Rethinking Energy Conservation in Ontario – Results:Province-Wide Electricity Conservation Targets
| In November, 2010, the ECO released volume 2 of its Annual Report on the progress of activities in Ontario to reduce or make more efficient use of electricity, natural gas, propane, oil and transportation fuels. Click here for more information on this report, including videos and communications materials. | |||||
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Province-Wide Electricity Conservation Targets
Several targets for electricity conservation have been established by the Ontario government. The first target, set in 2005, was a reduction in peak electricity demand of 1,350 megawatts (MW) to be achieved by 2007. In 2008, the Ontario Power Authority (OPA) reported that this target had been met, with a total of 1,379 MW of savings achieved.
After considering the advice of the OPA on the future of the electricity system, including the contribution of conservation, the government set short- and long-term targets for electricity conservation. These were contained in a Supply Mix Directive issued in June 2006, which were to be achieved through an Integrated Power System Plan. For a fuller description, see our Annual Energy Conservation Progress Report – 2009 (Volume One). These targets were:
- a further reduction in peak demand of 1,350 MW to be achieved by 2010 (a total of 2,700 MW by 2010); and,
- a further reduction in peak demand of 3,600 MW by 2025 (a total of 6,300 MW by 2025).
The 2025 target is no longer relevant or definitive for electricity planning purposes. The Minister of Energy announced on September 20, 2010 that a new Supply Mix Directive for a new Long-Term Energy Plan would be issued shortly, following public consultation. It may modify the size or the timing of the existing 6,300 MW target.
Additionally, in March 2010, a Conservation and Demand Management (CDM) directive was issued by the Minister to the Ontario Energy Board (OEB) as described below in “Looking Ahead to 2011”. It specified a target to be achieved by 2014. It is not yet determined whether this target will be incorporated as an interim target in the new directive for the Long-Term Energy Plan.
Results
The OPA’s progress towards meeting the 2010 peak demand reduction target as a result of 2008 and 2009 initiatives is shown in Table 3.
Results are divided into the four categories of conservation used in the Integrated Power System Plan:
- energy efficiency (use of more efficient technology);
- demand management (reducing electricity use during peak hours, including shifting use to off-peak hours);
- customer-based “behind the meter” generation; and,
- fuel switching (changing from electricity to another fuel, such as natural gas).
The estimate of peak demand savings achieved includes savings from OPA initiatives (some of which were undertaken in collaboration with local utilities), and non-OPA actions. Non-OPA initiatives include government improvements to energy efficiency codes and standards, other conservation programs (e.g., those offered independently by utilities or the Ministry of Energy), and the Ontario government’s introduction of smart metering and time-of-use pricing.
The OPA estimates that 864.1 MW of peak demand savings had been achieved as of the end of 2009, based on actions in 2008 and 2009. Table 3 shows the significant contribution of the OPA’s industrial demand response programs (Demand Response 1, 2, 3). These programs specifically target reducing peak demand, as opposed to reducing energy consumption in general. Due to their importance, the OPA Demand Response programs are discussed in more detail in section 4.1 of this report.
Other OPA programs that have delivered some results to date include the Cool Savings Rebate (a consumer program that offers rebates for energy-efficient residential heating and cooling equipment; 36.2 MW of savings), the Electricity Retrofit Incentive Program (a business program that offers incentives for high-efficiency retrofits of non-residential buildings; 29.5 MW of savings), and Power Savings Blitz (a business program that offers free lighting retrofits for small commercial buildings; 48.3 MW of savings).
Table 3: Peak Demand Savings From 2008 and 2009 Initiatives
| Conservation Category | Initiatives | Net Peak Demand Savings, as of year end 2009 (MW) |
|---|---|---|
| Energy Efficiency | OPA Consumer Programs | 73.4 |
| OPA Business Programs | 100.7 | |
| OPA Low-Income Programs | 3.9 | |
| OPA Industrial Programs | 0 | |
| Non-OPA Energy Efficiency Programs | 34.5 | |
| Codes and Standards | 49.0 | |
| Demand Management | peakSaver | 64.1 |
| OPA Demand Response 1 | 187.9 | |
| OPA Demand Response 2 | 127.5 | |
| OPA Demand Response 3 | 182.2 | |
| Other OPA Demand Response | 31.3 | |
| Smart Meters and Time-of-Use Pricing | 0 | |
| Customer-based Generation | 9.7 | |
| Fuel Switching | 0 | |
| Totals | 864.1 |
| Source: Ontario Power Authority, letter to ECO, September 9, 2010 |
Looking forward, the peak demand savings achieved as of 2009 from energy efficiency and customer-based generation initiatives will persist into 2010, as they involve technological changes that will remain in effect. These savings will be augmented in 2010 by savings from new participants in existing programs, new programs (such as the OPA’s Industrial Accelerator Program for large industrial companies) and time-of-use pricing, which will be in place for many more customers in 2010. The expected savings from demand response programs are less certain, as savings from these resources do not roll over from year to year, but instead depend on continued program enrolment by participants.
Combining the above factors, peak demand savings at the end of 2010 will likely be greater than at the end of 2009. Whether they will be enough to meet the 2010 target is an open question. The OPA has already suggested that the 2010 target will likely not be met. The primary reason given for this is the economic downturn. The OPA estimates that industrial electricity demand has been reduced by approximately 30 per cent due to facility closures or reductions in production, eliminating opportunities for energy conservation savings (particularly demand response) from these facilities. The downturn has also made it more difficult for companies to raise funding for energy efficiency investments.
Issues and ECO Comment
The ECO acknowledges that the OPA has a robust evaluation, measurement, and verification process in place for its conservation programs (see section 2.0). Therefore, the ECO believes that the results provided for OPA initiatives (which make up the vast majority of estimated peak demand savings) can generally be relied upon. However, the ECO has two specific concerns with the OPA’s reporting of progress towards the 2010 peak demand reduction target.
First, the ECO notes that the intent of the Ministry of Energy was for the 2010 peak demand reduction target of 1,350 MW to be “in addition to the 1,350 MW reduction set by the government as a target for achievement in 2007.” In other words, Ontario should achieve a cumulative reduction in projected peak demand of 2,700 MW by 2010.
The peak demand savings for some older initiatives will not continue into 2010. This issue is known as persistence and is determined by the lifetime of an energy efficiency measure or program (for example, the energy savings due to installation of an energy-efficient appliance would persist for the estimated lifetime of the appliance, e.g., 10 years). Therefore, achieving the 2010 target will actually require more than 1,350 MW of new peak demand savings between 2008 and 2010.
To properly measure progress towards the 2010 target, the OPA should review its analysis of savings achieved as of the end of 2007 and assess which of these savings have and have not persisted into 2010. Persistent savings should then be added to any new savings that result from post-2007 initiatives, and assessed against the cumulative target of a 2,700 MW reduction in peak demand.
Using this methodology, the cumulative results to date will be somewhat less than the 2,243 MW calculated by simply adding savings achieved as of the end of 2007 (1,379 MW) and savings achieved in 2008 and 2009 (864 MW), due to this issue of persistence. To use the most obvious example, adding the OPA’s estimate of savings as of 2007 to its estimate of post-2007 savings would double-count the contribution of the OPA’s demand response programs, overestimating cumulative savings by more than 300 MW.
The ECO recommends that the Ontario Power Authority assess the persistence of pre-2008 peak demand savings and report its conservation results in comparison to the government-established cumulative target of 2,700 MW in peak demand reduction by 2010.
Second, the ECO has an additional concern about the way the OPA has reported peak demand savings at the end of 2009 from the Demand Response 1 (DR1) program. This program (and the OPA’s other industrial demand response programs) work by providing financial compensation to participants in exchange for reductions in electricity consumption during periods of high demand. The OPA reports savings for this program (and its other industrial DR programs) as the amount of demand reduction potential available from participants, and has reported that DR1 contributed 187.9 MW of peak demand savings as of the end of 2009. However, the DR1 program relies on voluntary action by participants to reduce their electricity demand. An evaluation conducted for the OPA showed that many of the firms currently in DR1 do not actively participate, with the result that the actual peak demand savings the program can deliver is negligible, less than one MW. As a first approximation, the OPA’s estimate of net peak demand savings as of the end of 2009 should remove the 187.9 MW attributed to DR1, reducing the estimate of peak demand savings due to 2008 and 2009 initiatives from 864.1 MW to 676.2 MW. The ECO notes that correcting for the two methodological errors discussed above would leave the OPA even further from achieving the cumulative 2010 peak demand reduction target of 2,700 MW.
| Looking Ahead to 2011 — CDM Targets for Electricity Distributors |
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| The Green Energy and Green Economy Act, 2009 accorded the Minister of Energy a directive power to promote electricity conservation. On March 31, 2010 the Minister exercised this power by issuing a directive (the “CDM Directive”) to the Ontario Energy Board (OEB) requiring it to establish conservation and demand management (CDM) targets for Local Distribution Companies (LDCs).
Mandatory LDC CDM targets will be met by each LDC as a condition of distributors’ licences and, according to the CDM Directive, the OPA is also responsible for the target’s achievement. The target addresses both peak demand and electricity consumption; it is set as a reduction of 1,330 MW peak demand and 6,000 gigawatt-hours (GWh) of reduced consumption province wide. The conservation amounts are to be achieved over a four-year period starting January 1, 2011 and ending December 31, 2014. The OEB has issued a CDM Code to implement many details contained in the CDM Directive to guide LDCs’ CDM activities. Each utility will be assigned an individual electricity reduction target and will be compensated for meeting or exceeding its target. The Minister also issued direction to the OPA in April 2010. This both notified the OPA of the CDM Directive issued to the OEB and directed the OPA to provide advice to the OEB, following consultation with LDCs, on the appropriate allocation of the CDM targets among LDCs. The OPA was also directed by the Minister to undertake a number of facilitating and coordinating activities related to LDCs’ implementing CDM. Allocation of each distributor’s share of the targets is, as of October 2010, under development and not finalized. The ECO will report further in future reports. |
