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Executive Summary: Effective and Resilient Governance for Energy Efficiency in Low-Carbon Sustainable Energy Transitions

February 25, 2020

Full report available here

Estimates of the technologically and economically achievable potential for energy efficiency improvements in Canada are significant. Modelling by the International Energy Agency and Natural Resources Canada, for example, suggests that under ambitious policy scenarios, energy efficiency improvements could account for nearly 50 per cent of the GHG emission reductions required to meet Canada’s commitments under the Paris climate change agreement.

In addition to offering the potential to make major contributions to a low-carbon sustainable energy transition, energy efficiency improvements can reduce energy costs to consumers, avoid the adverse environmental and social impacts of new energy supplies, improve productivity, strengthen energy security and enhance the resilience of energy systems to the impacts of climate change.

Despite their benefits, energy efficiency initiatives have struggled to achieve their full technological and economic potential to reduce to energy demand. These failures have been due to a range of market, institutional, financial, policy, regulatory, behavioural and informational barriers.

In recent years, new challenges have emerged beyond these traditional and well-understood obstacles. Changes in policy direction, often flowing from changes in governments, have resulted in significant retrenchments, and in some cases wholesale dismantlings, of energy efficiency strategies in North America. The Government of Ontario’s decision to terminate its “Conservation First” strategy in March 2019 was among the most dramatic of these developments, but far from unique.

This study seeks to understand the dynamics behind these developments, and to identify potential strategies and design principles to inform the development of more effective and resilient governance structures for energy efficiency in Canada. Specifically, the study examines a series of cases in which commitment and consensus around energy efficiency faltered, threatening the stability and, at times, the existence, of energy efficiency programming in a variety of Canadian and American jurisdictions.

Based on these cases, and a review of wider public policy literature on institutional robustness and policy resiliency, a set of five guiding yet non-prescriptive principles for building effective and resilient energy efficiency strategies across Canada are presented. These principles are:

  • Clarity of objectives, roles, funding and accountability;
  • Fairness in the distribution of costs and benefits;
  • Flexibility and the ability to adapt to changing needs, circumstances and opportunities;
  • Polycentrism (the involvement of multiple actors and agencies) in program design and delivery; and
  • Diversity in partnerships, strategy, funding mechanisms and evaluation.

These principles are translated into specific recommendations regarding the governance, financing, delivery and evaluation of energy efficiency strategies using Ontario as an illustrative example.

The key recommendations for Ontario that emerge in this context include:

  • The establishment of a new provincial agency - Energy Efficiency Ontario (EEO), with a mandate to develop a comprehensive, integrative energy efficiency strategy for the province.
  • The engagement or re-engagement of a variety of agents with established expertise and capacity in program design and implementation, including Local Distribution Companies (LDCs) and Enbridge for residential and commercial consumers, and the Independent Electricity System Operator (IESO) for large industrial consumers, in energy efficiency program delivery.
  • The establishment of requirements that natural gas and electricity utilities LDCs demonstrate their pursuit of all cost-effective and achievable energy efficiency opportunities as condition of rate and capital investment approval by the Ontario Energy Board, on an ongoing basis.
  •  The strengthening of the mandates of the Auditor-General of Ontario/Environmental Commissioner of Ontario to assess and report on the province’s energy efficiency performance.

The primary focus of the study is on energy efficiency governance in the context of energy uses in buildings, stationary equipment, appliances and devices and industry. The core principles could be applied to other energy uses, and wider climate change mitigation strategies as well. The study does not make recommendations on the specific details of program or portfolio design.

The full report is available here.