cost-cutting

B.C. Hydro pulls back on conservation

Funding cuts respond to surplus supply, rising rates
Monday, September 23, 2013
By Barbara Carss

B.C. Hydro has proposed significant cuts to its conservation and demand management incentives over the next three years. Funding for some incentives has already been rolled back, while the utility’s recently released draft Integrated Resource Plan (IRP) sets out a longer list of potential future adjustments to the commercial, industrial and residential Power Smart programs.

The IRP, which is open for public comment until Oct. 23, outlines strategies for energy savings, generation and transmission to 2021. In the longer term, the plan continues to aim for annual savings of 7,800 Gigawatt-hours and 1,400 Megawatts of capacity savings (also known as peak demand reduction) by 2021, to comply with the mandate in B.C.’s Clean Energy Act that two-thirds of the projected increase in electricity demand to 2020 be met through conservation and efficiency.

However, the planners maintain that a current surplus of supply in the province provides some flexibility to reduce conservation spending until at least 2017. Knowledgeable observers suggest efforts to rein in projected rate increases also underlie the recommendation.

“It’s a direction that has been embraced by both the government and B.C. Hydro, and they are already focused internally on doing that. There is an expectation within B.C. Hydro that it will be ramping back program spending,” reports David Craig, executive director of the Commercial Energy Consumers Association of British Columbia. “It probably has a lot less to do with the system being in surplus than the fact that they are facing rate increases they would really like to keep to a lower range.”

Recent moves include: a 50 per cent reduction in funding for energy studies, which are offered for higher volume power consumers participating in the Power Smart Partner program; and an embargo on new enrollees in the continuous optimization program, which provides subsidies for energy or retro-commissioning studies and energy management information systems.

The IRP recommends other program cuts beginning in 2014. In the commercial sector, the Power Smart Partner program, product/equipment replacement, subsidies for energy managers’ salaries and employee engagement programs are on the list for potential funding reductions. In the residential sector, the IRP proposes eliminating new home construction incentives in 2015, and scaling back the refrigerator buy-back program and other incentives for lighting, appliances and electronics.

Ultimately, all ratepayers finance Power Smart programs so provincial officials are not alone in contending that electricity rates shouldn’t subsidize measures that most consumers would undertake on their own anyway.

“Frankly, reducing some of the product incentives is legitimate because we want to avoid overpaying to shift investment decisions toward energy-efficient products,” says Andrew Pape-Salmon, senior energy specialist with RDH Building Engineering Ltd., and vice-chair of the Canadian Energy Efficiency Alliance. “Limited funds are best spent transforming the market toward emerging building designs and products that could become part of future regulated codes and standards.”

“B.C. Hydro was one of the first utilities out the gate to run conservation programs. It has been doing this for 10 to 15 years, and on some fronts there’s not a lot left to do,” concurs Paul LaBranche, executive vice-president of the Building Owners and Managers Association of British Columbia (BOMA B.C.). “We are now in a position of transforming the industry holistically rather than looking at specific measures for specific buildings. B.C. Hydro has reached a lot of the low-hanging fruit and the only way to get the high-hanging fruit is through broader strategic initiatives.”

From that perspective, conservation proponents caution that curtailing expenditure on energy efficiency could have a backlash in the future when savings will be more critical.

“Buildings and building systems last for a very long time. There are a lot of investment decisions that can occur today, tomorrow and next year that will have a very long-term impact on energy consumption,” notes RDH Building Engineering’s Pape-Salmon. “My concern about scaling back these programs is, ‘Would we be missing the opportunity to influence investments that affect long-term energy efficiency?’.”

Even though there is now surplus supply for the total annual provincial consumption, the IRP recommends development of generating facilities to address future needs as B.C.’s population and economy grows, and to ensure adequate system capacity during peak demand periods. This includes a 1,100-Megawatt hydroelectric facility on the Peace River, known as Site C, and smaller expansions at other existing generating plants to provide peak capacity.

The Commercial Energy Consumers Association’s Craig argues those plans should also be factored into the returns on conservation.

“What’s not adequately developed in the resource plan is what (B.C. Hydro) is saving through delaying future requirements for new generation,” he says. “Delaying Site C is worth an enormous amount of money.”

Conservation and demand management programs in B.C. currently cost $32 to $49 per Megawatt-hour (MWh) depending on the rate structure, of which B.C. Hydro covers $16 to $29 per MWh. In contrast, various renewable energy contracts that the province and B.C. Hydro have signed with smaller independent power producers (IPPs) average out to approximately $130 per MWh. Meanwhile, neighbouring Alberta and U.S. states to the south provide potential markets.

“If you have surplus electricity from conservation and efficiency, you can sell it in the spot market for the cost that the utility is putting into it. So you don’t lose any money. It is cost-neutral to continue to pursue it,” asserts Craig.

That’s an argument the Commercial Energy Consumers Association intends to submit to the B.C. government, and Craig is looking for support from other industry groups.

“It would be extremely helpful if we were able to get a significant backing from the commercial sector for the advocacy that we are going to be putting forward,” he says.

Barbara Carss is editor-in-chief of Canadian Property Management and Building Strategies & Sustainability magazines.

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