Alberta’s ignored energy resourceCapturing the full value of energy efficiency

Blog - Dec. 19, 2016 - By Julia-Maria Becker

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Alberta is a province rich in so many things: vast nature, kind people and obviously energy resources. But there’s a resource Alberta has largely ignored, despite its immense potential: energy efficiency.

Broadly speaking, efficiency is a way to get more with less. It’s colloquially understood as a way to save money and reduce emissions by using less energy. This is true, but it has a multitude of unrecognized benefits that can significantly increase the value of energy efficiency. Realizing the full value of energy efficiency comes from thinking of it as a resource whenever you think about investment options in electricity generation.

Incorporating energy efficiency into infrastructure investment decisions originated in the U.S. after the energy crisis of the 1970s. Until then, regulatory and business models were based on the assumption that demand would continue to grow and prices would decrease. After the energy crisis, utilities began to provide energy efficiency programs to manage the demand for electricity in order to make them less vulnerable to supply changes.

Originally, the incentive to invest in energy efficiency was purely driven by an interest to be less vulnerable to international exposure. Many utilities then started integrating energy efficiency into their resource planning. Other benefits, like increased savings for customers and reduced emissions were nice side effects.

Nowadays, the value in thinking of energy efficiency as a tangible resource in itself is increasingly understood around the world. In the U.S. and Europe it is generally standard practice to factor energy efficiency into investment decisions in the utility system. Efficiency presents a clear cost advantage in electricity production.

EE over other energy sources

For example, between 2003 and 2010, the electric utility serving New York City and Westchester Country, Consolidation Edison, saved $223 million in capital investments due to efficiency programs that deferred transmission and distribution updates; adding up to $300 million savings for ratepayers.

The jurisdictions that are most successful in saving electricity (such as Massachusetts, Maine, Hawaii and Rhode Island) are the ones that don’t artificially cap spending on energy efficiency. Instead, they treat it as a resource that should be used whenever it is cost-effective.

Alberta’s utility system isn’t currently mandated to incorporate energy efficiency into its investment decisions and companies are not encouraged  to use energy efficiency in the place of other more costly investments. As a result, significant money has been spent on transmission and distribution infrastructure, among other things, that could have been saved if energy efficiency was an investment alternative. The Alberta Electric System Operator (AESO) calculated an average transmission rate of $32/MWh in 2016 and projected this rate to increase to $37/MWh by 2020. Between 2016-2020 AESO projects to spend $2.5 billion on in progress projects and $400 million for planned developments for capital transmission system projects.

The first step to integrate energy efficiency into Alberta’s utility system is to change the  mandate for the regulator, system operator and consumer advocate to pursue energy efficiency. In the best case, they should pursue energy efficiency whenever it is the most cost effective investment decision compared to other system’s resources. If Alberta adopted this framing for energy efficiency, the province would be able to avoid additional investments in transmission and distribution infrastructure in the next decades, as well as reduce the need for additional generation and ultimately benefit from lower overall energy costs and resiliency against the price volatility common to other fuel sources. Let’s make sure Alberta doesn’t miss its opportunity to develop this energy resource in the future.

Julia-Maria Becker

Julia-Maria Becker is the director of the Pembina Institute's clean economy program in Alberta, based in Calgary.


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