Canadian energy savings are decreasing when they need to scale up

by James Gaede, Brendan Haley. Originally published on Policy Options
November 18, 2021

Energy efficiency is essential to meeting global climate-change goals. The International Energy Agency’s latest World Energy Outlook calls for energy intensity improvements to more than double, 100 per cent of new buildings to be zero-carbon ready and a 2.5 times increase in building retrofits from current plans – all by 2030.

The pandemic and increased climate impacts have moved energy efficiency from an oft-forgotten policy area to a priority. More time spent at home has led to greater concern about indoor-air quality and comfort. Public buildings have had to consider how to improve ventilation without increasing energy costs. Extreme weather events like the February 2021 Texas power outage, summer heat waves and forest fires have demonstrated the value of more efficient buildings, which can maintain temperature during power outages, keep cool on the hottest days and improve indoor-air quality.

These factors, combined with a more politically organized energy efficiency sector, led to cutting energy waste being included in the first chapter of Canada’s 2020 climate plan. The Canada Infrastructure Bank has included building retrofits as part of its mandate, and the federal government introduced a Greener Homes program, consisting of $5,000 grants and an anticipated $40,000 interest-free loan to help homeowners make energy efficient retrofits to their homes.

While these policy developments are promising, recent trends are worrisome.

Progress on energy efficiency has stalled

Efficiency Canada tracks provincial energy saving policies and performance through our annual Provincial Energy Efficiency Scorecard. The 2021 edition, released on November 18, shows that national savings from energy efficiency programs are down 38 per cent from their peak in 2017.

This is partly due to the way the pandemic disrupted programs. One of the few provinces that met 2020 savings goals was British Columbia (the first ranked province), which increased incentive levels. All others fell short of spending targets.

New construction can’t be allowed to sidestep energy efficiency

The larger story, however, is one of provincial policy changes that have resulted in a longer-term downward trend. Ontario capped its electricity conservation spending in 2020 and eliminated electricity residential programs. Alberta has also seen significant declines in savings after the government shut down Energy Efficiency Alberta. Predominately hydroelectric provinces like B.C. and Quebec have been holding back energy savings programs from reaching their full potential, yet a net-zero emissions future requires these savings to ramp up to make space for clean electrification.

Below, figures 1 and 2 show how Canada’s net annual energy savings (the amount of energy saved each year because of energy efficiency programs that ran in that year) have been declining for the past four years. Savings in 2020 were down approximately 38 per cent from their peak in 2017 of approximately 23 petajoules. For reference, one petajoule of energy is enough to power around 9,000 homes for a year, at an assumed annual energy consumption of 110 gigajoules per Canadian household (one petajoule equals 1 million gigajoules). Figure 1 shows energy savings by fuel type (i.e., electricity, natural gas, etc.), while figure 2 shows energy savings by province.

New federal programs are not designed to solicit more investment from utilities and other levels of government and might not change this downward trend in the provinces. For instance, the Greener Homes program is not integrated with most similar provincial program offerings. There is a danger that this lack of co-ordination could make provincial residential programs less cost effective by adding administrative costs while also making it difficult for utilities to claim savings that result from their investments.

National energy savings policy goals have also stalled. The Pan-Canadian Framework on Clean Growth and Climate Change called for all provinces to adopt a “net zero energy ready” building code by 2030. The development of a national model building code in 2020 was expected to be the first step, but this model code has yet to be released at the end of 2021. National model codes are intended to be adopted (with minor adjustments, in some cases) and given the force of law by provinces.

A consequence of these delays is that British Columbia remains the only province committed to requiring that all new buildings be net zero energy ready in the future (and B.C. is now committed to a zero carbon standard). Building codes and related initiatives are a big reason why the province continues to rank first in our Scorecard.

New construction can’t be allowed to sidestep energy efficiency

Canada’s climate plan also called for an energy efficiency “retrofit code” to be developed for existing buildings by 2022, but the committee tasked with developing this code provided a timeline that would delay it until 2030. Making disclosure of energy performance of a home when it is sold or rented would value energy upgrades, and requiring large buildings to report energy usage would help prioritize the least efficient buildings for upgrades. However, outside of B.C., no province plans to introduce mandatory home energy labels, and only Ontario requires energy reporting from large buildings.

Accelerating provincial energy efficiency

The 2021 Scorecard shows there is a lot more to do, and a federal government committed to net-zero emissions should design its policies to fill gaps and accelerate provincial-level performance. Here are four priority areas:

1. Take leadership to stop the stalling of building codes: Model building codes are developed by a volunteer body and a provincial committee, which do not recognize net-zero emissions as part of their mandate. If the federal government wants to get building codes on track it will need to take leadership by defining the building performance levels required in a net-zero emissions economy, and then fund and implement a strategy to accelerate provincial and municipal code adoption.

2. Transform building retrofits: Provincial and utility energy efficiency portfolios need to go after deeper savings as low-hanging-fruit opportunities in areas such as lighting diminish. The federal government should take a mission-oriented approach to making the retrofit process lower cost, faster and better by creating market development teams focused on creating economies of scale and new business models.

3. Expand scale and scope of low-income energy efficiency: Current levels of provincial investment in low-income programs are far below what is required to retrofit the 20 per cent of households that find themselves in energy poverty. Recent federal government programs are inaccessible to low-income Canadians most vulnerable to energy price increases and unhealthy homes.

The federal government can define national priorities to reduce energy poverty and emissions, and then use its funding to direct existing provincial programs toward incorporating these objectives through deeper retrofits and switching to zero-carbon fuel sources.

4. Promote energy management systems in industry: Most provinces have comprehensive industrial efficiency programs, but do not require certification under recognized standards such as ISO-50001. The existing federal initiative to support ISO-50001 certification should be significantly expanded to enable partnerships with provincial programs.

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To meet our national net-zero emission policy goals, the federal government needs to think strategically about how to accelerate and leverage provincial policy systems. This involves fixing delays of federal policy platforms that provincial policy-makers rely upon, as well as focusing federal priorities on transformative change where no one is left behind. With increased federal leadership we could see provincial energy efficiency scaling up instead of stalling.

This article first appeared on Policy Options and is republished here under a Creative Commons license.