The following appeared in the Thursday, July 9, 2009 edition of Y-File:

A study released yesterday by York University researchers finds that despite its recently adopted Green Energy & Green Economy Act, Ontario is falling behind other leading jurisdictions in Canada and the US in its policies for energy efficiency.

"Ontario has set significant energy conservation targets for its electricity system, but unlike jurisdictions such as California and more recently British Columbia, it has failed to establish the framework of underlying policies needed to achieve these goals,” says study lead author Mark Winfield (left), a professor in York's Faculty of Environmental Studies.

"In light of the Ontario government's recent decision to defer procurement of nuclear reactors, it has become especially important to put the right policies in place to realize the full potential for energy efficiency, and reduce future demand for electricity and costs for consumers," he says.

The study, "Applying the Total Resource Cost Test to Conservation and Demand Management Initiatives of Local Electricity Distribution Companies in Ontario: Assessment and Recommendations for Reform", focuses on the methods by which the Ontario Energy Board (OEB) and Ontario Power Authority (OPA) evaluate and approve funding for energy conservation initiatives proposed by local electricity distribution utilities.

It recommends a number of specific changes to the practices of both organizations to encourage innovation on the part of electricity distribution utilities, particularly the achievement of permanent and long-term reductions in electricity demand.

Regulators in California and New York, for example, must take into account avoided externalities - additional benefits of conservation programs - such as reductions in greenhouse gas emissions, when evaluating program cost-effectiveness. No such requirement exists in Ontario, Winfield says.

"In evaluating the total cost of a program, you need to take into account the avoided environmental costs and risks. You also want to consider a program’s social impact. You can’t calculate the cost-effectiveness of a program unless you have a picture of its potential value," he says. The study points to BC, which recently introduced mechanisms to account for the social benefits of initiatives targeted at low-income households.

Winfield notes that barriers to progress on electricity conservation extend beyond the tools employed to evaluate proposed conservation initiatives. The study finds the province's institutional structures and funding arrangements for energy conservation "fragmented and confusing", and that the new Green Energy & Green Economy Act has the potential, depending on how it is implemented, to compound these problems.

Researchers interviewed staff at local electricity development companies involved in program design and delivery, as well as key industry informants. They found that the current policy framework lacks flexibility for companies to tailor programs to their specific needs. It also lacks measures to evaluate programs with long-term goals, such as education and awareness initiatives, making funding difficult to achieve.

Experts project that 80 per cent of the province's generating assets will need to be replaced as they reach the ends of their operational lives over the next 20 years.

"It's clear that Ontario needs a more complete and integrated policy structure for energy conservation to achieve a sustainable electricity system," Winfield says.

The study issues the following recommendations:

• Providing clear direction to the OPA and the OEB that all cost-effective and achievable conservation and demand opportunities be pursued before consideration of additional supply options in electricity system planning.
• Rationalizing, consolidating and stabilizing the funding regime for conservation and demand initiatives.
• Strengthening and clarifying institutional arrangements for the planning and delivery of conservation and demand measures in Ontario, including the establishment of an office of energy efficiency within the Ministry of Energy & Infrastructure to lead and coordinate the province’s efforts.
• Providing clear policy direction to the OEB and OPA with respect to the evaluation of proposed initiatives, including consideration of the avoided environmental costs and risks and potential social benefits associated with such initiatives.
• Promoting program innovation by providing greater flexibility to local electricity distribution companies in the initial years of new, self-designed program delivery, and applying alternative evaluative frameworks to programs aimed at achieving long-term behavioural changes (e.g. education and awareness programs) that are necessary for constituency and capacity building, but which may not initially perform well under the Total Resource Cost Test framework.

The study is co-authored by Tatiana Koveshnikova, a PhD candidate in the Faculty of Environmental Studies at York University and an Associate Fellow with York's Institute for Research & Innovation in Sustainability. It is funded through a research grant from the Electricity Distributors Association Local Distribution Centre Futures Fund.

A copy of the study is available on the Faculty of Environmental Studies's Web site. Click here to obtain a PDF of the study.