Canada Electricity Advisory Council Recognizes the Demand Side

On June 10, 2024, the Canada Electricity Advisory Council publicly released its Final Report, Powering Canada: A blueprint for success. The Council is an independent body of 19 electricity sector leaders created shortly after the 2023 federal budget to advise the Minister of Energy and Natural Resources of Canada.

Budget 2023 included substantial investment tax credits, primarily supporting energy generation. Here at Efficiency Canada, we responded by writing that saving electricity was needed to reach net-zero goals affordably (see The path to clean electricity must include energy efficiency).

The Council agrees, stating that the 2023 federal budget “was largely silent on the demand side of the equation” and that “significant improvements to energy efficiency and load flexibility can dramatically reduce the need for expensive new electricity infrastructure.” The report finds that reducing the costs of future electricity systems must be a priority, and the Council said it “believes that significant gains in energy efficiency and DSM (demand-side management) can significantly reduce costs.”

Saving Energy to Lighten the Load is, therefore, one of the four priority areas in the report. See below for some highlights on the report’s recommendations related to energy efficiency and demand-side solutions:

Energy Efficiency Accountability

The report notes that the federal government has signed commitments, most recently, to double the rate of energy efficiency improvements by 2030, yet has no concrete plan to achieve this goal.

It recommends creating a formal accountability framework within a year that applies the Efficiency First principle to achieve policy goals. It also provides regular progress indicators, such as the annual rate of building retrofits.

Investment Tax Credits and Aligning Federal Support with Net-Zero

When the federal government funded the Clean Electricity Tax Credit, it stated that provincial authorities that manage electricity (e.g., utility boards) would need to commit to net-zero electricity and “lower bills.” The Council recommends changing these commitments to require provinces and territories to publish energy roadmaps (see below).

The appendix notes that the Council received several recommendations to tie the tax credits towards directives for regulators to pursue all cost-effective energy efficiency (this was an Efficiency Canada recommendation). Such a requirement would have resulted in concrete action towards net-zero emissions, reduced long-term electricity system costs and therefore reduced bills while rebalancing policy towards prioritizing lower-cost energy demand solutions over energy supply.

Related recommendations suggest aligning other federal supports, such as the Clean Growth Fund and Canada Infrastructure Bank, to “better support the full suite of energy transition projects, including distribution investment and DSM solutions.”

In addition, they recommend equalizing eligibility to investment tax credits between non-taxable and taxable entities. One crucial area is making the Clean Technology Tax Credit available to not-for-profit and tax-exempt organizations like condominium corporations, co-ops, and First Nations. This tax credit can be used for on-site solar panels, batteries, heat pumps, and other low-carbon heat and electricity equipment.

Re-direct Smart Renewables and Electrification Pathways Program (SREP) towards Demand Side Management

A vital recommendation to rebalance federal policy towards the demand side involves transitioning the SREP program towards demand-side solutions (energy efficiency, demand flexibility, and related grid modernization). The program was recapitalized by $3 billion over 13 years in the 2023 budget.

Alternatively, the Council recommends additional funding for DSM and grid modernization.

A National Approach to Energy Poverty

The Council calls for a comprehensive and national approach to addressing energy poverty.

An analysis within the report highlights the need for targeted support for low-income Canadians, finding that the benefits of electrification will be unequal across income groups and regions. The good news is that 70 per cent of households in Canada will spend less on energy because of electrification’s energy efficiency benefits. However, 30 per cent of Canadians see higher costs, and fewer low-income Canadians will see net savings due to factors such as being less likely to own a personal electric vehicle.

However, this analysis appears to consider electrification rather than broader energy efficiency strategies, like building envelope improvements, that reduce bills. 

The Council mirrors Efficiency Canada’s campaign for the federal government to fund low-income energy efficiency by at least $2 billion over four years. The Council welcomes the recent funding of the Greener Homes Affordability Program but said funding is “significantly below estimates of the overall need.”

Furthermore, the Council calls for developing a definition of energy poverty in Canada, which mirrors recommendations in Efficiency Canada’s recent Efficiency+ report. It also calls for better data to identify those most in need and tools such as an Energy Dashboard (see the latest energy poverty data compiled by Efficiency Canada here).

Modernize Energy Efficiency Appliance and Equipment Standards

The Council recognizes the federal government’s essential role in creating minimum energy efficiency standards for appliances and equipment.

They call for modernizing the Energy Efficiency Act to serve new electricity system needs and adapt to new technologies. This includes making electricity loads flexible through requirements for equipment interoperability with smart devices and controls. Stay tuned for some new Efficiency Canada research on how to retool Canada’s Energy Efficiency Act for this century.

The Council calls for quick alignment with U.S. standards but notes that heating and related equipment is an area where Canada requires better standards. This recommendation mirrors Sarah Riddell’s recent policy brief on “Advancing Canadian Appliance and Equipment Standards.” This could look like the federal government requiring all new space and hot water systems to be at least 100 per cent efficient through the use of heat pumps.

In addition, the report suggests federal regulations “enable the requirement of heating functions in central air-conditioning units,” which picks up on the idea from our “A Cool Way to Heat Homes” report that central air conditioners in Canada should be heat pumps.

Achieving Net-Zero Building Codes

The report acknowledges that building codes play a role in both promoting electrification and saving electricity.

They recommend that model national codes recognize the emission reduction benefits of efficient electric heating. The 2025 edition of the codes are set to include operational GHG emission considerations.

They also recommend that new codes must help electricity systems by recognizing the benefits of grid-interactive efficient buildings to reduce peak demands, improve grid reliability, and integrate variable renewable energy.

The report recommends enhancing the Codes Acceleration Fund, which Efficiency Canada originally proposed creating, to support provinces and territories.

Most urgently, the Council says the federal government can support energy-efficient buildings directly by ensuring that new housing developments subsidized by the federal government meet the highest tiers of Canada’s National Model Building Code. Efficiency Canada recently coordinated a letter signed by almost 100 organizations calling for precisely this.

Greening Government Strategy and Support for Building Performance Standards

The Council also sees an area for federal leadership through its buildings through the Greening Government Strategy. They recommended expanding the strategy to crown corporations, which was announced just last week.

The Council also picks up on an Efficiency Canada report recommendation on integrating building performance standards into the federal building strategy to create a template for provincial and municipal levels of government to adopt. Elsewhere, the report highlights the role of municipalities in mandating “staged performance requirements for existing buildings.”

Energy Planning

The report also includes some novel recommendations for changing energy planning. Electricity systems often use Integrated Resource Plans to consider how demand—and supply-side solutions meet resource requirements. However, within narrow utility regulatory governance systems, these plans often fail to consider net-zero emission scenarios, the extent of electrification required, and interactions with other energy systems (like natural gas).

To provide a holistic view, the report recommends that the federal government support provinces and territories in creating energy roadmaps towards net-zero and pathway assessments to explore scenarios.

Québec conducted such a planning exercise for net-zero emissions. It triggered the province to move away from forecasts of energy surplus towards recognizing an urgent need for more clean electricity resources. Hydro-Québec then significantly expanded its electricity-saving goals.

The Council suggests developing these roadmaps and pathway studies as the primary requirement for accessing investment tax credits (see above). 

It is still being determined how these planning processes will consider risk and if they will be required to consider demand-side solutions as a resource option.

Conclusion

The Council’s report shows that energy efficiency and demand-side solutions are integral to expanding the electrification of the economy with clean electricity. Efficiency Canada and other energy efficiency allies have been providing policy ideas, and we are glad the Council picked up many of them.

The federal government is now responsible for implementing these recommendations. The more support energy efficiency allies can give to important recommendations, the more likely they are to be implemented.