Why Canada's next generation of appliances needs to be smarter

As Canadians look for ways to lower their energy bills, several utilities are offering optional rates and programs that pay households to shift electricity use away from peak times. A properly equipped water heater can heat and store water before electricity demand peaks, avoiding drawing electricity during the busiest hours (without leaving anyone with a cold shower).

The problem? The demand-flexible models available through local retailers and contractors can cost at least $1,000 more than conventional water heaters. This is not because the ability to respond to electricity signals necessarily costs $1,000, but because demand flexibility is most often bundled into premium models with additional features many Canadians may not need (or want to pay for). When useful technology is available mainly in premium product lines, many households are effectively priced out of participating.

Modernizing the Energy Efficiency Act could help change things.

Bill S-4, An Act to amend the Energy Efficiency Act, is currently making its way through Parliament and could help ensure Canadians don’t face this problem. Canada’s Energy Efficiency Act has traditionally focused on how much energy and water appliances use. If passed, Bill S-4 would give the federal government new ways to regulate everyday appliances and technologies, including water heaters, heat pumps, and electric vehicle (EV) chargers. This could include requirements for how they communicate with other systems and adjust their electricity use.

For demand flexibility, these capabilities are particularly important:

• Connectivity and interoperability: Appliances and other devices can receive and exchange signals with different energy management systems using common communication standards.
• Controllability: With customer consent, an appliance or other device can automatically adjust its electricity use in response to signals, while respecting safety requirements and customer comfort and preferences.

Connectivity allows an appliance to communicate with external systems. Interoperability takes this a step further, allowing it to work with different compatible systems. Think of interoperability as allowing different devices to “speak the same language.” An appliance might already connect to a phone app but be unable to communicate with a utility’s demand response program. When connections depend on proprietary manufacturer platforms, utilities and other service providers can face additional integration costs and restrictions. Those costs ultimately affect the economics of the programs and the rewards available to customers.

However, industry opposition to proposed measures of interoperability, connectivity, and controllability in Bill S-4 threatens to hamper meaningful progress. 

Without sufficient authority to establish common requirements, Canada risks continuing to rely on fragmented, proprietary or voluntary capabilities, potentially limiting participation in electricity-saving programs. An appliance should be able to work with the customer’s choice of compatible energy management technologies, not only with its manufacturer’s own app.

How smarter appliances can lower electricity costs for everyone

These new regulatory powers could help utilities make better use of the electricity grid we already have, including in areas where capacity is already constrained. Demand flexibility can reduce pressure on the grid during peak periods and improve renewable electricity use, including use of electricity generated by homeowners. This isn’t futuristic technology. Demand-flexible appliances have existed for years, and some U.S. states already require new electric water heaters to have these capabilities.

Most importantly, this flexibility can help keep electricity costs down by deferring or avoiding expensive investments in new electricity infrastructure while maintaining a reliable electricity system. We can make better use of the electricity system without asking people to sacrifice comfort or convenience. And everyone can benefit, not just households that participate in demand flexibility programs. Even households that do not allow utilities to adjust electricity use can benefit from a lower-cost electricity system that helps keep everyone’s bills more affordable. Lowering electricity costs isn’t only about using less electricity — it’s also about when we use it.

What’s at risk?

Despite these opportunities, there is a risk that provisions enabling interoperability, connectivity, and controllability will be removed from Bill S-4 due to some industry opposition. 

During Senate hearings, manufacturers and industry associations like the Association of Home Appliance Manufacturers Canada and Whirlpool Canada raised concerns about some of these provisions. Other industry concerns include potential regulatory complexity, increased costs and the risk of creating requirements that differ from those in the U.S.

Would these capabilities drive up consumer prices? Efficiency Canada research suggests that the incremental cost of building connectivity, interoperability and controllability into appliances can be modest, particularly when incorporated during manufacturing. Making demand flexibility a standard feature across suitable product lines could encourage competition, reduce reliance on premium models and lower incremental costs as manufacturers produce more equipment with these capabilities.

Getting these requirements right is also important as newer technologies enter the market. For example, some EV chargers cannot even be programmed to charge at certain times, leaving customers to rely on their vehicle’s scheduling capabilities or to manually time their charging. Others can be scheduled to charge overnight but cannot necessarily respond directly to signals from utility programs. Consumers may discover these limitations only after purchasing equipment they expect to use for many years.

What about aligning with U.S. standards?

Manufacturers are right to emphasize North American harmonization. Canada is a relatively small market, and unnecessarily different technical requirements could reduce consumer choice and increase prices.

However, in today’s political climate, with the Trump administration slowing efforts to strengthen federal appliance efficiency regulations, Canada should not look exclusively to Washington, D.C., for leadership on appliance and equipment standards. U.S. states are often leading the way and collectively represent major markets. Washington, Oregon and Colorado already require covered electric storage water heaters to include demand-response communication capabilities. California and Illinois have also incorporated demand-responsive water heating requirements into their building energy codes, applying to specific types of water heaters and installations.

Give government the authority, then get the standards right

Let’s be clear: Bill S-4 would not require every appliance or piece of equipment to be demand flexible. It would give the federal government the authority to consider these requirements in the future, not impose them immediately.

Any proposed standards would still need to go through a separate regulatory development process, including consultation and assessment of costs, technical feasibility, safety and other implications for each product category.

Nor would demand-flexible equipment mean handing utilities unrestricted control over household appliances. Having the capability is different from choosing to participate in a program. Customers should remain in control of whether they participate and under what conditions.

This is why Parliament should reject calls to weaken Bill S-4’s proposed authority. Instead, it should work with manufacturers, utilities, governments and standards organizations to develop practical demand-flexible-ready requirements based on established standards wherever possible.

When Canadians need to replace or upgrade their appliances, demand flexibility should be a common default feature rather than an expensive luxury. Bill S-4 offers an opportunity to make grid-ready appliances accessible to all Canadians.