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The province’s largest power generator, Ontario Power Generation (OPG), has been selling clean energy credits outside of a government-approved framework — a revenue-making scheme the Crown corporation created without public knowledge.
The power generator told The Narwhal the program has been running in some form since 2013. That means it started before the previous Liberal government implemented a carbon pricing and credit program across the province, and has continued after Doug Ford’s Progressive Conservative government nixed that cap-and-trade program in 2018.
Energy experts say that by creating its own program outside of a publicly acknowledged framework, Ontario Power Generation may be understating the emissions reported by the province, and undermining efforts to ensure Ontario has a clean electricity grid.
“Ontario’s grid may in fact be dirtier and its emissions higher than we all think and know,” said an industry expert familiar with the program who wasn’t authorized to speak publicly. “To what degree, is the question.”
Ontario Power Generation supplies more than half of Ontario’s energy through hydroelectric, nuclear, solar and other clean energy facilities. This energy mix ensures that Ontario’s grid is 94 per cent emissions free — a fact widely publicized by the power generator and the government, and which forms the basis for the emissions accounting done by businesses and municipalities across the province.
Publicly available details on the clean energy credit program are scarce. Ontario Power Generation provided The Narwhal with a background technical briefing with an executive, who said that since 2013, the company has been selling credits — what it calls “environmental attributes” — from hydro power generation that are monetized based on megawatt hours of clean energy generated. These credits can be purchased by companies and governments to offset their own emissions from fossil fuel-generated electricity and meet their climate goals.
The executive, who the power generator asked not be named, did not share where exactly these credits were being sold, but noted that “there’s been a very high demand from corporations and organizations that want to meet their environment and sustainability goals. That’s what’s really driven us to move into the [clean energy credit] market.”
This is just the latest example of Ontario’s long-standing tension between attracting business and creating serious climate policy. The cap-and-trade program the Ford government killed was designed to both establish a clean energy industry and help meet the province’s climate targets. Since then, Ontario businesses have been subjected to a rollercoaster of climate policies, from the federal carbon price to the Ford government’s emissions performance standards. This has left local corporations with little autonomy or stability as they attempt to keep their climate promises.
Ontario Power Generation suggests its clean energy credit scheme could be a solution for these businesses. Neal Kelly, a spokesperson for the company, told The Narwhal in an email the province’s current efforts to establish a voluntary market for these credits is a catalyst “to incentivize new clean energy development.”
“In addition, an Ontario-based market could be a critical tool in attracting new economic activity to the province,” he added. “This will not erode Ontario’s clean grid and will help attract new clean energy infrastructure that can help mitigate climate change.”
The Ontario Power Generation executive told The Narwhal the sales of these credits were “limited,” earning the company an average annual revenue of less than $400,000 between 2013 and 2020.
When asked about whether these credits undermined the province’s climate mitigation efforts, a spokesperson for Ontario’s energy minister, Todd Smith, said the sales were “so minimal” they had no impact on any accounting of emissions or the cleanliness of the electricity grid.
However, industry experts wonder, if the impact is so insignificant, why Ontario Power Generation didn’t publicize these sales. As the program came to light early this year, many were caught off guard and felt undermined in their own emissions reduction efforts.
The Narwhal spoke to five members of the energy industry who asked that their names be kept confidential since they weren’t authorized to speak publicly about this issue. It also spoke to a number of academics and environmental experts, and sent dozens of questions to Ontario Power Generation, the Independent Electricity System Operator, the Ontario Energy Board and Ontario’s energy minister. What emerges is a concerning picture of a publicly owned utility making revenue through an opaque program that might also undercut the province’s emissions reduction goals.
Demand on Ontario’s clean electricity grid is only going to increase. In the lead-up to the Ontario election on June 2, all of the province’s political parties are pledging to substantially increase electric-vehicle usage. Companies are also pledging greater sustainability efforts. Industry and environmental experts fear Ontario Power Generation’s clean energy credit sales will degrade an accomplishment Ontarians can be proud of.
This issue first came to light in January through an obscure comment made by the top executive at Ontario Power Generation that left a number of energy industry insiders scratching their heads about whether the province’s largest power generator has been hiding a major new line of its business.
In January 2022, the Ministry of Energy announced a new voluntary clean energy registry in a press release. The stated goal was to help businesses “meet their corporate sustainability goals,” and the registry was to be designed by the Independent Electricity System Operator, the Crown corporation responsible for running Ontario’s electricity market.
At the bottom of the press release was a two-sentence statement by Ken Hartwick, president and chief executive officer of Ontario Power Generation, saying the company “has seen a strong increase in interest, and uptick in sales, for environmental attributes from our non-emitting hydroelectric and nuclear facilities.”
“We largely ignored the quotes because who reads the quotes from CEOs and ministers?” said a second energy expert who has worked with the Ontario Power Generation. “We had never heard of this before.”
“We’re all kind of flabbergasted because we’re trying to figure this out … while OPG is trying very hard to not disclose any information.”
Several key stakeholders and industry sources say they knew nothing about the program and are still in the dark. They say the Independent Electricity System Operator, which works closely with Ontario Power Generation, didn’t know either until recently, which The Narwhal confirmed.
“During some initial outreach to stakeholders to support the development of a [clean energy credit] market, Ontario Power Generation indicated it has previously sold a limited number of [credits],” a spokesperson for the Independent Electricity System Operator told The Narwhal in an email.
The power generator’s annual budgets from 2019 to 2021 do not make any specific mention of revenue from the sale of carbon credits. The latest filing with the Ontario Energy Board, the provincial energy regulator to which all utilities must report income and expenditure, also does not specifically refer to income from carbon credits. A spokesperson for the board told The Narwhal in an email that Ontario Power Generation “has not filed any information with the [board] regarding the sale of environmental attributes.”
As the auditor general prepares to audit the Crown corporation this year, sources are left with many concerning questions that may not be fully answered until well after the provincial election on June 2. Do these sales mean Ontario’s emissions savings are being counted twice, once here and once in purchasing jurisdictions? How might revenue impact utility bills for individual and corporate electricity consumers in the province?
“We don’t know which of their energy plants have been creating these credits. We don’t know which companies have bought them. … We don’t know where that money has gone,” the same industry expert said.
Kelly, Ontario Power Generation’s spokesperson, told The Narwhal all revenue from these sales are included in the company’s overall revenue, and “are intended to flow back to ratepayers or in support of future clean energy projects.”
The company executive who spoke to The Narwhal said that, until 2021, Ontario Power Generation listed these sales under the term “EcoLogo-certified green power” in its sustainability reporting. EcoLogo is a third-party brokerage that tracks sales of North American credits.
Kelly said that based on increased demand for such credits, the company started a “small-scale” pilot project last December. Now, the company is logging and monitoring sales via the Midwest Renewable Energy Tracking System — an emissions credit tracking and trading system for all participating North American jurisdictions and facilities. The Narwhal found one Ontario Power Generation facility listed in this system: the Sir Adam Beck hydroelectric generating station in Niagara Falls, Ont., which produces about nine per cent of Ontario’s electricity supply.
The executive would not directly answer questions about who was informed or consulted before the credit system was set up, or as the sales progressed over the years. That the company has run this scheme for over nine years without accountability worries industry experts.
“I’ve never seen anything like this before,” a third expert said. “I’ve never seen a Crown agency create a revenue stream and then not subject to be reviewed in how it’s functioning.”
The Ontario Power Generation executive said that because of an upsurge in demand for clean energy credits in 2021, the company will be reporting its clean energy credit sales in its third-quarter sustainability report and all subsequent reports.
Emissions calculations are intrinsically meticulous. Ontario municipalities and businesses base their carbon footprint and emissions projections on the fact that the grid that provides the bulk of the electricity they use is clean.
Ontario Power Generation’s sales of environmental attributes complicates this.
The clean energy Ontario produces is often touted as a point of pride for Ontarians, that “in our businesses and in our homes we are using almost carbon-free power,” said Kent Elson, a lawyer who represents the non-governmental organization Environmental Defence at Ontario Energy Board hearings. “That’s an important value and that’s being sold out from under us.”
Ontario Power Generation is subject to a review in front of the Ontario Energy Board every five years. The last hearing was held in 2021 and these sales were not disclosed.
On May 2, Elson wrote to the board and the power generator to ask for it to “re-open or institute a new proceeding to consider issues relating to Ontario Power Generation’s ongoing sales of clean energy credits.”
“More concerning is that these sales presumably cannot be ‘undone’ and as such the value of the clean energy benefits are permanently lost to Ontario consumers,” Elson’s letter reads. A spokesperson for the Ontario Energy Board told both Elson and The Narwhal the letter is under review.
The Ontario Green Party has also asked the auditor general to investigate the sales and their impact as part of her audit of Ontario Power Generation, the results of which won’t come out until after the June election.
“In some ways, this is dealing in hot air,” said Mark Winfield, a York University professor in the faculty of environmental and urban change, who had also heard rumblings of the mysterious program. “There’s no set of rules that says there’s a need for these offsets, or for these credits, and establishes how they will be priced.”
Some say any clean energy credits sold should not be claimed as part of Ontario’s emissions reduction efforts. But there’s no way, at present, to publicly monitor this. Unlike many jurisdictions in the United States, Ontario doesn’t have a mandatory clean energy credit market regulating accounting of sales of clean energy credits.
“In a sense, (Ontario Power Generation is) monetizing an asset that is owned by the people of Ontario,” Winfield said. “It’s a complicated mess because there are no rules in this space. We haven’t developed proper carbon markets in North America.”
Winfield and other industry experts noted that an attempt at creating rules around a carbon market were dismantled and demolished by the Progressive Conservative government when it took office. The cap-and-trade program had started establishing a system around offsets and the trading of carbon credits, all with the goal of reducing emissions.
“Carbon credit” is a catch-all term: under the cap-and-trade system, they’re created when emitters achieve real reductions relative to their baseline emissions. Clean energy credits like Ontario Power Generation is selling, on the other hand, are carbon credits that focus specifically on reducing electricity use from non-renewable sources.
Any credit system requires stringent regulation and tracking, which experts say cap-and-trade had begun developing in Ontario before it was cancelled.
Ontario Power Generation “is kind of taking advantage of this void to manufacture value out of nothing,” Winfield said. “The question is why. Why would they do that?”
There are additional concerns about how these sales will be accounted for in climate targets and policy-making. “If Ontario is selling these credits into the United States, who gets to claim their benefit: them or us?” Elson asked.
The Ontario Power Generation executive said there is no double-counting, noting the sales are “tracked and monitored carefully” through third-party brokerage systems.
“Everything OPG does is as a public company, is done by taxpayer support,” said another Ontario energy official not authorized to speak publicly. “OPG doesn’t have the right to keep this a secret from people.”
The earliest publicly available sign The Narwhal could find that Ontario Power Generation was planning to sell energy credits is a job listing from early 2021. It was for a new position in downtown Toronto: senior manager, origination. The description is of a business role that would “develop new relationships and growth opportunities “across the Northeast and Midwest regions.”
Among the role’s 22 listed duties is the responsibility to “negotiate and structure the sales of environmental attributes (e.g. renewable energy credits) associated with OPG’s generating assets … and emissions credits.”
There doesn’t seem to be any other public record of a program or a plan from then until Ontario Power Generation CEO Ken Hartwick’s statement in last January’s press release.
A month later, in February 2022, the Independent Electricity System Operator held a series of public engagement sessions. This is when others in the industry began voicing their discomfort with the opaque program.
One session was about the voluntary clean energy credits registry the operator had been directed to set up by the provincial government. One participant, from the Toronto Atmospheric Fund, asked if the Independent Electricity System Operator had done an analysis of how many credits were being sold by the power generator and whether the data of these sales existed in the public realm.
In response, Brennan Louw, a senior manager at the Independent Electricity System Operator, admitted that despite the operator being in charge of the province’s electricity market, the sales were “relatively new news” and he didn’t “know exact numbers.”
“To my knowledge, there isn’t clear accounting for [these credits], or public accounting for that at the moment,” Louw told the members attending the session. He said Ontario Power Generation was the only organization selling such credits in the province “as far as I know.”
His colleague, Dave Richardson, from the operator’s policy research and development department, told the audience the operator didn’t have any data from the power generator’s sales “because there’s no regulatory regime to require the disclosure of those sales right now. But it’s something we’ve identified and we’re going to figure out to be as transparent as possible and avoid double counting….”
Another public engagement session that day focused on “pathways to decarbonization.” There, Independent Electricity System Operator executives were asked how the organization might be amending emissions projections based on Ontario Power Generation’s sale of environmental attributes outside the province.
“Wouldn’t that affect the pathway to decarbonization for Ontario if all the [clean energy credits] are exiting the Ontario market?” asked an audience member from Evolugen, which runs hydro, wind and solar facilities across Canada.
After a brief silence, David Devereaux, a senior manager in resource and plan assessments at the operator, responded, “I think it’s something to consider. It definitely sounds like a risk.”
A few weeks after these sessions, Ontario Power Generation officially made its scheme public. On March 16 it added another page to the climate change section of its website, titled “Clean energy credit program.”
The introduction of the page states the company “offers electricity consumers clean energy credits from our facilities in both Canada and the United States.” It assures readers these credit sales are “tracked in a central registry that is transparent and auditable, to ensure each credit is allocated to only one use (e.g., unique with no double counting).”
On its website, the power generator promises to “transition to using the Ontario registry if and when it becomes available.” The company is expecting the registry to be live in January 2023.
Winfield said “it’s no accident” the Ford government is proposing a clean energy registry just as the industry is slowly learning of Ontario Power Generation’s private sales of clean energy credits. “They’re kind of creating a market for what OPG is selling,” he said. “They’re kind of legitimizing what OPG is doing here.”
In theory, a clean energy credit market can drive sustainable economic development, but only if the revenue generated by the sales is reinvested in emissions-reduction or other clean energy projects — something Ontario Power Generation has shown no evidence of.
“There’s no actual reduction in greenhouse gas emissions happening because of these sales,” Winfield said. “So why is the government of Ontario then creating a framework to validate that?”
Ontario Power Generation’s quiet sales of clean energy credits are also concerning for many because Ontario is on track for a massive increase in emissions in upcoming years. The nuclear power plant in Pickering, Ont., will be shut down starting next year, with the electricity it generates replaced by natural-gas fired generation. The government’s voluntary clean energy credit system will not help offset this increase, experts say. And neither will the power generator’s sale of these credits.
“It’s kind of bizarre that we would be selling these attributes in some kind of a market when the reality, with respect to greenhouse gas emissions and electricity in Ontario, is we’re on the precipice of a massive increase in emissions,” Winfield said.
The Narwhal repeatedly asked Ontario Power Generation what benefits the company sees by selling these credits when researchers like Winfield say such sales are not helpful to climate efforts unless revenue is reinvested in clean energy development.
“For us, it’s fairly straightforward,” the executive said. “We would be seeking to benefit the ratepayers of Ontario … so the funds would be flowing back to them to reduce burden.” He cited the 2022 Ontario budget put out by the Ford government last month that reiterated plans for a clean energy registry that “would return funds raised through the purchase of (clean energy credits) to Ontario ratepayers and support future clean energy generation in the province.”
The Narwhal asked again what benefits to ratepayers would look like. The executive responded that consultations were underway with the Independent Electricity System Operator and the Ontario Energy Board. “I think we all need to kind of wait to see how that is finalized to answer that question,” he said.
The Narwhal asked if the company has seen any benefits from the clean energy credit sales it had done thus far. “So I think the benefit we’re seeing is that there is an incredible demand for this, obviously a growing demand,” he said, adding that the program helped companies who wanted to offset their emissions, as well as ratepayers.
“This approach is really throwing off all of our climate efforts,” an industry expert told The Narwhal. “The only scenario at the end of this is our system isn’t as clean as we think it is. It’s only worse. There’s no scenario where things are better. It’s only that our emissions will be higher than we actually think they are.”
Updated on May 6, 2022 at 1:33 p.m. ET: A previous version of this story stated that Ontario Power Generation is selling credits based on sales of solar and hydro energy, but it is only selling credits based on hydro production. As well, these credits are monetized based on the megawatt hours of clean energy produced, not the volume of emissions saved. While the power generator began its clean energy credit sales 2013, the official pilot program for these sales only began in late 2021. These sales won’t be included in the company’s 2022 Q2 financial report, as previously stated, but only in their sustainability reports.
Updated on May 12, 2022 at 2:50 p.m. ET: This story has been updated to clarify the distinction between credits generated under a cap-and-trade system and the clean energy credits Ontario Power Generation is selling.
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