Law and sausage are two things you don’t want to see being made. We hope you feel differently about the natural gas guidelines.
Otto von Bismark famously said that “Law and sausage are two things you do not want to see being made,” and you would be forgiven if you believed this observation could be applied to the upcoming consultations on the revisions to the Natural Gas Demand-Side Management (DSM) Guidelines.
OK, implementing the Ontario government’s commitment to conservation is probably less glamorous than a climate change summit in Paris, but nevertheless very important. Just how great the need is to accelerate gas conservation efforts was noted in the Ontario Environmental Commissioner’s recently-released report in which industry and buildings were identified as two main sources of greenhouse gas (GHG) emissions in this province.
Ontarians use 25 million cubic metres of natural gas per year, producing 50 megatonnes or 30% of the province’s carbon emissions annually. (New studies indicate that methane emissions released during natural gas extraction and from gas pipelines are over and above the emissions quantification associated with consumption.) To reach Ontario’s 2020 GHG reduction target, the province’s annual emissions must drop by 17 megatonnes. Reducing the consumption of natural gas by a mere 1% each year between now and then will bring us 15% closer to that goal.
Which brings us back to why we need to participate in the process of updating the natural gas guidelines, which the Minister of Energy, Bob Chiarelli, directed be done to achieve “all cost-effective conservation.”
Our key recommendation is to follow the Minister’s directive: achieve all cost-effective conservation. There is lots of efficiency resource which is cheaper than new supply. Conservation targets should be informed by bottom-up conservation potential studies. If Ontario mirrored similar (cold-weather) jurisdictions in the US with similarly ambitious conservation goals, savings targets would be 1-2 percent of total gas sales and conservation budgets would be at least $200 million per year, tripling the current level of investment.
Of key importance is the choice of cost-effectiveness test – it should include all the costs and benefits, including those that are all-too-often excluded like impacts on health, vulnerable communities, and climate change.
The gas utilities should be able to earn a decent return on their investments in conservation – as good or better than the return on new supply. They currently earn “shareholder incentives” for conservation that are consistent with other utilities in North America, but these are awarded for savings significantly below comparable jurisdictions. More effective approaches to measuring and rewarding performance would ensure that Enbridge and Union earn their incentives for exemplary performance, without changing the total incentive budget. To underpin this, a system of robust, detailed (facility and sector levels) and regular (at least every 3 years) measurement of DSM performance is needed.
The Minister specifically directed that the new DSM policy focus on integrated gas and electricity conservation programs, which is especially relevant for retrofitting buildings. Since coordinated program delivery can have multiple benefits – lower costs, better reach, more market clarity – the gas and electric utilities should be required to implement and document their collaborative activities and results. Building on the current Gas DSM framework, they should also be required to explore and pursue fuel-switching options that are economic and lead to a net reduction in greenhouse gas emissions.
The point of all this technical re-design is to ensure that the utilities invest in all cost-effective conservation. While gas rates will go up slightly, the overall savings will far outweigh the investment. Take 2012 as an example of great value for money: Ontario’s two gas utilities spent approximately $62 million on conservation (less than $0.0024 per m3 of gas sold) and that will save customers about $460 million over the lifetime of the measures.
The key is to design the programs to maximize participation, so that all stakeholders can benefit. Investment in conservation also leads to better buildings, lower greenhouse gas emissions, and green, local economic development opportunities across a range of sectors.
At TAF, we’re the first to admit that it all gets a little nerdy, but a new natural gas guideline could in fact be a game-changer.