michigan than it does with the rest of the world combined. Conversely, Canada is the largest trading partner for all of the Great Lakes Basin states and the top export destination for 27 other U.S. states besides. Ontario alone ranks as the United States' fourth largest trading partner – right after Mexico.

So, what are our U.S. neighbour states' policies regarding renewable and where are things likely to go in future? As with most things in business, it's a mixed bag. Ontario has some neighbours which are taking the lead on renewables – such as New York and Pennsylvania – and other neighbours which have perfectly good renewable portfolio standards in place but have not taken an aggressive leadership stance in recent years.

From a political perspective, it is worth noting that some of the narrowest victory margins in the recent U.S. election were reported in battleground states surrounding Ontario in the Great Lakes basin. In Wisconsin, Michigan and Pennsylvania, the victory margin for Trump was narrow and ranged from 0.3% to 1.2%. These slim victories likely mean that state governors and state governments will need to tread a careful line to assess the electorate's opinion on a wide array of political issues – renewable energy policy being only one of them.

Interestingly, American public opinion on DERs is often counterintuitive and does not always run along party lines. While Florida voters were helping to install Donald Trump in the Oval Office, for instance, they simultaneously quashed a ballot initiative that would have killed rooftop solar in the state. A similar phenomenon occurred in Nevada. Despite candidate rhetoric, voters generally like renewable energy - particularly when it saves them money.

Current neighbour state policy snapshots

Michigan

Michigan has in place a relatively favourable Renewable Energy Standard (RES) which has resulted in the investment of hundreds of millions of dollars in renewable energy programs, primarily in wind and solar. The Michigan RES mandated an increase in the renewable contribution of Michigan's energy mix from 3% to 10% by 2015, and the state successfully achieved this mix. Going forward, however, Michigan's renewable energy growth is less certain. There are currently several proposed bills to amend the RES proceeding through Michigan's legislature, some of which call for an increase in the standard, and some of which call for its repeal. The short-term future of Michigan's renewable energy sector will depend on the results of these proposals, and Ontarians would be wise to pay close attention.

Wisconsin

Wisconsin implemented a mandate similar to Michigan's in 1999, called the Renewable Portfolio Standard (RPS), which required that 10 percent of the state's electricity come from renewable sources by 2015. The state was able to meet this goal, but the future of the RPS in Wisconsin is uncertain. Wisconsin remains largely reliant on coal, and is among several states that have challenged the U.S. federal Clean Power Plan in court. That said, in 2007 Wisconsin launched the Midwest Renewable Energy Tracking System (M-RETS), a market-based system designed to help utilities meet their renewable goals. Additionally, some reports indicate that support for solar is still strong among local governments and with the utilities themselves. Madison, Wisconsin, for example, recently adopted a plan committing the city to obtain 25% of its energy from clean sources by 2025, and utilities like Dairyland Power and Madison Gas and Electric have recently begun major, utility-scale solar projects.

Pennsylvania

The outlook is brighter in the Commonwealth of Pennsylvania, where an Alternative Energy Portfolio Standard (AEPS) requires that 18 percent of the state's power come from renewable sources by 2021, with 0.5 percent of the 18 explicitly coming from solar photovoltaic sources. Pennsylvanian electricity is currently 11 percent produced by renewable sources, so one can expect significant expansion over the next five years in order to meet the AEPS requirements. In 2015, $32 million was invested in solar installations in the state, with 13 MW of new solar capacity becoming available. Pennsylvania is expected to install 348 MW of solar capacity in the next five years, doubling the amount installed over the previous five years.

In addition, the 2015 Pennsylvania Climate Change Action Plan Update called for an increase in the AEPS mandate and for investment in rooftop solar. The Department of Environmental Protection has also indicated that it will draft a state plan to comply with the federal Clean Power Plan. These policies position Pennsylvania to see significant renewable energy and solar growth in the near future whether there is federal support from the Trump administration or not.

Ohio

Ohio is another state with a renewable energy portfolio standard. In Ohio's case, the requirement is that 12.5 percent of electricity must come from renewable and alternative sources by 2027, and the law sets annual benchmarks and incremental percentage requirements that must be met along the way.

In 2014, however, a senate bill was introduced that created a two-year freeze on the standard, allowing for a panel to study the costs and benefits of the standard. In December of 2016, a bill was proposed that would extend the freeze or make the energy portfolio standard voluntary going forward. Fortunately, that bill was vetoed by Ohio Governor John Kasich just prior to the end of the year, thereby reinstating the portfolio standard. Kasich has repeatedly made clear that he is a supporter of renewable energy investment.

New York

The state of New York is very likely to be a key driver of renewable energy policy development in the coming years. It has a vast economy which ranks just behind Canada's in size and, if an independent nation, would rank as the 12th or 13th largest economy in the world. With its size, global influence, and proximity to Ontario, New York's renewable energy policy will play a substantial role in Ontario's solar industry over the next few years.

New York continues to advance a highly progressive renewable energy policy that will very likely continue unabated through the Trump years. In August of 2016, Governor Andrew Cuomo announced the New York State Public Service Commission's approval of the Clean Energy Standard (CES), described as the state's most comprehensive and ambitious clean energy mandate in its history. The CES requires that 50 percent of New York's electricity come from renewable sources by 2030, with an aggressive phase-in plan scheduled for the next several years that calls for utilities and energy suppliers to be 30% renewable by 2021.

In addition, New York has developed a relatively robust capacity market and strong policies in support of smart grid technology, both of which bode well for investment in efficient and renewable sources of energy and for energy trade with Ontario. The smart grid, which is being implemented by the Energy Research and Development Authority (NYSERDA), provides, among other things, funding for Distributed Energy Resource Integration and for developing a "High Performing Grid" which accommodates a diverse supply of clean energy generation resources.    

Pathways forward in the Great Lakes region

Generally, despite the results of the recent U.S. federal election, state policies across the Great Lakes region continue to support the growth of renewable energy and the adoption of energy system innovation. If the Trump administration follows through on some of its promises to drop funding and support for clean energy initiatives, these states are still poised to see growth in renewable energy and solar continue in the coming years.

Because of both the scale of our trading relationship with neighbouring U.S. economies and because of size of those economies themselves, the key for Ontario would be to nurture and support the continued development of renewables, DER's, and energy cloud technologies across the region.

The continuation of initiatives between Ontario energy regulators and U.S. state energy regulators to refine utility models and begin the re-write of the regulatory compact necessary in light of rapidly approaching technological change is time well spent. Along the same lines, beginning to focus on neighbouring states, and other leading U.S. markets, as key targets for the development of export opportunities for Ontario power sector manufacturers and innovators would also be well-advised.

Senior delegations from Ontario's energy, infrastructure, manufacturing, innovation, finance and policy sectors should be travelling to Great Lakes Basin states regularly to sell Ontario products and expertise, share ideas and support state and municipal level renewable energy initiatives.

As the rapid growth of both distributed and utility scale renewables continues, and as the electrification of the transportation and built infrastructure sectors continues to roll out, opportunities for innovation and industrial redevelopment across the Great Lakes region will continue apace. Given the momentum of technological innovation which is occurring across the space, it is highly unlikely that a pull-back from renewables at the federal level in the U.S. will have any material impact on opportunities for Ontario renewable energy sector companies.

That being said, the anticipated shift in U.S. federal policy should serve as a useful reminder for Ontario energy sector stakeholders both of the significant opportunities which exist very close to home and of the importance of high-quality relationships with our neighbouring U.S. states.

Footnotes

1 Levelized Cost of Energy Analysis 10.0, https://www.lazard.com/media/438038/levelized-cost-of-energy-v100.pdf

2 Wind and Solar Are Crushing Fossil Fuels, https://www.bloomberg.com/news/articles/2016-04-06/wind-and-solar-are-crushing-fossil-fuels

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
14 Sep 2017, Seminar, Birmingham, UK

Has Cloud replaced traditional outsourcing models? We will compare cloud to outsourcing, consider whether they have effectively become the same thing for many solutions and assess some of the advantages and disadvantages of each model.

18 Sep 2017, Seminar, London, UK

Our annual event as part of the London Design Festival is now in its fifth year. We would be delighted if you are able to join us again.

21 Sep 2017, Seminar, London, UK

Has Cloud replaced traditional outsourcing models? We will compare cloud to outsourcing, consider whether they have effectively become the same thing for many solutions and assess some of the advantages and disadvantages of each model.

 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.