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An Insider’s Guide to the Economic Benefits of Energy Efficiency

Energy Efficiency Q & A: Philippe Dunsky, Dunsky Energy Consulting

Philippe Dunsky helped co-author the Acadia Center’s report showing how EE can grow jobs and GDP.

With the release of last month’s report on the macroeconomic benefits of energy efficiency in Canada we’ve taken the opportunity to discuss it further with one of its authors – Philippe Dunsky, president of Dunsky Energy Consulting in Montreal. The report projects the potential economic spin-offs for energy efficiency by covering a 15-year period with three different investment scenarios – each considering efficiency programs that generate energy savings in the residential, commercial and industrial sectors. Here is an insider’s take on Energy Efficiency: Engine of Economic Growth in Canada A Macroeconomic Modeling & Tax Revenue Impact Assessment.

Q.  What is the key finding about energy efficiency?

A. We have an opportunity in Canada to address environmental concerns while creating over 200,000 new jobs across the country in one year. That’s nearly 10 times the number of Canadians working in the oil sands. Going aggressive on energy performance would also add up to $50 billion to the nation’s annual GDP, and raise nearly $3 billion/year in additional tax revenue as a result of increased economic activity.

Q Describe the modeling scenarios?

A. We assessed three scenarios. The base takes the existing level of effort country-wide and bumps it up just a bit. The mid scenario assumes that each province moves aggressively on energy efficiency, to the point of joining the top five or so regions in North America. And the high scenario – and this is really aggressive – assumes that across the board, Canadian provinces match the highest-performing states on the continent, essentially matching Massachusetts and Vermont.

 Q What surprised you most about your modeling results?

A. I guess it’s just the extent to which efficiency can have such a big bang for the buck and positive economic impact in every region. For example, even in provinces where power generation is so tightly woven into the economic fabric – take Quebec, for example – energy efficiency is still far cheaper and superior from an economic benefits perspective.

Q Which province would benefit the most?

A. I don’t think there’s a top one, the impacts you’re looking at are tremendous across the board. The benefits are slightly stronger for the larger provinces because their economic structures are better-suited to meet the demand for efficiency jobs and services. But you look at a smaller province, say Manitoba for example, and you’re still looking at up to a $1 billion increase in GDP, 5,000-8,000 new jobs [not “job-years”] and net provincial revenue of more than $50 million annually.

Q What’s Canada’s biggest energy efficiency challenge?

A. The federal government has to get back into the game – there’s only so much you can do with a radically underfunded Office of Energy Efficiency. There’s no serious federal action at this stage, the current government is not committed. That doesn’t mean Canada needs to take a nation-wide approach, but a strategic approach to support provincial efforts. From a Canadian economic development standpoint, this has to be understood as a major sector of the economy, and treated as such.

Q What is the easiest to accomplish to improve energy efficiency in Canada?

The easiest is probably not going to happen at a federal level. What’s easiest is for provinces to double up on leadership on what they’re already doing. They can adopt more aggressive savings targets. Nova Scotia has been a great example of provincial leadership – many provinces would do good to study and perhaps emulate Nova Scotia. They’re showing leadership, and at this stage, are set to reap the economic benefits more than most.

Q What is the value of the tax revenue impact assessment?

A. Provincial coffers everywhere are struggling to get out of deficit. I’m from Quebec and you don’t see many opportunities for adding $400-500 million a year to provincial coffers without increasing taxes.

Q What are the details on the job creation potential from energy efficiency?

Net Employment Impact in Canada by Sector

A. The greatest job increases will be in sectors related to energy efficiency programs such as construction, retail sales, professional services and manufacturing. When you do energy efficiency you accomplish two things. The first is to invest right away into upgrading equipment, insulating homes, lowering people’s bills. And then they keep more money in their pocket and go to restaurants, buy things, and so on. On the business side, they reinvest in people, processes, equipment. It’s a double bang for buck – the equivalent of a stimulus and a tax break. So potential jobs will start out heavy on construction and the trades and as we have savings come in, then it blows open with the spill-over into the economy – manufacturing, retail, professional services, eventually into every sector of economy.

Q Why does energy efficiency need incentives when we argue it’s cost effective?

Unfortunately even though this is cost effective a lot of consumers don’t do it on their own. Either trades people don’t know much about options, or retailers don’t stock it, or the average customer can’t do the calculation to do the payback on an Energy Star dishwasher — I include myself in that! Those are some of the reasons why they don’t do it on their own and that’s why we need programs and incentives to stimulate investment.

Q The role of utilities is changing and sometimes energy efficiency and energy generation have conflicting goals. What does that mean for energy efficiency?

A. It depends on every utility, for some utilities energy efficiency is an important advantage, in Massachusetts for example. There are some utilities, especially in Canada today, in surplus situations, when they look at energy efficiency they see a revenue reduction. Others are looking at large-scale capital projects and associated debt to meet new loads, and efficiency can defer those investments and reduce risk at the same time. I think the real thing is that pretty much everywhere energy efficiency is public policy. Whether driving utilities or other organizations doing it, it stems from public policy — it not only pushes environmental goals, but we now see how powerful it is for the economy.

Q What’s preventing some governments from investing in energy efficiency?

A. Energy efficiency is real low-hanging fruit for any government interested in GDP, jobs and revenue. The reason it is probably underinvested in from a political perspective is it’s not as easy to wrap our heads around as solar power, or pipes in the ground. So that makes it harder to grasp, and to visualize as a sector of its own. I mean, it’s insulation, it’s clothes washers, it’s HVAC systems, its industrial processes… it’s really distributed. It’s hard to wrap up in a sound bite, but a smart politician will see it as an undervalued opportunity and help the provinces and the country reap the benefits.

Posted December 18, 2014

Elizabeth McDonald is president of CEEA