Conservation is a key element of the province’s Long-Term Energy Plan. At the same time, the provincial government is reconsidering its Conservation and Demand Management Framework, which expires at the end of 2014. Policy documents suggest that cost-effective conservation should be pursued before new generation is considered.
Conservation is directed at reducing electricity consumption, but demand will continue to grow as a result of population and economic growth. Government claims of conservation successes are not substantiated and targets are very difficult to measure.
Smart meters and time-of-use pricing have been introduced to help consumers manage their electricity use but these tools have shown only marginal results. Consumers have to work very hard to achieve any savings. Even with peak higher electricity prices, there are only so many household chores that can be done between nine at night and dawn and on weekends.
Increasing the peak price would have a significant impact on electricity consumers and would likely generate considerable backlash. These programs can achieve more if they were better aligned with peak demand. Current peak window hours are too wide (and therefore include a number of non-peak hours), and consequently the incentive is not supporting maximized load shifting at peak times.
Ontario has been sending mixed signals to consumers. Higher electricity prices are recognized as a key incentive for ratepayers to change their behaviour. Faced with a consumer backlash over rising electricity prices, the Ontario government introduced the Clean Energy Benefit customer rebate program in 2010. This initiative costs Ontario taxpayers $1 billion a year. Concurrently, large industrial customers have been receiving subsidies to maintain competitiveness and demand management incentives to reduce their electricity demand.
Experience elsewhere shows that sustained investments are necessary to educate consumers, to change consumer behaviour, and to develop enabling programs and technologies. Ratepayers have no way of knowing how cost effective these investments are or what the final price tag will be until it appears on a future electricity bill.
The significant investments made in conservation programs to date have not been verified and no transparent mechanisms exist to do so. The Ontario government claims that conservation has reduced electricity demand by over 1,900 megawatts of electricity between 2005 and 2011. Realistically, much of the reduction in electricity demand during this period was the result of the economic recession and the loss of tens of thousands manufacturing jobs.
Conservation efforts are likely to achieve diminishing returns and require higher expenditures in each subsequent target period. These diminishing returns occur because the lowest cost measures are implemented first, which means that future periods must increasingly draw on programs that are more expensive, face more substantial implementation challenges, or target less price-sensitive or conservation-minded customer groups. Researchers have confirmed that the marginal effectiveness of conservation spending declines with additional expenditures.
If ambitious conservation targets are included in supply planning decisions and the forecasted demand savings are not achieved, Ontario could be left with insufficient supply, which would threaten the electricity system’s security and reliability and result in higher costs. Greenhouse gas emissions would increase as a result of increased natural gas generation that would be required to fill the gap expeditiously.
In order to avoid this outcome, any consideration of new or revised conservation targets for Ontario should be based on a thorough and critical examination of future cost effective conservation potential, and a conservative assessment of the feasibility and cost of achieving the proposed targets.
For more information about Conservation go to the following websites: