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Improving Energy Performance in Canada – Report to Parliament Under the Energy Efficiency Act - 2003-2004

Executive Summary

With the ratification of the Kyoto Protocol in 2002, Canada formally committed to a specific target for reducing its greenhouse gas (GHG) emissions to address the global issue of climate change. Canada's industrialized economy makes decreasing GHG emissions a particular challenge.

Canadians spend almost $114 billion per year on energy to heat and cool their homes and offices and to operate their appliances, cars and industrial processes. Several factors contribute to Canadian energy demand: a vast geography, a northern climate with extreme seasonal variations in temperature and an economy founded on an abundance of natural resources.

Types of Energy Use
There are two general types of energy use: primary and secondary. Primary use comprises Canada's total consumption, including energy required to transform one form to another – such as coal to electricity – and to deliver energy to consumers. Secondary use comprises energy consumed for residential, agricultural, commercial/institutional, industrial and transportation purposes.

Key highlights in energy use include the following:

• Between 1990 and 2002, the latest year for which figures are available, primary energy use increased by 21.5 percent.
• In 2002, secondary use accounted for 69.1 percent of primary energy use and produced 66.2 percent (482 megatonnes) of Canada's total GHG emissions. This last figure includes emissions produced by utilities in meeting the demand for electricity.
• Without improvements in energy efficiency made to buildings and equipment and the changes in the behaviour of energy users during the past several decades, the increases in energy use would have been much higher.

The industrial sector consumes the most energy, accounting for 38.7 percent of total secondary energy use in 2002. Transportation is second (28.1 percent), followed by residential (17.0 percent), commercial/institutional (13.8 percent) and agriculture (2.5 percent).

Five key factors contribute to changes in energy use:

• Activity – variations in levels of activity within sectors
• Weather – annual fluctuations
• Structure – shifts toward more or less energy-intensive activities
• Service level – increased penetration of auxiliary equipment and space cooling in commercial/institutional buildings
• Energy efficiency – how effectively energy is being used

Promoting Energy Efficiency
For the past decade, Natural Resources Canada (NRCan) has promoted energy efficiency and the use of alterna-tive energy as a means to reduce GHG emissions and save money. NRCan exercises a broad range of policy instruments, including leadership, information, voluntary actions, financial incentives, research and development (R&D) and regulation. Regulation allows for the enforcement of compliance.

The Energy Efficiency Act, which came into force in 1992, provides for the making and enforcement of regulations concerning minimum energy performance levels for energy-using products, as well as the labelling of energy-using products and the collection of data on energy use. The Energy Efficiency Regulations are described in Chapters 4, 5 and 6, with an emphasis on their contribution to energy efficiency in the housing, building and industrial sectors, respectively.

Energy Intensity / Energy Efficiency
As explained in Chapter 2, although aggregate energy intensity is sometimes used as a proxy for energy efficiency, there is a difference between the two terms. Understanding this difference is important when comparing Canada with other countries. Energy intensity is a broader measure, capturing not only energy efficiency, but also the impacts of weather variations and changes in the structure of the economy (among other things). While Canada has a higher aggregated intensity than most International Energy Agency (IEA) countries, it has made significant overall improvements in energy efficiency. According to a recent IEA report¹ that examined 13 countries, Canada has the fourth fastest rate of energy efficiency improvement.

Evidence of Change
As explained in this report, recent growth in energy use is primarily due to increased activity in various sectors; however, this growth would have been far greater without improvements in energy efficiency. As reported in Chapter 2, energy efficiency improvements made between 1990 and 2002 are estimated to have reduced GHG emissions by almost 50 megatonnes and decreased energy expenditures by $11.6 billion in 2002.

Over this period, the residential sector recorded a 19.8 percent increase in energy efficiency. The figures for industry (14.2 percent), transportation (9.9 percent) and the commercial/institutional (7.3 percent) sectors demonstrate that improvements in energy efficiency are being made throughout the economy.

Through improvements in energy efficiency, Canadians can reduce the size of their energy bills and achieve important environmental goals. In the short term, changes to less GHG-intensive fuels (e.g. from coal to natural gas) can help reduce GHG emissions. However, over the long term, reducing GHG emissions to 1990 levels will require more widespread use of alternative energy. In recent years, the production of energy derived from alternative sources has increased significantly. Between 1990 and 2001, the last year for which data are available, the amount of electricity generated from the sun, wind and biomass increased by 204 percent.

Measuring Progress
The goal of NRCan's efficiency and alternative energy (EAE) initiatives is to improve energy use by altering energy-consumption practices and patterns in Canada. Measuring the effectiveness of the initiatives is of paramount importance to the success and viability of EAE.

NRCan regularly measures three aspects of EAE programs. Program outputs are items produced on a regular basis, such as marketing and informational materials, demonstration projects, financial incentives and regulations. These items are designed to deliver program outcomes, such as changes in behaviour. These alterations lead to market outcomes, such as observable differences in the amount and type of energy consumed.

Engaging Canadians
To maximize the effectiveness of its initiatives, NRCan engages a growing number of partners from the private and public sectors. Dozens of cooperative agreements are in place with a broad range of businesses, community groups and other levels of government.

These initiatives engage Canadian society, along with every sector of the economy, in new and more efficient approaches to secondary energy use and in the development and deployment of renewable energy sources.

This report provides an overview of the work being done in each sector, highlights NRCan's EAE programs and lists their key achievements for 2003-2004. All programs are described in the corresponding sector chapter. Program entries for market transformation programs also include quantitative performance indicators in graph or table format. A list of NRCan's EAE initiatives and expenditures appears in Appendix 1.

Housing

The residential sector accounts for 17 percent of total secondary energy use and 15.6 percent of Canada's annual GHG emissions. Between 1990 and 2002, residential energy use increased by 8.6 percent, while GHG emissions increased by 8.4 percent. The growth in energy use was largely due to increased activity.

Improvements in energy efficiency, through superior construction of new homes and reduced energy use by occupants, moderated that increase. Without these improvements, which were supported by NRCan programs, total residential energy consumption would have been 19.8 percent higher.

NRCan programs in the housing sector focus on three areas: new houses, existing houses and residential equipment. The majority of dwellings in Canada are detached and semi-detached houses, so most NRCan programs in this sector focus on these types of homes.

New Houses
Houses built in Canada today are more energy efficient than ever. For example, air-leakage rates have improved dramatically. Data recorded during audits performed under EnerGuide for Houses demonstrate that, prior to retrofits, the average number of air changes per hour for homes built before 1945 was 12; the number for homes built between 2000 and 2004 is 8.

NRCan's R-2000² Standard encourages Canadian builders to build, and Canadian consumers to purchase, houses that are more energy efficient and environmentally responsible than is required by current Canadian building codes. A house built to the R-2000 Standard undergoes only 1.1 air changes per hour and consumes 64 percent less energy than the average house constructed in 1970. EnerGuide for (New) Houses is an energy-performance rating and labelling scheme based on the R-2000 Standard, but targets large-volume, mass-market builders.

NRCan's Super E^TM House Program³ supports the export of energy-efficient and environmentally friendly housing technology to foreign builders. Thanks to this program, the R-2000 concept has been adapted to several international markets. Since the program began in 1998, 91 units have been built in Japan and 92 units in the United Kingdom. In both Japan and the U.K., Super E^TM is now established as high quality housing uniquely available from Canada and its exporters.

Existing Houses
NRCan programs for existing houses encourage Canadians to improve the energy efficiency of their homes, particularly when undertaking renovation and maintenance projects. In October 2003, a retrofit incentive was launched whereby homeowners can qualify for a non-taxable grant when retrofitting their homes. Homeowners who completed retrofit activities experienced an average annual energy savings of 19 percent.

In 2003-2004, more than 48 000 houses underwent energy evaluations. Retrofitted homes saw a reduction in energy consumption of between 20 and 38 percent; grant recipients reduced their carbon dioxide emissions by an average of 4 tonnes per year, per house.

Residential Equipment
NRCan develops regulations and sets standards for the energy performance of residential equipment, such as appliances and furnaces. Through labelling and promotional activities, NRCan also encourages the manufacture and purchase of more energy-efficient equipment. Residential equipment programs consist of EnerGuide for Equipment and the international ENERGY STAR^® label.

From 1990 to 2000, the EnerGuide labelling program is estimated to have resulted in a total energy savings of 531 gigawatt hours and a reduction of 287 kilotonnes of GHG emissions. From 2003-2004, over 140 organizations have been recruited to participate in and promote ENERGY STAR^® in Canada.

Buildings

Retail and office space account for more than half of the commercial/institutional sector's energy demands. Between 1990 and 2002, commercial/institutional energy use (excluding street lighting) increased by 30.8 percent. In 2000, the commercial/institutional sector accounted for 13.8 percent of total secondary energy use and 13.4 percent of GHG emissions. However, improvements in energy efficiency worked to decrease total energy use by 7.3 percent.

NRCan programs address all building types with measures that target new buildings, existing buildings and equipment.

New Buildings
NRCan provides financial incentives to builders and developers who incorporate energy-efficient features into new construction projects. Since its inception, the Commercial Building Incentive Program has issued incentives to 372 projects, thereby avoiding 78 kilotonnes of GHG emissions.

NRCan also provides assistance to builders and developers of industrial structures. In 2003-2004, six contribution agreements were signed; moreover, 17 architects and engineers received training on energy-efficient industrial building design.

Existing Buildings
NRCan provides commercial organizations and public institutions with access to tools and financial assistance to improve the energy efficiency of their existing buildings. Between 1998 and 2004, federal contributions to renovation and retrofitting projects totalled $30.5 million, and client investment equalled $571.4 million. Energy savings achieved through these projects was worth $80 million.

Equipment
Through a range of equipment programs, NRCan establishes standards and regulations for energy efficiency and supports the development, testing, deployment and promotion of new technologies.

In 2003-2004, NRCan established minimum performance standards for water chillers and exit signs; the cumulative annual reductions attributable to these standards are estimated to be approximately 0.02 megatonnes in the year 2005 and 0.17 megatonnes in the year 2020. NRCan also provides comparative information on the energy performance of equipment and uses the international ENERGY STAR^® label to identify the most energy-efficient products available.

Through its Refrigeration Action Program for Buildings, NRCan supports the development and adoption of refrigeration technologies that reduce energy consumption, synthetic refrigerant use and GHG emissions. In 2003-2004, the program launched a demonstration project of integrated heating, ventilation and air conditioning (HVAC) and refrigeration technologies in a Quebec supermarket, as well as in three ice rinks.

NRCan also helps to develop and promote the adoption of intelligent building technologies and practices that reduce energy consumption and GHG emissions. Furthermore, NRCan distributes and supports building simulation software for the Canadian housing and building industry. To date, the software has simulated improved energy efficiency for over 128 000 houses and 380 commercial buildings.

Community Energy Systems
NRCan works in partnership with Canadian communities and businesses to develop Sustainable Community Energy Plans, using tools that will help reduce energy demand, emphasize conservation and promote reliance on local renewable energy sources. In 2003-2004, NRCan developed a planning methodology that enables municipalities to develop a long-term growth strategy while minimizing energy consumption and maximizing renewable energy use.

Industry

The industrial sector includes all manufacturing industries, all mining activities, forestry and construction, but excludes electricity generation. Overall, industrial energy demand accounts for 38.7 percent of secondary energy use and 33.8 percent of GHG emissions.

Between 1990 and 2002, industrial energy use increased by 16.9 percent, while industrial GHG emissions grew by 15.2 percent.

Improvements in energy efficiency helped reduce total energy use by 14.2 percent. Within this sector, NRCan's energy efficiency initiatives focus on industrial processes and technologies, equipment and buildings.

Industrial Processes and Technologies
NRCan works with companies and associations to address barriers to planning, implementing, tracking and reporting energy efficiency improvement targets in industry. Between 1990 and 2002, the Canadian Industry Program for Energy Conservation achieved an average energy intensity improvement of 1.9 percent per year, thereby avoiding 23.8 megatonnes of GHG emissions.

NRCan also designs, develops and deploys technologies for cleaner fossil fuel power generation. In 2003-2004, NRCan devised a new combustion protocol for assessing energy and emission performance of bitumen/water emulsions for industrial applications.

NRCan supports Canadian industry in the development and adoption of innovative energy-efficient practices, such as Process Integration (PI) and advanced process control systems. In 2003-2004, NRCan completed a successful PI collaboration that identified energy savings of $4.5 million per year and GHG reductions of 34 kilotonnes per year.

In 2003-2004, NRCan helped finance a company that is developing a new mechanical transmission for diesel generator sets. NRCan also is supporting the development of a production-scale process that recycles post-industrial polyethylene cross-linked foam waste material into foam sheet products.

The Government of Canada Action Plan 2000 on Climate Change has allocated $10 million to the Minerals and Metals Program, which has its home in the Minerals and Metals Sector of NRCan.

Equipment
Through regulation, standards setting, labelling and research support, NRCan programs work to improve the energy efficiency of equipment used in industry.

Canada's Energy Efficiency Regulations set out minimum performance standards through the Energy Efficiency Act to eliminate the less energy-efficient models of energy-using equipment from the market. EnerGuide for Equipment promotes and encourages the manufacture, purchase and use of more energy-efficient industrial equipment. In 2003-2004, market studies were completed for compressors, uninterruptible power supplies, battery chargers, arc welders and pumps.

Transportation

The transportation sector accounts for 28.1 percent of secondary energy use and 34.2 percent of GHG emissions. This sector is divided into three sub-sectors: passenger, which comprised 56.7 percent of the sector's total energy use in 2002; freight, 39.3 percent; and off-road, 4.0 percent.

Between 1990 and 2002, transportation energy use grew by 22.8 percent. Two main factors were responsible for the rise: an increase in activity and shifts between modes of transport. In the light-duty vehicle mode, although the fuel efficiency of new vehicles has improved markedly, average fuel economy has not changed significantly, because new cars and trucks are increasingly heavier and feature more powerful engines.

Between 1990 and 2002, improvements in energy efficiency reduced energy use in this sector by 9.9 percent from what it would have been in the absence of such improvements.

In 2002, road transport, at 78.1 percent, was the largest user of energy in the sector. Passenger energy use accounted for 60.5 percent of that total, and freight, 39.5 percent. In this sector, NRCan focuses its energy-use programs on road transport, dividing them into four areas: vehicles, R&D, alternative transportation fuels and longer-term transportation technology.

Vehicles
NRCan intends to bring about a 25 percent improvement in the fuel efficiency of new light-duty vehicles sold in Canada by 2010. GHG reductions of 5.2 megatonnes by 2010 are being sought.

NRCan programs encourage manufacturers to meet targets for fuel consumption and to improve fuel efficiency by adopting advances in technology. Parallel programs encourage motorists to purchase energy-efficient vehicles. Under a voluntary agreement, manufacturers attach EnerGuide fuel-consumption labels to vehicles to help purchasers make informed buying decisions.

In 2003-2004, Idle-Free Awareness campaigns were completed in many cities across Canada and a Tire Inflation campaign was developed and launched.

In partnership with fleets, industry stakeholders and other levels of government, NRCan delivers information materials, workshops, demonstrations and training to fleet operators to help improve fuel efficiency and encourage the use of alternative fuels such as natural gas in commercial and municipal fleets.

During 2003-2004, the SmartDriver workshops trained more than 160 000 novice and experienced drivers in fuel-efficient driving techniques and introduced over 700 new instructors to the Fleet Vehicles Initiative.

Transportation Research and Development
NRCan supports research into transportation technologies that improve the energy efficiency of vehicles and reduce GHG emissions.

During 2003-2004, recent developments in hydroforming have enabled significant productivity gains and weight reductions for complex structural components in the automotive industry.

In the mining industry, NRCan plays a lead role in a consortium that is developing a mining vehicle powered by fuel cells. The fuel cell locomotive is now undergoing long-term reliability testing of the fuel cell power plant.

Alternative Transportation Fuels
NRCan promotes the use and development of alternative fuels, such as ethanol and biodiesel, to minimize environmental impacts.

NRCan's Future Fuels Initiative, co-managed with Agriculture and Agri-Food Canada, aims to increase the supply and use of fuel ethanol produced from biomass. In 2003-2004, the initiative completed an ethanol-blended gasoline awareness campaign in partnership with Ontario and Quebec fuel retailers.

During 2003-2004, as part of its Ethanol Expansion Program, NRCan allocated contributions to seven projects from across Canada that plan to increase domestic ethanol production by a total of 750 million litres per year.

NRCan's Biodiesel Initiative supports the Government of Canada's proposed target of 500 million litres of biodiesel production per year by 2010.

Transportation Technologies
NRCan, in partnership with industry, develops and evaluates hydrogen and fuel cell technologies to reduce GHG emissions and minimize other environmental impacts.

In 2003-2004, the Canadian Transportation Fuel Cell Alliance, a public-private initiative, produced a draft hydrogen installation code for Canada and participated in ongoing codes and standards activities at a national and international level.

In partnership with industry, NRCan is working to develop and deploy leading-edge hydrogen and transportation technologies that will reduce GHG emissions.

Renewable Energy

Most of the renewable energy used in Canada comes from either hydro-electricity or thermal energy from biomass. In 2002, renewable energy generation capacity from renewable sources accounted for 61 percent of total Canadian electricity capacity.

In 2003, hydro power accounted for approximately 60 percent of total electricity generation; small-scale hydro-electric projects constitute about 4 percent of Canada's electricity-generating capacity and offer potential for increased production. Several other renewable energy sources and technologies exist in Canada: bioenergy, earth energy, wind energy and solar energy.

Bioenergy, a renewable source of energy derived from biomass, contributes about 6 percent of Canada's primary energy and represents Canada's second largest renewable energy source. Earth energy, produced by ground-source heat pumps, supplies less than 1 percent of the market for space and water heating and cooling in Canada.

In 2003, wind energy accounted for less than 1 percent of Canada's total electricity generation; however, the potential is much greater. An NRCan study estimated that wind energy potentially could supply 11 percent of total Canadian electricity consumption.

Three main technologies use solar energy: passive solar technologies, active solar thermal systems and solar electric (photovoltaic) systems. The Canadian Coast Guard is the largest individual user of photovoltaic systems in Canada, with an estimated 7000 navigational buoys, beacons and lighthouses.

NRCan delivers several initiatives to increase the use of small-scale renewable energy in Canada. These initiatives support education and promotion programs, develop standards and research, and provide financial incentives for capacity building.

Renewable Energy Programs
Between 1998 and 2001, NRCan entered into pilot projects to purchase electricity from emerging renewable energy sources (ERES). NRCan has pledged to purchase 20 percent of its electricity from ERES by 2010.

Through the Photovoltaic and Hybrid Systems Program, NRCan initiated a partnership to develop and demonstrate a multi-energy (hybrid) technology that will combine and integrate several types of renewable energy into a single system with a generator.

More than $2.5 million in federal incentives was distributed to 89 projects under the Renewable Energy Deployment Initiative, valued at $22 million.

In 2003-2004, the Renewable Energy Technologies Program funded work toward the development of "new and improved engineering designs of equipment for small hydro power plants to increase efficiency and reduce costs".

NRCan's Wind Power Production Incentive (WPPI) aims to support the installation of 1000 megawatts of new wind energy capacity by 2007. By displacing other sources, wind power capacity installed under the WPPI is projected to reduce annual GHG emissions by 3 megatonnes by 2010. In 2003-2004, guidelines were developed to assist wind developers, utilities and businesses in preparing an Environmental Impact Statement under the Canadian Environmental Assessment Act.

The Market Incentive Program is a $25-million program to stimulate emerging markets for renewable electricity. The Government of Canada will provide a short-term financial incentive of up to 40 percent of the eligible costs of an approved project. In 2003-2004, three contribution agreements were signed with the provincial governments of New Brunswick, Ontario and Prince Edward Island.

Federal House in Order

As the country's largest single enterprise, the Government of Canada is getting its own energy-use house in order. The Government of Canada has established a target of a 31 percent reduction in its GHG emissions by 2010.

The Government of Canada has already achieved a 24 percent reduction since 1990 through a series of measures, including building retrofits, improvements in fleet management, downsizing of operations and purchases of "green" power. In 1990, emissions were 3925 kilotonnes; in 2002, emissions were down to 2971 kilotonnes; the 2010 target is 2724 kilotonnes.

The departments and agencies responsible for 95 percent of federal GHG emissions have been assigned specific targets under a three-year action plan and must report annually on their programs. NRCan provides services and support to federal departments and agencies to help them achieve their energy efficiency targets.

The Federal House in Order initiative includes such activities as GHG inventory and tracking, purchases of "green" power and efforts to reduce outside emissions.

Federal Initiatives
Under the Federal Buildings Initiative (FBI), NRCan, through public-private partnerships, helps federal government organizations implement energy efficiency improvements in order to reduce energy use, GHG emissions and operating costs.

During 2003-2004, $25.6 million was invested by the private sector in FBI projects. FBI projects had an average energy intensity improvement of 20 percent by project.

The Federal Industrial Boiler Program (FIBP) provides technical and project-management services to federal departments and agencies that are implementing energy efficiency projects. Since its inception in 1991, the FIBP has worked with many federal government departments to reduce energy costs. These partnerships have reduced GHG emissions by an average of 4.7 kilotonnes per year.

Through the Federal Vehicles Initiative, NRCan assists other federal departments and agencies in improving the efficiency of their fleets and switching to cleaner burning fuels. During 2003-2004, the Government of Canada acquired 293 alternative fuel vehicles. Additionally, three new alternative fuel sites were established and two additional sites are under construction.

General Programs

Outreach
The Office of Energy Efficiency's Outreach program provides information and activities to increase Canadians' awareness and understanding of climate change and the link to energy use, and to encourage Canadians to take action. The program also targets youth as future energy consumers.

In 2003-2004, there was a 30 percent increase in the volume of publications distributed and a 300 percent increase in Web site visits, indicative of increasing interest in energy efficiency.

The One-Tonne Challenge was launched in March 2004. The One-Tonne Challenge asks Canadians to reduce their personal annual GHG emissions by one tonne by using less energy, reducing waste and conserving water and other resources.

Program of Energy Research and Development
NRCan funds R&D designed to ensure a sustainable energy future for Canada in the best interests of our economy and our environment. In 2003-2004, NRCan allocated $41.5 million to energy R&D programs managed and performed in the department.

Climate Change Technology Development and Innovation Program
NRCan aims to accelerate the development of cost-effective R&D mitigation technologies in multiple sectors. In 2003-2004, 15 new R&D projects were near completion.

International Initiative for Technology Development
In 2003-2004, NRCan launched the Clean Energy Technology Portal and provided marketing support at five national and international conferences.

Climate Change Technology and Innovation Research and Development
In 2003-2004, NRCan allocated $5.1 million to energy R&D programs managed and performed in the department.

¹ Oil Crises and Climate Challenges – 30 Years of Energy Use in IEA Countries, Paris, IEA, 2004.

² R-2000 is an official mark of Natural Resources Canada.

³ Super E is an official mark of Her Majesty the Queen in Right of Canada as represented by the Minister of Natural Resources.