Alberta's Journey to Quantifying Avoided Energy Costs: The Role of Energy Efficiency Policies
As the world grapples with the pressing need for sustainable energy solutions, Alberta has taken significant strides toward achieving net-zero emissions by 2050. Given the research-backed evidence that clean electrification is the most cost-effective path to meet this ambitious goal, Alberta's electrification rates are rising. However, this growth brings with it the challenge of ensuring a consistent and reliable electricity supply. This is where energy efficiency policies come into play, serving as an effective tool to manage soaring electricity demands and avoid subsequent costs of system expansion.
Why Quantifying Avoided Costs is Critical
The primary benefit of energy efficiency policies is their ability to avoid partial costs related to energy, capacity and transmission and distribution as it softens demand growth. However, determining the exact value of these avoided costs is not straightforward. Different regions have unique methods, data availability, and market structures that influence their calculations. This makes it crucial for Alberta to establish its own framework, drawing inspiration from leading jurisdictions such as California, New England, and Ontario.
Understanding the Global Landscape
My research, set against the backdrop of escalating electricity demands and their inherent challenges, delves into the nuances of energy efficiency policies and the significant financial benefits they bring to utility systems. While regions such as the U.S. have widely embraced and documented energy efficiency policies, Canada's journey has been more staggered. The common thread across jurisdictions is the utilization of anticipated electricity pricing to determine avoided energy costs. Yet, when it comes to capacity and transmission and distribution costs, the methodologies diverge based on the region's energy sources and infrastructural investments.
Jurisdictions such as New England and California, renowned for their robust energy efficiency policies, offer extensive documentation that Alberta can use as a reference. A closer look reveals significant variations in their methodologies, chiefly because of differences in data accessibility, market structure, and other unique regional factors. The approach of Ontario, Canada's frontrunner in energy efficiency policies, further underscores the need for a tailored approach to quantifying avoided costs.
Filling Alberta's Policy Gaps
In Alberta's context, although its methodologies align closely with Ontario and California, it is evident that Alberta stands at a pivotal juncture. The province needs a robust data infrastructure to ensure its model is tailored to its unique requirements. Equally important is the agility to adapt to changing energy landscapes, coupled with sharp political foresight.
Alberta's energy market operates within a competitive wholesale framework, necessitating a forward-looking strategy to calculate avoided energy costs. This involves establishing data-rich models that can predict future market prices with high accuracy. Moreover, given the province's heavy reliance on fossil fuels, current calculations for avoided capacity costs can be based on the expenses associated with new gas turbine generation facilities. As Alberta transitions to greener energy solutions, this metric might need revisiting.
Additionally, regional transmission and distribution planning will guide Alberta's calculations for avoided transmission and distribution costs. Since electricity consumption varies across regions, Alberta needs to decide between a comprehensive methodology or a more localized approach. Insights from New England's comprehensive framework can be particularly instructive here.
Energy efficiency policies offer a promising route for Alberta to navigate its energy challenges. With the right strategies in place, the province is poised to make the most of these initiatives, bringing it closer to its goal of net-zero emissions by 2050.
Qiushan (Lillian) Li is a Master’s student at the University of Calgary’s School of Public Policy.