Electricity Energy Efficiency Programming Post 2024

What is energy efficiency?

Energy efficiency is the practice of getting the same job done by using less energy. Electricity energy efficiency in this notice is focused on electricity energy efficiency programming that has reduced Ontario’s annual consumption of electricity and reduced emissions. Today, Ontario has one of the cleanest electricity grids in the world. Reducing electricity demand delays or reduces the need to build new infrastructure, like generating facilities, or transmission and distribution lines, and lowers electricity bills.

As the energy transition continues, the average household or business is likely to increase their electricity consumption as they reduce their use of fossil fuels. This expected increase in electricity consumption makes electricity energy efficiency programs even more valuable to Ontario families, businesses, and industries.

Ontario has operated electricity energy efficiency programs since the early 2000s, and in 2011 began multi-year program ‘frameworks’ which would end, and be renewed, roughly every 4 years. These frameworks are referred to as conservation and demand management (CDM) frameworks and are funded through electricity rates. Ontario is currently in the 2021-2024 CDM framework, which has a budget of roughly $1 billion. CDM frameworks outline the objectives, budget, targets, rules, and guidelines that govern the delivery of electricity energy efficiency programs in the province. Currently, the Independent Electricity System Operator (IESO) is responsible for centrally designing, coordinating, delivering, and funding these energy efficiency programs, while the Minister of Energy sets the objectives and budget of the multi-year framework.

Electricity energy efficiency programs can range from consumer offers for energy efficient lightbulbs, to supports to upgrade insultation in older buildings, to helping builders build more energy efficient buildings. All programs help to lower electricity consumption and electricity bills. Often their effects last for many years.

Current CDM programs are targeted to those who need them most, including business, residential, low-income and First Nations customers, and to regions of the province with electricity constraints. All Ontarians are able to benefit from efficiency programming.

According to the Independent Electricity System Operator (IESO) each dollar invested in electricity energy efficiency avoids two dollars in cost to the electricity system.

The benefits of energy efficiency include:

• Maximized potential: Smart energy technology choices contributing to smarter businesses and greater home comfort and quality of life.
• Energy affordability: Helping families and businesses reduce their energy bills and helping make businesses more competitive.
• Reducing demand and strain: Supporting a more efficient electricity grid and reducing the need to build new energy infrastructure, including electricity generation or transmission and distribution lines.   
• Greenhouse gas emission reductions: Reducing peak demand reduces how often Ontario’s natural gas plants operate.  

What have electricity energy efficiency programs achieved?

In 2021, Ontario’s “Save on Energy” branded electricity energy efficiency programs celebrated their tenth anniversary. Today, more than 250,000 Ontario homes and businesses have participated in electricity energy efficiency programs over the last decade:

• 17 million energy-saving products purchased by Ontarians for installation in their homes with help from Save on Energy incentives​ (e.g. smart thermostats, energy efficient lightbulbs, etc.)
• 110,000 small business participants​
• More than 100,000 low-income homes served​
• 195+ energy managers hired – a skilled workforce of highly qualified professionals​

Since 2006, electricity energy efficiency programs have reduced Ontario’s electricity demand by 9% or 14.3 terawatt hours (TWh) of persistent energy savings by the end of 2021 (IESO 2022 Annual Planning Outlook). This is equivalent to all the electricity used by the cities of Ottawa, London, Kitchener, Kingston, and Burlington in 2021.

How did we get here?

The current 2021-2024 CDM Framework was established through the September 30, 2020 Minister’s Directive to the IESO.

In September 2022, the government accepted the recommendation of the IESO to expand electricity energy efficiency programs and roll out four new or expanded electricity energy efficiency programs within the current CDM Framework and increase the framework’s budget to $1 billion. This quick and decisive action will help meet electricity system needs, including key regional priorities, that are expected to emerge in the near future (identified in the IESO's 2022 Annual Acquisition Report).

The current CDM framework ends December 31, 2024.

What is the future need of electricity energy efficiency?

Ontario’s electricity consumption has largely remained flat since 2005, partly due to successful electricity energy efficiency programs. However, due to electrification, emission reduction efforts and economic growth, Ontario is expecting an unprecedented increase in electricity demand over the next two decades. Ontario is committed to affordable, reliable and sustainable electricity and as demand increases, electricity energy efficiency programs are critical to continued success.  

• The IESO’s 2022 Pathways to Decarbonization report identifies acceleration of electricity energy efficiency as a no-regret action to help meet growing demand because it is a resource that does not emit greenhouse gases and is often a cost-effective alternative to building new infrastructure
• The IESO’s Achievable Potential Study refresh in 2022, found that there is significant opportunity for additional electricity energy efficiency offerings to meet growing system needs: as much as 485 megawatt (MW) and 5.2 TWh by 2028, and 1,851 MW and 16.1 TWh in 2033.

Ontario, along with other leading jurisdictions across North America, is looking at the next evolution of energy efficiency programming as a key tool in meeting future electricity needs. Examples of innovative programs being tested in other jurisdictions include:

• Using home battery walls and electric vehicles to provide energy storage capabilities to the broader electricity grid in return for lower home electricity bills.
• Enabling smart technologies in homes and businesses (e.g. air conditioner, electric hot water heater, home electric vehicle charger) to better align energy consumption at times that work for consumers and reduce strain on the electricity grid, in return for lower electricity bills.
• Supporting deployment of electric heat pumps or other cost-effective technologies that increase electricity demand at times of the day or year when the grid has surplus, offsetting fossil fuel use, lowering customer bills and increasing electricity grid efficiency.
• Targeting free retrofit and energy transition programs to lower-income families with high energy burdens due to age of home, poor insultation, or inefficient home appliances.

Through this consultation, we are asking for input to help identify the best opportunities and ways to achieve a more reliable, clean, and affordable electricity system. Feedback will help inform the scope and design of the province’s future electricity energy efficiency programs.   

 Questions:

I. Objectives and targets, definition, and funding source

A. Objectives and targets

The primary objectives of the current 2021-24 CDM Framework include:

• Helping to cost-effectively meet local, regional, and/or system-wide electricity needs. 
• Helping electricity consumers who are most in need to receive electricity-saving measures, such as small business, commercial, institutional, industrial, low-income, and First Nation customers.

Within the current CDM Framework, typical targets include energy savings (in TWh) and peak demand reductions (in MW).

Through the Mid-Term Review stakeholder engagements, the IESO heard an increasing interest in decarbonization and electrification opportunities, and distributed energy resources (DERs). Further, energy costs can be a significant burden on households, in particular those with lower incomes.

1. How sufficient are the current primary objectives and targets for addressing evolving system and customer needs?
2. Should additional objectives or targets be considered when developing electricity energy efficiency programming? For example, objectives and/or targets relating to beneficial electrification (replacing fossil fuel use with electricity in a way that reduces overall emissions and energy costs), overall grid efficiency including demand flexibility (reducing, increasing or shifting customer load), electricity bill reduction, etc.

B. Definition:

The current definition for electricity energy efficiency programming under the 2021-2024 CDM Framework is as follows:

The IESO shall consider CDM to be inclusive of activities aimed at reducing peak electricity demand and/or electricity consumption from the electricity system. Examples of CDM include energy efficiency replacements whereby similar output is achieved with less electricity, and behind-the-meter consumer generation.

However, for the purposes of the CDM programs, the IESO shall consider CDM to exclude:

• Those measures promoted through a different program or initiative undertaken by the Government of Ontario or the IESO; and
• Behind-the-meter consumer generation that uses fossil fuels purchased from or otherwise supplied by a third party as a primary fuel source.

3. Does this CDM definition appropriately capture DER, and demand response (DR), and other opportunities arising from new technologies and business models that enable greater customer choice to achieve more electricity savings within CDM?  If not, what changes should be made recognizing there may be other revenue options and models that may become available to DERs (e.g., local and wholesale electricity markets) outside of CDM?  
4. Should the definition consider additional elements such as beneficial electrification?

C. Funding Source

5. Currently, funding from electricity ratepayers through the Global Adjustment (GA) can support electricity energy efficiency programs that target local and/or regional needs and which also demonstrate cost effectiveness at the system-wide level. How do we determine the extent to which local and/or regional programs are to be funded by all electricity ratepayers (i.e., through the GA)?
6. Currently, DER and DR activities can be funded through the GA if they meet the CDM definition. Beneficial electrification is not an eligible CDM activity. Should beneficial electrification be an eligible CDM activity; and if so, what funding source is most appropriate (e.g., electricity ratepayer, natural gas ratepayer, taxpayer)?

II. Responsiveness to system needs

The IESO’s 2022 Mid-Term CDM Review found that the current CDM framework could be more flexible to enable larger and faster adjustments to programs and budgets mid-framework to better respond to fast-evolving needs. Stakeholders also indicated that the current “start and stop” model, which has all programs end and new programs start on a specific date, is inefficient and causes confusion among consumers and uncertainty among service delivery agents.

7. Would a more enduring commitment to energy efficiency programming and funding produce better outcomes? What could this look like?
8. In the context of the energy transition and growing electrification needs, how can electricity energy efficiency programs be better integrated into electricity distribution and transmission system planning as well as resource procurements? 
9. What additional tools could be used to develop energy efficiency programming budgets and targets? Examples of existing available tools include:

• Achievable Potential Studies, which evaluate how much electricity energy efficiency is possible from a technical, economic, and market potential basis.
• Annual Planning Outlooks, which provide a long-term view of electricity demand needs in Ontario and indicates the relative economic value of CDM. This report is updated on an annual basis.
• Annual Acquisition Reports, which specify the mechanisms to provide a flexible and cost-effective approach for competitively securing electricity resources necessary to meet demand.

10. How can electricity energy efficiency programs be better integrated or coordinated with other policy initiatives such as procurements (e.g., of DER resources), pricing schemes, building codes and energy efficiency standards, to help manage electricity demand and reduce GHG emissions?
11. What are examples from other jurisdictions where demand flexibility and targeted energy efficiency have helped optimize the use of the existing grid in constrained areas or where the grid is under-utilized? For example, aggregated demand response program, DER and non-wires alternatives, energy storage, locational value and electricity pricing options, etc.

III. Improving customer experience

Energy efficiency programs are uniquely positioned to engage directly with electricity customers, to help inform behaviours and provide choice that will benefit both customers (e.g., through electricity bill reductions) and the system (e.g., through reducing reliance on additional infrastructure investments including resource procurements). There is an opportunity with electricity energy efficiency programming to improve the customer experience and enhance customer choice to achieve greater impact. 

A. Needs:

12. What additional support is needed to get customers to undertake more energy efficiency?
13. What should the government consider when communicating the benefits and motivations behind energy efficiency programs to encourage participation and improve public awareness? Examples of benefits are cost savings, comfort, enhanced customer choice, etc.
14. Are there best practices from other jurisdictions on improving customer engagement in energy efficiency particularly for the hard-to-reach segments?
15. How can we make better use of technology to achieve our electricity energy efficiency goals? 

B. Coordinated delivery:

Electricity and natural gas energy efficiency programs are currently delivered under separate policy frameworks. Stakeholders have indicated that outcomes in both programs would be improved if there was more coordination between electricity and natural gas energy efficiency programs. Benefits could include more customer choice, improved customer experience, and administrative efficiencies (e.g., from joint procurements).

16. What opportunities should Ontario consider, to improve the coordination of electricity and natural gas energy efficiency frameworks, program delivery, and oversight?    
17. What common performance metrics could be used to design, track, and evaluate coordinated energy efficiency activities (e.g., cost benefit tests, emissions reduction goals)?
18. Are there examples from other jurisdiction where natural gas and electricity energy efficiency program planning and delivery are integrated?

IV. General

19. The IESO’s Mid-Term review of the 2021-2024 CDM Framework, including programming, was released in December 2022.  Please share any further feedback on any of the existing programming, including opportunities for improvement or lessons learned from other jurisdictions.  

Responses and supplementary information should be submitted to the contact provided in this notice by no later than 5PM on September 22, 2023.