ENERGY EFFICIENCY AT HYDRO-QUEBEC - WHY I GNORE 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 electr icity consumption by the year 2000, i.e., 5.6 per cent of the forecast ed electricity consumption. Hydro-Quebec energy efficiency program dea ls only with electricity consumption and no other energy sources are c onsidered. This paper throws some light on this aspect. It is found th at there are some parts of the residential and commercial sectors wher e natural gas substitution would be cheaper than the energy economy me asures which are put forward by Hydro-Quebec. All parties which are in volved 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 lo wer electricity rates. However, it should not be forgotten that the ra tionale for Hydro-Quebec intervention lies in the fact that electricit y 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 lea st cost alternative is not even considered.