Energy efficiency at Hydro-Quebec: Why forget the substitution of electricity by natural gas?

Hydro-Quebec has launched an energy program which will cost $1.9 billion and which intends to save 9.3 TWh of electricity consumption by the year 2000, equivalent to 5.6% of the forecasted electricity consumption. The program only considers electricity and ignores other energy sources. An analysis is conducted to determine whether the subsidies that Hydro-Quebec is prepared to spend in each sector of the program would be sufficient to make up the difference between the cost of electricity and that of natural gas for the end-user. A positive response to this question will allow identification of a less costly way that Hydro-Quebec could realize its energy efficiency objectives. The analysis takes into account the marginal cost of electricity production, the average cost of energy efficiency measures, electricity prices, and the prices of natural gas and of gas-burning equipment. The results of a detailed analysis of four typical cases in the residential and commercial sectors indicate that market segments exist in which an energy efficiency program that includes substitution of other forms of energy for electricity would be preferable to a simple reduction in electricity consumption. However, the rationale for the Hydro-Quebec program is that electricity prices are based on historical average costs; as a result, electricity prices are lower than marginal costs. This problem should be addressed before considering expensive energy efficiency programs where the least-cost alternative is not even considered. 5 refs., 1 fig., 2 tabs