This week, EiD has a good article on carbon pricing in British Columbia. There is some reference to energy efficiency but not much. To build on what is going on — or what should go on in Canada — here is an important post by Martin Adelaar, explaining why energy efficiency needs to be given a higher priority. Martin Adelaar recently retired from a career of over 30 years in the energy management field. Martin started his career with stints at Environment Canada and Energy, Mines and Resources Canada. He was later a partner with Marbek Resource Consultants. When Marbek became ICF Canada, Martin stayed on as a consultant. Martin’s work encompassed energy efficiency policy, programs, evaluation, market assessments and benchmarking covering most sectors of the economy. His clients included industry, all levels of government in Canada, most of the electric and gas utilities in Canada, and international organisations such as the World Bank, the Inter-American Development Bank and the Canadian International Development Agency. He conducted assignments in southern Africa, Eastern Europe, central America, the Caribbean and Brazil. Martin knows energy efficiency and EiD is delighted to bring this post to all EiD readers. Hopefully we will be hearing more from him.
Our National Carbon Plan Should Begin With Energy Efficiency
Energy efficiency is described by the International Energy Agency as the “first fuel” for decarbonization. A time of economic uncertainty and volatility is the best moment to reap the economic and carbon benefits of an ambitious energy efficiency intervention, spanning every sector of the economy and every part of the country.
Yet the common narrative is to position carbon pricing as the main policy tool to meet Canada’s climate goals. It’s a simplistic, risky narrative that overlooks the past role and huge future potential of energy efficiency in reducing greenhouse gas emissions. Look no farther than British Columbia, where accolades for the BC carbon tax largely overlook that 20 years of cost-effective EE programs delivered by BC Hydro and Fortis Gas helped create the market conditions needed for the tax to be help foster emission reductions.
Energy efficiency taps the overwhelming potential to get the heating, cooling, lighting, travel, motive power, and other energy services we need using less actual input energy. It means highly insulated, airtight homes and buildings, highly efficient equipment and vehicles, and use of information technology to drive the smart manufacturing and smart grid systems of the future. It works best when it combines these technical solutions with an array of behavioural and management best practices at home, at work, and on our highways.
A raft of studies show that energy efficiency can be delivered at a cost less than the energy supply it displaces and that it`s enabled the economy to decouple energy consumption from GDP growth leading to enormous cost savings across the economy. The savings are huge: about $27 billion in Canada between 1990 and 2009, according to Natural Resources Canada and $800 billion in the U.S. from 1980-2014, according to the American Council for an Energy Efficient Economy.
Yet most analyses of energy efficiency do not capture the multitude of economic benefits resulting from activity triggered by the re-spending of saved dollars and the energy efficiency services/goods and supply chain. Energy efficiency increases employment and tax revenues; business competitiveness and property values while reducing health costs through air pollution reduction. In a rare analysis of some of these benefits, Navius estimates that energy efficiency in Canada between 2002 and 2012 incrementally increased GDP by roughly 1%, nearly $16 billion per year annually.
Despite the impressive gains to date, energy efficiency is the gift that keeps on giving, as the evolution of technological and management innovation can mine even greater savings resulting in larger economic benefits. In 2014, the Acadia Centre estimated that, over a 28 year period, future energy efficiency in Canada could generate $230 billion to $580 billion in net GDP and 1.5 to 4.0 million additional job-years.
The energy efficiency gains in Canada have not happened by accident. The federal Office of Energy Conservation was launched in 1975 and, since then, a broad range of government policy and program initiatives have evolved to target myriad market barriers, using an ever evolving toolbox of policy and program instruments. For instance, federal leadership has led to energy performance standards and labelling requirements which now cover more than 40 energy using products.
Today, electric and gas utilities are the main energy efficiency delivery agents in most provinces and territories as innovative policies helped to align energy efficiency with utility business interests. For instance, natural gas utility investments in EE programs since 2000 exceed $850 million. Regulators and/or provincial governments have mandated utilities to pursue all cost-effective energy efficiency programs, setting a framework that enables them to recover their energy efficiency investments and lost revenues and earn incentives by hitting their targets.
Yes, carbon pricing is necessary and, yes, carbon pricing will enhance the already robust business case for energy efficiency. But energy efficiency still faces significant market barriers, and carbon pricing won’t be enough to address them. That’s why it will take federal leadership—beyond the current program focus on equipment performance, building standards, benchmarking, and training—to trigger a massive scale-up of energy efficiency. A starting point would be to escape the silo mode of thinking and establish integrated, national programs to achieve multiple policy goals through a single platform, for example:
- A national housing renewal strategy/program aimed at ensuring affordable and healthy housing for all Canadians would have low energy design/retrofit as a key element and involve the transfer of funding to provinces/territories and cities.
- A national “remanufacturing” strategy would consolidate myriad support programs and funding for industry and manufacturing into a single, seamless platform, with energy efficiency positioned as a major driver for dramatic cost savings and productivity improvements, and Canadian suppliers positioned to capture some of the future multi-billion dollar global energy efficiency market.
- A reinvigorated research, development and deployment strategy would use the leadership and strategic partnerships of the CanmetENERGY laboratories and other research organizations to unleash the additional energy savings that come from optimizing entire systems. A shining example, using information and communications technology to maximize the benefits of intelligent efficiency, smart manufacturing and the internet of things.
With significant new infrastructure investment already high on the federal agenda, this is the moment to scale up energy efficiency investment. To help mobilize private capital, the government should work with financial institutions and investment funds to establish the conditions for a securitized energy efficiency debt market. This means accelerating the application of innovative financing vehicles like performance contracting, mortgage-backed EE financing and property assessed clean energy programs. Taking such action would be timely given that, during COP 21, over 100 banks managing a total of $4 trillion in assets called for a doubling of EE by 2030. Finally, to ensure that real estate appraisal and valuation fully integrates the incremental value of energy efficiency, Ottawa can work with the Appraisal Institute of Canada to adapt the Royal Institution of Chartered Surveyors 2014 Valuation Practice Statement into best practice methods to be fostered among valuation and appraisal professionals, investors and lenders.
Let’s not allow a myopic focus on carbon pricing to obscure the economic and carbon benefits of an aggressive national energy efficiency intervention. The new federal leadership has a momentous opportunity to re-imagine and re-engage, to achieve deep energy efficiency benefits for Canadian households and businesses, our economy and our future.