ELECTRICITY AND NOVA SCOTIA’S FUTURE: Hurdles and … · 2014-02-24 · Starr, Bill Zimmerman, Mark Butler and Wayne Groszko. HURDLES AND OPPORTUNITIES 1 Table of Contents The Ecology

1HURDLES AND OPPORTUNITIES

ECOLOGY ACTION CENTRE RECOMMENDATIONS FOR NOVA SCOTIA ENERGY POLICY

Hurdles and Opportunities

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ELECTRICITY AND NOVA SCOTIA’S FUTURE:

Catherine Abreu

THE ECOLOGY ACTION CENTRE AND ENERGY ISSUES COMMITTEESince 1971, the Ecology Action Centre (EAC) has been working to build a healthier, more sustainable Nova Scotia and Atlantic Canada. Today the EAC has 2,800 members, 250 volunteers and staff, and seven active issue committees, including the Energy Issues Committee. The Energy Issues Committee (EIC) is composed of EAC staff and volunteers who are interested and engaged in work on energy and climate change issues. EIC members bring a diverse range of skills and expertise to promoting policies and projects that prioritize renewable energy, energy conservation, and responsible resource development for the benefit of Nova Scotians and the future of our province.

REPORT AUTHORS AND ACKNOWLEDGEMENTSCatherine Abreu, EAC Energy Coordinator, is the lead author of this report. Kristin Lutes co-authored Section 6.3: Engage Nova Scotians in Long-Term Energy Planning. EIC members provided invaluable input to report content. Very special thanks to Brian Gifford, Jamie Thomson, Claire McNeil, Wendy Lil, Brendan Haley, Richard Starr, Bill Zimmerman, Mark Butler and Wayne Groszko.


Table of ContentsThe Ecology Action Centre and Energy Issues Committee .................................................................................................. Inside Ftont Cover

Report Authors and Acknoledgements .............................................................................................................................................. Inside Ftont Cover

Report Highlights .......................................................................................................................................................................................................................... 3

Executive Summary .....................................................................................................................................................................................................................6

1. Introduction ............................................................................................................................................................................................................................... 10

2. Nova Scotia’s Electricity Landscape .......................................................................................................................................................................... 11

2.1 Background and Public Regulation ......................................................................................................................................................................... 11

2.2 Nova Scotia Power Incorporated .............................................................................................................................................................................. 11

2.2.1 Generation .................................................................................................................................................................................................................. 11

2.2.2 Transmission + Distribution ........................................................................................................................................................................... 12

2.3 Efficiency Nova Scotia Corporation ........................................................................................................................................................................13

2.4 Independent Power Producers and the Community Feed-In Tariff ................................................................................................... 14

2.5 Municipal Utilities ........................................................................................................................................................................................................... 14

2.6 Muskrat Falls and the Maritime Link ................................................................................................................................................................... 14

3. Key Elements of Current Discourse .......................................................................................................................................................................... 15

3.1 Escalating Costs of Electricity .................................................................................................................................................................................... 15

3.2 Ownership and Accountability ................................................................................................................................................................................ 15

3.3 Environmental Obligations ........................................................................................................................................................................................ 16

3.4 Energy Security.................................................................................................................................................................................................................. 16

3.5 Access to Electricity .........................................................................................................................................................................................................17

4. The Conversation We Need ............................................................................................................................................................................................ 18

5. Successes to Date ................................................................................................................................................................................................................... 19

5.1 Energy Efficiency ............................................................................................................................................................................................................... 19

5.2 Greenhouse Gas Emissions Reductions ............................................................................................................................................................. 19

5.3 Renewable Energy Development ............................................................................................................................................................................20

6. Options and Opportunities ............................................................................................................................................................................................ 21

6.1 Plan for 2050: A Fossil-Free Electricity System ............................................................................................................................................... 21

6.1.1 Dismantle Our Attachment to Coal Plants ............................................................................................................................................. 21

6.1.2 Expand Renewables Beyond 2020 ............................................................................................................................................................... 23

6.1.3 Pursue Energy Conservation Through ENSC .......................................................................................................................................... 23

6.1.4 Incorporate More Renewable Energy and Decrease Costs with an Atlantic Power Pool ...........................................24

The NEPOOL Model ................................................................................................................................................................................................24

Power Pooling in 21st Century Atlantic Canada....................................................................................................................................24

6.2 Make Nova Scotia’s Electricity System Available and Accountable to Nova Scotians........................................................... 26

6.2.1 Decentralize Electricity System Authority .............................................................................................................................................. 26

Increasing Non-NSPI Ownership of New Renewable Energy Generation ............................................................................... 16

Changing the Ownership Structure of Utility Assets ........................................................................................................................ 16

6.2.2 Improve Nova Scotians’ Understanding of Utility Accountability ......................................................................................... 28

Remodeling the Guaranteed Rate of Return ........................................................................................................................................... 28

6.3 Engage Nova Scotians in Long-Term Energy Planning ..............................................................................................................................30

How We Plan for Our Energy Future Now .................................................................................................................................................30

Energy Planning Authorities .............................................................................................................................................................................31

Suggestions for a Nova Scotia Planning Authority .............................................................................................................................31

6.4 Protect Universal Access to Electricity ................................................................................................................................................................ 33

7. Summary of Recommendations.................................................................................................................................................................................. 35


Report HighlightsThe Conversation We Need

Nova Scotia’s electricity landscape is in the midst of dramatic change, and decisions about how regional energy resources are developed and consumed have far-reaching implications.

Nova Scotia has legislated a variety of progressive greenhouse gas (GHG) reduction and renewable energy integration targets. Even these ambitious steps are only the first in getting the province to meet the scientifically agreed upon target of reducing overall emissions 80% below 1990 levels by 2050. In coming decades, electricity will fulfill an increasing portion of our energy requirements for home heating and transportation. Establishing a low-carbon electricity system is essential to facilitating this development.

Nova Scotia differs from other Canadian jurisdictions that have undertaken similar energy and electricity system transformations in that energy security is a central motivating factor here rather than economic opportunity. Energy import dependency is one of Nova Scotia’s greatest social and economic vulnerabilities, since the province is almost wholly reliant on expensive and volatile import markets for its heating, transportation and electricity fuel supplies. Our degree of reliance on fossil fuel imports is unique in Canada.

Communities around the world are struggling with the rising costs of electricity and energy. Electricity rate increases are unavoidable as fuel costs rise and ageing infrastructure requires investment. The root of Nova Scotia’s rate increase problem is coal. Since 2004, the price NSPI pays for coal has increased by 70%. The latest 3% increases scheduled for 2013 and 2014 reflect the increasing costs of coal and natural gas as well as the costs of renewable fuels. These increases are the first time investment in renewables has directly impacted rates.

Low income Nova Scotians who pay more than 3% of their income on electricity (or 6% if they heat their homes electrically) are most severely affected by electricity price increases. Current barriers to equitable electricity access significantly affect the health and wellness of Nova Scotians. Nova Scotia must develop creative solutions that ensure long-term sustainable and equitable access to electricity.

Tensions surrounding rate increases and electricity system transformation in the province are heightened by the centralization in Nova Scotia Power Incorporated (NSPI) of authority over the electricity system. Regardless of whether anti-NSPI sentiment is justified, it has a great deal of influence over the tone and content of energy discourse in Nova Scotia.

Nova Scotians’ anxiety surrounding electricity rates and energy planning has the potential to derail momentum on progressive energy policy. Energy has become a political football in Nova Scotia. In response to public concern over rate increases, Nova Scotia’s political parties do Nova Scotians the disservice of crafting arguments that focus on short-term savings while often ignoring the big picture.

We are in the midst of building a new energy system for our province, because our old system is in crisis.

We need a vibrant debate of intelligent, comprehensive visions for how Nova Scotia might change its electricity landscape and plan for its energy future to make life better for Nova Scotians. We need leadership that celebrates our successes and believes we can move forward together to address the crisis that confronts us.

ELECTRICITY AND NOVA SCOTIA’S FUTURE:4Successes to Protect

Nova Scotia is the leader in energy efficiency in Canada because we have an independent Efficiency Utility, Efficiency Nova Scotia Corporation (ENSC), that is ratepayer funded. The International Energy Agency recommends that all jurisdictions seek to establish Efficiency Utilities charged with ensuring energy efficiency competes with other supply options and providing cost-effective efficiency to end-use consumers. Nova Scotia can be proud of ENSC with good reason. Ratepayer funding for efficiency means it is accountable to ratepayers. It enables regulatory oversight and ensures that funding levels are based on cost-effectiveness. To date, energy efficiency programs have reduced the annual electricity load in Nova Scotia by 469 GWh, or 4.3%.

Energy efficiency is best thought of as an energy source, figuring into our energy system in the same way that coal, natural gas, wind, and hydropower might. The more energy efficiency we use, the less we have to use other fuels. Investing money to save electricity only costs on average 3 cents/kWh saved. Ratepayers pay on average 11 cents/kWh to burn fossil fuels. While energy efficiency is the only energy product we see singled out on our power bills, Nova Scotians pay for efficiency just as we pay for our transmission and distribution system along with other energy sources like coal. Referring to the surcharge that funds ENSC as a tax is equivalent to referring to fuel costs as coal taxes or hydro taxes and referring to system costs as electric substation taxes or transmission link taxes. We pay much higher “taxes” for fuel and system maintenance than we do for efficiency.

When Nova Scotia introduced hard caps on emissions from its electricity sector in 2007, we relied on coal to produce over 80% of our electricity and over 50% of provincial emissions resulted from electricity production. Nova Scotia has reduced GHG emissions from our electricity sector by 10% since 2007. This equates roughly to a 5% reduction in overall provincial emissions. In 2012, Nova Scotia counted on coal to produce 59% of its electricity. These gains are extremely significant.

The Center for Health and the Global Environment at Harvard Medical School estimates that particulate matter, nitrogen oxide and sulphur oxide associated with the combustion of coal kills over 24,000 people annually in the US, including 2,800 from lung cancer. The Canadian Cancer Society reports that Nova Scotia has the highest incidence of cancer rates in Canada for most cancers, and that lung cancer remains the leading cause of cancer death in Nova Scotia. Protecting the health of our province and our people means protecting and ramping up our GHG emissions reductions. Continuing to reduce our dependence on coal and transitioning to a fossil-free electricity system are the key means of ensuring our success.

Renewable energy contributed 18% of Nova Scotia’s electricity production in 2012. This represents a fifty percent increase from renewable penetration (12%) two years prior in 2010. We are on track to more than double 2010 renewable energy production within the next two years to 25% of our overall production by 2015. We have established substantial momentum for renewable energy development in the province. The only domestic energy sources that remain to Nova Scotia are renewable sources. It is incumbent upon us to harness the power of our renewable resources and build an electricity system that relies to greater degrees on these sources as their availability grows. This is the only way for Nova Scotia to address its unique energy security hurdle.

A disproportionate amount of attention is paid to the costs of developing renewable energy. It is important to keep in mind that traditional fuel sources like oil, coal, and natural gas benefit from direct and indirect subsidies unavailable to renewable energy. Government programs that incentivize renewable development are often criticized, yet fossil fuels are riding on a century-long legacy of development incentives. The price we pay for fossil fuels externalizes the health and environmental costs associated with their use. Renewables, though requiring higher capital investment in early development stages, offer stable and predictable prices in the long-term while fossil fuels pose a continuous threat to the stability and affordability of systems that rely on them.


Options That Move Us Forward PLAN FOR 2050: A FOSSIL-FREE ELECTRICITY SYSTEM. Our current targets take us to 2030 and we are on a trajectory to meet them. Decisions we make now and in the near future will characterize the context we have to work in moving beyond 2030. We must actively engineer the future we need now and set intermediate energy targets toward a goal of reducing GHG emissions to 80% below 1990 levels by 2050.

Depreciate steam generation at a higher rate to align end of useful life for thermal units with 2030 GHG reduction targets

Pursue energy conservation through Efficiency Nova Scotia Corporation

Expand renewable energy targets aggressively beyond 2020

Incorporate more renewable energy, decrease electricity system costs with an Atlantic Power Pool

MAKE NOVA SCOTIA’S ELECTRICITY SYSTEM AVAILABLE AND ACCOUNTABLE TO NOVA SCOTIANS. Nova Scotians want to understand how they might benefit from the shifts currently taking place in our electricity system. As long as the range of benefit seems limited to a large, monopoly utility, Nova Scotia’s energy transition will remain a source of instability and controversy. Nova Scotians want the opportunity to take part in their new electricity system, and to be sure their best interests are being pursued by those responsible for their electricity system.

Increase decentralized ownership of new renewable energy generation by expanding the Community Feed-In Tariff (COMFIT) and developing a COMFIT or FIT for solar energy

Target low-income Nova Scotians and incentivize participation in the COMFIT program for individuals and communities working in resource-based economies and living in rural areas

Develop a toolkit to support development of energy cooperatives in Nova Scotia

Develop an education strategy for financing institutions on renewable energy project financing

Commission a third-party evaluation of the potential for and impact of bringing Nova Scotia’s distribution and transmission grid back under public ownership

Commission a report on instituting performance-based regulation (PBR) in Nova Scotia

Explore the potential for and impacts of linking NSPI’s return on equity to PBR

ENGAGE NOVA SCOTIANS IN LONG-TERM ENERGY PLANNING. The current structures responsible for energy planning in Nova Scotia are far too limited to allow for a sufficiently dynamic, long-term energy planning process. Planning for Nova Scotia’s energy system requires balancing a variety of factors such as global and local environmental impacts, economic considerations, and social implications. While economic considerations are crucial, the attempt to limit decision criteria to minimizing cost to the ratepayer ignores other factors necessary to properly evaluate complex energy decisions. A Nova Scotia Energy Planning Authority can separate energy planning from the whims of election cycles and create a space for public engagement and

Appoint a panel tasked with developing the framework for a Nova Scotia Energy Planning Authority (EPA) through consultation with Nova Scotians

Make the goal of an EPA to create and enforce a multi-criteria evaluation metric for long-term energy planning and decision-making in the province

Establish continuous and meaningful engagement with Nova Scotians on energy planning

PROTECT UNIVERSAL ACCESS TO ELECTRICITY. It is critical to ensure Nova Scotians have equitable access to electricity without relying on the short-term and blunt response of artificially lowering or freezing electricity rates. A Universal Service Program, as described in our companion report Solving NS’ Electricity Pricing Problem - Energy Affordability vs. Rising Electricity Prices, is an elegant solution.

Establish a Universal Service Program

Ensure new affordable housing meets high efficiency standards and take further steps to ensure equitable access to energy efficiency and conservation programs

ELECTRICITY AND NOVA SCOTIA’S FUTURE:6

Executive SummaryNova Scotia’s electricity landscape is transforming and we must make the best of it.Nova Scotia’s electricity and energy systems are transforming, giving Nova Scotians the opportunity to transform along with them. We cannot afford to miss out on the chance we have to maturely evaluate our current situation, accept past decisions, refuse to repeat past mistakes, and make informed, conscientious decisions about our future. In these reports, the Energy Issues Committee (EIC) of the Ecology Action Centre (EAC) lays out a broad network of options that, if implemented, can work together to better the lives of Nova Scotians now and ensure a healthy, sustainable and prosperous Nova Scotia for decades to come.

We are in the midst of building a new energy system for our province, because our old system is in crisis. The world has changed in ways that Nova Scotia cannot hide from. The reality of climate change has fundamentally altered the energy systems of jurisdictions around the world. Traditional fuels are increasingly expensive and harder to come by. Infrastructure customized to the mid-20th century status quo of fossil-fuel abundance and dependence is ageing, costing more to maintain, retrofit, and upgrade. Along with the cost of fossil fuels, electricity prices are rising everywhere. The burden of rising fuel and electricity costs is felt more keenly as the costs of most other consumer goods also rise. Within this milieu, Nova Scotians are talking about energy more than ever, but our conversations do not adequately reflect the realities and possibilities of our situation.

Anxiety surrounding electricity rates and energy planning has the potential to derail momentum on progressive energy policy. Energy has become a political football in Nova Scotia. In response to public concern over rate increases, Nova Scotia’s political parties do Nova Scotians the disservice of crafting arguments that focus on short-term savings while often ignoring the big picture.

We need a vibrant debate of intelligent, comprehensive visions for how Nova Scotia might change its electricity landscape and plan for its energy future to make life better for Nova Scotians. We need leadership that celebrates our successes and believes we can move forward together to address the crisis that confronts us.

Electricity price increases are inevitable; Nova Scotia needs real solutions that ensure long-term, sustainable and equitable access to electricity.The reality is that electricity price increases are inevitable. Energy costs have grown at over twice the rate of other items registered by the Canadian Consumer Price Index for the last 10 years. Electricity rate increases are unavoidable as energy costs rise and ageing infrastructure requires investment. The root of Nova Scotia’s rate increase problem is coal. Since 2004, the price Nova Scotia Power Incorporated (NSPI) pays for coal has increased by 70%. Artificially lowering or freezing electricity rates is an imprudent response to our new and permanent reality. The EIC calls for real, made-in-Nova Scotia solutions that abandon flashy short-term promises in favor of long-term planning.


Electricity rates are rising. We can slow the pace of rising electricity bills with energy efficiency and a Universal Service Program. We can get control over the situation by diversifying our electricity system with renewables.

The latest 3% rate increases scheduled for 2013 and 2014 reflect the increasing costs of coal and natural gas as well as the costs of renewable fuels. These increases are the first time investment in renewables has directly impacted rates. Investing in renewable energy now is investing in the structural shift that Nova Scotia needs to build a flexible electricity system that relies on a diversity of domestically procured fuels. Only this structural shift will stabilize electricity rates in the long-term.

Scrambling to halt electricity price increases is unrealistic. Ensuring all Nova Scotians have equal access to electricity means lowering electricity bills with energy efficiency programs and addressing the problems of poverty and household energy insecurity with creative solutions such as a Universal Service Program.

Energy efficiency, GHG emissions reductions, and renewable energy improve the lives of Nova Scotians.The progress we have made in sustainable energy planning in the past six years should be cause for celebration in Nova Scotia. As we reduce emissions in this province, we are also developing domestic energy resources, diversifying a fuel supply that can no longer rely on expensive imported coal, and democratizing our electricity system with energy efficiency and community-based power generation. It is critical that we stay on track. Nova Scotia cannot afford to dismantle the momentum we have created to carry us into our future.

Energy efficiency is Nova Scotia’s secret weapon. We are the leader in energy efficiency in Canada because we have an independent Efficiency Utility, Efficiency Nova Scotia Corporation (ENSC), which is ratepayer funded. The International Energy Agency recommends that all jurisdictions seek to establish Efficiency Utilities charged with ensuring energy efficiency competes with other supply options and providing cost-effective efficiency to end-use consumers. Ratepayer funding for efficiency means it is accountable to ratepayers. It enables regulatory oversight and ensures that funding levels are based on cost-effectiveness. To date, energy efficiency programs have reduced the annual electricity load in Nova Scotia by 469 GWh, or 4.3%.

The Center for Health and the Global Environment at Harvard Medical School estimates the combustion of coal kills over 24,000 people annually in the US, including 2,800 from lung cancer. The Canadian Cancer Society reports that Nova Scotia has the highest incidence of cancer rates in Canada for most cancers, and that lung cancer remains the leading cause of cancer death in Nova Scotia. Nova Scotia has reduced GHG emissions from our electricity sector by 10% since 2007. Protecting the health of our province and our people means protecting and ramping up our GHG emissions reductions. Continuing to reduce our dependence on coal and transitioning to a fossil-free electricity system are the key means of ensuring our success.

The only domestic energy sources that remain to Nova Scotia are renewable sources. It is incumbent upon us to harness the power of our wind, solar, and tidal resources and build an electricity system that relies to greater degrees on these sources as their availability grows. This is the only way for Nova Scotia to address its unique energy security hurdle. We are on track to more than double 2010 renewable energy production within the next two years to 25% of our overall production by 2015. The price we pay for fossil fuels externalizes the health and environmental costs associated with their use. Renewables, though requiring higher capital investment in early development stages, offer stable and predictable prices to Nova Scotians in the long-term while fossil fuels pose a continuous threat to our health and the stability and affordability of our electricity system.

ELECTRICITY AND NOVA SCOTIA’S FUTURE:8Nova Scotia must plan for a fossil-free electricity system that is built by the people of Nova Scotia.If we want to protect our province and our people while remaining competitive in the emerging global economy, we cannot repeat history and continue with our brittle, centralized electricity system that relies on a single fuel. Nova Scotia must build a new electricity system that acknowledges our context and capitalizes on our strengths.

Energy import dependency is one of Nova Scotia’s greatest social and economic vulnerabilities, since the province is almost wholly reliant on foreign markets for its heating, transportation and electricity fuel supply needs. Our degree of reliance on fossil fuel imports is unique in Canada. A made-in-Nova Scotia electricity system is one that relies on a diverse range of our domestic, renewable energy supplies.

Our current renewable energy goals take us to 2020 while our GHG reduction targets take us to 2030. Decisions we make now and in the near future will characterize the context we have to work in moving beyond 2030. We must actively engineer the future we need now and set intermediate energy targets toward the goals of a fossil-free electricity system and GHG emissions 80% below 1990 levels by 2050. Steam generation should be depreciated at a higher rate to align end of useful life for thermal units with 2030 GHG reduction targets. An Atlantic Power Pool should be established to incorporate more renewables into the regional grid.

Nova Scotians must be given the opportunity to take part in their new electricity system, and to be sure their best interests are being pursued by decision makers. Otherwise, the transformation underway in our electricity system will be assailed by doubt and controversy. EIC recommends increasing decentralized ownership of new renewable energy generation, commissioning a third-party evaluation of the potential for and impact of bringing Nova Scotia’s distribution and transmission grid back under public ownership, and commissioning a report on instituting performance-base regulation for NSPI.

A Nova Scotia Energy Planning Authority can free energy planning from the political whims of election cycles, develop a long-term perspective, and actively engage Nova Scotians.Nova Scotians must be engaged in planning for their long-term energy future. The current structures responsible for energy planning in Nova Scotia are far too limited to allow for a sufficiently dynamic, long-term energy planning process. Momentum on energy policy is threatened every four years due to the election cycle. The Utility and Review Board is guided by principles set in the Public Utilities Act, a document that dates from 1913. Planning for Nova Scotia’s energy system requires balancing a variety of factors such as global and local environmental impacts, economic considerations, and social implications. While economic considerations are crucial, the attempt to limit decision criteria to minimizing cost to the ratepayer ignores other factors necessary to properly evaluate complex energy decisions. In other jurisdictions, Energy Planning Authorities work to separate energy planning from the whims of election cycles and create a space for public engagement and all-party buy-in. EIC recommends the appointment of a panel tasked with developing the framework for a Nova Scotia Energy Planning Authority through broad consultation with Nova Scotians.


Establishing a Universal Service Program will protect Nova Scotians’ access to electricity.It is time that Nova Scotia Focus on affordability instead of electricity price alone. We must take decisive steps toward energy conservation and to reduce the energy burden of the lowest income Nova Scotians so they don’t have to choose between heating and eating or medicine and lights. The best solution to the very real problems facing low income households is to create Universal Service Program, a four point targeted program that makes energy affordable to those households.

Low income Nova Scotians who pay more than 3% of their income on electricity (or 6% if they heat their homes electrically) are most severely affected by electricity price increases. The provincial government currently spends $117 million subsidizing electricity and fuel purchases. The Department of Community Services also provides repayable loans to some Income Assistance households. Efficiency NS spends some of its $45 million helping low-income households install money saving devices. We can fund the $9-14 million cost of a Universal Service Program from general tax revenues including the savings from existing programs; a refund of the HST rebate for households earning over $100,000 and a contribution from NSPI; or a small fee on all electricity bills.


1 IntroductionNova Scotians can’t stop talking about energy and electricity, and their preoccupation with these topics is easily understood. The Province’s electricity landscape is in the midst of dramatic change, and decisions about how regional energy resources are developed and consumed have far-reaching implications.

Energy poverty is a reality in many Nova Scotian households, where the combined cost of electricity and heating exceeds six percent of income. Some of Nova Scotia Power Incorporated’s (NSPI) largest industrial customers have closed their doors, citing high electricity rates as a key reason for closure. The volatility of coal markets and unparalleled greenhouse gas (GHG) intensity of the fuel are forcing the Province to revamp an electrical system predicated on coal combustion.

Public debate is polarized and politicized. NSPI and the provincial New Democratic Party government link rate increases to the rising cost of coal and demand decline. The Official Opposition pinpoints the cost of Nova Scotia’s efficiency programs as an undue burden for ratepayers. The Progressive Conservative caucus warns against the costs of investing in too much renewable energy too fast. Solidarity Halifax and other advocacy groups demand that NS government expropriate the private utility. The Lower Power Rates alliance connects high electricity rates to what it calls a ‘broken system’ where regulatory authority is too weak to protect Nova Scotians.

Mounting anxiety surrounding Nova Scotia’s electricity rates and energy planning has the potential to derail momentum on progressive energy policy. Very significant gains that have been made in energy efficiency, renewable energy, and GHG emissions reductions could be stalled or reversed.

The Ecology Action Centre’s (EAC) Energy Issues Committee (EIC) acknowledges the real benefits that arise from investment in energy efficiency and renewables and believes they are critically important to sustain. The EIC also recognizes the potential and opportunity for positive change to arise from the current debate.

This report highlights those areas where the EIC believes there is the greatest opportunity for progress within Nova Scotia’s electricity system and offers recommendations for change. There is also some discussion of broader energy planning, though the report primarily focuses on electricity as it is our electricity system that is undergoing transformation and is the source of a great deal of attention and debate.

The report begins with an overview of Nova Scotia’s current electricity landscape. Understanding the contours of our electricity system is crucial to imagining how they might shift. From there, an attempt is made to single out the key themes driving present dialogue around electricity and energy planning in the province. An analysis of this dialogue follows in Section 4: The Conversation We Need. Section 5: Successes to Date describes the progress we have made in energy policy thus far, calling for sustained momentum on energy efficiency, greenhouse gas emissions reductions, and renewable energy development. The next section, Section 6: Options and Opportunities, contains our recommendations. These recommendations are primarily directed to the level of Nova Scotia’s present and future governments and policy-makers. The report concludes with a summary of these recommendations.


2 Nova Scotia’s Electricity Landscape2.1 Background and Public RegulationNova Scotia Power Incorporated (NSPI) produces and distributes 95% of the electricity in Nova Scotia.

The Department of Energy and Department of Environment are responsible for developing the regulations that govern the electricity sector. The Nova Scotia Utility and Review Board (UARB) is responsible for overseeing the regulation of the electricity sector. The UARB has a mandate under the Public Utilities Act to ensure universal access for all Nova Scotians to public utility services at “just and reasonable” rates.

Comparatively speaking, Nova Scotia is ahead of the curve in Canada in terms of policy goals and approaches to reducing GHGs and other emissions from the electricity sector. Milestones include:

Provincial GHG Reduction Goal: 10% below 1990 GHG levels by 2020

Provincial Emissions Reductions Goals for Sulphur Oxide, Nitrogen Oxide and Mercury

Electricity GHG Hard Cap Goal: 7.5 Megatonnes (MT) by 2020, which is 25% below 2007 GHG levels from the electricity sector (this constitutes 50% of the Provincial GHG reduction target)

Energy Efficiency & Conservation: 20% greater efficiency above 2008 levels by 2020, and the establishment of the first arms’-length energy efficiency agency in Canada – Efficiency Nova Scotia

Renewable Electricity: legislated goal to have 25% of provincial electricity supply produced from renewable sources by 2015 and 40% of provincial electricity supply produced from renewable sources by 2020

Many of these goals were approved with 100% all-party consent from the 2007 NS legislature with the passing of the Environmental Goals and Sustainable Prosperity Act (EGSPA).

2.2 Nova Scotia Power IncorporatedNSPI primarily generates electricity at 5 thermal electricity plants (roughly 66% of NSPI’s total generating capacity in 2011). In 2012, about 59% of NSPI’s electricity generation resulted from coal combustion. Most of this coal is imported from three countries: Columbia, Venezuela and the United States (Hughes 2007).

The release of greenhouse gas (GHG) emissions from NSPI’s coal burning for electricity constitutes the single largest source of GHGs in the province of Nova Scotia, fully 46% of total provincial emissions.

NSPI is a vertically integrated, regulated utility. NSPI is a publicly regulated utility – the Nova Scotia UARB sets rates based on NSPI’s approved cost of service and sets a guaranteed rate of return, currently set at a range of 8.75% to 9.25% a year. NSPI is the major asset holding of Emera Corporation, a multi-national energy company with holdings in Canada, the U.S.A. and the Caribbean.

2.2.1 GENERATIONNSPI owns, operates, and maintains the vast majority of electricity generation facilities in Nova Scotia.

Table 1 lists Nova Scotia Power Incorporated’s (NSPI) generation assets.

ELECTRICITY AND NOVA SCOTIA’S FUTURE:12TABLE 1: NSPI GENERATION ASSETS (NSPI 2013G) Unit Net Capacity In Service Fuel Type 2011 GWh

Lingan Unit 1 155MW 1979 Coal / Petcoke 931.8




Tufts Cove Unit 1 81MW 1965 Oil / Natural Gas 522.6



Tufts Cove Unit 4 49MW 2003 Natural Gas 259.8

Tufts Cove Unit 5 49MW 2004 Natural Gas 151.4

Tufts Cove Unit 6 50MW 2012 Waste Heat / Nat. Gas 0

Point Tupper 154MW 1973 Coal / Petcoke 627.6

Point Aconi 171MW 1994 Petcoke / Coal 1 098.5

Trenton Unit 5 152MW 1969 Coal / Petcoke 644.5

Trenton Unit 6 155MW 1991 Coal / Petcoke 1 173.3

Burnside 1 33MW 1976 Light Oil 1.357



Burnside 4 33MW 1976 Light Oil -0.046

Victoria Junction 1 33MW 1976 Light Oil 0.189

Victoria Junction 2 33MW 1975 Light Oil 0.261

Tusket 1 24MW 1971 Light Oil 0.005

Hydro System 397MW Various Hydro 1 088.5

NSPI Wind 80MW Various Wind 247.5

A seasonal shutdown schedule was recently announced for Lingan coal-fired units 3 and 4 with complete shutdown anticipated for 2017.

2.2.2 TRANSMISSION + DISTRIBUTIONNSPI owns and operates Nova Scotia’s electricity grid. The grid delivers electricity to consumers along high-voltage transmission lines that carry power from generation facilities to demand centers. Lower voltage distribution lines connect individual consumers within demand centers.

TAKEN FROM NSPI (2013F):

Nova Scotia’s transmission and distribution system consists of 31,800km of power lines stretching across roughly 29,500 transmission towers, 500,000 distribution poles, and 190 substations to bring electricity from power plants to customers.

About 5,300 km of transmission lines operating at high-voltages from 69 KV to 345 KV bring electricity from generating stations to distribution substations throughout the province. Transmission lines often run along large steel or wooden towers, commonly seen along Nova Scotia’s highways.


AMHERST

PICTOU ANTIGONISHTRENTON

PORTHAWKSBURY

SYDNEY

WOLFVILLE

DIGBY

YARMOUTHLIVERPOOL

DARTMOUTHHALIFAX

ANNAPOLIS ROYAL

Electricity carried by transmission lines is sent through distribution substations and transformers that step the electricity down to a lower voltage level that is safe for delivery to homes and businesses. 26,500 km of distribution lines then carry the electricity to localized areas and connect to individual meters on homes and businesses.

A 350 MW capacity transmission line connects Nova Scotia with New Brunswick, enabling limited importing and exporting of electricity with neighbouring jurisdictions. The Nova Scotia system operator may import electricity when it is needed and can be purchased at a lower price than it can be generated inside the province, or may export electricity when it can be sold at a price that lowers costs for customers inside Nova Scotia.

FIGURE 1: NSPI TRANSMISSION AND DISTRIBUTION ASSETS (NSPI 2013F)

2.3 Efficiency Nova Scotia CorporationEfficiency Nova Scotia Corporation (ENSC) was established through provincial legislation in 2009 as a sole-purpose independent administrator for electric efficiency. ENSC is a not-for-profit agency responsible for the design and delivery of cost-effective, demand side management (DSM) programs and services in Nova Scotia. In 2010, the process of transferring energy efficiency programs and service delivery from NSPI to Efficiency NS began. In 2011, with the transfer complete, ENSC tabled and received UARB approval for its first ever DSM Plan. The Plan detailed energy efficiency programs and services for Nova Scotia electricity rate-payers and anticipated results for 2012. Following the successful execution of the 2012 Plan, ENSC received regulatory approval for a multi-year DSM Plan for 2013 and 2014.

A systems benefit charge is levied on all electricity consumers in Nova Scotia to cover ENSC electricity program costs.

TRURO

69 KV LINES

138 KV LINES

230 KV LINES

345 KV LINES

ELECTRICITY AND NOVA SCOTIA’S FUTURE:142.4 Independent Power Producers and the Community Feed-In TariffThe Electricity Act requires Nova Scotia to produce 25% of its electricity from renewable energy by 2015. Legislation mandates that 300 gigawatt hours (GWh) of this requirement be met using energy from Independent Power Producers (IPPs). IPPs are larger-scale renewable energy projects of which NSPI can hold no more than 49% ownership. Their intention is to promote participation in meeting renewable energy goals from non-NSPI parties.

The Community Feed-In Tariff (COMFIT) program was introduced in 2011 to make room for small-scale (under 6MW), community-owned renewable energy projects. COMFIT projects are expected to provide up to 100MW of generating capacity to Nova Scotia. The program guarantees a pre-determined per-kWh rate, differentiated by renewable technology, to producers. Municipalities, First Nations, cooperatives, universities, community economic development investment funds (CEDIFs) and non-profit groups are eligible to apply to the COMFIT program. There is a separate Feed-In Tariff (FIT) for Developmental Tidal Arrays that does not carry the community ownership requirements of the COMFIT.

2.5 Municipal UtilitiesThere are six municipally owned independent utilities in Nova Scotia:

Town of Antigonish

Berwick Electric Commission

Town of Canso

Town of Lunenburg

Town of Mahone Bay

Riverport Electric Light Commissioners

These utilities supply electricity to consumers within their territory and own and operate their own distribution systems. Together, they account for approximately 2% of the electrical load in the province. Until recently, municipal utilities were required to purchase power from NSPI. This changed in 2007 when the Province granted municipal utilities the ability to purchase electricity from any competitor on the wholesale market. NSPI continues to provide the majority of power purchased by municipal utilties.

2.6 Muskrat Falls and the Maritime LinkThe Nova Scotia Utility and Review Board recently approved the Maritime Link project on a conditional basis. The Maritime Link is a subsea cable that will connect the island of Newfoundland to Nova Scotia and have the capacity to transmit 500MW of energy between the two provinces. This energy will come from a new hydroelectric dam being built at Muskrat Falls, Labrador. Emera will build and finance the Maritime Link in exchange for 20% of the power produced at Muskrat Falls. Newfoundland & Labrador will consume 40% of that power, leaving another 40% available for purchase.

Harnessing the hydroelectric potential of the Lower Churchill system in Labrador would have irreversible adverse effects on the local ecosystem and indigenous Nunatsiavut, Nitassinan, and NunatuKavut communities (Lower Churchill Joint Review Panel 2011). The dramatic, large-scale impacts of the Muskrat Falls project must be weighed against its potential to transition the region away from fossil fuel dependence.

The ecological and social impacts of developing Muskrat Falls must also be weighed against the potential adverse impacts of alternative options, in the short and long-term. Widespread ecological and economic consequences of climate change must be met with comprehensive energy system planning in Atlantic Canada.


3 Key Elements of Current DiscourseDebate on energy policy in Nova Scotia is a minefield of competing interests and priorities. The situation is made more volatile as energy becomes a political football for provincial parties to bandy about leading up to the imminent provincial election. There are five recurring themes that emerge in all of the varied and often contradictory conversations being had about energy: escalating costs of electricity; ownership and accountability; environmental obligations; energy security; and access to electricity.

3.1 Escalating Costs of ElectricityMany Nova Scotians were enraged by Nova Scotia Power Incorporated’s (NSPI) latest application for a six per cent rate hike over two years. The application came on the heels of seven increases over the last eleven years, and persistent resentment of salaries and bonuses paid to top executives of NSPI and its parent company, Emera. An online petition opposing the rate hikes gathered almost 31,000 signatures. Taking the now-approved rate hikes into account, 2014 electricity rates will be about 50% higher than 2001 rates.

The root of the rate increase problem is coal. Since 2004, the price NSPI pays for coal has increased by 70% (NSPI 2013g). These costs are passed on to Nova Scotian ratepayers. Since 2006, Nova Scotia’s residential electricity rates have increased over 30%. The preceding decades had seen comparatively few rate increases. On average, Nova Scotia residents are paying about two cents more per kilowatt hour (kWh) of electricity than they were in 2006 (Hughes 2009). This is due in part to the rising operating costs associated with NSPI’s high dependency on an imported coal supply and the associated need for environmental compliance in reducing coal burning emissions through technological innovation and lower-emissions fuel supplies.

The 3% rate increases scheduled for 2013 and 2014 reflect the increasing costs of coal and natural gas as well as the costs of renewable fuels (NSPI 2012b). These increases are the first time investment in renewable energy has directly impacted rates in Nova Scotia. Previous increases resulted from rising fuel and infrastructure costs. As the province transforms its fossil fuel –dependent electricity system and invests in necessary upgrades to ageing infrastructure, rates will face increasing pressure.

See our companion report Solving NS’ Electricity Pricing Problem: Energy Affordability vs. Rising Electricity Prices for further exploration of this issue and recommended solutions.

3.2 Ownership and AccountabilityTensions surrounding rate increases and electricity system transformation are heightened by the centralization in NSPI of authority over the electricity system. NSPI is the focus of much criticism and villainization within the province. Regardless of whether anti-NSPI sentiment is justified, it has a great deal of influence over the tone and content of energy discourse in Nova Scotia.

Common concerns revolve around: 1) NSPI and Emera profits, salaries, and bonuses; 2) potential conflicts of interest arising from the role NSPI’s guaranteed rate of return plays in its investment decision making; 3) whether NSPI should be allowed to pass on to ratepayers risks associated with new investments; and 4) lack of clarity and/or accessibility within the regulatory structure that governs NSPI (i.e. perceived absence of public accountability despite substantial regulatory oversight).

ELECTRICITY AND NOVA SCOTIA’S FUTURE:16Responses to this issue arise from nearly every sector of Nova Scotia society. As mentioned, several public advocacy groups have in recent years called on Nova Scotia government to re-appropriate the utility and make it public once more (Solidarity Halifax 2012). Others have suggested separating generation from transmission/distribution assets and asserting public ownership over the latter (Majka 2012a). Many Nova Scotians, including the Progressive Conservative Party, demand adjustments to the guaranteed rate of return ranging from a reduction to a total elimination (Jackson 2013a). Some, including the Provincial Liberal Party, propose partial or complete deregulation of the Nova Scotia electricity market to allow for greater competition (Jackson 2013b).

3.3 Environmental ObligationsIn 2012, the Government of Canada announced new regulations for coal burning electricity that have significant implications for Nova Scotia. Under the equivalency agreement Nova Scotia has signed with the Federal Government, the Province is required to reduce its greenhouse gas (GHG) emissions from the electricity sector to 7.5 million tonnes of CO2 equivalent (CO2e) by 2020. This is a 25% reduction from 2007 levels (10.15 million tones CO2e). A further 40% reduction to 4.5 million tonnes CO2e is required by 2030. (Nova Scotia 2012)

The mitigation of GHG emissions from coal burning in Nova Scotia depends on building greater domestic and regional energy security from sustainable, low-carbon sources of renewable electricity supplies. Stabilizing and reducing electricity demand through energy efficiency and conservation programs is also required. The necessity of these measures is made more critical by the very real threats posed by climate change. As a coastal province that relies heavily on resource-based economic activity, Nova Scotia is particularly vulnerable to the impacts of a changing climate.

As outlined above, Nova Scotia has legislated a variety of progressive GHG reduction and renewable energy integration targets. Even these ambitious steps are only the first in getting the province to meet the scientifically agreed upon target of reducing overall emissions 80% below 1990 levels by 2050. In coming decades, electricity will fulfill an increasing portion of our energy requirements for home heating and transportation. Establishing a low-carbon electricity system is essential to facilitating this development.

3.4 Energy SecurityEnergy import dependency is one of Nova Scotia’s greatest social and economic vulnerabilities, since the province is almost wholly reliant on foreign markets for its heating, transportation and electricity fuel supply needs. Our degree of reliance on fossil fuel imports is unique in Canada. In a time of increasing market volatility and global uncertainty, this foreign dependency is a key provincial policy issue with broad ramifications on all sectors of society.

The topic of Nova Scotia’s overwhelming reliance on expensive, imported energy supplies like oil and coal has been thoroughly discussed by policy-makers and the public for decades (see for example Energy: A Plan for Nova Scotia, 1979 and subsequent provincial energy strategies, including the 2009 Energy Plan). Starr (2011) describes the pivotal role energy insecurity has played in shaping the evolution of Nova Scotia’s energy policy.

Yet still the problem remains: Nova Scotia is energy insecure. Energy insecurity is a primary motivator encouraging the province’s transition from an electricity system that relies predominately on a single, imported fuel source to one that incorporates a diverse range of domestic and regionally procured energy supplies.


3.5 Access to ElectricityElectricity is a necessity, and provides energy for cooking, heating and lighting. As such it is essential to the right to adequate housing, in providing a safe means of cooking, refrigeration and a healthy home environment. At an international level, Canada is a signatory to the Convention on Economic, Social and Cultural Rights (CESCR), which protects the right to adequate housing, as well as the Convention on the Elimination of Discrimination Against Women (CEDAW), which protects women’s rights to adequate living conditions, particularly in relation to electricity. For poor households, the loss of electricity can result in a forced eviction into homelessness.

Low income Nova Scotians who pay more than 3% of their income on electricity (or 6% if they heat their homes electrically) are most severely affected by electricity price increases. This includes people who are unemployed or living on social assistance, those working for low wages, visible minorities and low income seniors on fixed incomes. They are most likely to face the stark choice of heating or eating, medications or lights. This is also true for Nova Scotians who heat with oil with its faster rising price. About 125,000 households are affected with about 76,000 Low Income Cut Off households being the most severely affected.

It is imperative that Nova Scotia develop effective and adaptable means of guaranteeing equitable access to electricity province-wide. Current barriers to electricity access significantly affect the health and wellbeing of Nova Scotians.


4 The Conversation We NeedThe world has changed in ways that Nova Scotia cannot hide from. The reality of climate change has fundamentally altered the energy systems of jurisdictions around the world. The inherent scarcity of non-renewable resources is having an evermore-recognizable impact on fossil fuel markets: traditional fuels are increasingly expensive and often harder to come by. Infrastructure customized to the mid-20th century status quo of fossil-fuel abundance and dependence is ageing, costing more to maintain, retrofit, and upgrade. Along with the cost of fossil fuels, electricity prices are rising everywhere. The burden of rising fuel and electricity costs is felt more keenly as the costs of most other consumer goods and services also rise. Within this milieu, Nova Scotians are talking about energy more than ever, but our conversations do not adequately reflect the realities and possibilities of our situation.

Energy has become a political football in Nova Scotia. We have lately been inundated with political messaging that attempts to ally us against certain policies or rally us in favour of new measures that, at best, would result in minuscule improvements to energy affordability and security. In response to public concern about price increases, Nova Scotia’s political parties are doing us the disservice of crafting arguments that focus on short-term savings while often ignoring the big picture.

So far, we are being sold plans that shave, at the most and in the short-term, a few dollars off our bi-monthly bills from NSPI. We are hearing that we should consider extending our dependence on our obsolete, fossil fuel-reliant energy system, leaving us at the mercy of volatile fossil fuel markets. There are promises that play to resentment of Nova Scotia Power’s monopoly while boasting token rate reductions, and plans that generate a lot of powerful rhetoric about disturbing NSPI’s stronghold while failing to provide clear, evidence-based projections for how that might actually play out. Nova Scotians are being egged on to argue over ideas that sound big, but are unlikely to result in substantive changes to our electricity sector.

The progress we’ve made in sustainable energy planning in the past six years is somehow a point of contention rather than celebration. This despite the fact that as we reduce emissions in this province, we are also developing domestic energy resources, diversifying a fuel supply that can no longer afford to rely on expensive imported coal, and democratizing our electricity system with energy efficiency and community-based power generation.

Wind farms, energy efficiency, Muskrat Falls, biomass, rising energy rates: these are not discrete, controversial topics. They are interrelated elements of a dramatic transition underway in Nova Scotia, and they are controversial because they represent a new kind of electricity and energy system. We are in the midst of building a new energy system for our province, because our old system is in crisis.

What we need is vibrant debate of intelligent, comprehensive visions for how Nova Scotia might do things differently and make life better for Nova Scotians well into the future. What we need is leadership that believes we can address this crisis together, boldly, with pride and vision.

With that in mind, it is important to begin by outlining the leadership and successes Nova Scotia can be proud of.


5 Successes to Date5.1 Energy EfficiencyNova Scotia is the leader in energy efficiency in Canada because we have an independent Efficiency Utility that is ratepayer funded.

Energy efficiency is best thought of as an energy source, figuring into our energy system in the same way that coal, natural gas, wind, and hydropower might. The more energy efficiency we use, the less we have to use other fuels. The UARB decided to invest in energy efficiency because it is the cheapest energy option and the best deal for Nova Scotian ratepayers. Investing money to save electricity only costs on average 3 cents/kWh saved. Ratepayers pay on average 11 cents/kWh to burn fossil fuels (ENSC 2012). Without investment in energy efficiency, Nova Scotia would eventually have to build a new power plant to satisfy demand (recent reductions in demand for electricity resulting from the loss of some large industrial consumers is likely to be short-term as Nova Scotia prioritizes reinvigorating its industrial sector). Investing in energy efficiency also creates more local employment than investing in any other energy source.

To date, energy efficiency programs have reduced the annual electricity load by 469 GWh, or 4.3%. Without energy efficiency initiatives we would have to generate 4.3% more electricity. ENSC has delivered programming to over 100,000 participants. In 2012, ENSC launched a program that will help save participating farms an average of $1,700 on annual electricity costs in coming years. (ENSC 2012)

While energy efficiency is the only energy product we see singled out on our power bills, Nova Scotians pay for efficiency just as we pay for our transmission and distribution system along with other energy sources like coal. Referring to the surcharge that funds ENSC as a tax is equivalent to referring to fuel costs as coal taxes or hydro taxes and referring to system costs as electric substation taxes or transmission link taxes. If we were to consider all of our electricity system investments as such, we would find that we pay much higher “taxes” for fuel and system maintenance than we do for energy efficiency.

In 2008, Wheeler outlined a stakeholder consensus on energy efficiency and demand side management. Stakeholders rejected funding efficiency programs via the government because of concerns over patronage and political interference. NSPI administration was rejected because of the inherent conflict of interest with activities that reduce the sale of their product. EAC was among the stakeholders that advocated for the Efficiency Utility model. This model involved creating an independent agency focused solely on encouraging energy efficiency: the Efficiency Nova Scotia Corporation.

The International Energy Agency (IEA) (2011) recommends that all jurisdictions seek to establish Efficiency Utilities charged with ensuring energy efficiency competes with other supply options and providing cost-effective efficiency to end-use consumers. Nova Scotia’s Efficiency Utility model, with ENSC operating as an independent agency, is unique in Canada and viewed as a best practice (IEA 2011 and Weis et al. 2012). Nova Scotia can be proud of this with good reason. Ratepayer funding for efficiency means it is accountable to ratepayers. It enables regulatory oversight and ensures that funding levels are based on cost-effectiveness.

5.2 Greenhouse Gas Emissions ReductionsWhile Nova Scotia is not the only jurisdiction in Canada to face the challenge of coal dependence and institute aggressive measures to transition away from coal, its starting position differs significantly from other provinces.

When Nova Scotia introduced hard caps on emissions from its electricity sector in 2007, we relied on coal to produce over 80% of our electricity and over 50% of provincial emissions resulted from electricity production. The average contribution to provincial emissions from electricity generation in other provinces is less than 10%. Other

ELECTRICITY AND NOVA SCOTIA’S FUTURE:20coal-dependent provinces like Alberta and Saskatchewan have electricity sectors that constitute 21% and 20% of provincial emissions, respectively. Ontario, which has committed to phasing out its coal plants entirely by 2014, relied on coal to produce 19% of its electricity in 2007 (Weis et al. 2012).

In 2012, Nova Scotia counted on coal to produce 59% of its electricity (NSPI 2013a). The percentage was forecast to be just under 50%, but high natural gas prices and availability issues pushed the use of coal up. We have reduced GHG emissions from our electricity sector by 10% since 2007. This equates roughly to a 5% reduction in overall provincial emissions. These gains are extremely significant.

A recent study from the Center for Health and the Global Environment at Harvard Medical School (2011), estimated that in the United States particulate matter, nitrogen oxide and sulphur oxide associated with the combustion of coal kills over 24,000 people annually, including 2,800 from lung cancer. The Harvard study estimated that the health impacts and lost productivity associated with mercury emissions stands at $5.5 billion USD a year, while nitrogen and sulphur oxide emissions cost $187.5 billion USD a year, in lives lost.

In 2009, the Canadian Cancer Society reported that Nova Scotia continues to hold the distinction of the highest incidence of cancer rates in Canada for most cancers, and that lung cancer remains the leading cause of cancer death in Nova Scotia.

The Intergovernmental Panel on Climate Change (IPCC) concludes that as a result of human activities, average global temperatures have warmed by over 0.7 degrees in the past 150 years. These increases in global temperatures have caused widespread melting of snow and ice while contributing to rising global average sea levels. Climate impacts associated with these changes are beginning to increase in frequency and severity (IPCC 2012). Atlantic hurricanes are moving northward in record warm oceans, and causing damage to Nova Scotian coastal communities, as experienced with Hurricane Juan in 2003, or more recently with Hurricane Earl in 2010.

Protecting the health of our province and our people means protecting and ramping up our GHG emissions reductions. Continuing to reduce our dependence on coal and transitioning to a fossil-free electricity system are the key means of ensuring our success.

5.3 Renewable Energy DevelopmentRenewables can vastly improve energy security by providing domestic sources of power and displacing electric demand through direct heat production (IEA 2013). Renewables also improve the diversity of fuel sources, thereby contributing to electricity system flexibility and improving resiliency to central shocks (IEA 2013). Until recently, Nova Scotia has had a brittle, single-source system that relies on coal. It is essential we develop a dynamic multi-source system that relies on our local renewable energy potential. We are taking significant steps in this direction. The environmental impact of each renewable source and the real impact on GHG reduction must be examined and questions have been raised about some of the specific projects in Nova Scotia, but the overall direction is very sound.

Renewable energy contributed 18% of Nova Scotia’s electricity production in 2012 (NSPI 2013g). This represents a 50% increase from renewable penetration (12%) two years prior in 2010. We are on track to more than double 2010 renewable energy production within the next two years to 25% of our overall production by 2015. We have established substantial momentum for renewable energy development in the province.

As the IEA (2013) points out, a disproportionate amount of attention is paid to the costs of developing renewable energy. While the issue of cost can never be ignored, it is important to keep several things in mind when evaluating the costs of renewables. To begin, traditional fuel sources like oil, coal, and natural gas benefit from direct and indirect subsidies that renewable energy cannot take advantage of. While criticism is often leveled at government programs that incentivize renewable development, fossil fuels are riding on a century –long legacy of development incentives. Further, there is an infrastructural inertia that facilitates the cheaper use of fossil fuels while use of renewables requires infrastructural change and investment. The price we pay for fossil fuels externalizes the health and environmental costs associated with their production and use. Finally, renewables, though requiring higher capital investment in the early stages of development, offer stable and predictable prices in the long-term while fossil fuels pose a continuous threat to the stability and affordability of systems that rely on them.


6 Options and OpportunitiesThere is any number of options available to Nova Scotians as we contemplate the best and most equitable means of meeting our current and future energy needs. While by no means an exhaustive list, the opportunities highlighted here and in our companion report Solving Nova Scotia’s Electricity Pricing Problem: Energy Affordability vs. Rising Electricity Prices are those which the Energy Issues Committee of the Ecology Action Centre believes have the greatest potential to develop a fairer, cleaner, sustainable and more accountable energy system for the future of this province its people.

6.1 Plan for 2050: A Fossil-Free Electricity SystemThe long-term health of Nova Scotians and our province depends on our ability to plan for and implement a low-carbon future. In order to avoid the catastrophic health, economic, and ecological impacts of more than 2°C of global warming, the IPCC (2012) estimates that GHG emissions must be reduced by 60% to 80% below 1990 levels by 2050. Nova Scotia must orient its energy planning to this long-term target.

Our current targets take us to 2030 and we are on a trajectory to meet them. Decisions we make now and in the near future will characterize the context we have to work in moving beyond 2030. We must actively engineer the future we need now, on the front-end. Sealing the deal on coal phase-out can free us up to invest without hesitation in the renewable energy infrastructure we need to carry us into the next decades. Conserving energy and reducing our consumption through efficiency programs while ramping up our development of renewable energy will transform our electricity system and our daily lives. Figuring out how to regionalize our energy system in order to incorporate more renewable energy into our fuel mix will prepare us for a future where not only our homes and businesses but also our vehicles are run by electricity produced from renewable sources.

A made-in-Nova Scotia energy system is a diverse and renewables-dependent energy system. We have the singular opportunity to become a leading example in Canada and the world of complete system transformation from near-total reliance on fossil fuels to fossil-free electricity.

6.1.1 DISMANTLE OUR ATTACHMENT TO COAL PLANTSNSPI’s generation, transmission and distribution assets are depreciated over time at a rate regulated by the UARB. The depreciation rate of NSPI’s assets is an indicator of the ‘useful life’ of generation facilities and grid components. The lower the depreciation rate, the longer the asset is recorded as a loss of profit on NSPI’s balance sheets, and the longer the asset must remain in operation to mitigate that loss.

Retirement of generation facilities or grid components prior to the end of their useful life, as determined by NSPI, results in ‘stranded assets’. An NSPI asset might be described as ‘stranded’ if it has not yet fully depreciated (and so must still be recorded as a loss of profit on NSPI’s balance sheets) and is no longer performing its intended function.

Table 2 details changes since 1996 to NSPI’s depreciation rates for its steam-electric generation units. Steam-electric units in Nova Scotia burn coal, oil, petcoke and natural gas as fuel.

ELECTRICITY AND NOVA SCOTIA’S FUTURE:22TABLE 2: TIMELINE OF DEPRECIATION RATES FOR NSPI’S STEAM GENERATION ASSETSYear

1996 UARB approves reduction in depreciation rates from 2.93% to 2.76%

2003 Depreciation rates lowered to 2.5%

2011 Steam depreciation rate remains at 2.5%

2012-2014 Depreciation rate is forecast at 2.82%

A report commissioned from independent consultants Gannett and Flemming and published in 2010 recommended an increase in depreciation rates for steam generation assets to 3.62%. The same report recommended decreases in depreciation rates for transmission assets to 2.35% from 2.64% and for distribution assets to 3.81% from 4.04%.

Were NSPI to adopt Gannet and Flemming’s recommendations, calculations of the useful lives of steam generation, transmission, and distribution assets would change. Steam generation would reach the end of useful life sooner while transmission and distribution assets’ useful lives would be extended. Table 3 compares end-of-useful-life years for steam generation under NSPI’s current depreciation rates with the same under Gannet and Flemming’s proposed rates.

TABLE 3: END OF USEFUL LIFE FOR STEAM GENERATION UNDER CURRENT VS. PROPOSED DEPRECIATION RATES (GANNETT – FLEMMING 2010)

End of Useful Life End of Useful Life Unit Current Rates Gannett – Flemming

Lingan 1 + 2 2026 2025

Lingan 3 + 4 2030 2028

Point Aconi 2039 2035

Point Tupper 2028 2025 – 2027

Trenton 5 2025 2025

Trenton 6 2037 2033

Tufts Cove 1, 2, + 3 2020 2020

Point Tupper Marine 2037 2035

Depreciation rates proposed by Gannett and Flemming do not dramatically scale back the useful life of steam generation assets. Rather, they establish a timeline whereby the majority of steam generation reaches the end of useful life well before 2030 with just three units coming in a few years after that date. 2030 is currently the final year of compliance for GHG emissions reductions from electricity generation under provincial and federal regulations.

It is advisable to adjust depreciation rates for NSPI’s steam generation assets to fall closer in line with GHG emission compliance periods. While it is true that GHG emission reductions are the priority and those reductions can occur even as some coal-fired generators remain online, there is value in dismantling some of our utility’s financial attachment to those facilities. Fossil fuel –fired generators will be used in progressively lesser degrees in coming years as regulations constrain how much coal, petcoke, oil, and natural gas NSPI might burn. The risk of stranded assets – generators that are still on the books but are not being used as intended – will rise. Adjusting depreciation rates for other assets, such as transmission and distribution assets can mitigate the impact to ratepayers of changing steam depreciation rates.


While some units should be shut down completely and decommissioned, it may indeed be valuable to keep some fossil fuel combustion units operational as more and more of Nova Scotia’s electricity is made using renewable energy sources. Kept operating at a minimal capacity, these units might be called upon to ramp up production and meet provincial demand as gaps occasionally appear in supply. Yet it is possible for NSPI to operate in precisely this way even while steam generation is depreciated at a faster rate. We can ‘pay off’ our aged and dirty infrastructure earlier so that the decision of whether to close a plant or reduce its operations to a minimum is made according to what is best for our electricity system rather than being influenced by fear of stranded assets.

6.1.2 PURSUE ENERGY CONSERVATION THROUGH ENSCThe International Energy Agency (IEA) concludes: “increasing energy efficiency is the quickest and least costly way of addressing energy security, environmental and economic challenges” (IEA 2011).

Energy efficiency is a cost-effective energy resource because saving kilowatt hours is cheaper than having to produce them by building power plants and burning expensive fuels. Paying for energy efficiency programs through power rates therefore reduces the future costs of the entire electricity system. This means less money going out of Nova Scotians’ pockets. While power rates might continue to rise, energy efficiency can ensure that power bills stabilize and even decrease.

As well as being a cost-effective way to manage the electricity system and to reduce greenhouse gas emissions and other forms of pollution, energy efficiency is a powerful and direct method of reducing Nova Scotians’ energy burdens. ENSC actually works to reduce the quantity of energy consumed by those households and businesses that participate in its programs aimed at increasing the efficiency of heating systems, lighting, appliances, equipment and industrial operations. These programs give Nova Scotia households a direct method of controlling their energy burdens (Haley, 2010).

As pointed out by Haley (2010), “providing equitable access to energy efficiency programs is a social objective that can exist alongside the ecological objective of reducing pollution and the economic objective of lowering electricity system costs. These objectives can reinforce one another and increase political support for energy efficiency programs.”

ENSC has made remarkable progress in its three years of operation. There is significant room for the organization to grow in its ability to meet social, environmental, and economic objectives. Nova Scotia must continue to expand upon and benefit from the leadership it has shown in establishing an Efficiency Utility to put our electricity system on a path that will improve the lives of Nova Scotians.

6.1.3 EXPAND RENEWABLES BEYOND 2020Jurisdictions across Canada largely have electricity systems that were built to take advantage of domestic energy resources. In Nova Scotia, this means we have an electricity system that was built to take advantage of our domestic coal supplies. Our challenge is that, while hydropower and nuclear reactors continue to work for provinces with electricity systems that rely on them, we have run out of coal that is clean enough for us to burn. The fuel we built our electricity system on is limited in supply and bountiful in adverse health and environmental impacts.

The only domestic energy sources that remain to Nova Scotia are renewable sources. It is incumbent upon us to harness the power of our wind, solar, and tidal resources and build an electricity system that relies to greater degrees on these sources as their availability grows. This is the only way for Nova Scotia to address its unique energy security hurdle.

Nova Scotia has made impressive progress in renewable energy development over recent years, compelled by our targets of 25% of electricity produced from renewable sources by 2015 and 40% produced from renewable sources by 2020. We must establish a series of legislated targets for renewable energy development beyond 2020 to secure our energy future and keep us on track to reducing GHG emissions by 80% below 1990 levels by 2050.

ELECTRICITY AND NOVA SCOTIA’S FUTURE:246.1.4 INCORPORATE MORE RENEWABLE ENERGY AND DECREASE COSTS WITH AN ATLANTIC POWER POOLA number of individuals and organizations have weighed in on the concept of an Atlantic Power Pool, notably the Atlantic Institute for Market Studies and the Atlantic Energy Gateway Initiative*.

Atlantic Canada consists of four provinces and three electricity-balancing areas, each serving a relatively small number of customers. Two of the provinces – P.E.I. and Nova Scotia – either now or soon will need to rely significantly on power supply from outside of the province. The development of the Muskrat Falls project would not only connect Newfoundland and Labrador into the regional transmission system for the first time but would make a new hydro resource available. And multilateral undertakings like the Atlantic Energy Gateway Initiative have moved the provinces closer to cooperation. (Weil and McEacharn 2012)

By joining forces to create an Atlantic Power Pool, each of the provincial utilities would be able to maintain control over domestic generation and transmission while benefitting from a central dispatch system. A central dispatch system could result in savings for utilities as the costs of balancing electric power system resource demand and supply would be spread over a larger, more diverse region. Savings for customers could result from a central dispatcher determining the least cost energy mix hour-by-hour. System reliability across the region would be enhanced because of improved transmission capacity, shared operation reserve capacity, and improved balancing of intermittent sources.

THE NEPOOL MODEL

As pointed out by Weil and McEacharn (2012), the New England Power Pool (NEPOOL) is a relevant model for the Atlantic Canadian context. NEPOOL operated a central dispatch system for the six New England states for 25 years until 1996. Federal mandate to create competitive, regulated electricity markets in the mid-90s transitioned NEPOOL into an Independent System Operator, or ISO New England.

Until the early 2000’s, most states were similar to Atlantic Provinces in that each state had a primary utility that owned and operated the majority of domestic generation, transmission, and distribution assets. NEPOOL was successful because it limited changes to the existing structure while offering increased opportunities for greater economy and efficiency.

NEPOOL operated according to painstakingly negotiated rules agreed to unanimously by each participating party. Authority was given to a power exchange to dispatch electricity according to those rules. The exchange remained a creature of the participants at all times and was never independent. Dispatch order in NEPOOL was determined entirely by cost. Taking into consideration all generation within the region as well as some from neighbouring interconnected pools, the exchange dispatched in order of lowest to highest cost.

Generally as electricity passes over neighbouring transmission systems, each jurisdiction charges for the use of its lines. To eliminate this tariff pancaking and maintain the economic efficiencies of power pooling, NEPOOL parties worked together to develop a single transmission tariff.

New England’s power pool model highlights a variety of considerations Atlantic Canada must take seriously if provinces choose to work toward a regional dispatch system. Many of these considerations relate to the inevitable differences between New England of the late 20th century and Atlantic Canada of the early 21st century.

POWER POOLING IN 21ST CENTURY ATLANTIC CANADA

In the early 1970s, New England was providing electricity to fewer customers than it is now and did not have many export obligations. There were few larger generators in the mix, and there were no GHG emissions constraints limiting oil, coal, and natural gas consumption. Even now, intermittent sources like wind make up a sliver of New England’s fuel mix. When NEPOOL was first established, intermittent energy sources were not a consideration.

In 2013, Atlantic Provinces want to maintain healthy bases that are reliably serviced and wheel electricity to market south of the border where New England is looking to grow its sliver of clean and renewable power. There is a larger nuclear plant in New Brunswick and, if Muskrat Falls is developed, a large and growing hydro resource will enter into the regional mix. Decarbonizing the electricity sector has become a priority throughout Atlantic Canada. The Maritime

* The Atlantic Energy Gateway (AEG) Initiative was launched in 2009 to increase regional co-operation towards the development of clean energy resources. AEG is hosted by the Atlantic Canada Opportunities Agency (ACOA) and funded by investments from Natural Resources Canada (NRCan) and the Atlantic Provinces. It brings together representatives from Atlantic provincial governments, power utilities, and electricity system operators.


Provinces are already bucking up against the limits of what their grids can manage in terms of intermittent renewables while they invest in storage innovation. Each province has its own regulatory style and set of GHG reduction and clean energy integration targets. These departures from the context that gave rise to NEPOOL mean that power pooling presents a series of potential benefits to Atlantic Canada in 2013 that weren’t quite as relevant to New England in 1970.

Atlantic Canada stands to gain from the same benefits New England discovered in the early days of NEPOOL, namely cost savings to utilities and customers and enhanced reliability (Atlantic Energy Gateway Initiative 2012d). Yet the region is also keen to balance intermittent resources more efficiently. As electricity generation is decarbonized and fuel mixes are diversified, it is not feasible (and certainly illogical) for every province to build up the balancing and storage capacity it needs on its own. A power pool would substantially improve resource balancing across the region and ease rising tension over ongoing renewable energy development.

Power pooling would also create a new layer of incentive to invest in transmission in and between the Atlantic Provinces. At this point, that incentive is closely associated with new generation developments like Muskrat Falls. A central dispatch system would make upgrading transmission systems a priority unto itself and may help alleviate some of the back-and-forth over capital recruitment that can presently stall transmission investment.

The costly risk of having to curtail wind would be reduced by an Atlantic Power Pool, as excess wind would be made available to meet demand in neighbouring provinces or stored in nearby jurisdictions’ storage facilities and hydro reservoirs.

The potential for regional harmonization of certain standards and fees is an attractive component of an Atlantic Power Pool. Establishing a regional transmission tariff would be challenging, but of clear benefit to regional resource sharing and export. Aligning mismatched legislated targets and service standards would go a long way in enhancing each of the Atlantic Provinces’ capacities to fulfill regulatory obligations.

In considering power pooling, Atlantic Canada must grapple with some difficult questions – some very similar to those New England confronted, some very different.

In the absence of federal or regional regulation, an Atlantic Power Pool would have to develop a governance model acceptable to all parties. Governance provisions would have to allow for decisions to be made while holding every province and utility equal. To ensure the power pool had access to adequate generation and transmission into the future, a planning process would have to be established that included an appropriate level of public engagement (Atlantic Energy Gateway Initiative 2012e). It is unclear the implications this might have for individual provinces’ planning authority.

If the Atlantic Provinces were to consider harmonizing standards, they would have to overcome the complications of doing so while enshrining leadership and avoiding deferral to the lowest common denominator. Following along with the lowest-cost dispatch priority presented by NEPOOL might hinder the region’s progress in transitioning to modern, clean, and renewable infrastructure. Atlantic Provinces would have to work out ways to protect current successes and ensure future progress. The power sector will lead decarbonization as Atlantic Canada heads toward a fossil-free future; planning for that as a part of creating an Atlantic Power Pool would mean establishing clear priorities for investment in innovation and new technologies at the provincial and regional levels.

ELECTRICITY AND NOVA SCOTIA’S FUTURE:266.2 Make Nova Scotia’s Electricity System Available and Accountable to Nova ScotiansWhile criticism is often attached to the financial benefits perceived as accruing to NSPI at the expense of ratepayers, much of the resentment leveled at NSPI actually results from Nova Scotians wanting and failing to identify how they might benefit from the shifts currently taking place in our electricity system. As long as the range of benefit seems limited to a large, monopoly utility, Nova Scotia’s energy transition will remain a source of instability and controversy. Nova Scotians want the opportunity to take part in their new electricity system, whether through understanding it better or building a wind turbine. Nova Scotians also want to be sure their best interests are being pursued by those responsible for their electricity system.

Making Nova Scotia’s electricity system more available and accountable to Nova Scotians is essential to mitigating pushback that has the potential to stall and reverse progress. It is also the best way of moving responsibility for the kinds of infrastructural changes our province needs to all levels and scales of Nova Scotia society so that transition is owned by many and easy to spot everywhere.

6.2.1 DECENTRALIZE ELECTRICITY SYSTEM AUTHORITYNova Scotia differs from other Canadian jurisdictions that have undertaken similar energy and electricity system transformations in that energy security is a central motivating factor here rather than economic opportunity. Quebec’s access to and ability to profit from large amounts of hydroelectricity incentivizes much of its movement on progressive energy policy, such as vehicle electrification. Ontario’s commitment to coal phase-out and complementary feed-in tariff program is shored up by plans and policies that grow the province’s manufacturing industry to supply renewable energy development. Energy system transformation has caused a good deal of strain even in those provinces where members of the public and private sectors see direct benefit from it. In Nova Scotia, where transition is required to mitigate reliance on expensive energy imports and has fewer obvious ties to economic growth, the challenge of communicating benefit is formidable. Coming up with creative ways of expanding ownership over and benefit from aspects of this transition outside of NSPI is critical. While initiatives such as the IPP and COMFIT programs are attempts to do just that, it is clear that they alone do not suffice in their current incarnation.

Two potential channels for decentralizing authority in Nova Scotia’s changing energy system are to: 1) expand IPP, COMFIT, and FIT programs and develop other avenues for increasing public participation and ownership; and 2) change the ownership structure of utility assets.

INCREASING DECENTRALIZED OWNERSHIP OF NEW RENEWABLE ENERGY GENERATION

At the cost of provoking Germany reference exhaustion, it is worth highlighting that over 50% of renewable energy capacity in that country is owned by individuals or farmers (Guardian Sustainable Business 2013). Power production provides a stable, long-term source of income for landowners that might otherwise struggle to maintain steady cash flow in today’s economy. Decentralized ownership of power production substantially ameliorates pushback against initiatives like a renewable energy surcharge that has increased average power bills by 47% since 2011 in a country that already had the second-highest power rates in the European Union (Guardian Sustainable Business 2013). It is also worth noting that Germany began is energy transformation, or energiewende, in 1992. It has at least 15 years on Nova Scotia as we tailor a transitional framework to our unique context while troubleshooting our unique challenges. While it is true that we will need time, as Germany did, to work out the kinks of a made-in-Nova Scotia energy transformation, we can take some lessons away from their experience.

First, decentralized ownership works. Specifically, decentralized ownership programs that target already struggling segments of the population work. In Nova Scotia, this would suggest expanding the COMFIT program to incentivize participation from individuals and communities working in resource-based occupations (such as agriculture and fisheries) and living in rural areas. Targeting low-income Nova Scotians living in urban and rural areas while developing innovative financing models may also go some way in addressing energy insecurity at the household level.


Second, cooperatives work. It is estimated that German energy cooperatives have leveraged 800 million euros in investment from over 80,000 private citizens. Shares in such cooperatives are affordable, costing between 100 and 500 euros on average. Nova Scotia’s COMFIT program is wise to include cooperatives as eligible participants, yet much work can be done to support the formation of energy cooperatives in the province. The development of an energy cooperative toolkit combined with a public outreach, education, and advertisement campaign could go a long way in broadening access to renewable generation opportunities.

Third, solar power, while less economical to develop than some other renewable energy, is highly accessible. Nova Scotia’s Department of Energy is in the process of evaluating the potential for solar development in the province. Their evaluation would ideally result in the introduction of a COMFIT or independent FIT for solar energy.

Finally, adequate and accessible financing is essential. German banks have had a good deal of time to become comfortable with renewable technologies and the distinctive characteristics of renewable development models. Acquiring a $20,000 loan for solar panels in Germany is as straightforward as borrowing $20,000 for a fishing boat here. Nova Scotia does not have the luxury of time. If we are to stay on track and nurture widespread support for our energy transition, it is critical that we accelerate the learning curve for financing institutions. This will require government leadership within the financing sector and innovative funds and financing models that bridge the cap for renewable energy entrepreneurs as traditional lenders learn the ropes (see Atlantic Energy Gateway Initiative 2012c). Some progress has been made on this front with government support and guarantees for larger wind projects and research and development funds administered through bodies such as the Offshore Energy Research Association (OERA). Community Economic Development Investment Funds (CEDIFs) are another example of innovative financing, though CEDIFs rely heavily on public subsidies that can seem unjustified when long-term contracts guarantee a price that offers decent returns. These interim solutions should be strategically expanded and, most importantly, tailored and targeted to small and medium –sized, decentralized projects.

Increasing public ownership of and participation in new renewable energy generation has significant potential to extend the benefits of this province’s energy transformation to Nova Scotians and strengthen much-needed social license. Doing so would raise some unavoidable concerns over how to integrate that new renewable energy into an electricity grid that is quickly reaching the limits of how many intermittent megawatts it can balance. The majority of this challenge is technical and requires a combination of storage solutions, regional integration, patience and cleverness. Yet it also raises some questions worth considering about Nova Scotia’s current situation where a single, private entity owns most electricity generation as well as the means of moving that electricity.

CHANGING THE OWNERSHIP STRUCTURE OF UTILITY ASSETSIt is logical to step back and reevaluate the way energy business is done in Nova Scotia as we distance ourselves from aging and obsolete coal-dependent infrastructure, take increasing advantage of the benefits of energy efficiency, invest in domestic and regional renewable energy development, and develop close collaborations with neighboring provinces. As NSPI is chief operator in the energy arena, it follows that a close look at the status-quo structure of the utility and some fine-tuning of its capacity are warranted.

The overwhelming majority (nearly 90%) of NSPI’s generation assets consist of fossil fuel –fired combustion units. Such fossil fuel dependent infrastructure is increasingly obsolete and costly to maintain. Bringing these facilities under public ownership, whether through purchase or expropriation, is not in the best interest of Nova Scotians. Calls for complete public takeover of NSPI’s assets would benefit from close examination.

That being said, no cost-benefit analysis was conducted prior to the privatization of Nova Scotia’s electric utility in 1992 (Majka, 2012a). Given the absence of evidence-based reasoning for the act of privatization itself and the general impression that Nova Scotians should accept a private, monopoly utility as status quo in the subsequent two decades, it is hardly surprising that members of the public are now asking for assurance that the current utility ownership structure is ideal.

Non-NSPI electricity generators are coming online now. Securing public support for Nova Scotia’s energy transition means making room for more decentralized power producers to come online into the future. Increased regional energy sharing is a certainty. The proposition of an Atlantic Power Pool and central dispatch system is on the table. Given these and other factors, the prospect of a publically owned distribution and transmission grid is an attractive one.

ELECTRICITY AND NOVA SCOTIA’S FUTURE:28Owning the grid would theoretically allow Nova Scotia to make decisions about connectivity and fuel supply based on priorities other than profit margins. Government-imposed regulations at this point force NSPI into the unnatural position of foregoing its own generation in favor of IPP or COMFIT generation. If the grid were a public asset, any conflicts of interest on the supply side would be eliminated. The system operator would purchase electricity from a variety of suppliers, including the current NSPI’s large generation units. Decision-making criteria for power purchases could organically incorporate low-cost priorities as well as regulatory requirements.

Of course, the reality of a publically owned grid may not match the theory. Majka (2012a) discusses the complications for policy makers caused by cost pressures from necessary investments in grid infrastructure and the expense of integrating more renewables into the mix. There is also the question of what body might operate the grid and how closely integrated that body could and should be with government. Practically speaking, public ownership of the grid would offer no guarantee that Nova Scotia’s transition to a cleaner, more efficient energy system would proceed more smoothly or effectively.

The technicalities of purchasing or expropriating transmission and distribution assets are also a tangle of unknowns. The cost would be at least $1.5 billion and likely closer to double that amount. NSPI’s generation assets would certainly remain viable, as the system operator of a public grid would continue to rely heavily on their supply. Yet the implications for NSPI’s business model and remaining operations are unclear.

A thorough, independent study should be undertaken to analyze the cost-benefit of Nova Scotia’s current utility ownership model against the option of a publically owned grid.

6.2.2 IMPROVE NOVA SCOTIANS’ UNDERSTANDING OF UTILITY ACCOUNTABILITYIt is without question that anti-NSPI sentiment relates a great deal to the level of accountability Nova Scotians perceive they and their government are able to demand of their utility. Access to electricity is taken for granted as a basic right within our society. As the cost of this essential commodity continues to rise in our province, Nova Scotians find it increasingly difficult to accept that their electricity provider should behave as any other profit-seeking corporation might. That NSPI is a regulated entity, and therefore cannot act with the same level of independent agency available to other corporations, is of cold comfort to individuals and families struggling to pay their electricity bills. As discussed in the following section, it is vital we change the way we plan for the province’s energy future and update our Public Utilities Act to ensure it reflects Nova Scotians’ modern values.

Nova Scotia’s governments are consistently criticized for working too closely with, or being ‘in the pocket’ of, NSPI. Political parties in opposition launch this accusation at the party in power only to face the same accusation when they move into provincial leadership. It is entirely reasonable that government would need to carefully consult the province’s electricity generator, transmitter, and distributor while developing energy policy. Policy might otherwise be dangerously removed from reality. However, since privatization, no government has successfully navigated the tension created by the need to constantly collaborate with NSPI and the public desire for separation between utility and state. Again, Nova Scotia is in urgent need of a mature energy planning process based on public consultation that maintains continuity beyond political terms in office.

Aside from inviting Nova Scotians to take part in planning for Nova Scotia’s energy future and establishing a planning process that lends itself to increased liability, enhancing NSPI’s level of accountability to the public means considering a structural change that might entrench accountability deeper within the organization. NSPI’s guaranteed rate of return has come under fire consistently in recent years. It is useful to examine this contentious element of the utility and ask whether it might be altered to improve Nova Scotians’ understanding of how their utility remains accountable.

REMODELING THE GUARANTEED RATE OF RETURNThe Public Utilities Act endows the UARB with the power to set NSPI’s ‘rate of return on rate base’ on top of investment costs that are also regulated by the UARB. In an effort to simplify, we will here refer to the ‘rate of return on rate base’ as ‘return on equity’ (ROE). NSPI applies to the UARB for an ROE through General Rate Applications (GRAs). The 2013 GRA set NSPI’s ROE at a regulated range of 8.75% - 9.25% (NSPI 2012a). In other words, NSPI is permitted to achieve (and pass on to its shareholders) a rate of return up to 9.25% and subject to review by the UARB.


NSPI’s ROE is calculated on its assets. Since the ROE is regulated within a fixed range, growth in the utility’s net return – say through improved operating efficiency – has a limited impact on the returns NSPI can achieve and pass on to shareholders. NSPI’s returns are therefore most influenced by asset management; maintaining and expanding the assets that ROE is calculated on offers NSPI the most control over returns.

Several have pointed out that this creates an incentive for NSPI to invest new capital and grow its asset pool (see for example Retallack 2012). Meanwhile, within the parameters of ratemaking, NSPI is permitted to pass on much of the financial risk associated with new investments to Nova Scotia ratepayers. This situation generates animosity when NSPI proposes to invest in a large capital expenditure. Such investments have the potential to earn NSPI returns while ratepayers finance the risk.

NSPI’s current ROE is well within the average range for regulated Canadian utilities (Concentric Energy Advisors 2008 and 2011). Lowering or eliminating NSPI’s guaranteed rate of return might provide some superficial relief of public tensions. In the long term, however, it is an imprudent solution that mistakes the symptoms of a problem – resentment of profit – for the problem itself – a mismatch between profit and risk. Remodeling the ROE is a more appropriate option to consider.

Ketchum and Kim (2013) point out that regulators across North America are facing challenges as electric utilities adapt to a changing energy landscape. Regulators are seeing an increase in rate applications to recover capital and operating costs associated with replacement of ageing infrastructure, volatility in fossil fuel markets, and compliance with environmental regulations. As regulators struggle with the arduous task of determining reasonable ROEs within unfamiliar and fluctuating circumstances, it is becoming necessary to design regulatory decision support tools that account for a new level of diversity in decision-making parameters.

The concept of performance-based regulation is gaining more traction as social and environmental concerns permeate the regulatory landscape. In a performance-based regulatory regime, ROE might be tied to achievement of specified targets. Targets could include environmental, operating efficiency, and cost of service standards. If performance-based regulation were considered for Nova Scotia, a broader allowable ROE range would be established, with a minimum and a maximum. NSPI would be given the opportunity to achieve greater returns based on how well they were able to meet certain targets. Returns would no longer be as strongly associated with asset management, and NSPI’s influence over its returns would extend to a wider range of factors. The public would see NSPI’s profits tied directly to its follow-through on (presumably) commonly held priorities.

May (2003) outlines the formidable difficulties and potential pitfalls of performance-based regulation. Most notably, a switch from prescriptive to performance –based regulation might increase qualitative measures of utility accountability while decreasing quantitative measures. It is far more difficult to quantitatively evaluate a metric of environmental, operational, and service performance standards than to monitor capital expenditures and ensure the utility does not exceed its maximum allowable ROE. The question of evaluation is key: how would standards be set and who would determine whether they were met? What formula would decide where in the spectrum of allowable ROE a certain level of compliance might fall?

Determining whether a performance-based regulation is appropriate and feasible for Nova Scotia is beyond the scope of this paper. Yet given public demand for increased accountability from our utility, it is essential that we consider possible means of adjusting our regulatory model to foster accountability. Remodeling NSPI’s ROE using a performance-based approach is one option worth further study.

ELECTRICITY AND NOVA SCOTIA’S FUTURE:306.3 Engage Nova Scotians in Long-Term Energy PlanningHistorically, electricity in Nova Scotia has been generated from a small number of large-scale thermal generation units allowing for more simplistic planning. Planning for Nova Scotia’s energy system is becoming more complex, requiring balancing a variety of factors such as global and local environmental impacts, economic considerations, and social implications. Such decisions require engaging multiple stakeholders from a variety of disciplines. As we strive to reach our goals, we more often discuss plans and projects that have far-reaching implications for Nova Scotia’s energy future and the regional energy picture. Development of hydroelectric potential at Muskrat Falls is one such project. The project will redefine relationships between Nova Scotia and neighboring provinces when it comes to energy and electricity system planning. Deciding whether the project is right for Nova Scotia involved planning for how our province might and should look decades from now.

The current structures responsible for energy planning in Nova Scotia are far too limited to allow for a sufficiently dynamic, long-term energy planning process. Government departments are subject to the political priorities and whims of the party in power. Momentum on energy policy is threatened every four years due to the election cycle. The UARB is guided by principles that date from 1909 or 1913, depending on which version of the Public Utilities Act is considered. These principles fail to reflect modern social and environmental values. While economic considerations are crucial, the attempt to limit decision criteria to minimizing cost to the ratepayer ignores other factors necessary to properly evaluate complex energy decisions.

It is time Nova Scotia develop an Energy Planning Authority (EPA). We should begin this process by establishing a panel tasked with undertaking a province-wide consultation and developing recommendations for the structure and mandate of a Nova Scotia EPA.

HOW WE PLAN FOR OUR ENERGY FUTURE NOWCurrently, Nova Scotia’s energy system planning is determined by three factors: government regulations and policies, the power utility’s Integrated Resource Plan, and the Utility and Review Board’s review of proposed rates and capital expenditures.

GOVERNMENT As outlined above, both the provincial and federal government have regulations, targets and policies that affect Nova Scotia’s energy system. The provincial Renewable Energy Strategy sets targets for percentage of electricity generated from renewable sources for 2015 and 2020 and for levels of GHG and other emissions. Nova Scotia has an equivalency agreement with the Federal Government that requires the province to reduce GHG emissions from its electricity sector and consequently scale down generation from coal combustion at legislated intervals. Such regulations are guiding the types of energy sources that will be used to generate electricity in Nova Scotia in coming decades. Electricity generation in Nova Scotia is slated to have an increased reliance on renewable electricity and natural gas and a reduced reliance on coal-fired electricity.

INTEGRATED RESOURCE PLANIn 2007, Nova Scotia Power (NSPI) developed a long-term Integrated Resource Plan (IRP), in collaboration with UARB staff and its consultants, and key stakeholders. An IRP is a strategy to meet long-term forecasted energy demand through a combination of demand side and supply side resources. NSPI’s plan included a mix of options to meet long-term electricity needs while maintaining a cost-effective, reliable system that complied with environmental legislations and regulations. Both the 2007 Report and the 2009 Update Report recommended investment in Demand Side Management programs and renewable generation, along with upgrading NSPI’s existing generation fleet.

UTILITY AND REVIEW BOARDThe Nova Scotia Utility and Review Board (UARB) has general supervisory power over electric utilities in the province. The UARB is an independent, quasi-judicial body with jurisdiction over setting electricity rates and approving large capital expenditures. Under the Board’s current mandate, the UARB must choose the lowest cost option for the ratepayer that is consistent with obligations under current provincial and federal legislation.


ENERGY PLANNING AUTHORITIESThe suggestion that Nova Scotia’s energy planning process is in need of restructuring dates back to 2001 when then NDP energy critic Howard Epstein proposed legislation to establish an arms-length Energy Council. The proposed Council would develop energy policy through public consultation. Over a decade later, our province is more in need of a modern, publically accountable planning framework than ever. Establishing an EPA in Nova Scotia would fulfill this need.

Many jurisdictions around the world are creating Energy Planning Authorities (EPAs) to plan for increasingly complex energy systems. An EPA creates integrated, long-term energy plans for developing a sustainable energy system. The plans assess how future energy demands can be met through conservation, generation and transmission and offer recommendations for government policy priorities. An effective EPA should evaluate energy decisions using environmental and social metrics in addition to economic and technical considerations. The implementation and structure of these authorities varies across jurisdictions.

In the United Kingdom, the EPA is a government department known as the Department of Energy and Climate Change (DECC). The DECC was created in 2008 to merge energy policy and climate change policy into one department. The department is responsible for ensuring secure, clean and affordable energy supplies. Their current priorities are supporting energy infrastructure investment, promoting action on climate change and minimizing costs to the consumer (United Kingdom 2013).

In Germany, energy planning occurs within the Federal Network Agency (known as Bundesnetzagentur, BNetzA). Like Nova Scotia’s UARB, the BNetzA is the regulatory authority responsible for electricity and gas markets, providing efficient and non-discriminatory access to the grid and regulating fees. In contrast, the mandate of the Germany agency has a broader scope than the UARB; the agency is responsible for ensuring safe, cost-efficient, consumer-friendly, efficient and environmentally friendly electricity and gas for the public (Bundesnetzagentur 2013).

In Ontario, the Ontario Power Authority develops integrated electricity plans that examine long-term energy demands and the options available to meet these demands. The purpose of the OPA is to create an electricity system that meets technical standards, public policy goals and community support (Ontario Power Authority 2013). The OPA also initiated a regional planning process that is integrated, forward-looking, and engages stakeholders. Design criteria for choosing options are decided by the specific study team and may include input received through stakeholder consultation. Regional plans developed through OPA’s process consider cost responsibility, affordability, feasibility, environmental impacts and feedback from community stakeholders (Ontario Power Authority 2013).

These are three examples of EPAs housed respectively within government, regulatory, and third-party models. Despite their structural diversity, all are responsible for creating an electricity system that is not only affordable, but meets environmental goals and includes long-term considerations. In each case, the governments involved established the overall direction and the EPAs led an integrated planning process based on goals set at the political level. While not always successful or popular, these EPAs have to some degree separated energy planning in their jurisdictions from election cycles and created space for public engagement and all-party buy-in.

SUGGESTIONS FOR A NOVA SCOTIA PLANNING AUTHORITYSustainable energy planning is associated with high levels of uncertainty, conflicting objectives, multiple interests and perspectives, and a variety of data and information. Consequently, the decision-making method should reflect these intricacies. Traditional single criteria approaches focused on determining the most efficient option at the lowest cost is no longer sufficient. A multi-criteria approach to decision-making has become increasingly popular for sustainable energy planning, and typically include the following criteria:

Economic – investment, operation and maintenance, fuel costs;

Technical – efficiency, reliability, safety;

Environmental – greenhouse gas emissions, local environmental degradation;

Social – social acceptability, job creation;

Geopolitical – security of supply.

ELECTRICITY AND NOVA SCOTIA’S FUTURE:32BROADER CRITERIAIn 2009, Adams and Wheeler of the Faculty of Management at Dalhousie University conducted a stakeholder consultation process on the future of renewable energy in Nova Scotia on behalf of the province. Following their report, the EAC submitted a supplementary report, highlighting key recommendations (Ecology Action Centre 2009).

Wheeler and Adams (2009) found that “the current mandate of the UARB does not provide clear or adequate direction in relation to the integration of renewable energy in the supply mix for the province” and recommended a review process of the UARB’s mandate. The EAC recommended that the mandate of regulators (UARB) be modified to include the best interests of future generations and non-cost criteria such as carbon emissions, environmental progress and sustainable prosperity policy directions.

As neither Wheeler and Adams’ or the EAC’s recommendations for the mandate of the UARB have been implemented, we reiterate the importance that the energy regulator’s decision criteria include environmental and other non-cost variables, and consider long-term implications.

RECOMMENDED LONG-TERM PLANNING PRIORITIES FOR A NOVA SCOTIA EPA Establish a 2050 target date for a 100% carbon-free energy system in Nova Scotia where electricity is produced from renewable sources and vehicles and heat are predominantly fueled by clean electricity

Make provincial energy security the first consideration before opportunities for export when considering development of domestic energy resources

Plan for how to deal with a price on carbon

Define the benefits and parameters of enhanced regionalization

Develop a full-cost accounting methodology for considering cost-effectiveness of domestic energy resource development and non-domestic fuel procurement

Commit to pursuing all energy efficiency that is cost effective and achievable for electric and non-electric fuels

Implement a consultation process that ensures energy-related resource and policy developments are consistent with overall vision established by the EPA

PUBLIC ENGAGEMENTThe EAC also recommends a planning process that includes improved and meaningful public consultation. Public involvement in energy decisions is beneficial for a number of reasons: it allows decisions to reflect public values; educates the public; creates a process that the public views as fair and transparent; and may illuminate issues otherwise ignored. Involving public in the planning and development of energy projects typically leads to greater public acceptance (Hobbs and Horn 1997).

Nova Scotia has a history of mistrust and politicization with energy supply and distribution issues (Wheeler 2013). Much of the public outrage can be attributed to a lack of mechanisms available for the public to influence the actions of the utility and the resulting implications for Nova Scotia’s energy landscape.

As Nova Scotia shifts to an increasingly complex energy system, the public needs improved tools in order to discuss changes to our energy system. A crucial component to this is creating a two-way flow of information. Public acceptance of energy projects depends on providing the public with adequate and trustworthy information about the potential implications of the project on their area. Improved information flow will enable Nova Scotians to make informed and nuanced judgments (Parks and Theobald 2011). An improved system for educating and engaging the public will enable the public to play a role in changes affecting their futures and create a more mature dialogue around energy issues in the province.

STRUCTURESeveral options exist for the structure of an energy planning authority in Nova Scotia as highlighted above. A regulatory approach to the energy planning authority could be housed in the Nova Scotia UARB (similar to the German Federal Network Agency). Alternatively, the energy planning authority could be a government body (similar to the Department of Energy and Climate Change in the UK, building on the NS Department of Energy) or a third party (similar to the Ontario Power Authority in Ontario).


The benefit of housing the energy planning authority within government is that the government is already responsible for setting policy goals and criteria. On the other hand, government is vulnerable to political changes and is subject to bureaucratic inefficiencies, potentially resulting in a slower process than the alternatives.

A third party EPA would be independent of government and industry groups. It might have access to greater expertise in planning for energy projects than a government department. The downside of a third party model is higher implementation difficulty due to distance from decision makers. There is also the potential for bureaucratic overload.

There are some advantages of creating an EPA within the UARB: it would be arms-length of government and therefore less influenced by political turnover; implementation might be relatively simple, requiring modifications to the existing mandate; and decisions would be fairly transparent as they would result from clearly defined decision criteria. It is fair to question the flexibility of an entrenched bureaucratic body like the UARB. Whether such an institution would be able to transition into a dynamic forward-thinking EPA needs some discussion.

If the UARB were to take on the role of an EPA, the provincial government would be required to significantly modify its mandate. A new mandate could require the board to assess projects through a multitude of policy criteria, including economic considerations, environmental effects (greenhouse gas emissions, local environmental degradation), and social implications. It would be of the utmost importance to explicitly require public consultation and to ensure proposed projects are in the best interest of current and future generations.

Regardless of the structure used to create an energy planning authority, the EAC recommends that the authority: 1) evaluate energy decisions using multiple criteria that includes environmental, social, and other non-cost criteria; 2) consider long-term implications; and 3) involve the public in meaningful engagement.

6.4 Protect Universal Access to ElectricityNova Scotians are angry about the increases in electricity rates from NSPI over the last several years. By 2012, the increase in electricity prices since 2001 was 68% while the increase in fuel oil prices was 90%. About 30% of NS homes are heated with electricity. Most of these increases occurred before 2009 and have been caused by rising foreign coal prices, but the latest rounds have incensed Nova Scotians.

Low income Nova Scotians who pay more than 3% of their income on electricity (or 6% if they heat their homes electrically) are most severely affected by electricity price increases. The provincial government currently spends $117 million subsidizing electricity and fuel purchases. This includes $104 million on the Your Energy Rebate Program (rebates the 10% provincial portion of the HST, or about $240, to every household); $12.4 million on the Heating Assistance Rebate Program (HARP) (helps 50,000 low income households with a $200 rebate on heating costs) and $800,000 on the Good Neighbour Energy Fund (helps about 1400 households with emergency relief up to $350/year every 2 years). The total assistance is up to $440/ year and $790/2nd year. The Department of Community Services also provides repayable loans to some Income Assistance households. Efficiency NS spends some of its $45 million helping low-income households install money saving devices.

The Affordable Energy Coalition says “The disadvantage of these programs is that they are either restricted to crisis relief (grants or rebates once per season) or they are targeted so widely (such as the tax rebates) as to have little impact on truly vulnerable households with unsustainable electricity burdens.” NSPI and the Affordable Energy Coalition are currently working on administrative changes to reduce extra costs often experienced by low-income households.

Solving NS’ Electricity Pricing Problem – Energy Affordability vs. Rising Electricity Prices, a companion report produced by the EIC, recommends the following actions to protect universal access to electricity:

Focus on affordability instead of price alone. Take decisive steps toward energy conservation. Take decisive steps to reduce the energy burden of the lowest income Nova Scotians so they don’t have to choose between heating and eating or medicine and lights.


The best solution to the very real problems facing low income households is to create a four point targeted program that makes energy affordable to those households:

Limit electricity costs to 3% of income (6% for those who with electrical heat).

Provide realistic relief for arrears

Provide relief for emergencies like job loss

Assist low income households with energy conservation

Fund the $9-14 million cost of such a program from general tax revenues including the savings from existing programs; a refund of the HST rebate for households earning over $100,000 and a contribution from NSPI; or a small fee on all electricity bills.

Adopt realistic shelter rates for income assistance recipients. Consider a guaranteed annual income that would ensure all low income households can afford rising energy costs.

For more detail, see Solving NS’ Electricity Pricing Problem – Energy Affordability vs. Rising Electricity Prices.

The current controversies over electricity pricing must result in real change for the Nova Scotians who are most severely affected by rising prices. These controversies must not become an excuse to derail important progress being made through expanded energy efficiency efforts and expanded use of renewables. We must continue to tackle climate change while ensuring those most affected by rising energy costs can afford to pay for essential energy services.


7 Summary of RecommendationsNova Scotia’s electricity and energy systems are transforming, giving Nova Scotians the opportunity to transform along with them. We cannot afford to miss out on the chance we have to maturely evaluate our current situation and make informed, conscientious decisions about our future. The Energy Issues Committee of the Ecology Action Centre believes the ideas laid out in this report establish a broad network of options that, if implemented, can work together to better the lives of Nova Scotians now and ensure a healthy, sustainable, and prosperous Nova Scotia for decades to come.

TABLE 4: SUMMARY OF ECOLOGY ACTION CENTRE’S ENERGY ISSUES COMMITTEE RECOMMENDATIONSPlan for 2050: A Fossil-Free Electricity System

Set intermediate energy targets toward a goal of reducing GHG emissions to 80% below 1990 levels by 2050

Dismantle Nova Scotia’s attachment to coal plants

Depreciate steam generation at a higher rate to align end of useful life for thermal stations with

2030 GHG reduction targets

Pursue Energy Conservation through Efficiency Nova Scotia Corporation

Expand Renewable Energy Targets Aggressively Beyond 2020

Incorporate More Renewable Energy and Decrease Costs with an Atlantic Power Pool

Agree to enter into a power pool with other Atlantic Provinces

Create a regional planning process that prioritizes renewable integration

Make Nova Scotia’s Electricity System Available and Accountable to Nova Scotians

Decentralize Electricity System Authority

Expand COMFIT Program

Incentivize participation from individuals and communities working in resource-based economies and

living in rural areas

Target low-income Nova Scotians

Develop a toolkit to support development of energy cooperatives in Nova Scotia

Partner energy cooperative toolkit with a public outreach campaign

Develop a FIT or COMFIT for solar energy

Develop an education strategy for financing institutions on renewable energy project financing

Continue and expand upon innovative government-led financing models for renewable development

Tailor financing for small and medium –sized, decentralized renewable projects

Commission a third-party evaluation of the potential for and impact of bringing Nova Scotia’s distribution and transmission grid back under public ownership

Improve Nova Scotians’ Understanding of Utility Accountability

Commission a report on instituting performance-based regulation in Nova Scotia

Explore the potential for and impacts of linking NSPI’s ROE to performance-based regulation

ELECTRICITY AND NOVA SCOTIA’S FUTURE:36Engage Nova Scotians in Long-Term Energy Planning

Appoint a panel tasked with developing the framework for a Nova Scotia Energy Planning Authority (EPA) through consultation with Nova Scotians

Make the goal of an EPA to create and enforce a multi-criteria evaluation metric for long-term energy planning and decision-making in the province

Task the panel with establishing the parameters of continuous and meaningful public engagement for an EPA

Protect Universal Access to Electricity

Establish a Universal Service Program

Ensure new affordable housing meets high energy efficiency standards

Take further steps to ensure equitable access to energy efficiency and conservation programs

Increase incomes


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