The Ontario government has pledged $342 million in additional energy efficiency spending to be rolled out between the spring of 2023 and the end of 2024 as a part of the current four-year framework for conservation and demand management (CDM) programs. The new injection is a 49 per cent boost to the budget allotted when the framework was launched in 2021, but still falls short of the funding available before the government scaled back offerings for the commercial sector and cancelled most programs for the residential sector in 2019.

“We were quite disappointed when there were cuts to the CDM framework a few years ago at a time when conservation was gaining momentum,” says Bala Gnanam, vice president, sustainability, advocacy and stakeholder relations, with the Building Owners and Managers Association (BOMA) of Canada. “So we are pleased to see Ontario is committing additional funds now. Better late than never.”

The government’s rationale is spelled out in a directive that Energy Minister Todd Smith issued to Ontario’s Independent Electric System Operator (IESO) in late September. It’s premised on projected future electricity demand and the economics of curbing consumption to offset the need to produce more supply.

The IESO advises more electricity system capacity will be required as early as 2025 to keep up with provincial growth and the steady switch away from fossil fuels for transportation and building space heating. In sync with escalating demand, aging nuclear generating units are slated to be decommissioned or sidelined for refurbishment.

“Fulfilling this forecasted supply need will require the IESO to procure electricity products and services from both existing and new resources,” Smith’s directive states. “Energy efficiency programs have the potential to generate significant savings for ratepayers, lowering electricity costs. Moreover, they help to reduce our dependence on natural gas electricity generation, which is a priority for the government.”

Along with coordinating the distribution of the additional CDM funds, the IESO is tasked with inducing an extra 285 megawatts (MW) of annual peak demand reduction and 1.1 million megawatt-hours (MWh) of annual energy savings by 2025. That’s expected to translate into a $650 million cost saving and a 3 million tonne reduction in greenhouse gas (GHG) emissions over the lifetime of the energy efficiency measures, providing good payback on the investment.

The new $342 million allocation will flow into four CDM programs, with up to $136 million or nearly 40 per cent of the funds earmarked for incentives for greenhouse operators in southwest Ontario. The remainder is intended to underwrite:

• allowance for custom energy-efficiency projects within the IESO’s existing retrofit program for the commercial, industrial and institutional sectors, broadening out from the current focus on prescriptive measures;
• “enhancements” of the IESO’s local programs for targeted areas experiencing particular electricity system constraints, which currently encompasses the Richview South district in Toronto, York Region, Ottawa and the Belle River area in Windsor-Essex, including incentives for distributed energy; and
• the creation of a new voluntary demand response program for residential customers agreeing to let their local utility adjust their central air-conditioning or heat pump controls via their smart thermostats.

LDCs tapped for larger role

Smith’s directive also hints at potential rate-based energy efficiency funding to supplement the budget the provincial government has provided. That’s to be considered as part of the pending mid-term review of the 2021-24 CDM framework.

“The IESO shall explore opportunities for regulated distributors to build on IESO CDM programs where they can add value to their distribution system. This may include support for distributors’ CDM applications to the Ontario Energy Board for distribution rate funding that are in the best interest of Ontario electricity ratepayers and program customers,” the directive states.

The provincial government effectively purged local distribution companies (LDCs) when it dismantled the previous government’s CDM framework in 2019 and transferred program oversight solely to the IESO, but decarbonization proponents stress that electricity grid capacity is critical to enable fuel-switching and connect new clean power sources. They argue that the managers of the grid should be assigned a role in peak demand reduction.

“As more businesses and municipalities are targeting net-zero, there needs to be a focus on helping achieve smart electrification at an appropriate pace and on using conservation as an offset to the electricity growth. Local distribution companies would be a logical place to look for a coordinated effort between the grid, distribution system, municipality and the distribution customers,” maintains Andrew Pride, an energy management specialist and consultant on conservation planning.

“I read this part of the directive as opening the door for LDCs to apply for rate increases to support the IESO CDM programs and bring incremental value to the distribution and transmission systems,” Gnanam observes. “Our industry would support it if such rate increases were used for grid innovation and to improve grid reliability and resilience.”

As for the deployment of the new CDM funding, he underscores the significant energy savings and emissions reduction returns to be reaped in aging Class B and C buildings. “We would like to see much of the additional funding allocated to support this sector in the way of special incentive programs, education and training and other initiatives to build capacity,” Gnanam urges.

Meanwhile, Jeff Ranson, BOMA Toronto’s senior director, energy, environment and advocacy, characterizes CDM as “good grid citizenship” that frees up more capacity to pursue emissions reductions. “In terms of allocation of funding, we see a real need to support both conservation and zero carbon transition planning,” he says.

Slate of program launches set for 2023

For its part, the Ontario government anticipates a large chunk of the projected peak demand reduction will be achieved in southwest Ontario’s greenhouse sector — 225 MW of the targeted 285 MW — through incentives for LED lighting and behind-the-meter distributed energy resources (DER), such as combined solar generation and battery storage. “This will help to alleviate electricity system constraints in the region and foster economic development,” a government release states.

It also indicates the new CDM programs will be ready for applicants in the spring of 2023. Meanwhile, the IESO had already been scheduled to launch three other new CDM programs in 2023, which have been in development over the past two years. These include:

• commissioning incentives for existing buildings;
• incentives conveyed through commercial lighting distributors, providing point-of-sale discounts for energy-efficient products; and
• the planned transition from subsidizing energy managers’ salaries to instead offering “training, resources and enhanced technical support” for companies with an energy manager on their payroll.

Perhaps illustrative of the challenges of the provincial government’s timeline for launching additional programs, last May, Rob Edwards, the IESO’s business manager for private sector initiatives, told online attendees of BOMA Toronto’s annual global adjustment workshop that commissioning incentives would become available in the fall of 2022. When asked about the program’s eligibility criteria, he noted: “That is still under design and that’s why we’re not able to launch it until the fall.”

Barbara Carss is editor-in-chief of Canadian Property Management.