January 28, 2021 | Research
This special episode was recorded live at the first IESO engagement day of 2021, where Terry Young talks with James Scongack, EVP of Corporate Affairs & Operational Services at Bruce Power. They spoke about how the industry response to the COVID-19 pandemic; opportunities for existing and new resources to meet emerging needs in Ontario’s electricity system; and the importance of clarity and transparency with stakeholders.
Terry Young (00:09):
Hello everyone. And thanks for tuning into the IESO's Powering Tomorrow podcast. My name is Terry Young. In each episode, we sit down with our guests to get their perspective on the opportunities and challenges, power grids are facing in the midst of the rapid transformation happening in the industry. We'll also learn more about some of the innovative ideas or concepts helping to shape the future of the electricity system.
James Scongack (00:33):
Welcome to the first stakeholder engagement meeting of 2021. There's a lot on the agenda today. Some really great discussion. I'm really looking forward to the input from stakeholders, want to let you know, as well that we are going to be releasing the episode of this discussion with James and I, as part of the IESO Powering Tomorrow podcast. With that, I'm going to turn it over to James. James and I have worked together for quite a while in the sector. And James is one of the leaders of the sector. And when we have this conversation hopefully James will share some of his perspective as well, because I think it's a perspective worth hearing. James has been with the Stakeholder Advisory Committee for some period of time and worked with them. And if you know, James you'll know the reason commentary that, that he provides, and I hope he takes that same approach and ask him any questions with that James over to you.
James Scongack (01:45):
Yeah. Great. Thanks very much, Terry, you know, we typically like to get together at the OEN Terry every year for, this type of presentation, but we're in a real different world. And you know, Terry, I think one of the things that, you know, obviously a lot, a lot of things we're going to talk about, this morning, but I think, you've been in the sector a long time. You've seen the ups and downs. You've been through the black-out, you could probably write a book. Maybe you will write a book about some of the stories during your career. But, you know, Terry, if we take a step back and we really think about, you know, where we are right now in the pandemic and, and really be interested in your thoughts on this, you know, everybody on this virtual call today, everybody in the electricity sector, whether it's the IESO control room, the distributors, the transmitters, the generators, the folks investing in innovation, you know, I think we should be so proud of how the sector has stepped up with COVID-19. And maybe that's really, I think, a good place for us to start today's discussion Terry. And, you've been, as I mentioned in the sector a long, long time, and you're in the interim CEO. And just from your perspective, you know, really be interested in your thoughts in terms of, how the sector has stepped up during COVID-19 and how it's changed us. But most importantly, how has Ontario been able to count on us?
Terry Young (03:07):
When the merger between the IESO and the Ontario Power Authority occurred in I think beginning of 2015, I had the responsibility for a number of things, including conservation and, and there was a number of employees and they were all from the Ontario Power Authority. And so we would get into meetings and someone would say something or they would have done something. And there would be a round of applause in the meeting. And I asked Katherine Sparks and Nick Schruder about, you know, like how many rounds of applause can we have here, but it was a great way of recognizing it's a really great way of recognizing. And if, if I think if we were in that room right now I'd give the whole sector a round of applause, that it deserves it the way that we have responded. And at the, at the sake of blowing our own horn, we haven't, missed a beat. That you think about the generators, so your folks, James, and those of the other generators and, and how they've come to work, many of them have come to work every day, you know, while a lot of us are staying at home and being safe. They're going out there and they've got the fear of the pandemic that we all have, but their roles are essential. They're critical, and they are going in and doing their job. And then for those of us, staying home and working from home, how we've responded and changed. And I think of this engagement session and how we've moved kept going and actually found some real benefits associated with this because we are getting greater participation than we might otherwise not have.
Terry Young (04:55):
And so I think that from settling the market, running the contract management from the work that you and your team does, and all of the Bruce folks, OPG the hydro facilities, wind solar, all of that, to the distribution companies, to the transmission company and to those who are in the emerging businesses that are, continuing to deliver a product that is so essential to us, it's amazing. You stop there and that would be one thing, but then I start to think about how some companies have really stepped up in terms of some of the other things that they've been able to provide. And I think of Bruce, the PPEs, the personal protective equipment, and some of the stuff that your company has done, and some of the things that other companies have done. And so not only have we continued to do our job under some very, very challenging conditions. You wouldn't, if you looked at the power sector, in some respects, you wouldn't know there was a pandemic because everything is moving the way that it's supposed to go. But then how they've gone above over and above that with other things I think just adds to that. And so, as I said, we all deserve to provide all of us in the sector a round of applause. And I think that's certainly noticed by all of us and at the risk of continue to talk to ourselves because we too do spend a lot of time talking to ourselves in this case. I think that the recognition is so, so deserved.
James Scongack (06:36):
No, Terry, I completely agree. And, you know, one of the things when, when I have the chance to talk to municipal officials across Ontario, whether it's in Northern Ontario, Eastern Ontario, large cities, you know it, and you see how all of the organizations in the sector have stepped up. You know, it really also reinforces not only sort of the, the community focus of our electricity sector, but really just how profound it is in all of our communities. And, Terry, one of the one of the things that I really want to flag because often I think when we have these sessions with you in the IESO, and I know we're going to talk about a lot of other items this morning and today, one of the areas that I consistently always say that we don't talk enough about, but maybe it's good news.
Terry Young (07:20):
We don't talk about it. Cause it means everything's going well. Is the folks in operations at the IESO, obviously we're interested in the future of the supply mix, and we're gonna talk about those things today. But, you know, especially in that March, April may timeframe where nobody really knew what was happening, nobody really knew what the impacts would be. And, if you just look at just the strength of that organization, the folks who have planned for those situations they've worked with generators, they worked with transmitters, distributors and I think those folks sometimes they don't get the kind of attention just because it goes so well, but, you know, if they weren't able to perform at that level, we'd be having a much different conversation today.
Terry Young (08:04):
You know, it's interesting when you look at some of the stats from 2020, and you see just the things that were going on, demand a good example of that, right? We had no idea where demand was going when, when the lockout first lockdown first started in, in, in March, right. And then it continued to accelerate with more businesses closing. And so we saw some lows in terms of, of electricity demand. And as you know, in this business, it's not just the peaks, it's also the valleys that, that, that we're concerned about. And, and, you know, at times our, our demand overnight was getting below 10,000 megawatts. And 10,000 for me has always been that kind of bellwether where, you know, if you're up there, you're, you know, your actions are last, but the minute you start to approach 10,000 or go last, then you're starting to really start to be concerned about S about surplus load.
Terry Young (08:57):
You're starting to be concerned about having too much supply. You're starting to get into the decisions that you have to take in terms of dispatching resources off. And so the number of times that we were there, and if you look at the, if you look at even the overall energy demand last year, I mean, it's the lowest we had since 1988. I was really, really surprised at that. And then you turn around and you start thinking of those peaks. We had peaks of a peak of over 24,000. It's the highest peak that we saw since 2013. So it's those extremes that we were dealing with and we were able to respond, and again our control room was able to respond, thanks from all the contributions that folks were making. And so I think you touched on that when you talked about the way the sector worked together. And I think that was clearly demonstrated in 2020. And it's the thing that stands out most to me, you know, is that collaboration that occurred. It happened in our own organization, and I'm sure it happened in yours, and I'm sure it happened in other organizations. We were able to put things aside and concentrate on the task at hand. And we certainly delivered, so again at the risk of breaking my arm for patting ourselves on the back here, I do think it was a fairly significant year in terms of how this sector responded.
James Scongack (10:27):
No, Terry, I agree. And I think that public confidence and the stakeholder confidence is so important. Now, Terry I'm really interested in your perspective, we as we sort of look ahead the next five to 10 years, one of the things I always find is there's always this healthy tension or, maybe enthusiasm. And, we see this in nuclear, everybody wants to do the new thing, wants to build the new plant, and if we sort of look ahead the next five to 10 years, I think there's a dynamic around, what are the new things we need to do in this sector? What are the things we need to innovate? What are the new technologies we need to bring in, whether it's storage renewable integration, more distributed generation, but then there's also the flip side of, we have a lot of very high value assets that perform very well and that sort of, optimize existing assets with that innovation Terry.
James Scongack (11:17):
And I really think that over the next five to 10 years, that's going to really be our focus is how do we properly optimize, leverage, enhance what we have, but also be open to that new technology and look into the future. And just as somebody like yourself, who's been in the sector now for many decades and have seen the various changes, just wondering, from your vantage point, how do you see those playing out that balance between new technology and leveraging what we have, and, because there's so many individual pieces we're going to talk about throughout these stakeholder sessions. But to me that's really heart of the issue. You know, folks who have existing assets are always putting their hand up and, you know, Bruce's in the same category. We can do more, we can optimize. And then you got a lot of folks who have what I would call newer products who are trying to move us forward. The truth is we need both. And just wondering, you know, how do you view that interaction over the next five to 10 years?
Terry Young (12:10):
So I just want to provide one clarification though, James, although I live around the corner from the Sir Adam Beck Public School, I did not know the man personally. So I know I do have some years in the sector that's for sure. But I think, when I look at it - so a couple of things, when we introduced the our innovation efforts a few years ago, and we've been working with people across the sector, companies that we've been working with, governments to try to introduce this, to look at what our focus should be on innovation. One of the pieces of advice we got from the Stakeholder Advisory Committee, and I think we've taken to that is, you know, do what you can to leverage existing assets. And we've certainly done that. And so as we look to the next five to 10 years, and what's really different now, I think what's really different. And I haven't seen this in some time is that we do see a very significant need emerging. So if you think about, what the Annual Planning Outlook told us, there's a session later today about this, but what we were are seeing are, fairly significant capacity needs emerging in 2026. And then as we start to go beyond that five-year period. So in the five years after that, we're also at a transition point in the sense that so many of the contracts that we have right now are expiring. And so we're going to have to need to transition off that. And to me, I think, yes, there is room for both there's room for both leveraging, more of the existing assets that we have. And there's also room for these emerging resources we're seeing, you know, increased reliance on technologies like storage. You know, I'm quite excited about what's going on in the States and as the Federal Energy Regulatory Commission or FERC, their recent Order 2222, that talks about integrating more distributed resources into the system. And I think there's going to be terrific lessons for us there and terrific opportunities for Ontario to leverage this, but at the same time, if you look at the supply mix we have right now, there are other jurisdictions who would be envious of that supply mix. First and foremost, 93% non emitting. And then you've got some very, very significant assets that we can rely on. Nuclear, for instance, that, you know, is, has that workhorse. We are able to get a significant amount of production from those facilities. Hydro continues to be there, right? There's been advancements over the last while in terms of wind and solar. And we have obviously gas and we're starting to see other things starting to emerge, so I think the thing that we need though, and this is what the IESO is focused on these days is really developing that plan. So people can see where their opportunities are. So people can see where, some of the challenges that we have, that we can gain some recognition - joint recognition - around those challenges around those opportunities. So we're starting from this kind of common, level of understanding about what's ahead of us. And that's what we're going to be focused on is priority. Number one for us, we, we started that, well, I guess, priority number one B, cause I think one A would be continuing to manage the impacts of COVID, but, you know, we've started to talk to stakeholders. We know we have the Annual Planning Outlook, that's looking out for the needs. And later this year, we want to introduce something that we're calling the Annual Acquisition Report, where we're indicating to the community what it is the needs are and what our opportunities are to address those needs. So again, providing that clarity, and I think that's one of the things that's been missing is, some of the decisions that we've taken have caught people by surprise and what we want to work on is trying to bring stakeholders with us instead.
James Scongack (16:44):
Yeah. Terry, I think that's a great point and, you know, one of the things that sometimes we can forget about it because we're not, we're not living and breathing it right now. And I think, you know, whether you're in the transmission distribution business, when you're the generation business, you know, I think we all know how difficult it is to actually site new infrastructure anywhere and Ontario included. Right. And you remember some of those battles from, you know, the previous 20 years. Every source of generation has had challenges with, with siting new assets, transmission distribution. And so, you know, I also think we need to recognize that, you know, new, new assets are not easy to secure and often with that come a lot of risk. So I think balancing those things is, is really important. And I agree with you. I think we need both. I think we have a lot of value in existing assets that we have't been able to scratch the surface of, but we also need to be open about, you know, how do we leverage some of those new technologies to optimize that? I know what's coming up here on 9:30, so maybe I'll pass it over to Jordan. Because we really do want to hear some questions and feedback from the group. It looks like we're a hundred people now, which is fantastic. So Jordan, over to you.
Jordan Penic (17:53):
So I think I see one question that's come in from Annette for sure. And so I'll read that out first. So with the change in direction in the U.S. under the Biden administration, can you comment on the export market growth for clean electricity?
Terry Young (18:11):
Well, I think obviously all of us are very much both personally and professionally watching what's going on down south and you know, I see the appointment of the new chair of FERC, some of the comments that President Biden is making and others. And then I look at what we have in Ontario and, you know talk about the clean system that we have. And I think it does give us something to build on, not just in terms of the export market, but also in terms of here in Ontario. As we look at electrification, as we look at different things that are starting to happen. And again, it speaks to what we've been talking about, which is yes, we're very excited about what tomorrow will bring in terms of new resources and how we can integrate them reliably and cost effectively. Because when we look at this, obviously affordability is a big priority, as it should be. And so we're looking at resources in terms of enhancing reliability and, and contributing to affordability. But we, also again, have a great supply mix now and how can we best utilize that?
Jordan Penic (19:41):
All right. Thanks very much, Terry. So there's no further questions at the moment, but for everybody on the call today, feel free to submit them electronically or raise your hand. And we'll take another pause in a moment to answer some further questions from you. So James, I'll pass it back over to you.
James Scongack (20:03):
Yeah, for sure. And Jordan, maybe I'll just jump a bit and it's a great question. And just, you know, I think when, when COVID hit, obviously we knew and Terry, I think you touched on this, you know, we had a major economic dislocation with COVID. And so I think what a lot of people were waiting to see was, is COVID gonna take the foot off the gas, so to speak on sort of the climate change agenda. And what's really interesting as still, well, we're in the thick of COVID and we don't even know if the worst is behind us yet with these variants we're seeing. And I know all of the people in the sector are taking precautions on that, from my perspective, it looks like COVID has just further even accelerated that focus on that clean system that Terry is talking about. And you really see that dominating the discussion between Canada and the U.S. It's really important we make sure we have a factual debate. It's really devastating for Canada, some of the news on pipelines, which was very disappointing, but I think as an electricity sector, the challenge we need to take away to Terry's point is yes, we're going to have major significant supply needs over the next 20 years. We can debate about how much those supply needs are, what can be covered with existing assets, but as a sector, you know, it is going to be unacceptable for us to not continue to be a clean sector. That is now the given of what we have. And so I think it's really about, you know, how do we leverage those assets to ensure we maintain ourselves to be an emissions free sector? You know, at some point I think there's going to be a challenge - is the electricity sector in Ontario, net zero, you know, OPG and other companies in the sector come out with their net zero plans. We did from Bruce. Everybody's doing that, but, you know, I think customers, and I think the political climate is going to be, that we need to be a net zero sector. And in any of our operations, we do have impacts in terms of greenhouse gases, whether from the manufacturing of our components. And I think all of us as individual players in the sector need to think about also, what are we doing in terms of that net zero basis, whether it's our financing. You go to the bond market, now people want ESG investments. They expect that. And Terry, just, just from your perspective, how does the IESO look at that? Where do you see the sort of the climate change debate going, obviously in the short term, we are going to require some additional pinch hitting from our gas assets and some of those existing assets, but over the long-term where do you see that going?
Terry Young (22:25):
So thank you. Great question and great, great comments. I you can see it, you know, emerging around us and obviously we need to respond to government policy. We need to respond to the environment that we're seeing around us. And so I think as, as we look at this, we're starting to consider the impacts of electrification, the impacts of electric vehicles, all of that. And you'll start to see us more clearly indicate how we are considering that. So that's one of the challenges that that we're going to respond to. I saw one of the questions come up and it talked a little bit about, you know, from a community perspective that that obviously environment is front and center with them. I had an opportunity last week, Monday or Tuesday, I can't remember, but I got invited to the Kingston City Council, and they were debating a resolution to send a letter to the government asking for the, talking about the shutdown of the gas-fired facilities, generation facilities that we have here. And so I went and spoke to them and essentially it was just to give them a sense of what our use of gas is and why. And so if you look at, 7% last year, although there's probably about 30%, that's installed overall of the supply mix. And it was a great discussion. They had some really good, good questions for me. I laughed because so this whole, you know, writing the letters in that is, there are a number of municipalities who've done this. And someone who's a commentator in the sector, Parker Gallant, I guess critiqued my performance, and his one-word description was was "unconvincing". I mean, I laughed out loud when I heard this, because I wasn't trying to be convincing. I was trying to provide some facts, but it gives you a sense of that discussion that's now taking place. And so I think James, as you are, as all of us are, we need to be aware of that discussion what the environment is around us and potentially how governments will respond to that as well.
James Scongack (24:54):
Well, Terry, you know, one of the things I, I mean, you could argue it's a challenge in any area of public policy. But you know, I think the issue of absolute sometimes is our biggest problem. And, at the end of the day, it's really about, you know it's really about the interaction of these pieces. And I find where we tend to get ourselves into trouble is when we talk in absolutes and that's really, one thing I'm interested in your perspective on, because I mean this is going to probably be an area of discussion for the next 30 years. Like it's been the last 30 years, but, you know, it's always, you know, we always hear this also around the issue of competition and hey, you know, we should have competitive markets on the one hand. And then, I sort of say competition isn't for everybody. And, you know, you can kind of get into an absolute about, you know, competition is sort of around an MBA discussion around, you know, here's how you drive prices and, and the truth is absolutes just, just don't work. And just wondering, you know, if you could share your perspective with the sector on that issue of competition, where do you think competition makes sense? Where does competition not make sense? Because there are places where, you know, where the IESO needs to be able to have bilateral conversations. There are times where a competitive process makes sense, and I think we can all have an adult conversation about that, but I think we'd all agree, you know, there's no absolute that that one solution is primary over the other. And just wondering how you see that balance over the next five to 10 years.
Terry Young (26:23):
So if I think of the Resource Adequacy Framework that we introduced last fall, and I think of the work around the Incremental Capacity Auction that we were engaged in probably two years ago now. Competition is where I see the biggest difference. We've been clear as of the Resource Adequacy Framework that we've built, that we've introduced that there are going to be other means of procurement that are going to be non-competitive. So when we look at, you know, large projects, when we look at projects that have long lead times and high capital costs you know who are they going to compete with? And so, and it's an interesting thing. And so we know that we believe that we can see more competition than we are right now, but we're not saying that it's a hundred percent, we are saying that there are, so as we look to bring some of these contracts as they expire, you know, we're looking at them. We want to work with the, with the asset owners and talk about a competitive process that they, they might be able to participate in. And so that we can get that. But there are some that can't, I mean, we're, we're very clear about that. And I think over the last two years, I think that's one of the big differences, I think, and I'm pleased with that. We are able to have those conversations now and do it with, not a lens that says everything's competitive, but where does competition make sense, where our facilities able to compete, and then what are the mechanisms that we can put in place to allow them to compete. But very clearly, and we're seeing that now, too. One of the things that has generated a lot of discussion in the sector is the unsolicited proposals process that's been initiated. And certainly, to give a little bit of perspective on this, we know that there are assets or potential assets or projects that investors, stakeholders or whatever, see value in, and we see value in as well. And the government, wants to understand that value. And so they've asked us to look at some of these, and there's probably three main criteria that we're looking at when we evaluate these. One is, from a system perspective, is there benefit, does it make sense? Number two, from a ratepayer perspective, is it affordable? Does it make sense for the ratepayer, because they're going to be on the hook for this, obviously. And then the third one is, do we need it now or can it wait for a competitive process? And so when we look at that and these proposals come forward and there will be some that hit all criteria and there'll be a number that won't. It's not intended to replace the Resource Adequacy Rramework that we're putting in place, but we are recognizing that where projects can be competitive, we may not have that process to deal with them. But at the same time, I think James, that there's been an understanding that we have with stakeholders is that yes, we first have to look at the lens of what can compete and what can't.
James Scongack (30:04):
Terry and I also think too that the key piece people need to we need to continue to challenge, but also be comfortable with as a sector is, where there are those bilateral discussions that, you know, we're continuing to ensure value for money. And I know that's a top priority for, the IESO in your organization. And so, you know, we have had scenarios in the past where, you'll recall right when we opened up the electricity market nearly 20 years ago. What that led to is lack of investment and probably even higher prices in some hours of the day, than we see now. So again, I think you're right, we have to avoid sort of these binary type discussions and be smart and about it. Overall Terry, when you, and I know, sorry, Jordan, are there any other questions? I have one other question for Terry, if we have time.
Jordan Penic (30:54):
Yeah. There's a few other questions here, while you guys have been talking. So if we can maybe just ask a few of those of Terry. So just really quickly here, the new APO relies more on gas and has raised concerns for environmentalists. With Ontario supporting small modular reactor development with deployment post 2030. Why has IESO not included SMR deployment post 2030? I assume in its planning and forecasts.
Terry Young (31:23):
I think it's just really where we are right now, in terms of waiting for that development and clear, getting a better understanding of timelines, getting a better understanding of when this will be. But I think it's clear - we look at these longer-term plans, SMR small, modular reactors are certainly on the radar. And I think for us, it's a question of, trying to get more specific about when we see these being introduced and the opportunities and the capabilities that they will have and how they will help address the needs that we have.
Jordan Penic (32:06):
Great. Thanks, Terry. From Matthew Brown - Where do you see the greatest benefits from the market renewal process materializing for generators, ratepayers and the IESO?
Terry Young (32:17):
Well, when I look at Mark Renewal and it's a huge project that we have underway. And we've just by the way, we appointed a new executive to lead this effort. Folks will be familiar with Jessica Savage and Jessica, excited to announce that she's going to be leading our efforts in this area. And her first day on the job was yesterday, actually, so she's getting right to this. So when I think of Market Renewal, I think just how much this work is needed in terms of redesigning, some of the changes to update our system, to improve the dispatch. Like there's just so much. We haven't done anything significant since the market opened in 2002 so this is badly needed. We've talked about some of the value that it has, some of the benefits in the range of about a billion dollars in terms of efficiencies. So this is a project that's significant one, that's taking a lot of effort, not just from us from stakeholders. And we're now, we're posting detailed design documents later this week. And then we're going to get into the rules and the manuals process. So if you're on the Technical Panel, you've got a lot of work ahead of you is this the way that I would describe it. But again, I think this is a project that has been some time coming and we'll produce the benefits that I think this sector needs.
Jordan Penic (34:00):
Alright, why don't we take one more question from the audience here, and then I'll pass it back over to you, James to close things out today. So FERC Order 2222 about distributed energy resources, aggregations in wholesale markets it under underscores a number of requirements to enable their participation going forward. What's the outlook and timeline for Ontario for this type of DER aggregation participation in the IESO market?
Terry Young (34:34):
Well, as I look at FERC 2222, it's something that we're going to keep an eye on. I think of distributed energy resources that are coming forward, one of our focuses this year will be to develop a roadmap associated with this. There's just a lot of different inputs. I actually do feel that we are at a particularly good time in terms of seeing some of the progress, but I would say that's one of the things that we're trying to focus on this year as we look at this roadmap and try to understand what's coming and when.
Jordan Penic (35:26):
Okay. Thanks very much, Terry. So why don't I pass it back to James?
James Scongack (35:31):
Great, thanks Jordan, and appreciate you and the team at the IESO for setting this up and Terry thanks very much for today's discussion. And also, I think on behalf of the whole sector, whatever source of generation or innovation, transmission, distribution, the folks that represent communities across the sector, I really think this is a great opportunity for us to thank you and the Board and the entire team at the IESO for everything that you do. Obviously throughout the day to day, there's going to be a lot of great information shared and lot of healthy discussions. And I think what makes our sector great is those different perspectives and how we can challenge each other to get the best outcome for Ontarians. So thanks very much for today's session Terry, and I think Jordan, we're gonna move on to a break unless Terry there's anything you'd like to say to wrap.
Terry Young (36:23):
I appreciate the interest in this, and I think the great thing about this sector too, that I might end with is that we're getting bigger, so there are new entrants coming in and the promise of those new entrants. I think of diversity, I think of inclusion two big words for us today, two things that all of us need to focus on. And the diversity that we will get through the inclusion of new participants is something that I think the sector will benefit from. So we had a discussion last week in a Regional Forum and we had 500 people join, and it was such great perspective. So thanks everyone for your interest today.
Terry Young (37:21):
We hope you enjoyed this episode of the podcast. To stay up to date on the latest initiatives, taking place across Ontario's electricity industry. We invite you to follow us on Twitter, Facebook, and LinkedIn, or by visiting us at www.ieso.ca. Thanks for listening.