For most people in New Brunswick, the idea of time-based pricing of electricity seems pretty foreign. We’re used to a flat rate per kilowatt-hour for the electricity we use. However, just like any other product we use, the cost of generating that electricity varies quite dramatically based on how it was made – we just don’t see it at our end.

At certain times we are paying significantly more than it costs to generate, and at other times, we are paying significantly less – i.e. the utility is losing money selling it to us.

Unlike other products though, we can’t (yet) economically store electricity in large quantities, so it has to be produced as and when it is needed. During the year, we tend to use more electricity in the peak of summer and the peak of winter for air conditioning and heating than we on a mild September day. In the course of a day, we go through cycles too – people tend to get up, go to work, eat, and go to bed at roughly the same time – and so the electricity demand curve mirrors our personal activity levels.

Using Ontario as an example (publicly available data), we can see that in 2009, electricity demand was 10.7GW at a minimum and 24.4GW at a maximum – an increase of over 125 per cent. The larger that the margin becomes between minimum and maximum, the more expensive our electricity becomes, as we have to recoup the building cost for these power stations that aren’t used very often.

In fact in 2009, while Ontario had enough installed capacity to be able to supply the 24.4GW of electricity, the electricity demand only exceeded 20GW for approximately 20 days during the year.

By flattening the electricity demand curve we would be able to operate fewer power stations more frequently, and thus reduce (or at least limit increases to) the cost of our electricity supply.

One method of doing this is through time-based pricing. When electricity demand is low, our electricity is generally produced from sources that are the cheapest to run (such as nuclear and coal), and so the cost of generating that electricity is low.

As demand increases, increasing expensive to operate power plants are brought online to meet the temporary need, such as natural gas and oil. Time-based pricing would see that the price we pay for electricity more accurately reflect the cost of generating it – so using power in the middle of the day in August (peak period) would cost more than using power in the middle of the night in September (off-peak period).

This would accomplish two things. First, people and companies would start to shift their behaviour patterns to match the new pricing profile. Dishwashing or laundry could be saved until the late evening or early morning.

Power-intensive industries could reschedule certain activities to obtain cheaper electricity. This would have the effect of lowering the peak demand, and increasing the off-peak demand. Second, it would hopefully reduce overall energy consumption. Air conditioners and heaters might get adjusted a couple of degrees during the day when no one is actually in the house, due to the higher cost of electricity.

Some new technologies are needed, and some are on their way, such as smart metres, capable of recording the amount of electricity and time of use, which would also be capable of displaying the current power rate to consumers to aid in decision-making. Smart appliances are on the horizon, such as washers and dryers that automatically run when electricity is at its cheapest, and fridges that will delay compressor cycles at peak price times.

Future electric vehicles have the potential to charge themselves during off-peak hours, and re-sell electricity to the grid during peak hours for a profit, thus acting as a giant national battery of sorts.

Jurisdictions such as California and Ontario have already rolled out time-based pricing, with 3.6 million customers in Ontario expected to be on the new system by mid-2011. Ontario has three price bands for electricity (not including transmission and distribution) – On-Peak at 9.1 cents per kWh, Mid-Peak at 7.6 cents, and Off-Peak at 4.2 cents. Without wading into the NB Power debate here, it would be interesting to know how the deal will affect the future of time-based pricing in New Brunswick, regardless of which way it goes.

In recent years the topic of energy efficiency and the role it will play in reducing our energy use and carbon dioxide emissions has become increasingly popular.

There is a societal belief that if we make cars, appliances and houses more fuel and energy efficient, then we are doing ‘our part’ to combat climate change.

The challenge is that we really need to focus on reducing the amount of energy we use, and unfortunately, improving energy efficiency does not always lead to energy reduction. This may seem counter-intuitive at first, so let’s look at some interesting statistics.

I found a car advertisement dated Oct. 20th, 1983. It was taken from The Daily Telegraph – a British newspaper – and advertises the ‘new’ Peugeot 205. This vehicle seems rather unremarkable at first – very 80’s – and does little to grab your attention until you start to read. This car was capable of getting 60 MPG (or 3.9 L / 100 km) on the highway, and 43 MPG in the city (5.4 L / 100 km). By today’s standards that is phenomenal. It is on par with today’s best performing hybrids, and far exceeds the fuel economy of most conventional cars available at present.

So what happened? Did we forget how to build fuel-efficient cars? Actually no, we didn’t. In fact, since 1983 we have made huge strides in improving fuel efficiency.

In 2007, the average car being sold in the United States used almost exactly half the amount of fuel per horsepower compared with cars built in 1983. Unfortunately, that same car weighs over 25 per cent more than it did 1983.

We’ve dropped the average 0-100 km/h acceleration time from 14 seconds to less than 10 in the same time period, and most importantly – to make our heavier cars go faster – we’ve more than doubled the horsepower in the average car, from 107 to 223.

So while our scientists and engineers worked hard to make our engines twice as fuel efficient, we also decided to double the size of them. The end result is that our average vehicle today consumes about the same amount of gas it did over 25 years ago.

Unfortunately, this problem isn’t just limited to cars – it applies to our homes as well.

Between 1990 and 2006, the energy used by the average refrigerator sold in Canada dropped by a staggering 50 per cent; dishwashers by an even more impressive 64 per cent; electric stoves by 31 per cent; and the list goes on.

In that same time period, however, total energy use in Canadian households actually increased by five per cent.

Why? Population growth is part of it – but what is more concerning is that we started to build bigger houses (up four per cent), and then started to put fewer people inside each of them (down eight per cent).

It is for these reasons that, despite all the talk we hear about energy efficiency and conservation, the World Energy Outlook still predicts a nine per cent increase in the amount of energy used in North America between 2006 and 2030.

We have an incredible amount of talent in this country and around the world to make massive gains in terms of energy efficiency, but we need to be careful not to negate those gains by always demanding bigger and better. Buying a new energy efficient fridge is a progressive step – but not if you put your old one in the basement to keep your beer cold!

Energy efficiency is important, but it’s critical that it go hand in hand with maintaining or reducing the size and power of the goods we consume so that our total energy consumption begins a downward trend.

So next time you’re out buying a vehicle, ask yourself whether you really need 225 horsepower, or whether 150 (or less) would do just fine.