Ontario’s new energy efficiency programs—high cost, little benefit

The Wynne government is once again pursuing high-cost energy programs that will yield minimal benefits for Ontarians. This time the government has its sights set on energy efficiency programs.

Last week, Environment Minister Chris Ballard announced that $377 million in proceeds from Ontario’s cap-and-trade auctions will be used to establish a Green Ontario Fund. According to the government, this new agency will oversee programs and rebates for homes and businesses to reduce energy costs.

Under the new program, Ontario households can register to have a smart thermostat installed at no cost. Ballard estimates the smart thermostats and installations will use about $40 million from the green fund. The government predicts consumers will see a savings of up to 15 per cent on bills from adjusting their thermostats. The government has also recently announced that up to $657 million from cap-and-trade proceeds will be used for social housing repairs and retrofits.

Ontarians might be tempted by the government’s smart thermostat and other energy-saving upgrades—but, will these programs actually save consumers money? Probably not.

Studies from the United States suggest that energy conservation program costs are often understated and far outweigh the benefits. For example, a 2015 Berkeley University study found that the U.S Weatherization Assistance Program—a home retrofit program—predicted 2.5 times more energy savings than were actually realized. The study also found that the cost of the program per household was about twice the value of the energy savings, even after accounting for the value of reduced air pollutant emissions.

Moreover, research shows when governments subsidize the adoption of energy efficient equipment, households and firms will actually respond by increasing their usage. For instance, a household that obtains a rebate to purchase an energy efficient dishwasher that uses less energy may then opt to run it less full and therefore more often. This raises questions about whether energy efficiency programs actually result in reduced energy consumption.

Ontarians are already feeling the pinch from high electricity prices. A recent Fraser Institute study found Ontario’s electricity prices increased 71 per cent from 2008 to 2016. This means Ontario’s electricity price increases were more than double the national average. Ontario’s major cities, Toronto and Ottawa, have the highest average monthly electricity bills when compared to other major cities.

What’s behind the drastic electricity price increase in Ontario?

Simply put, an array of poor policy decisions at Queen’s Park and the imbalance between the supply and demand of electricity in the province. When Ontario’s energy generation exceeds demand, it must be exported—quite often at a loss—leaving ratepayers to cover the difference. Surely the supply and demand imbalance in Ontario is not a problem that can be solved with energy efficiency programs.

So let’s think about the big picture. Instead of pursuing meaningful reforms that will provide relief from Ontario’s skyrocketing electricity bills, the Wynne government is betting on energy efficiency programs to try to provide a low-cost means of managing power needs. Unfortunately, Ontario’s new energy efficiency plans largely rely on unproven claims.

The Wynne government seems to think cutting energy bills is as easy as “changing a lightbulb" or "switching a thermostat.” Research shows that simply isn’t true. Ontario’s energy efficiency programs are costly and will likely result in minimal energy savings for residents and businesses.