ENERGY EFFICIENCY AT HYDRO-QUEBEC - WHY IGNORE THE SUBSTITUTABILITY OF ELECTRICITY AND NATURAL-GAS

Hydro-Quebec has launched an energy efficiency program which will run from 1990 to 2000 and which will cost 1.9 billion dollars (1991$). The purpose of the program is to take 9.3 terawatt hours (TWh) off electricity consumption by the year 2000, i.e., 5.6 per cent of the forecasted electricity consumption. Hydro-Quebec energy efficiency program deals only with electricity consumption and no other energy sources are considered. This paper throws some light on this aspect. It is found that there are some parts of the residential and commercial sectors where natural gas substitution would be cheaper than the energy economy measures which are put forward by Hydro-Quebec. All parties which are involved would come out as winners: the recipients of the grants paid by Hydro-Quebec, the Crown Corporation which would realize its objective at lesser costs, and all other electricity consumers who would pay lower electricity rates. However, it should not be forgotten that the rationale for Hydro-Quebec intervention lies in the fact that electricity prices are based on historical average costs and that, as a result, 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.