Crux Energy Consulting

Crux Energy’s snapshot of home energy affordability across Canada:

As we head toward another winter season, electric utilities facing peak demand challenges are making strategic decisions about how best to manage their energy sources. Cold winter nights can be among the most carbon-intensive for some utilities and, as electrification grows, they can also pose reliability risks. Natural gas heating helps alleviate this strain by reducing peak demand and shifting energy usage away from electricity during critical periods. In a world increasingly shifting toward electrification, natural gas heating may not seem like an electric utility’s first option for managing demand. However, even in one of the most decarbonized jurisdictions—Québec—natural gas heating plays a vital role in mitigating system load. Hydro-Québec promotes the use of dual-energy systems that combine electric and natural gas heating to relieve grid stress. In parallel, Hydro-Québec’s payments to énergir help keep natural gas system prices lower while maintaining it as a dependable stand-by resource. This is smart, proactive planning. Most winter-peaking regions in Canada and the US already have well-established natural gas distribution networks, making it cost-effective to implement or expand this approach compared to the significant investments required for scaling up electric infrastructure. #efficiency #costofliving #gasutilities #electricutilities #homeheating #decarbonization #utilitystrategy

Here is an example of how legislators and regulators can work with utilities to create virtual power plants: https://lnkd.in/e49ziqyc

In a recent post on energy efficiency, we briefly touched on Virtual Power Plants (VPPs). But what exactly are VPPs, and how can they help reduce your home energy costs? A VPP is a network of decentralized power-generating or power-shifting units such as battery storage systems, smart EV chargers, and smart thermostats. These units are interconnected through advanced software to create a single, flexible power source that can be managed in real-time. 1. Optimized Energy Distribution: VPPs sell excess energy to the grid or reduce demand during peak periods. This generates revenue and helps lower overall energy prices by reducing reliance on traditional, more expensive peaking power plants. 2. Reduced Energy Waste: By shifting energy use to times when renewables are producing power but demand is low, VPPs minimize energy waste and maximize efficiency, which can lead to lower energy costs. 3. Supply and Demand Management: Households with solar panels and batteries can sell excess energy (supply) to the grid during peak times, such as during the dinner hour on a cold, dark winter evening. Ideally, prices paid to home owners with solar reflect the demand and pay more during peaks and less during low energy demand (which is what encourages the use of batteries). Households can also reduce energy consumption (demand) during peak times by allowing smart thermostats to lower temperatures by a degree or two or delaying EV charging until the peak is over, reducing their own energy bills. Again, ideally power prices reflect the higher demand during peaks to encourage this. 4. Managed Energy Solutions: With the integration of smart devices like smart thermostats, VPP providers can provide energy management services and aggregate load and supply, optimizing usage based on real-time data to maximize savings. This eliminates the need for individual households to determine when to buy or sell energy. By participating in a VPP, households should be able to reduce their own energy costs while contributing to a more efficient and sustainable energy system. #vpp #homeenergy #distributedenergy #energymanagement Image Source: Dakota Electric Association

For those following our posts on LinkedIn, you know we've been exploring the household energy burden across Canada, along with potential solutions to ease this burden where it is the highest. Our analysis is based on the annual energy cost for an average Canadian home (considering the average household electricity demand and primary heating source in each province) divided by the median after-tax income in that province. So far, our energy burden analysis has focused on the numerator—how much households pay out of pocket for energy each year. However, the denominator—the median after-tax income—is equally important. We thought it would be interesting to examine what energy affordability would look like if the median after-tax income in each province matched Alberta's (the highest in Canada). The results are striking. But this raises a crucial question: how do we increase median after-tax incomes? While we’re not economists, we would be remiss if we didn’t point out the importance of addressing Canada’s productivity challenge. Canada’s productivity growth is among the lowest of all OECD countries. So, how do we boost productivity? One approach is to invest in infrastructure. Not only can this spur economic growth and higher wages, but if the focus is on energy infrastructure, it can also help reduce household energy costs—addressing both productivity and energy affordability in one go. #energyaffordability #homeenergy #productivity #medianincomes #Canada

After an extensive exploration of energy affordability in Canada, we're at a pivotal moment to pause and assess our progress. Consider this: what if we removed sales tax from utility bills (recognizing utilities as necessities), lifted the carbon tax from generation (because electrification should not come with added costs), and adopted the energy efficiency practices of countries like Sweden? The results are striking. These changes could significantly equalize the energy burden across Canada, making energy more affordable for everyone. It’s a vision worth striving for. #efficiency #homeenergy #carbontax #gst #energyburden #Canada #energypolicy

We are exploring approaches to reducing the energy burden where it is highest in Canada. There is no silver bullet, so we are looking at a series of incremental steps that can be taken. Last week we suggested that sales tax should not apply to utility bills. Solution #2 - Remove Carbon Tax from Electricity The Federal government has set ambitious decarbonization goals, aiming to both decarbonize the electric grid—already 85% clean nationally—and advance electrification. However, the current approach to applying carbon tax to electric generation does not advance that agenda. The carbon tax is intended to reward consumers for choosing lower-carbon options. For example, a car owner may decide that it is cheaper to move to an electric vehicle when carbon pricing on gasoline puts pressure on their finances. But if that car owner lives in a province that does not have access to existing, local hydro resources, they are still paying (indirectly) a carbon tax on their electricity because it is applied to electric generation. The incentives are particularly upside down in Atlantic Canada. While the government has provided a carbon tax holiday on home heating oil to alleviate financial strain on families, many consumers in Atlantic Canada could greatly benefit from transitioning off oil to more efficient heat pumps. However, already high electricity prices are compounded by the carbon tax, which in turn diminishes the incentive to make the investment. Furthermore, the carbon tax on generation does not incentivize electric utilities to decarbonize; they are already on that path. Instead, the cost of the carbon tax is passed on to consumers as part of the cost of fuel. It neither serves as a carrot nor a stick for electric utilities and certainly does not encourage consumer electrification. Canada already has effective tools and policies requiring utilities to decarbonize, including stricter emissions standards and obligations to retire coal plants. The draft Clean Electricity Regulations (which are also problematic) would take the obligation to decarbonize generation even further. The impact on households in provinces that can least afford higher electricity rates is significant. For example, in Saskatchewan, the carbon charge comprises approximately 5% of a residential electricity bill. Our rough calculations indicate similar impacts in Nova Scotia and Alberta. In New Brunswick, where the generation mix is less carbon-intensive, the carbon charge currently comprises approximately 2% of a residential electricity bill. There are better ways to encourage the decarbonization of the electric grid without increasing the burden on electric customers in provinces that are already bearing the burden of the energy transition. These same customers are already facing high energy costs, and the carbon tax only exacerbates their financial strain.

We have reached the final province—Newfoundland and Labrador—where the average household energy burden (the portion of after-tax income spent on energy) is 4.7%, which is above the national average. However, the story in Labrador is quite different, where electricity prices are significantly lower than on the island of Newfoundland, and some areas of Labrador have higher incomes. The higher-than-average energy burden in Newfoundland is driven by: ???Higher-than-average energy costs. The average Newfoundland and Labrador household uses electricity for all their home heating needs and does not have the benefit of accessible, affordable natural gas like the western provinces. ???A lower median after-tax income further exacerbates the energy burden. However, future rates in Newfoundland may not rise as quickly as previously feared. The province has just finalized a rate mitigation plan with the Federal government, which came into effect at the beginning of this month. This plan caps annual domestic residential rate increases to 2.25% for costs associated with the Muskrat Falls project. Check out our full analysis of energy affordability in Newfoundland and Labrador on our website. #costofliving #homeheating #homeenergy #energytransition #NewfoundlandandLabrador #Canada

Like the other Atlantic provinces, the average Nova Scotian household bears a high energy burden (the portion of after-tax income spent on energy). At 5.1%, Nova Scotia has the second-highest energy burden in Canada after New Brunswick (5.2%). This is driven by: ???The relatively high cost of the energy transition in Nova Scotia where coal has traditionally been the primary fuel for generation and there is little access to local hydro sources. ???Higher average energy costs. In addition to higher-than-average electricity prices, the average Nova Scotian household uses fuel oil to heat their homes. ???A lower median after-tax income. Check out our full analysis of energy affordability in Nova Scotia on our website. #homeheating #homeenergy #costofliving #energyaffordability #energytransition #decarbonization #Canada #NovaScotia