www.eco.on.ca

Managing a Complex Energy System – ResultsAnnual Energy Conservation Progress Report – 2010 (Volume Two)

BackgrounderUndertheEnvironmentalBillofRights,1993,theEnvironmentalCommissionerofOntario(ECO)reportsannuallytotheLegislativeAssemblyofOntarioontheprovince’sprogressinenergyconservation.ManagingaComplexEnergySystem–ResultsisthesecondvolumeoftheAnnualEnergyConservationProgressReport–2010.VolumeOne,releasedinJune2011,focusedonthepolicyframeworkforenergyconservation,providinganextensivereviewofelectricitydevelopmentsaswellasaconciseanalysisofaregulatorydecisionaffectingfundingofnaturalgasconservation.Thissecondvolumemeasuresprogressagainstestablishedenergytargets,andreviewsnaturalgasindustrialconservationprograms,theOntarioPowerAuthority’sConservationFund,andelectricityretrofitprogramsforcommercialandinstitutionalbuildings.

Inthepublicdebateoverenergy,conservationisoftenignored.Overthepastyear,therehasbeenagreatdealofattentionfocusedonprices,renewableenergy,andnaturalgaspowerplants.Concernsabouttheaestheticandhealthimpactsofrenewableandgas-firedgenerationdominatedtheenergydebate.

TheECOcautionsthattherealvalueofconservationhasbeenlostinthisdiscussion.Ontarianswereleftwithalopsideddiscussionofpublicpolicythatneglectedtheeconomicandenvironmentalimpactofgrowthinenergydemandthatisnotmoderatedbyconservation.Seldommentionedwasthefactthatconservationeffortsareexpectedtooffsetmuchoftheprojectedgrowthinconsumptionbetweennowand2016.TheCommissionerbelievesthegovernmentshouldmakeconservationatopprioritybecauseofitsprovenabilitytosavecustomersmoneyandavoidnewandoftenunpopularenergysupplyprojects.Asthepasttwoyearshaveshown,willinghostcommunitiesofanytypeofpowerplantarefewandfarbetween.

The Value of Conservation

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governmentelectricityconsumptionbysome15percentcomparedtotheconsumptioninfiscalyear2002/03.(Page21)

TheECOrecommendsthattheMinisterofInfrastructureusetheGreenEnergyAct,2009directivepowertoremovebarriersfacedbycustodialministriestoachievethegovernment’selectricityconservationtarget.Forallintentsandpurposes,thegovernmenthasnowmetitsgoaltoinstallsmartmetersforalleligibleelectricitycustomers,althoughitachievedthegoalslightlylaterthananticipated,with99%ofeligiblecustomershavingmetersinstalledbyJuly2011(thetargetwastheendof2010).

ByJune30,2011,3.6millionofthesecustomerswerealsosupposedtobeshiftedovertotime-of-use(TOU)pricestotakeadvantageofthesmartmeters.Heretheprogresshasbeenslower:about2.8millioncustomershadmovedtoTOUpricingbytheJune30thtargetdate,aboutthree-quartersofthetargetamount.MostofthedelaysinTOUimplementationhavebeencausedbyunforeseentechnicalissuesthatlocaldistributioncompanies(LDCs)haveworkedtoovercome.

Whilepleasedabouttheprogressmade,theECOisdisappointedwiththedelayinTOUdatacollectionandanalysiswhichisneededtocomparepatternsofelectricityconsumptionbeforeandafterTOUbilling.ThegovernmenthasnomechanisminplacetomeasurehowpeoplehavechangedtheirconsumptionwiththeintroductionofTOUpricing.Theprices,setsemi-annuallybytheOntarioEnergyBoard(OEB),arenotbasedonactualdataofhowpricelevelsaffectcustomers’consumption.TheCommissionerbelievesthatthisdataisessentialiftheOEBistosetTOUpricesatlevelsthatmaximizetheamountofconservationfromelectricityconsumers.(Page24)

Targets and Progress

Reduce 2,700 MW of Peak Electricity Demand by 2010

Conserve Electricity inGovernment Operations

Implement Smart Meters and Time‐of‐Use Pricing

TheAnnualEnergyConservationProgressReport–2010(VolumeTwo)reviewedthreeofthegovernment’skeyconservationtargetsaswellasnewtargetssetbythegovernmentin2010toseehowmuchprogresswasbeingmade.Thegovernmentmadesubstantialprogress,butnotenoughtomeetthetargetofa2,700megawatt(MW)reductionofpeakelectricitydemandby2010thatwassetbytheMinisterofEnergy.AccordingtotheOntarioPowerAuthority(OPA),peakdemandwasreducedby1,751.9MW,duetoconservationinitiativesthatbeganin2005.

Despitenotreachingthe2010target,Ontario’sconservationeffortsdeliveredsignificantbenefitsbyreducingtheneedfornewgenerationandsavingelectricityratepayersmoney.Thereductioninpeakdemandbysome1,750MWisapproximatelyequivalenttohavingtoinstallthegeneratingcapacityofthreenaturalgaspeakingpowerplants.Byinvestingabout$1.7billioninconservationprogramsfrom2006to2010,Ontariosavedelectricityratepayers$3.8billioninavoidedelectricitysupplycosts.(Page17)Tosupportitscommitmenttoacultureofconservation,theOntariogovernmentpledgedtoreduceelectricityuseinitsownfacilitiesby10percentby2007,andanother10percentby2012.Thegovernmentaimedtoachievethesesavingsprimarilythroughupgradestoitsbuildings,employeeeducationandotheractions.Thegovernmentagency,InfrastructureOntario,metthisgoalinfacilitiesthatitmanaged,whiletheministriesthatmanagetheirownfacilities,suchastheMinistryofCommunityServicesandCorrectionalServicesortheMinistryofNaturalResources,laggedbehindbecauseinsufficientresourceswerededicatedtoimprovingefficiency.Thismeantthegovernmentwasabletoreduceitselectricityconsumptionbyonly8percentby2007,andexpectstoreachonly75percentofits2012target.Whileshortofitsgoal,thiswillstillreduce

EnergyefficiencyisoftengivenalowprioritybyOntario’sindustrialfirms.Therearesomeverycost-effectiveopportunitiestosaveenergy,buttheyareseldomacteduponwithouttheassistanceofutilities.Toovercomethesebarriers,Ontario’snaturalgasutilities(EnbridgeandUnionGas)haveofferedindustrialconservationprogramsthatprovidetechnicalassistanceandfinancialincentives.Theseprogramshaveconsistentlydeliveredlargesavingsandhavebeenmorecost-effectivethangasconservationprogramsinanyothersector.

However,theOEBrecentlytoldthegasutilitiesthatitisnolongermandatoryforthemtooffertheseprogramstolargeindustrialcustomers.BothofOntario’sgasdistributorshavereducedtheirproposedspendingfortheselargecustomersasaresult.TheOEBactionraisestheconcernthatdistributorswillcontinuetolimitspendingoutoffearthatrequeststofinancemoreextensiveprogramswillberejectedbytheBoard.Thelikelyresultwillbeadecreaseinthefundsdirectedatindustrialgasconservation.

TheEnvironmentalCommissionerbelievesthatiftheOEBhadexplicitlyconsideredsocietalcostsofenergyconsumption,suchasgreenhousegasemissions,itwouldhavemaintainedmandatoryconservationprogramsforlargeindustrialcustomers.ThispatternofnotconsideringtheenvironmentalconsequencesofenergyconsumptionisalsoreflectedinotherrecentOEBdecisionsforelectricityconservation.TheECOsuggestsachangeinlegislationtomaketheOEBmoreeffectiveinpromotingenergyconservation,ashadbeenintendedbytheGreenEnergyandGreenEconomyAct,2009.(Page38)

TheECOrecommendsthattheMinistryofEnergyamendtheOntarioEnergyBoardAct,1998sothattheOntarioEnergyBoard’sobjectivesincludehavingregardtotheenvironmentalcostsassociatedwithenergyconsumption.

In2010,thegovernmentintroducedtwomajornewelectricitytargets:

LDCConservationandDemandManagementTargets–2014

Forthefirsttime,LDCshavebeenassignedmandatoryconservationtargets.Theyarecollectivelyrequiredtoachieve1,330MWofpeakdemandsavingsin2014and6,000gigawatt-hours(GWh)ofconsumptionsavingsfrom2011to2014.Eachutilitywasgivenashareofthistargetanditwasmadeaconditionoftheirlicence.TheECOisconcernedthatLDCswillnotmeettheirtargetsduetoalatestartinlaunchingtheprograms,anddifficultiesingettingprogramapprovalsfromtheOEB.Todate,onlytwoLDCshaveappliedfortheBoard-Approvedprograms,whichwillbeneededifLDCsaretomeettheirtargets,andeachapplicationwaswithdrawnfollowinganunfavourabledecisionororderbytheOEB.TheEnvironmentalCommissionerurgesthegovernmentandtheOEBtopromptlyimplementchangestoensurethatthetargetismet.Failingthat,thegovernmentshouldreconsiderthetargettimelineof2014.TheECOalsorequeststhegovernment,theOPA,andtheOEBclarifywhetherandhowLDCscancredittheconservationsavingsthatwilloccurwithTOUpricingtowardstheirindividualLDCconservationtargets.(Page27)

Province-WideElectricityConservationTargets–2015andBeyond

Province-wideelectricityconsumptionanddemandreductiontargetswerealsoestablishedfortheperiodafter2014.TheOPAwilldiscloseitsstrategyformeetingthesetargetswhenitreleasesanupdatedIntegratedPowerSystemPlan.TheCommissionerisconcernedwiththelackoftransparencyinsettingthesenewprovince-widetargets.ThisissimilartowhatoccurredwhenthetargetsthatLDCsmustmeetby2014wereset.TheECObelievesthatthegovernmentdidnotmakeenoughinformationavailableaboutthemethodandassumptionsthatunderliethesetargets,sothepubliccouldnotjudgewhetherthesetargetsweresufficienttodeliveranoptimalamountofconservation.(Page34)

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Reviews of Conservation Programs

Natural Gas Industrial Conservation Programs

New Targets

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TheEnvironmentalCommissioneralsoreviewedfourconservationprogramsthatoperatedbetween2007and2010toimproveenergyefficiencyinexistingcommercialandinstitutionalbuildings.Theseprogramswerecost-effectiveindeliveringelectricitysavings,butgenerallydidnotachievetheirtargets.

In2011,theOPAreplacedtheseprogramswithanewprovince-wideprogramprovidingfinancialincentivesforbuildingretrofits,aswellasfundingforaudits,buildingcommissioningandbuildingoperatortraining.TheECOsupportstheseprogramenhancementsbutbelievesincreasedincentivesandmoreeducationandoutreacheffortsmaybeneededtomeetsavingstargets.

TheECOnotesabarriertoprogramparticipationthatprogrammanagersflaggedaboutthecommercialretrofitprogramsthatranfrom2007to2010.SomepotentialprogramparticipantsdeclinedtoparticipatebecausetheywerelegallyrequiredtogivetheOPAownershipofallenvironmentalattributes,suchascarboncreditsresultingfromreducedgreenhousegasemissions.(Page44)

TheECOrecommendsthattheOntarioPowerAuthorityreleaseclaimstoownershipofenvironmentalattributesarisingfromconservationprojectsfundedwiththeaidofOntarioPowerAuthorityincentives.

Electricity Retrofit Programs for Commercial and Institutional Buildings

The Conservation Fund

TheECOexaminedgrantsfromtheOPA’sConservationFundthatareawardedtostimulateinnovationinconservation,testuniqueelementsofconservationinitiatives,buildcapacity,andsupportpilotprojects.From2005to2010,theFundprovidedalmost$15millionto97projectsacrossallsectors,andtestedanumberofinitiativesthatarenowincorporatedintoOPA’sregularconservationprogramportfolio.TheOPAplanstomakemoreuseoftargetedRequestsforProposalsonspecificpriorityareasforelectricityconservationinvestments.TheECObelievesthatthereisacontinuingneedforaprogramliketheConservationFundtodriveimprovementsinconservationprogramdesignandencourageinnovation.(Page48)

Aussidisponibleenfrançais

Formoreinformation,contact:MariaLeungCommunicationsandOutreachCoordinatorEnvironmentalCommissionerofOntario416-325-3371/416-819-16731-800-701-6454Maria.leung@eco.on.ca

1075 Bay Street, Suite 605

Toronto, ON

M5S 2B1, Canada

T: 416.325.3377 F:416.325.3370

Toll free: 1.800.701.6454

commissioner@eco.on.ca

The Environmental Commissioner of Ontario is the provinceʹs independent environmental watchdog, appointed by the Legislative Assembly. The ECO monitors and reports on compliance with the

Environmental Bill of Rights, the governmentʹs progress in reducing greenhouse gas emissions and its actions towards achieving greater energy conservation in Ontario.

The Conservation Fund

DownloadtheEnvironmentalCommissioner’s2010EnergyConservationProgressReportManagingaComplexEnergySystem–Resultsat

wwwecoonca. . .