ARCHIVED - Council of Energy Ministers

Moving Forward on Energy Efficiency in Canada: A Foundation for Action

Overview: A Foundation for Action

Energy Efficiency - Addressing our growing energy needs

Energy efficiency and conservation are two effective ways to help meet our future energy needs and reduce the necessity and timing for new energy development. Energy efficiency can assist Canada to expand its economy while managing its energy demands. The energy efficiency industry already employs thousands of Canadians who manufacture and sell efficient products and technologies. More jobs can be created in businesses such as the manufacture of ENERGY STAR^® windows, the design, construction and sales of certified green buildings built to specified environmental standards and for the retooling of industrial processes to reduce energy waste.

Historical
Energy End-Use in Canada 1990 to 2004 Figure 1: Between 1990 and 2004, total energy use in Canada rose by 23%, while energy use in every sector increased at a different rate. The increase was attributable mainly to increases in GDP and population over the same time period.

Canadians require energy for heat, light, transportation, cooling, and power for equipment. Between 1990 and 2004, the demand in Canada for energy has increased by 23%¹. This increase has largely been driven by the growth in both population and economic activity (as measured by Gross Domestic Product [GDP]). Canada’s population grew by 15% between 1990 and 2004. Over the same period, GDP increased by 48%. Figure 1 shows the link between the key drivers and the growth in the energy demand in Canada.

Over this same period, Canada’s energy efficiency improved by an estimated 14%. If there had not been significant on-going improvements in energy efficiency in all end-use sectors, energy use would have increased by 36%, instead of the actual 23%². These energy savings of about 903 petajoules are roughly equivalent to removing 13 million cars and light trucks from the road³ . This improvement, resulting from energy efficiency measures undertaken since 1990, saved Canadians more than $14 billion in 2004⁴, about 10% of our energy bill, and lowered greenhouse gas emissions by about 54 megatonnes.

Status-quo Future
Canada’s Forcasted Energy End-Use 2005 to 2020 Figure 2: Between 2005 and 2020, total energy use in Canada is expected to rise by 20%, while energy use in every sector is expected to increase at different rates. The increase will be attributable mainly to increases in GDP and population.

Looking ahead, in the absence of significant changes in behaviour, energy demand is expected to continue to grow as the Canadian population and economy continue to grow. Population is forecasted to increase by 11% between 2005 and 2020 while GDP is expected to grow by another 43%. This population and activity growth is expected to contribute towards a 20% increase in energy use between 2005 and 2020⁵. Figure 2 presents other major drivers likely to contribute to the growth in energy demand in Canada.

Growing demand for energy imposes a number of costs on the economy:

• Environmental:  Energy development and use accounts for over 80% of greenhouse gas emissions in Canada as well as smog pollutants such as nitrogen oxides and sulphur dioxide.
• Energy security: The supply of electricity relative to demand is a serious concern for some regions.
• Economic and social: Rising energy demand coupled with energy price increases⁷ over the last decade puts pressure on consumers, especially low income Canadians, as well as on some manufacturers, who are also squeezed by a strong Canadian dollar and slow growth in selling prices for their commodities.

Energy efficiency is one means to address rising energy demand and the costs associated with it. Energy efficiency allows Canadians to reduce the waste of energy and get more heat, light and power out of the energy we use. Energy efficiency encourages the use of better technologies - both new and emerging - and better energy use practices in the way we heat our homes, cool our buildings, move ourselves and manufacture and transport our goods. Energy efficiency and conservation results in:

• Fewer emissions of greenhouse gases and pollutants while providing Canadians with the services they need.
• Extending the life of existing energy supplies and slowing the need for new supplies, usually at significantly lower cost.
• Strong economic growth with less energy use.
• Potential relief from rising energy prices.
• Improved competitiveness of Canadian industry.
• A robust and growing industry involved in the research, development and implementation of energy efficiency products and services.

A Commitment to Energy Efficiency

Energy efficiency is important to Canada’s federal, provincial and territorial energy Ministers - the Council of Energy Ministers. CEM jurisdictions all share an interest in energy efficiency although their primary objectives may differ. For some, reducing energy use to prevent different forms of pollution is paramount, particularly greenhouse gas and smog emissions. For others, conserving electricity and other energy supplies is a primary motivator. Social and economic development opportunities are also important – helping Canadians cope with higher energy prices, supporting cost-saving productivity improvements as well as the local employment opportunities that result from increasing investments in energy efficiency.

Taking action on energy efficiency can directly benefit organizations. A growing number of Canada’s health care facilities are reducing costs by improving their energy efficiency and directing the savings at patient care. A municipality that cuts energy waste by 10% can offer more services. Energy efficiency building retrofits improve a building’s value, contribute to its longevity and create productivity-enhancing improvements. In general, energy efficiency investments support infrastructure renewal across all sectors of the economy.

Progress in realising energy efficiency opportunities has already been made between 1990 and 2004, as suggested previously by the $14 billion in energy savings in 2004⁸ (resulting from energy efficiency measures undertaken since 1990). However, there are significant additional benefits to be achieved, which are more important than ever, in light of increasing demand for environmental protection, continuing concerns about electricity supply in some regions and forecast energy price escalation. Incremental action is required now in order to make Canada a greener, more sustainable, more productive and more competitive economy. Many of our key trading partners are taking aggressive steps to save energy.

This foundation document highlights some of the technologies and practices that can deliver energy savings throughout all regions of the country and key areas of the economy. They range from newly-emerging super efficient technologies to the well-known but underutilized.

This document also provides a menu of policy instruments or tools to realize the multiple benefits of energy efficiency, including environmental protection, energy security, productivity, competitiveness, affordability and technology development. The perspective of each jurisdiction will dictate which energy efficiency tools and which actions are the priority in the short, medium and long term. This document is meant to be equally useful to all jurisdictions, allowing them to meet their own policy objectives while contributing to the national energy efficiency potential at the same time.

While primarily a tool for CEM governments to show leadership for the rest of the economy and to shift public attitudes towards energy use, the foundation document also serves to identify the roles other parties can play to realize their own energy efficiency benefits. Energy consumers in all sectors, municipal administrations, utilities, energy boards, professional associations, manufacturers and others can all contribute to achieving the energy efficiency potential in Canada. In addition, manufacturers and suppliers of energy efficiency-related goods and services are a source of prosperity, innovation and export earnings that can only grow in importance as demand for energy efficiency increases worldwide.

In short, this document provides a range of tools for realizing Canada’s energy efficiency potential. Figure 4 outlines the key elements that are critical to achieving results.

Figure 4: Key Elements of the Energy Efficiency Potential

Energy efficiency is becoming increasingly important to the world at large. The G8 countries recently committed to implement national energy efficiency programs and advance international cooperation, notably on efficiency standards, as well as sustainable buildings, improvements in industry and labelling for new cars⁹ . The International Energy Agency supports strengthening building codes, standards for reduced standby power for electronic equipment to one watt, and phasing out inefficient lighting¹⁰ . In 2006, the Commission of the European Communities¹¹ released an Action Plan covering energy efficiency priorities for appliances, buildings, transportation and energy generation. The Intergovernmental Panel on Climate Change¹² reported that buildings represent the greatest opportunity for considerable reductions in CO₂ emissions, with net economic benefits. Energy efficiency in buildings will play a critical role in addressing the opportunities within this sector.

Energy efficiency is also important for our largest trading partner, the United States. In January 2007, President Bush signed an Executive Order, “Strengthening Federal Environmental, Energy, and Transportation Management” outlining goals for federal agencies. Measures include reducing the fuel consumption of petroleum products by federal agencies by 2% annually through the end of fiscal year 2015 and increasing the total fuel consumption that is non-petroleum-based by 10% annually relative to agency baselines for fiscal year 2005, and ensuring that new construction and major renovation of agency buildings comply with the Guiding Principles for Federal Leadership in High Performance and Sustainable Buildings. California set new car emissions standards to increase fuel efficiency and reduce emissions by 30% by 2016. In 2006, the state and the California Clean Energy Fund awarded a $1 million grant to the University of California (Davis) to create the nation’s first university-based Center on Energy Efficiency to focus on advancing innovation and bringing energy efficiency products, services and practices to the state’s marketplace.

Energy Efficiency, Fuel Switching and Renewable Fuels

This foundation document will address energy efficiency (meeting needs with less energy) as well as energy conservation (reducing needs, thereby requiring less energy). Concepts that are often addressed alongside energy efficiency, usually when environmental and energy security objectives are key, are fuel switching and the substitution of renewable energy for conventional forms. These will be included where they are linked with efficiency and where they do not divert from the efficiency focus (e.g., domestic solar hot water heaters). The development of renewable power for commercial purposes is excluded.

The Potential for Energy Efficiency in Canada

A number of recent studies have addressed the potential for energy efficiency improvements. While these studies vary in methodology, and are therefore difficult to compare, they all support the fact that there is significant potential for energy efficiency improvements. Some of the recent studies that support the potential identified herein are: 

• A 2006 study assessed how consumers would make energy choices, in light of different levels of program support from governments. It indicated energy conservation, efficiency and renewable energy can reduce the growth of energy demand between 16% and 56% by 2025¹³.
• The National Round Table on the Economy and the Environment released a long-term climate change study in 2006 that examined how technologies could reduce emissions¹⁴. It suggested that energy efficiency could achieve approximately 40% of their goal of a 60% reduction in greenhouse gas emissions, more than any other single source. With two exceptions, the technologies assessed are already available for adoption in Canada.
• A paper in Ontario covering the residential, commercial/institutional and industrial sectors, 2005 to 2025, concludes that electricity savings potential from energy efficiency would be in the 3% to 13% range, as compared to the reference case without any new market intervention¹⁵.
• A 2002 BC Hydro study focused on technologies that are commercially viable, or would be, by the year 2005. It demonstrated that electricity demand could be reduced by 11% to 15% per year for the residential, commercial and industrial sectors by 2016¹⁶.

Barriers to Energy Efficiency

The potential for energy efficiency is often defined as the energy that can be saved from profitable investments - from the energy user’s financial perspective or from the view of society – the economic perspective. In reality, decisions about energy use are not typically based on straight financial returns, even for businesses. This results in scores of unimplemented energy efficiency investments.

Consumers tend to regard energy use as a byproduct of their daily activities – driving a car, living in a house. Information about ways to save on energy costs, while helpful, may not be enough to trigger action. Other barriers include lack of financing, perceptions of risk and lack of access or availability of new technologies and the absence of specific, usable information. Too often, consumers, including governments in their own operations, overlook the operating cost reduction that offsets the upfront capital costs associated with making an investment in energy efficiency.

Businesses and the public sector also tend to under-invest in energy efficiency despite more analytical decision-making processes. Barriers to investment include those identified above, and in addition, efficiency investments have to compete against other uses for capital and equity, and efficiency investments with good returns may not be adopted when compared with more fundamental requirements (e.g. meeting payroll requirements) or better returns from other investments (e.g. expanding product lines).

Some barriers represent market failures. Where electricity users pay the average cost of power instead of the cost of production, for example, the price incentive to conserve is lost. The party who invests in an efficiency project may not always benefit. For example, landlords pass on energy costs to their tenants; thereby, neither has an incentive to improve the energy use in the buildings.

Tools described in this document are intended to address the barriers identified in Figure 5 to help transform the way we use energy in all sectors of the economy.

Figure 5: Addressing Barriers to Achieving Energy Efficiency Potential

Principles for Energy Efficiency

CEM jurisdictions agree on the value of principles as a guide to the development of energy efficiency policies and programs¹⁷. The principles are based on collective experience with the intention that they will be used to design and implement effective energy efficiency policies and programs. For the complete list of principles, please see Annex I.

Organizations That Shape Energy Use in Canada

Governments and public and private utilities, building on public policy, play a vital role in advancing energy efficiency, as investors in programs that stimulate actions and as policymakers and regulators that help shape the marketplace. Utilities, governments and government agencies can establish demand-side management programs that encourage industry, urban planners and energy consumers to conserve and reduce energy demand. Public and private utilities, with access to billing and energy use data, have a unique relationship to energy users and can be important players.

Provinces and territories have the ability to set the institutional framework for demand-side management, regulate energy utilities through public utility commissions, and regulate energy efficiency standards for building designs, building components, and energy-using equipment. In addition, provincial fiscal and resource policies can help shift investment and purchasing behaviour toward energy efficiency. Finally, provinces and territories can stimulate the marketplace with their own equipment purchasing, and building and vehicle leasing policies.

The federal government also sets energy efficiency standards for equipment that is sold across jurisdictions, including motor vehicles. It plays a key role in establishing consistent approaches for efficiency rating systems, labelling schemes, training and information services across Canada. It can also facilitate energy efficiency activities through capital cost allowance tax breaks, consumer rebates, and incentives.

Municipalities and local administrations can shape communities’ energy use, particularly for transportation, given the land-use planning impacts on commuting distances and complete communities. In addition, communities enforce building code standards on behalf of provinces and territories and thus, have a large impact on influencing the construction industry. Similarly, First Nations influence planning and managing transportation and building code standards on, and in some cases, off First Nation land.

The energy efficiency goods and services market is an emerging clean energy industry. Recent studies of energy efficiency potential in Canada have identified substantial markets for expanded investment in energy efficiency. This industry is expected to respond to the growing awareness of needs of the energy consuming market, the promotions and support of all orders of government and utilities and to the evident business opportunities. The efficiency industry includes the manufacture, distribution and sales of efficiency related products, the design of efficient buildings and manufacturing systems, energy auditing and advisory services, specialized financing, and research and technology development. These business opportunities are not limited to the domestic efficiency market but advanced goods and services are exportable in large measure. Market and policy conditions in the United States and other countries are creating considerable growth in this area.

The interest in energy use and energy efficiency is much wider than governments and utilities. Professional and industry associations, financial institutions, education and non-governmental organizations, private corporations and companies and retail outlets all influence energy use through their actions and practices. For example, professional architectural associations can profoundly impact the nature of the design and operating efficiency of the built environment. Many associations foster professional development, facilitate design workshops and seminars, sponsor incentive programs, offer educational opportunities at national and regional conferences, and lobby for sustainable building practices. Corporations and companies can contribute in three ways: by improving energy use in their own operations, by demonstrating leadership to others and by participating in the business opportunities afforded those who move to more sustainable business models. Some retail outlets, for example, are educating their customers and making them more aware of what they can do to lead more energy-efficient lifestyles.

To improve significantly the way in which energy is used in Canada, it will be necessary to employ a range of tools that are flexible, affordable and timely and invite participation from interested parties. Most importantly, it will require more take-up of more tools by more parties, including those not typically identified as energy efficiency influencers. Figure 6 describes some well known tools as well as more innovative instruments that could be effective, some with little or no incremental financial outlay. Further, tools for specific sectoral applications are described in further chapters.

The benefits and costs of implementing the tools illustrated vary widely and cannot be estimated here because costs are highly dependent on specific applications, including: sectoral and regional coverage, length of implementation, and technology eligibility. CEM jurisdictions can select their own tools and evaluate their benefits and costs accordingly.

Cross-cutting Opportunities – Reducing Waste

Energy is wasted as it is converted from primary sources into the energy that is sold  (eg: oil to gasoline and natural gas to electricity). Energy is also wasted as it is converted into useful services such as heat and light. Much of the energy we purchase is wasted in this latter fashion. Moving Forward on Energy Efficiency in Canada focuses on reducing energy waste and getting as much service as possible out of all our energy sources.

Waste energy can be captured from one sector for use in another sector. Also, actions can be taken in one sector to reduce energy use in another sector. Cross-cutting opportunities such as these can be overlooked because they require an integrated approach, typically involving multiple players, not just the energy user but also neighbouring energy users, utilities and governments. For example, community forms that have mixed end uses and high density reduce the demand for personal transportation because more people can meet more of their needs through transit, walking and cycling. Other examples of cross-cutting opportunities include:

• Cogeneration – where heat and power are produced simultaneously, for example, the waste heat from an industrial or building boiler is used to make electricity for use or sale.
• Heat recovery – waste heat from chillers or industrial processes is used for heating and/or cooling. For example, a commercial building is located near an industrial park in order to use the waste heat to meet their own low grade heat and energy requirements.
• Integrated on-site processing – from raw materials to more completed or finished products - to reduce transportation costs. Examples include processing lumber into furniture or pre-fabricated building products in one facility. Compact packaging for consumer products also reduces shipping load sizes and weights, therefore reducing transportation energy use.
• Community and sustainable energy planning – integrates the needs of all sectors and can be used to find ways to use waste energy appropriately and to incorporate innovative energy systems. These plans should include smart planning for compact, mixed use communities where land-use planning designates higher density nodes reducing transportation requirements and allowing more efficient transportation such as public transit, and is conducive to walking and cycling.

Identifying opportunities to reduce energy waste is a relatively new field – requiring further research, development and demonstration. However, many untouched and significant savings opportunities are realizable with a more coordinated, systematic approach to energy efficiency planning and program delivery.

1 Energy Effciency Trends in Canada: 1990 to 2004, Natural Resources Canada (2006).

2 Ibid

3 The energy savings are measured from the energy used by consumers across all sectors of the economy (e.g., the energy used to heat and cool homes). This excludes the energy required to transform one energy form into another (e.g. coal to electricity), the energy used to bring energy supplies to the consumer (e.g. pipeline), and energy used by industries as feeders to their production (e.g. natural gas used in chemical production).

4 Energy Effciency Trends in Canada: 1990 to 2004, Natural Resources Canada (2006).

5 Canada's Energy Outlook: The Reference Case 2006, Natural Resources Canada, 2006.

6 Energy used by final consumers for residential, agricultural, commercial, industrial and transportation purposes.

7 The International Energy Agency estimates a crude oil price of $47/bbl in the short term that could be as high as $86/bbl by 2030.

8 Energy Effciency Trends in Canada; 1990 to 2004, Natural Resources Canada (2006).

9 The G8 Group consists of the U.S., Britain, France, Japan, Germany, Canada, Italy and Russia.

10 The International Energy Agency acts as energy policy advisor to 26 member countries in their effort to ensure reliable, affordable and clean energy for their citizens.

11 The Commission, consisting of 27 representatives from each European Union country, proposes legislation on which the European Parliament and the Council decide, is responsible for implementing common policies, administers the budget and manages the Union's programmes.

12 The Intergovernmental Panel on Climate Change was established in 1988 by the World Meteorological Organization and the United Nations Environment Programme to assess scientific, technical and socio-economic information relevant to the understanding of climate change, its potential impacts and options for adaptation and mitigation.

13 Demand Side Management Potential in Canada: Energy Effciency Study, May 2006, Marbek Resource Consultants Ltd. and M.K. Jaccard and Associates Inc. The study did not consider the transportation or energy producing sectors.

14 Advice on a Long-Term Strategy on Energy and Climate Change, June 2006, National Round Table on the Environment and the Economy.

15 Ontario’s Integrated Power System Plan – Discussion Paper 3: Conservation and Demand Management, and Discussion Paper 2: Load Forecast, 2006, Ontario Power Authority.

16 Electricity Conservation Potential Review, 2002, BC Hydro.

17 The above principles have been adapted from those developed in 2006 by the Energy Effciency Working Group, Energy Sector Sustainability Table.