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Innovation Sandboxes

From Consensus to Action: How to Transform Canada’s Energy System

BY AÏDA NCIRI, QUEST AND RICHARD CARLSON, POLLUTION PROBE

Published on June 15, 2021 

ABOUT THE PROJECT

QUEST and Pollution Probe’s Innovation Sandboxes initiative is a four-year project to encourage and enable the innovation needed to meet our low-carbon targets through the use of Innovation Sandboxes in jurisdictions across Canada. We will do this by creating foundational policy frameworks and principles for Innovation Sandboxes that are tailored to participating Canadian provincial and territorial energy systems.

What Is An Innovation Sandbox?

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An Innovation Sandbox is a policy tool that uses collaboration to create conditions for innovation to be integrated into the energy system, allowing for the examination of real (and often perceived) barriers as well as testing solutions in a real-world environment. Innovation Sandboxes use tools such as Enquiry Services*, Innovation Hubs*, and Regulatory Trials*, along with mechanisms that capture lessons learned, to inform the development of policies. Energy Innovation Sandboxes provide the opportunity to change how processes, procedures, policies, rules, or regulations are applied in a controlled manner, with the ultimate goal of creating durable and lasting systemic change to enable innovations that benefit the energy sector, consumers, and society.

5 Reasons Why Innovation Sandboxes Are Needed In Canada

#1 - Accelerating Deployment of Low-Carbon Innovation to Meet Canada’s Net-Zero Target

If we want to achieve our climate and economic targets, we need both to speed up the pace and increase deployment of innovation. We also need to do so in a way that benefits all energy customers and that mitigates risks and unintended consequences. This requires us to rethink energy innovation policies at all levels of government and to:

  • Support the deployment and scale-up of proven low-carbon technologies 
  • Remove non-technological barriers to innovation and create long-term conditions that enable scale up of innovation.

Innovation Sandboxes can solve both of these problems by providing a broader lens through which to consider innovation and innovation policy in the energy sector, and by rebalancing focus from funding technology to innovation deployment.

#2 - Support Safe Testing of Products & Services in a Real-World Environment

Due to their heavy focus on technological demonstration projects, current energy innovation programs lack a space to experiment with non-technological innovations such as business models, consumers’ behaviours, governance and operational processes, and collaboration practices.

We heard about the need for innovation to move beyond conventional demonstration and to allow for safe trailing and testing within a real-world environment. Innovation Sandboxes provide this safe space. Examples of the types of innovations that could be tested in this way include: trialing new business, operational, governance, or consumer models, and testing new rate structures and practices.

Innovation Sandboxes that use real-world trials have the potential to introduce new opportunities that complement demonstration projects. This has been done by considering how the innovation integrates into the energy system (current standards, policies regulations, and business models) and interacts with other players (consumers, investment partners, and others).

#3 - Modernizing the Regulatory System

Innovation Sandboxes can help remove barriers in the energy regulatory landscape and modernize the energy regulatory system in three ways:

  1. Addressing regulatory no man’s land: these include regulations that did not catch up with emerging technologies or solutions, create uncertainty for innovators working with new technologies, as well as:
    • Regulatory lag: regulations that have been in place for so long that they are no longer stringent enough compared with recent technology performance
    • Lack of regulatory alignment creating a “patchwork of markets”: a streamlining and harmonization of provincial and territorial regulations with federal regulations
  2. Delivering enquiry services to make the regulatory system more accessible and easy to navigate: the energy system can be challenging to navigate. It takes significant resources to understand the system as well as to influence it. 
  3. Engaging new stakeholders, and in a different way: Non-traditional energy players do not speak the regulator’s language and feel overwhelmed by the regulatory “machine.” Innovation Sandboxes allow for the regulator to rethink the way they engage non-traditional stakeholders and to be innovative to make the system accessible to each actor.

#4 - Collaborating Across the Energy Sector and Capturing Lessons Learned to Inform Policy and Regulatory Change

Except in rare instances, most energy innovation policies and programs lack sound, comprehensive and well-thought-out collaborative and knowledge-sharing mechanisms. Typically, the results of a project centre on technical learning and advancements and are only shared through industry conferences and publications, leaving innovators and their innovations isolated from the economic, policy, and social dimensions of the system.

In addition, current energy innovation programs have limited to no mechanisms to capture findings and knowledge from projects and programs to inform policy and regulatory changes, yet this is essential to remove structural barriers to innovation and facilitate their scale-up.
Innovation Sandboxes can offer collaboration and knowledge sharing mechanisms through Innovation Hubs and put in place mechanisms to ensure lessons learned are documented and used to inform future energy policy and regulatory discussions.

#5 - A Flexible Tool That can be Adapted to each Jurisdictional Context

To be successful, Innovation Sandboxes need to be well-designed and there is no “one” type as they need to be tailored to the local context and specific needs of the jurisdiction in which they are developed. There are multiple ways to run an Innovation Sandbox. Innovation Sandboxes are diverse in who is creating and implementing them. They can be developed by governments and regulators — in some cases both — to pursue specific policy outcomes. 

Innovation Sandboxes are also diverse in the energy sources they consider: while the focus has tended to be on the electricity system, some include, or will be expanded to, natural gas. A few have also included transportation and electrical vehicles. Finally, Innovation Sandboxes are diverse in the policy tools that are associated with them, such as funding, data sharing, and academic research. 

This is why the design phase is crucial. Developing effective energy Innovation Sandboxes in Canada means ensuring they reflect each jurisdiction’s context and needs and are designed by incorporating feedback from diverse stakeholders representing the entire energy system, from energy users to new entrants, to utilities; from the regulators to the government. Therefore, developing effective Innovation Sandboxes requires the use of innovative and inclusive engagement processes.

Project Goals

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SUPPORT

Support net zero-targets through the deployment of readily available low-carbon technologies and testing new business models and regulatory frameworks

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GUIDE

Work with up to three Canadian jurisdictions to create tailored frameworks to introduce energy Innovation Sandboxes

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RESEARCH

Investigate and share knowledge and best practices on Innovation Sandboxes in Canada and internationally

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CONNECT

Increase collaboration and dialogue amongst regulators, policy makers, government, consumers, civil society, academia, and innovators

Next Steps

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Research (2020)

QUEST and Pollution Probe have already completed two reports as part of this project. The first report, Enter the Sandbox: Developing Innovation Sandboxes for the Energy Sector, is the first international research comparing Innovation Sandboxes implemented or being developed by nine jurisdictions worldwide. It presents the concept of sandboxes and how they have been designed. The second report, Getting to deployment: bridging the gaps in energy innovation in Canada,  reviews current innovation policies and programs in Canada’s energy sector and examines the potential role Innovation Sandboxes can play to overcome non-technological barriers and scale up low-carbon innovation in Canada’s energy sector.

National and jurisdictional workshops

QUEST and Pollution Probe are working collaboratively with provincial, territorial, and federal policy makers, regulators, and other key energy stakeholders to conduct workshops on developing tailored frameworks for Innovation Sandboxes that will provide the conditions for innovation that can meet public policies. This will be completed in three phases.

  • Phase 1: National Engagement | April 2021. This first national workshop aims to collect feedback and input in order to capture a diversity of perspectives on the barriers to innovation. 
  • Phase 2:  Jurisdictional engagement | Spring – Fall 2021. QUEST and Pollution Probe will engage with diverse stakeholders to recruit and work with several provinces and territories interested in implementing tailored Innovation Sandboxes. 
  • Phase 3: Jurisdictional workshop | Winter-Spring 2022. QUEST and Pollution Probe will hold a series of workshops with participating provinces and territories to develop Innovation Sandboxes frameworks tailored to their particular requirements and circumstances.

Preparation of Innovation Sandboxes Frameworks (2023)

QUEST and Pollution Probe will share learnings from the research and workshops and a national vision based on jurisdictional realities for the role of Innovation Sandboxes in Canada’s net-zero future. This will be done first nationally, and then for specific participating jurisdictions. These frameworks can then be used by others to inform policy and regulatory reform or to create more effective policies, regulations, and programs to accelerate the transition to a low-emissions future.

GET INVOLVED

We are looking to work with a diversity of organizations on this project, including:

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Federal energy regulators

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Provincial & territorial energy regulators

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Federal policy makers
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Provincial & territorial policy makers

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Indigenous communities and local governments

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Financiers/investors

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Energy Utilities (electric, gas, nuclear)

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Energy consumers representative

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Technology and services providers

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Consumers advocates

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Industry associations

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Academia

Create a Framework for Your Innovation Sandbox

We are currently looking to work with Canadian jurisdictions in 2021 and 2022 to develop tailored frameworks for Innovation Sandboxes to advance low-carbon innovation in their energy sector. If you are a senior official with a regulator, a policy maker, a local government, an Indigenous community, a utility, or an entrepreneur interested in creating Innovation Sandbox frameworks contact us below.

Want to get involved?

RESOURCES

The Reports

Innovation Sandboxes Report 1 cover

July 2020

The report, Enter the Sandbox: Developing Innovations Sandboxes for the Energy Sector, identifies best practices and lessons learned to design and develop Innovation Sandboxes in Canada by looking at sandboxes implemented or being developed, in ten jurisdictions worldwide.

QUEST’s Aïda Nciri and Pollution Probe’s Richard Carlson, our two report co-authors, presented the report’s key findings during a  webinar.

November 2020

This report, Getting to deployment: Bridging the Gaps in Energy Innovation in Canada,  reviews current innovation policy in Canada’s energy systems and identifies Innovation Sandboxes as a key policy tool to address non-technological barriers innovators face, and accelerate the deployment of innovation in Canada’s energy sector. In complement to current innovation programs focused on funding of technological R&D and demonstration projects, Innovation Sandboxes can help Canada’s energy sector achieve low-emission targets and economic growth.

INNOVATION SANDBOXES UPCOMING REPORT

September 2021

 Research currently ongoing

FAQ

When were Innovation Sandboxes developed

Innovation Sandboxes are a relatively new policy tool globally, but they are becoming more widely recognized as a useful tool for encouraging the deployment of innovation in various sectors, including in the energy sector (see report 1). Canada is no exception. Federal, provincial, territorial, and municipal governments are increasingly interested in the development of Innovation Sandboxes, and some jurisdictions have already established Innovation Sandboxes in different sectors. For example, the federal government has identified Innovation Sandboxes and Regulatory Trials as part of its initiative to broadly promote emerging technologies and to modernize regulatory frameworks in a number of sectors (see report 2).

While elements of sandbox-like tools can be seen in Canadian energy innovation programs, Ontario is the home of the only energy Innovation Sandbox in Canada. The Ontario Energy Board (OEB) — the energy regulator in Ontario — introduced an Innovation Sandbox in 2019 following feedback from the sector concerning regulatory barriers, and the desire to act quickly to encourage innovation.

What is an Enquiry Service?

A tool of Innovation Sandboxes that provides customized guidance to help innovators navigate
the system and overcome perceived barriers. As one example, innovators may have informal
discussions with the Innovation Sandbox administrator and have ideas assessed.

What is an Innovation Hub?

A tool of Innovation Sandboxes that employs collaborative tools or platforms that enable knowledge exchange and sharing of lessons learned between innovators, and general information about regulatory systems for conducting trials.

What is a Regulatory Trial?

A tool of Innovation Sandboxes that offers time-bound derogation or exemption to existing rules for specific trials (in some literature referred to as Regulatory Sandboxes).

How can I become a project partner?

If you are a regulator, a policy maker, a local government, an Indigenous community, a utility, or an entrepreneur and would like to participate in one of our Innovation Sandbox Framework development workshops for Canadian jurisdictions, please contact Project Manager, Eric Timmins

If you would like to support this project as a funder please contact Director, Projects and Research, Laura Gareau.

Are there Innovation Sandboxes in Canada?

Canada is no stranger to Innovation Sandboxes; in fact, several are already being used at the federal, provincial, and local government levels, in various sectors, such as in securities, agrifood, and transportation.

In the energy sector, the Ontario Energy Board (OEB) implemented the first Sandbox in Canada, which has shown that they can provide benefits and has highlighted areas for improvement. And while not true Innovation Sandboxes, some recent Canadian energy innovation programs have introduced sandbox-like tools in their design to address non-technological barriers and the deployment of new practices and business models.

PROJECT PARTNERS & SUPPORTERS

Partners

Funders

This project is made possible by support from the Suncor Energy Foundation (SEF) .

Other Resources

QUEST conducts and packages cutting edge applied research to empower practitioners and decision makers with the tools they need to advance Smart Energy Communities. Find out more about our projects:

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