What to expect from the energy market in 2020, according to Enel X: Part 1

Political changes in Ontario and Alberta will affect those provinces' energy industries.

In this three-part article, Enel X North America Inc. offers its insights into Canada’s energy market this year and beyond. This first part deals with the effects of Ontario’s current climate policies and the federal Output-Based Pricing System (OBPS).

Political strife in two provinces

2020 will be a year marked by regulatory transition amid political strife in Alberta and Ontario, Canada’s two deregulated electricity markets. Despite a flat demand outlook and relatively stable generation fleet in Ontario, the recent federal election sets the stage for struggle between left-leaning Ottawa and conservative provincial leadership. As Alberta transitions off coal-fired generation, political uncertainty and the future of both provincial and federal carbon legislation create a difficult environment for investment in new fossil plants.

Four consecutive terms of Liberal rule in Ontario came to an end during the June 2018 elections. In a resounding victory, the right-leaning Progressive Conservative party formed a majority government under Doug Ford, who made electricity costs central to his campaign and promised to reduce consumer hydro bills by 12 per cent. In his first few months as Premier, Ford cancelled over 750 early-stage renewable-energy contracts and repealed the Green Energy Act of 2009 before pulling Ontario out of the cap & trade program it shared with Quebec and California.

On June 21, 2018, however, the Greenhouse Gas Pollution Pricing Act received Royal Assent, allowing the federal government to establish a carbon-pricing program in any province that chooses not to impose one themselves. Under the direction of Premier Ford, Ontario is challenging the legality of a federal carbon-pricing scheme and has brought its grievance to the Supreme Court after losing in a lower-court challenge. Following its withdrawal from cap and trade, however, Ontario became subject to the federal carbon-pricing system. Companies in the energy market that emit 50 kilotons or more of carbon dioxide will be subject to the OBPS, which establishes industry-specific emission limits. Prices will be set at $30 per ton in 2020 and escalate $10 per ton annually until 2022.

The OPBS will have a marginal effect on Ontario’s energy market. Ontario’s fossil-fuel-based power generators will be charged for their carbon emissions under the OBPS. In 2018, however, 94 per cent of Ontario’s electricity supply came from nuclear, hydro, wind, and solar resources. Since less than six per cent of Ontario’s fuel supply is carbon-based, the effects of the OBPS will be limited.

To learn about how Ontario businesses are leveraging energy-storage technology, read this whitepaper from Enel X, Understanding Ontario’s Energy Storage Opportunity.

For more information, contact Enel X.

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