August 21, 2020 Ms. Melanie…

August 21, 2020

Ms. Melanie Torrie
Ministry of Energy, Northern Development and Mines,
Conservation and Renewable Energy Division
77 Grenville St.
5th Floor
Toronto, ON
M7A 2C1
Canada

RE: ERO # 019-2132

Dear Ms. Torrie,

I am writing to you on behalf of Google to provide feedback on the proposal for a 2021-2024 CDM Framework (ERO #019-2132). We commend the government for taking this action and providing the industry with predictability and certainty. These ingredients are important to driving costs down, encouraging innovation and ultimately addressing residential customer energy needs.

Founded in 2010, Nest Labs is dedicated to reinventing home products like the thermostat and smoke alarm to provide customers with simple, beautiful and thoughtful hardware, software and services helping them reduce energy consumption and keeping families comfortable and safe. Now part of Google’s Devices and Services business, Google Nest products are sold in the United States, Canada, United Kingdom, Ireland, France, Belgium, and the Netherlands, and are installed in more than 120 countries.

As you may know, Nest manufactures the Nest Learning Thermostat and the Nest Thermostat E, smart thermostats equipped with sensors, Wi-Fi capability, and processors, to help customers consume less energy: it learns their preferences, adjusts the temperature when the house is empty, and automatically lowers air conditioner runtime when humidity conditions permit, helping people lower their energy use without sacrificing comfort. Nest is designed to enable “Do It Yourself” installation, and to date the vast majority of Nest Learning Thermostat customers have done the installation themselves, most in under 30 minutes. The Thermostat E which has all the same energy savings features but at a lower price point is ideally suited to low-income assistance programs.

Independent energy savings studies show Nest Learning Thermostat saves about 10%-12% of heating usage and about 15% of cooling usage in homes with central air conditioning. In Ontario, this equates to 345 m3 of natural gas heating savings and 293 kWh electric savings. In summary, a Smart Thermostat (ST) for the smart home, is an innovative product within the home automation field with tremendous potential for customers, policy makers and governments alike. It not only seamlessly regulates temperatures while adapting to the needs of each house, but provides real, proven energy savings, avoiding the need for additional generation. This ultimately translates into significant dollar savings on hydro and gas bills as well as CO2 emission reductions (0.5 tonnes per thermostat installed in Ontario).

It should be noted that in order to attain the benefits of smart thermostats, it is important that governments, utilities, grid operators and technology providers work to increase deployment of these devices. Market penetration of ST’s remains low and an opportunity exists to leverage the untapped residential sector as a resource that can have a significant role in a market-based approach to meeting our collective energy needs.

This can be achieved in the following ways:

Energy Efficiency Customer Platform

Online marketplaces/platforms for energy efficiency products are an increasingly popular tool to unify, engage, activate, and support various energy management efforts across Ontario. Such a platform administered by a trusted advisor would connect energy efficiency customers with products, retailers, installers, comprehensive applicable review of rebates/incentives. All the programs and concepts listed below could be housed on an online platform making customer access simple and information readily available.

Recommendation:

Direct the IESO to begin exploring options with trusted advisors. Marketplaces should be considered as an opportunity to support efforts to educate and inform customers regarding a wide range of options to reduce energy consumption and save on energy bills.

Market Design Tools

1. Participation in the Wholesale Market including the Capacity Market

Today, advancements in technologies such as smart thermostats could allow hundreds of thousands of Ontario residential customers to participate in the DR market through the Capacity Market.

Recommendation:

● Reduce barriers to the residential sectors ability to participate in the DR market. This will create further opportunities for residential customers to take advantage of this tool to manage energy consumption and reduce energy bills on top of energy savings accrued out of the box (as stated above); and
● Increase opportunities for residential customers to participate in DR through additional programs offered by the IESO or local utilities.

2. Allow Energy Efficiency to Participate as a Resource in the Incremental Capacity Market

A capacity auction solicits bids to meet capacity resource commitments to meet estimated peak demand. The grid operator (IESO) would then provide revenues to the capacity providers, traditionally power generators, that can fulfill their commitments. More specifically, power providers are invited to offer bids on how much electricity they can supply in the future. Power providers determine how much they can feed into the grid; they enter the auction; and they are paid the resulting price.

Energy Efficiency (EE) is increasingly viewed as a resource in existing capacity markets such as the Forward Capacity Markets in ISO PJM and ISO New England, and as such competes with traditional power providers in the auction process. In the PJM market, from delivery year 2012/2013 to 2019/2020, the level of EE resources clearing the auction has nearly tripled, increasing from 568 MW to 1515 MW (https://aceee.org/blog/2016/06/energy-efficiency-lowers-costs-recent).

In 2017, ISO New England (ISO-NE) completed its eleventh Forward Capacity Auction (FCA 11). The auction enabled procurement of sufficient resources to meet electricity demand in 2020-2021. A total of 640 megawatts (MW) of new EE and demand-reduction (DR) measures cleared – an amount ISO-NE described as “the equivalent of a large power plant.” Following this auction, the cumulative amount of EE and DR resources is “more than 3,200 MW, or about 9% of the total capacity market,” thereby, firmly entrenching EE as a valuable resource. By substantially contributing to capacity in this auction, EE reduces wholesale market prices for electricity customers. The clearing price for FCA 11 was the lowest price since 2013 at $5.30 per kilowatt-month. A report by the Acadia Center shows that without EE, energy demand in the region during the winter of 2014-15 would have been 14% higher. EE essentially saved New Englanders $1.5 billion (https://e4thefuture.org/blog/energy-efficiency-succeeds-in-the-iso-ne-f…).

Allowing for EE as resource to participate in the Capacity Market will result in energy savings for Ontario’s residential customers and system operator as evidenced by both the PJM and New England markets.

Recommendation:

As IESO continues the evolution of the Capacity Market it is important that EE be included as a resource able to bid into the market.

3. Commitment to Conservation First Framework

Ontario is well on its way to meeting the 7 TWh by 2020 target set out in the Conservation First Framework (http://www.ieso.ca/en/Sector-Participants/Conservation-Delivery-and-Too…). This has been a highly successful program at developing and fostering a conservation culture in Ontario. In addition, infrastructure and ecosystems have been developed that could be leveraged to ensure 2020 targets are met. Conservation remains the lowest cost option to deliver on the government’s commitment to reduce energy bills.

Recommendation:

It is important that funding and appropriate targets are maintained in order to deliver on conservation objectives on a regional or province wide basis, and ensure that the residential sector is ready to participate in a future capacity market either through demand response or EE as a resource.

Deployment Tools

1. On-bill Financing

On-bill financing allows the customer to borrow money for an EE upgrade, which is then repaid on the utility bill. In 2015, the Ontario Ministry of Energy passed amendments to Ontario Regulation 161/99 under the Ontario Energy Board Act (1998) and Ontario Regulation 160/99 under the Electricity Act (1998) (Government of Ontario, 2015). These amendments clarified that utility led on-bill financing for electricity conservation and demand management measures are activities that electricity utilities can undertake. Today electric utilities in Ontario have the ability to offer customer on-bill financing. However, few, if any, have taken advantage of this regulation primarily due to collections risk and cost of updating billing systems.

It should also be noted that the gas utilities have not been able to implement on-bill financing. Union Gas sought approval for a “On-Bill Financing” of DSM programs, but was denied by the Ontario Energy Board.

It should be noted that Enbridge has taken an Open Bill Access approach (also known as "on-bill recovery"). The way it works is that Enbridge provides a billing service to many different energy-service companies that are not owned by or affiliated with Enbridge. If a customer decides to buy a product or service from a participating company, their charges will appear in the section called “Charges From Other Companies”. Financing fees and terms are offered through a participating company.

The above-mentioned program is suited for big ticket purchases and minimizes risks to a utility. This approach allows third-party institutions to take care of administrative functions, while utilities only need to process payments. However, for lower priced items, such as Smart Thermostats, On-Bill Financing could be an important tool to increase uptake in the technology.

Recommendation:

We are recommending On-Bill Financing as a tool for smaller ticket purchases linked to EE. Customers can access devices such as smart thermostats currently being offered through the DSM program, obtain an instant (the streamlined, improved customer experience approach) rebate and be allowed to pay the remaining balance on their monthly utility bills over a one or two year period. This makes it simple for customers to access solutions with minimal barriers.

2. Continuation of Low Income and Weatherization Programs

The low income sector remains a priority area for energy bill reduction. A couple of examples are outlined below.

Colorado Energy Office

Direct install programs are a tool that can be used to address the needs of this segment. Nest has been working to help combat energy poverty through its Power Project initiative. A key part of the Power Project is making the Nest Thermostat E available at reduced pricing to low-income programs. We are pleased to share the first evaluation of Nest's work in the low-income space in the form of a pilot project run with the Colorado Energy Office and the Arapahoe County Weatherization agency.

The pilot project launched in 2016. The Arapahoe County Weatherization agency was provided with 250 Nest thermostats and installed them in approximately half of the homes they weatherized from May 2016 through December 2017.

This pilot showed that installation of Nest thermostats led to a significant and substantive increase in energy savings compared to homes that received only traditional weatherization measures. Homes that received a Nest thermostat achieved average gas savings of 18.4% compared to 11.1% for comparable standard WAP clients.

Key Findings:

• Homes that received a Nest thermostat achieved average gas savings of 18.4% compared to 11.1% for comparable standard clients.

• Over the course of the pilot, just 5% of thermostats were removed due to either client request or hardware/compatibility problems.

• One somewhat surprising finding was that 81% of all clients that received a Nest thermostat had WiFi in the home. The absence of WiFi did not appear to have any significant impact on the savings.

Oregon’s ten-year plan

Oregon recently released plan to reduce the energy use in their affordable housing stock contained some observations that could be relevant Ontario’s efforts. Oregon found:

"Analyzing the natural gas savings measures, there was one measure that clearly stood out as having the highest cost-effective achievable potential savings – smart thermostats in homes with gas furnaces. This measure was cost-effective for all types of existing housing, including multifamily, manufactured housing and single-family. The total cost-effective achievable potential savings for this measure was about 3 million therms in savings." – p. 14

And similarly for electric savings:

"The second highest potential was found to be installing smart thermostats in units with electric furnaces or heat pumps. The cost-effective achievable potential savings across all building types for this measure was 98 million kWh." – p. 15

You can find Oregon's full plan here: https://www.oregon.gov/energy/Get-Involved/Documents/2018-BEEWG-Ten-Yea…

Recommendation:

There are a number of programs in Ontario targeting the moderate and low income segments. These
programs are administered through the IESO and utilities, both gas and electric ( (see https://www.greensaver.org). These programs have the potential to expand and to require a host of energy efficiency products and services. A smart thermostat should be considered a minimum requirement of any of these or future programs. Partnerships with technology providers can be leveraged to pass on benefits to moderate and low income households through such initiatives such as Nest’s Power Project (https://nestpowerproject.withgoogle.com/) where devices are offered to qualifying organizations at cost.

3. Building Code Amendments

Across North America, a variety of regulatory and policy bodies are in the process of defining “Smart Thermostats” as a category. From EPA’s Energy Star to state utility commission Technical Reference Manuals (Illinois, Pennsylvania, California, Texas), to California Title 24 Building Code, there is great interest in defining this new technology so that it may be included in a variety of efficiency programs.

Recommendation:

Adding a “Smart Thermostat” requirement to the Ontario Building Code would help contribute to carbon reduction targets and assist in achieving household EE within the new construction and substantial retrofits sectors.

We look forward to continuing to work with the government of Ontario to ensure customers are being well served and saving on energy bills in a sustainable fashion.

Sincerely,

Google, Devices and Services Partnerships Team