2012 Energy Conservation Progress Report (Volume Two)

Building Momentum

Results

The Environmental Commissioner of Ontario released Volume Two of his 2012 Annual Energy Conservation Progress Report to the Legislature on December 9th, 2013. Volume 1 was released in September 2013.

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Executive Summary

This report is data-focused and provides a resource for Ontarians who want to monitor the pace and scope of the progress made in conserving energy in this province. It analyses conservation programs, reviews initiatives and measures progress towards targets.

Progress on Energy Conservation Targets

The Long-Term Energy Plan’s Province-Wide Electricity Conservation Targets

The first of the Long-Term Energy Plan’s three interim targets occurs in 2015 (4,550 megawatts (MW) peak demand, and 13 terawatt-hours (TWh) energy from a 2005 baseline). As of 2012, progress of 2,445 MW and 7.6 TWh is nominally encouraging (indicating 54 per cent and 59 per cent of targets, respectively, has been achieved). However, a large portion of the savings claimed – about one-third of peak demand and two-thirds of energy – are attributed to codes and standards. The ECO cautions against accepting these results at face value. Despite requests from the ECO, the Ontario Power Authority has not provided persuasive information that explains how the savings attributed to codes and standards are calculated to support the claimed amounts.

Low Carbon Fuel Standard

Little progress was made in 2012 to reduce greenhouse gas (GHG) emissions from the transportation sector. In 2007, Ontario committed to implementing a Low Carbon Fuel Standard (LCFS) to reduce the carbon intensity of transportation fuels by 10 per cent by 2020. Other jurisdictions have used an LCFS to discourage the use of conventional petroleum products, but the Ministry of Energy has made no progress since its original commitment. Since the Ministry of the Environment is responsible for regulating transportation fuel qualities (e.g., vapour pressure) to control emissions, it may be appropriate that it lead implementation of the government’s LCFS commitment.

The ECO recommends that responsibility for implementing the government’s commitment to a low carbon fuel standard be assigned to the Ministry of the Environment.

Electricity Distributor Conservation and Demand Management Targets

Noteworthy trends in year two of the 2011 – 2014 Local Distribution Company (LDC) Conservation and Demand Management (CDM) target were: administrative improvements in the working relationship of the OPA and LDCs though obstacles to program delivery remain; strong performance of the saveONenergy business program, but continued weak performance in the consumer program confirming saturation of these residential initiatives; and, a much wider roll-out in 2012 of several programs that had late or spotty launches in 2011.

At this half-way mark, LDC performance toward the aggregate target (1,300 MW peak demand reduction in 2014 and 6,000 gigawatt-hours (GWh) of energy savings accumulated over the 4 years) mirrored 2011 trends: 379 MW and 3,906 GWh, or 29 per cent and 65 per cent respectively, of the targets achieved to date. If this continues, the collective effort of LDCs will fall well short of the aggregate demand target and just shy of the energy target.

No programs designed and delivered exclusively by LDCs (without OPA involvement) were introduced in 2012, although one was approved in 2013. At this late date, it seems certain that such programs will not meaningfully impact province-wide results. Cost effectiveness of programs diminished slightly compared to 2011 but they remain highly cost-effective. The cost of the energy efficiency programs was 4 cents per kilowatt-hour compared to an average cost of generated power (market price and global adjustment) of about 8 cents in 2012; for demand response programs, the cost was $9,855 per megawatt-month compared to roughly $15,000 per megawatt-month for recently added natural gas peaker plants.

Natural Gas Distributor Demand-Side Management Targets

Results of natural gas savings show that Enbridge Gas and Union Gas achieved commendable savings in 2012, this first year of the updated three-year (2012 – 2014) demand-side management policy framework which emphasizes deep (or long-term) savings and market transformation. On the key measurement of gas saved, Enbridge exceeded its newly-established metric of 820 million lifetime cubic metres of gas acquired from 2012 programs, and achieved slightly over a billion cubic metres. Enbridge had strong performance on other metrics that measure market transformation. However, these metrics carry much less weight than gas savings.

Union Gas exceeded its newly-established metric of 826 million lifetime cubic metres of gas acquired from 2012 programs. It also exceeded its new metric of 1 billion lifetime cubic metres of natural gas saved by large industrial users. Union had solid performance on other metrics that measure market transformation, meeting and exceeding targets for working with homebuilders. However, these metrics carry much less weight than gas savings.

Ontario Government Operations Electricity Reduction Target

The government made a two-part commitment to reduce its own electricity use by 20 per cent by 2012. First, in 2004, the province pledged to reduce its electricity use by 10 per cent by 2007. Second, in 2007, it renewed its commitment and pledged to reduce electricity consumption by an additional 10 per cent by 2012. The government did not meet its 2007 target. Preliminary results from the Ministry of Infrastructure (MOI) indicate that the government met its 20 per cent electricity reduction target and saved 98 GWh of electricity in 2012. A third party is currently reviewing the government’s estimated electricity savings; the verified, final results were unavailable at the time of writing this report.

MOI has completed commendable work to establish baselines, incorporate data from all ministries in its database for monitoring energy, and bring most ministry facilities under the requirements of a Minister’s directive that specifies reporting and planning of energy conservation in facilities owned by the Ontario government (facilities that are leased and some other facilities are exempt from the directive). Momentum will be maintained with two ongoing targets: a 19 per cent reduction in GHG emissions by 2014 and a 27 per cent reduction by 2020 compared against 2006 GHG emissions. Tracking energy used in government-leased facilities and greater transparency of government direction are two outstanding issues that should be addressed.

The ECO recommends that the Ministry of Infrastructure amend the Ontario Facilities Energy Reporting Directive to include leased facilities.

Codes and Standards

Product Energy Efficiency Standards

In February 2012, O. Reg. 82/95 was amended to include a ban on inefficient incandescent lighting. The ban comes into effect by December 2014. (The original commitment was to ban such light bulbs by 2012 but was delayed to harmonize with a revised federal timetable). In December 2012, O. Reg. 404/12 was passed and replaced O. Reg. 82/95. It came into effect shortly after passage in January 2013. The new regulation’s format makes it easier to compare old and new efficiency standards, and includes products that use energy and affect energy use (e.g., windows). Ontario Regulation 404/12 set 19 new minimum energy performance standards, and revised 24 existing standards.

These actions are commendable but occurred after delay and multiple attempts to update the standards and amend the regulation (several revised proposals seeking comment were posted on the Environmental Registry). To avoid such delays for future standards setting, and considering federal reviews that are regularly required, as well as the periodic review process used for amending energy provisions of the Ontario Building Code, the ECO believes that a cyclical mechanism is needed to ensure priority is given to updating standards.

The ECO recommends that the Ministry of Energy develop a regular update cycle for product standards, which identifies Ontario’s best opportunities to improve energy efficiency.

2012 Ontario Building Code

The Ontario Building Code (OBC) sets energy efficiency and other requirements for new buildings in Ontario and is updated on a five-year cycle. In November 2012, the Ministry of Municipal Affairs and Housing (MMAH) finalized the next version of the OBC (the “2012 Code”), through O. Reg. 332/12, building on energy efficiency requirements contained in the last version of the OBC.

The new energy requirements in the 2012 Code include higher general levels of building energy performance, relative to the 2006 Code, including a 15 per cent improvement in overall energy efficiency for houses and a 13 per cent improvement for large buildings. These requirements will come into force on January 1, 2017. Builders typically meet such performance standards by installing a combination of technologies which are bundled together in approved packages of technical standards. Some, like insulation, improve the performance of the building’s “envelope” and others, like high-efficiency furnaces or heat pumps, affect the mechanical performance of the building. Typically, the performance of certain technologies are weighed against – or traded off – others to meet the overall efficiency performance level required by the code. A recent technical standard amendment enabled builders to trade off envelope performance for drain water heat recovery.

New requirements for programmable thermostats and low-flow showerheads were also introduced in the 2012 Code and take effect earlier than 2017. The OBC now also contains a stated objective to limit the release of GHGs and to limit peak electrical demand. One proposal, to include in the code a requirement that houses be built “solar-ready”, (i.e., constructed so as to easily incorporate future connection of solar hot water or solar electricity systems), was not adopted in the 2012 Code because further technical study was deemed necessary.

The ECO recommends that the Ministry of Municipal Affairs and Housing modify the 2012 Ontario Building Code’s technical standards to restrict the use of trade-offs that reduce the level of energy performance of the building envelope.
Industrial Electricity Incentive Program
In 2012, the Ministry of Energy introduced an Industrial Electricity Incentive (IEI) program. It provides a reduced electricity price for industries in exchange for them investing in and thereby creating jobs in Ontario. The IEI program is designed to make use of the surplus supply of power that Ontario is currently experiencing, particularly at certain hours of the day. No price contracts have yet been awarded by the OPA, which was directed by the Minister of Energy to design a procurement process and negotiate contracts for electricity. Following a directive from the Minister of Energy, the IEI program rules and details created separate procurements for stream 1 applicants (e.g., characteristics such as, brand new facilities, peak demand of 25 megawatts or greater, price cap of 5.5 cents per kilowatt-hour) and stream 2 applicants (e.g., currently located in Ontario, expected peak demand increase of 1 megawatt, will receive various rebates of current price components).

The OPA included certain restrictions to ensure the IEI procurement produced benefits for the electricity system. A weighted point method for awarding contracts is intended to favour projects where only truly surplus electricity is consumed (i.e., consumed during hours that a surplus exists and not creating additional demand in non-surplus hours). Also, participants of both streams must submit an energy management plan to the OPA showing how their operations are energy efficient. And finally, IEI participants cannot partake of OPA conservation programs because of government concern for the amount of cross-subsidy from other classes of rate payers.

The ECO’s preferred solution is to address demand-supply imbalances through clear price signals that reflect the hourly cost of generating electricity, conserve electricity in peak hours, and minimize cross-subsidies that favour inefficient over efficient consumers. Nevertheless, the ECO finds that the stream 2 IEI program design with its firm end date of 2019, to coincide with the estimated end of surplus baseload generation, is an acceptable approach to address the near-term surplus of electricity in off-peak hours. The ECO believes that the stream 1 program design is a bad deal for consumers and may harm the environment. The stream 1 program could build load across all hours resulting in higher levels of GHG emissions and could result in decades-long contracts offering subsidized cheap prices. Over these long timelines, other options like electricity storage for renewable power, smart grid-enabled load reductions, and building load in non-surplus off-peak hours, for example with electric vehicles, are equally viable options.

The ECO recommends that the Ontario Power Authority provide Industrial Electricity Incentive price discounts only for projects that predominantly use surplus electricity.

 

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