In 2008, Alberta adopted its Climate Change Strategy (CCS). One of the three pillars of the CCS was Energy Efficiency. The energy efficiency policies would contribute to 24 megatons of greenhouse gas (GHG) reduction by 2050. But 4 years later, it seems this pillar was neglected: Alberta has the most energy-intensive economy in the country. The oil sand industry is not the only one to blame for this situation. How can this low performance be explained?
Autopsy of an Energy Intensive Province
Alberta accounts for almost 11% of Canada’s total population but the province’s energy consumption is much higher and reaches 16.7% of the country’s total demand. Some explain that this gap comes from the industrial sector (47% of Alberta energy demand), especially from the oil and gas sector, which is energy-intensive (30% of Alberta energy demand). In Canada, only 22.8% of the energy demand is due to industry (7.2% for the oil and gas sector). But this explanation is distorted.
A careful look at the economic sectors displays that Albertans are “the most energy-intensive consumers in the country – even when you don’t include [the] oil and gas industry – and [Albertans] spend less than anyone on being more efficient.” This assessment was made by Alison Redford, Alberta’s Premier. Alberta’s poor performance can be demonstrated in two ways: a comparison of the consumption by sector and per capita; and a comparison of GHG intensity.
The graphic below benchmarks the energy consumption per capita between Alberta and Canada. It points out a lack of energy efficiency in all the economic sectors: from industry to housing. Thus, the province’s industrial sector is three times more energy intensive than the Canadian average. Residential, public and commercial buildings consume 1.5 times the energy of Canadian national average.
Another demonstration of Alberta’s low performance is to assess the GHG Intensity of its economy. GHG Intensity is a ratio which measures the average rate of greenhouse gas emissions (in carbon equivalent) produced to GDP. GHG emissions are an indirect indicator of the energy used since they are mainly emitted from fossil fuel combustion.
While Alberta weighs in 16.2% of the Canadian GDP in 2010, the province generates two thirds of Canada’s GHG emissions (34%). Consequently, Alberta’s GHG intensity is almost twice as high as Canada’s, with 946.6 and 536.5 tons of carbon equivalent emissions for $1 million GDP respectively. This means that to produce the same amount of wealth, Alberta emits twice the GHG than the rest of Canada. Even subtracting the energy sector contribution from the GDP and the GHG emissions, the GHG intensity still remains almost twice as high.
In a nutshell, since the energy sector is an important factor contributing to Alberta’s low-performance in energy efficiency, all of the other sectors of the economy are also very greedy in energy demand.
Low Energy Price = High Consumption Behaviors
According to Statistics Canada, Alberta residential consumers paid approximately 33% less for their natural gas than the average Canadian in other provinces in 2010 (between $5 and $6.5/GJ). Natural gas in Alberta is used primarily for industrial use, residential and commercial space heating and electricity generation. Therefore, electricity prices are relatively low: between 0,08$/KwH and 0,11$/Kwh (Click here to see the source). Since the energy is cheap, households, industries and public administration do not pay attention to their bills and they are not encouraged to act in an energy-efficient way. Moreover, Alberta Building Code’s low-standard of insulation participates to the huge heat energy consumption in households and commercial buildings.
As well, industries are not interested in investing in energy-efficient technologies. According to a study of Canadian Manufacturers & Exporters « the energy performance benchmarking results illustrate a relatively low implementation of technical best practices (TBPs) in the Alberta industrial sector: […] most of the plants have implemented less than 42% of applicable TBPs, and the opportunity exists for most companies to implement more than 58% of the TBPs. The end uses with the lowest levels of implemented TBPs are motive power and HVAC. If all the remaining economically feasible best practices were implemented, total Alberta industrial energy use would be estimated to decrease from 2008 levels by 36 PJ in 2020. The estimated energy use in 2020 would be 56 PJ (or 25%) less than the Reference Case energy use in 2020 […]. » (page 4)
Consume as You Want! The Role of the “Price Signal” in the Energy Sector’s Business Model
Low energy prices, combined with the fact that Alberta does not have security supply issues, leads to a vicious cycle: to earn more, energy companies have to sell more. This business model is driven by the quantity of sold energy rather than the supplied services for energy savings.
In the European Union, for instance, pressures of both energy security supply and high energy cost resulted in a policy in energy efficiency since 2004. Indeed, in 2011, the average of electricity prices for households in the Euro zone was $0,25/kWh (0,187€), almost 2.5 times higher than Alberta’s price. The average of gas prices are 3.5 times higher, with $23,15 per Gigajoule (17,2€) (source: Euro Stat).
In 2008, the European Commission adopted a target of 20% reduction in energy demand by 2020 through energy efficiency policies. This goal is a part of the “Climate Package” – the other targets are 20% renewable in energy mix, 20% of GHG reduction and 10% biofuel for vehicles by 2020. To meet this target, policies to promote the development of energy services by energy providers through, for example, Certification Scheme or Energy Performance Contract have been implemented (Directive on energy efficiency 2004/8/EC and 2006/32/EC).
A predictable, visible and steady increase of energy prices in mid-term could prepare industries and households to invest more in efficient equipment. This new business model would also create a double benefit. First, it would stimulate the innovation and energy savings sector by developing and implementing low-energy technologies. Second, it would make renewable energy more competitive, reducing the cost gap with fossil energy. These two results would contribute to sustainable economic growth as well as fighting climate change.
Alberta is obviously a wealthy province in term of natural resources. It produces about 75% of Canada’s natural gas and owns huge oil reserves. But a question has to be raised on the management of these resources. Does Alberta want to throw its energy resources down the drain and have a short-term view of the quick benefits it can grab? Or does the province prefer to manage its resources on a long-term view, considering its ethical responsibility to preserve resources towards future generations as well as diversify its energy supply?
- Environment Alberta: for GHG emissions in Alberta (http://environment.alberta.ca/0915.html)
- Government of Alberta: for energy prices in Alberta (http://ucahelps.alberta.ca/price-summary.aspx)
- Euro Stat: for energy prices in Europe (http://epp.eurostat.ec.europa.eu/statistics_explained/index.php?title=File:Half-yearly_electricity_and_gas_prices,_first_half_of_year,_2009-2011_%28EUR_per_kWh%29.png&filetimestamp=20111124164017)
- Canadian Energy Overview 2010, July 2011, National Energy Board, ISSN 1917-506X
- National Inventory Report Greenhouse Gas Sources And Sinks In Canada 1990-2009, Executive Summary, Energy Canada, 2011, Cat. No.: En81-4/1-2009E-PDF, ISSN: 1706-3353
- Report on Energy Supply and Demand in Canada in 2009 Preliminary, May 2011, Statistic Canada, Catalogue no. 57-003-X, ISSN 1708-1580
- Improving Energy Efficiency for Alberta’s industrial and Manufactaring sector, Canadian Manufacturers & Exporters, Alberta division May 2010, (http://www.productivityalberta.ca/media/transfer/doc/improving_energy_efficiency_for_albertas_ind_and_manu_sectors.pdf)