The Toronto Star
January 28, 2012
Tear down barriers to energy conservation
So far, the best idea the province seems to have for slaying its deficit is to roll the dice on a Toronto casino. But there is a much better bet sitting right under the nose of Queen’s Park. As a province that imports all of its natural gas and that sells much of its electricity below cost, increasing energy efficiency is a sure fire way to increase economic growth and provincial revenues.
The Ontario Clean Air Alliance (OCAA) commissioned one of the province’s top economic forecasting firms — Spatial Economics — to look at what increasing the efficiency of natural gas use would do for our collective bottom line. It found that a 16 per cent reduction in our natural gas consumption by 2021 would increase GDP by $5.5 billion and reduce the combined federal and provincial deficits by $975 million. And it would do that while creating more than 33,800 new jobs and lowering the cost of doing business in Ontario.
This, however, is really just the tip of the efficiency iceberg: Union Gas has calculated that it could reduce its customers’ energy consumption by 30 per cent over roughly the same period. And those are real in-your-pocket savings: the costs of improving efficiency would be far outstripped by your utility bill reductions.
The OCAA is not alone in seeing this potential. The Canadian Council of Chief Executives recently came out with a report which bluntly stated: “We must use existing and future energy supplies as efficiently as possible, embracing the maxim that the cheapest form of energy is the unit that is not used.”
But if we want to increase our odds of successfully tapping into the prodigious potential of saving energy — from cleaner air and a safer climate to more productive industries and more comfortable homes — we need to get our priorities straight.
Right now, our energy regulatory system is rife with barriers and disincentives for energy conservation. Recent rulings by the Ontario Energy Board (OEB) that put short-term price control ahead of deeper cost savings are the perfect example of this cart-before-the-horse mentality.
Take the role of utilities in helping their customers save energy. Utilities are in an ideal position to assist customers, thanks to their existing relationships, knowledge of energy use patterns, and expertise. Yet regulators like the OEB are all too prone to putting up barriers to effective utility-driven energy efficiency programs. The recent decision by the OEB to deny a rate increase to Enbridge Gas Distribution and Union Gas to cover the cost of expanded efficiency programs is a perfect example. Customers would enjoy lower bills thanks to reduced consumption if Enbridge and Union had been allowed to proceed as planned. But the OEB’s price fixation makes it blind to the net savings that would result from more robust conservation programs.
We need to unshackle our utilities and get them into the efficiency business — big time. One of the toughest efficiency nuts to crack is business and consumer focus on fast payback. No one wants their money tied up for 10 or 15 years in new boilers or insulation, even if the long-term payback is excellent. Utilities, with their familiarity with long investment horizons and steady returns, are ideal agents to rent efficient equipment or otherwise structure programs that reduce this barrier.
But if we want utilities to become strong efficiency champions, we have to eliminate the red tape and perverse financial incentives which have been established by the OEB and the Ontario Power Authority (OPA). For example, the OPA is offering Toronto Hydro a profit bonus of up to $8.5 million for underspending its energy efficiency budget, even if it fails to achieve its minimum energy conservation targets set by the OEB. This is nuts.
Similarly, a focus on centralized program development by the OPA has stifled efforts to tailor efficiency efforts to different communities and local economies. One-size-fits-all looks awfully dated in an era of rapid customization, intensive data mining and “long-tail” marketing efforts. No wonder the environmental commissioner of Ontario says Ontario’s electricity conservation efforts are “incomplete” and warns that restrictions on program customization will likely lead to utilities missing their 2014 conservation targets.
If we really want to win — and win big — when it comes to economic growth, we have to focus on where the smart money is — reducing demand — rather than on the nickel slots — holding down prices. After all, it’s the total bill that matters, not the price per kWh or cubic meter of gas. Shifting focus away from price and toward total cost is the only true way to deal Ontarians a winning hand.
Jack Gibbons is chair of the Ontario Clean Air Alliance.