On Dec. 16 I first hinted it would happen — and now it has.  Just days before Christmas, the Ontario government has backed away from plans to start phasing our inefficient light bulbs on Jan. 1, 2012. You can read in my earlier post why I think that is a mistake, and how the McGuinty government can no longer be believed when it says it cares about the impacts of climate change and recognizes the urgency of reducing greenhouse-gas emissions. Let me be clear: the Green Energy Act is great and full of potential, and the feed-in-tariff program is helping create green jobs, but it’s probably one of the most expensive ways to reduce emissions in Ontario. The government likes to point to the coal phaseout as if that’s all that needs to be done, but by neglecting the low-hanging fruit that is energy efficiency, it is showing that it’s still only interested in half-measures and sexy solutions that make for a great photo opp.

But what fires me up most is Energy Minister Chris Bentley’s reason for the delay to 2014.  He more or less blamed the federal government for being first to impose a delay, telling the Toronto Star it was essential to harmonize with the federal schedule. “To ensure a consistent approach and to make compliance easier for consumers, retailers and manufacturers, the province proposes to harmonize compliance dates for incandescent light bulbs with the federal government,” the Star quotes an energy ministry official in a statement.

This completely contradicts Ontario’s earlier motives. Remember, it was Ontario that made the first move, announcing in mid-April 2007 it planned a phaseout of inefficient bulbs. This made it the first jurisdiction in North America to make such a commitment. Apparently harmonization of policy wasn’t a concern back then, as the federal government didn’t announce its intentions to do the same until a week later. McGuinty at the time basked in the glow of showing leadership on this issue. Leadership and setting an example mattered. Now it apparently doesn’t. Following is more important now.

British Columbia, meanwhile, announced its own planned ban after Ontario and has already followed through. That’s leadership, the same kind of leadership it showed by introducing a carbon tax.

Just looking at a new article (free registration required) from global consultancy McKinsey about the state of world commodities and the outlook looks bleak, to say the least.

“Our research shows that during the past eight years alone, (commodity prices) have undone the decline of the previous century, rising to levels not seen since the early 1900s,” according to McKinsey. “In addition, volatility is now greater than at any time since the oil-shocked 1970s because commodity prices increasingly move in lockstep. Our analysis suggests that they will remain high and volatile for at least the next 20 years if current trends hold—barring a major macroeconomic shock—as global resource markets oscillate in response to surging global demand and inelastic supplies.”

The report talks of the surging demand for energy, food, metals and water as 3 billion new middle-class citizens emerge over the next two decades. In India calorie intake will rise 20 per cent per person, while in China per-capita meat consumption is expected to rise 60 per cent. While such dramatic growth of consumption isn’t unusual historically, and while we have managed to accommodate that growth in the past, McKinsey says things are very different this time around:

There are three differences today. First, we are now aware of the potential climatic impact of carbon emissions associated with surging resource use. Without major changes, global carbon emissions will remain significantly above the level required to keep increases in the global temperature below 2 degrees Celsius—the threshold identified as potentially catastrophic.

Second, it’s becoming increasingly difficult to expand the supply of commodities, especially in the short run. While there may not be absolute resource shortages—the perceived risk of one has historically spurred efficiency-enhancing innovations—we are at a point where supply is increasingly inelastic. Long-term marginal costs are increasing for many resources as depletion rates accelerate and new investments are made in more complex, less productive locations.

Third, the linkages among resources are becoming increasingly important. Consider, for example, the potential ripple effects of water shortfalls at a time when roughly 70 percent of all water is consumed by agriculture and 12 percent by energy production. In Uganda, water shortages have led to escalating energy prices, which led to the use of more wood fuels, which led to deforestation and soil degradation that threatened the food supply.

So where do we go from here? McKinsey, citing forthcoming research, says better resource productivity can maybe meet more than 20 per cent of the forecast 2030 demand for energy, steel, water and land. Higher prices over the long-term will also create incentives for “breakthrough” innovations that could reduce carbon emissions. But even then, a heck of a lot more needs to be done, the consultancy argues — and it won’t be easy. “Major policy, behavioral, and institutional barriers must be addressed,” it argues. “Yet as we enter a new era for commodities, there’s little choice but to act.”

Action. Now isn’t that a novel concept. Sure beats denial.

My Clean Break column this week is kind of a Part II to last week’s column about the need for creating financing programs, such as Property-Assessed Clean Energy (PACE) or Property-Assessed Payments for Energy Retrofits (PAPER) programs, to get the energy-conservation ball rolling in Ontario. Last week I focused on residential retrofits. This week the spotlight is on commercial and multi-tenant buildings, with a look at some early successes by a consortium led by the Richard Branson-backed Carbon War Room and the potential of Toronto’s Tower Renewal program, which like the residential opportunity has been held back because the Ontario government has been slow to make the required regulatory amendments.

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Clean Break

By Tyler Hamilton

Jigar Shah thinks large when it comes to battling climate change.

That’s a good thing, because reducing humanity’s global greenhouse-gas emissions to a manageable level is a titanic problem needing equally enormous solutions.

Shah is the chief executive of Carbon War Room, a Washington, D.C.-based non-profit enterprise co-founded and funded by British-born billionaire Richard Branson.

His mission, as the organization’s name makes clear, is to wage a war against carbon emissions by harnessing the power of markets and entrepreneurs. The trick is to get massive amounts of private capital to flow in the right direction.

Government policy is nice and has a role to play, but in Shah’s words the real action we need will only come about “using greed as a force for good.” And incremental steps won’t cut it. In a world that tends to measure greenhouse-gas emissions by megatons, Carbon War Room is only interested in tackling gigatons.

In other words, go big and move fast or lose the war.

Time appears to be running out – and it’s not environmentalists issuing the warning these days. Fatih Birol, chief economist at the International Energy Agency, said this week “the door is closing” on our ability as a society to keep global emissions and temperatures to within manageable levels.

We already know that temperatures are on course to rise 2 degrees C no matter what we do. We have about five years, said Birol, to put the world on a course that will keep the thermometer from rising much further. “I am very worried,” the economist told the U.K.’s Guardian newspaper.

One area where Carbon War Room is moving fast and aiming at a large target is energy efficiency in buildings, which accounts for about 20 per cent of global CO2-equivalent emissions.

For example, Shah and his team helped bring together a consortium that is aiming to spend $650 million (U.S.), to start, on energy-efficiency retrofits in commercial buildings scattered throughout Miami, Fl. and Sacramento, Calif.

Their approach, revealed in September, builds on the creative financing model I wrote about in last week’s Clean Break column, only in this case it’s focused on commercial real estate.

The consortium is led by Ygrene Energy Fund, which reviews retrofit proposals and then passes them off to technology and engineering giant Lockheed Martin. Lockheed does the building audits, calculates the energy savings that could come from a retrofit, and provides all technology and services required to achieve those energy savings.

Energi Insurance Services reviews what Lockheed promises and insures the deal. To add an extra layer of security, HannoverRe further backs Energi’s insurance policy. The idea is that risk has been reduced so much that Barclays Capital, the financing partner in the consortium, is more than happy to fund it all.

Barclay’s gets paid back through a charge on the building owner’s property taxes that is collected by the municipalities over 15 or 20 years. If done right, that charge is less than the energy savings achieved through the retrofit. And it’s all done off-balance sheet, meaning it doesn’t add to a building owner’s debt load.

Miami and Sacramento love it, too. “They are going to generate 17,000 jobs, and they will see city revenues increase from a jump in building permit fees and sales tax revenues,” says Shah, in Toronto last week to speak at an industry conference.

Carbon War Room’s target is to see $300 billion (U.S.) in capital deployed in this way by 2020, and Shah is convinced a tipping point has already been reached.

“We have 65 cities on three continents begging us to deploy (this model) in their cities right now, and we’re moving as fast as we can,” says Shah, adding that pension funds and big institutional investors, having seen Barclays take the lead, are now coming to the table.

“There’s nothing anyone can do to stop it. It has irreversible momentum,” Shah says. “I’m ecstatic about it.”

That’s the power of aggregation, scale and thinking large. It can tap into massive pools of capital that one-off projects can’t touch.

Toronto has its own program in the works called Tower Renewal, which is aiming to see 1,200 residential apartment buildings in the GTA retrofitted at a cost of about $6 billion over 20 years.

The plan is to create an arms-length entity called Tower Renewal Corporation that would manage the program and arrange all financing. Project director Eleanor McAteer says the potential for energy savings, emissions-reduction and job creation is huge.

“Our approach would be very similar to what we’re reading about in Sacramento and Miami,” she says.

“We’ve had some general discussions with the financing marketplace and yes, there is a great deal of interest, but we need to have regulatory approval from the province before we can enter into any serious discussions.”

The city asked the province to make those regulatory changes in summer 2010. As the end of 2011 fast approaches there’s still no word from Queen’s Park.

So as momentum around the world for this kind of climate solution builds, Toronto is sitting and waiting for a simple action from the province that will come at no cost to taxpayers or ratepayers.

What’s the holdup Premier McGuinty?

Tyler Hamilton, author of Mad Like Tesla, writes weekly about green energy and clean technologies.

My Clean Break column in the Toronto Star this weekend takes a closer look at “local improvement charge” models for financing deep residential energy-efficiency retrofits. Subsidy/rebate programs help address the low-hanging fruit, but it’s time to move beyond light bulbs and shower heads and into programs that go after more substantial efficiency gains. To a large extent, this isn’t about handing out more subsidy dollars as much as enabling municipal financing models that are revenue-neutral to taxpayers and impose little (or zero) additional burden on ratepayers.

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Tyler Hamilton

What is the province doing to help homeowners conserve energy and cope with rising electricity prices?

Not much these days.

Ontario’s earlier commitment to match rebates under the federal government’s program has long expired. The program was extended to March 31, 2012, but the province decided to pull its support.

Instead, we got the Clean Energy Benefit – a 10 per cent rebate on electricity bills that will be in place until 2015 at a cost to taxpayers of more than $1 billion a year.

That’s money that could have gone toward conservation programs. Now it’s being used to undermine conservation by giving consumers less reason to care about energy wastefulness.

It’s hardly a sustainable approach. Clearly, the only way to help Ontario ratepayers cope with rising electricity rates over the long term is to push for deep energy conservation in households across the provinces.

And here’s the thing: it could, if done properly, barely cost anything for the province and municipalities to make such a serious conservation push.

It turns out that a lack of subsidies isn’t the biggest thing holding back major residential energy-efficiency projects; it’s the lack of affordable and easy-to-access financing.

It’s also about the lack of willingness on the part of provincial and municipal leaders to embrace programs that have already had successful test drives south of the border.

These programs come under a variety of names, but at their core is the ability of a municipality to raise cheap capital through a bond issue and then offer low-interest financing to homeowners wanting to do major energy-efficiency retrofits.

Under such a model, the homeowner repays the city (with interest) over 15 to 20 years through a type of “local improvement charge” added to property tax bills. The idea is that the permanent energy savings from the retrofit would more than cover the cost of repayment.

Also, the charge is tied to the home, not the owner, so doesn’t add to personal debt load. When an owner sells the property the new owner takes over the charge but also gains the benefit of having lower monthly energy costs in a climate of rising prices.

“There’s huge interesting in this approach, from people at all levels of government,” says Sonja Persram, president of Sustainable Alternatives Consulting Inc. in Toronto.

She says 26 U.S. states have already changed legislation to permit this kind of municipal financing, and late last year Nova Scotia made similar changes in support of a solar-thermal installation program in Halifax.

“It can be delivered at no cost to municipalities, and some municipalities have been looking at having programs that are even slightly revenue-positive,” she adds.

Under contract with the David Suzuki Foundation, Persram spent the past two years studying the approach, which she calls Property-Assessed Payments for Energy Retrofits, or PAPER for short. Her findings were published in three reports that came out in April, May and August.

The research has been well received in both financial and building appraisal communities, and earlier this year the Toronto Real Estate Board passed a motion supporting creation of a PAPER program for Ontario.

There is a big roadblock, however, and this is where the province plays a crucial role. Toronto and other municipalities can’t offer this kind of financing unless Ontario moves, like Nova Scotia did, to pass enabling legislation.

Queen’s Park would also need to assuage the concerns of mortgage lenders. After all, if you as a homeowner get $30,000 in municipal financing to retrofit your home, a bank might not like that the lien for that amount placed on your property takes priority over a mortgage in the event of default.

(Such a concern raised by Fannie Mae and Freddie Mac in the U.S. has effectively brought all PAPER-like residential programs to a standstill until legal issues are resolved).

The province would have to make clear to all parties that it wouldn’t be the entire $30,000 that gets priority over the mortgage, but only any defaulted payments on that financed amount. That’s because once the property is sold, the new owner would take over the remainder of the retrofit financing.

“In order for such a program to work here you have to have the province, the financial institutions and the City of Toronto all sitting in the same room talking about this issue,” says Tim Stoate, an associate director and investment expert at the Toronto Atmospheric Fund. “I don’t think that conversation has happened.”

It needs to happen if the McGuinty government wants to pay more than lip-service to its energy conservation goals. It is unlikely happen, at least not at a scale that matters, if the province doesn’t step in as chief facilitator and coordinator.

Tyler Hamilton, author of Mad Like Tesla, writes weekly about green energy and clean technologies. Contact him at tyler@cleanbreak.ca

It’s shameless self promotion, I know, but this is how you create awareness of books, and the point of writing Mad Like Tesla was to create awareness of the innovation going on around clean energy and the immense barriers inventors and entrepreneurs face. I also wanted to celebrate those much-needed risk takers in society, without whom we will never have the kind of breakthroughs necessary to tackle our energy demons. It’s part of the reason I write and have maintained this Clean Break blog for the past six years, without financial gain. It’s a labour of love, as time consuming as it often can be.

Mad Like Tesla: Underdog Inventors and Their Relentless Pursuit of Clean Energy was launched this month and has been well-received. The reviews so far have been positive, and awareness of the book is slowly building. But not fast enough. I want to take this moment to ask my readers, many of whom have already purchased the book (thank you!), to help spread the word. Share this link or the Mad Like Tesla website (www.madliketesla.com) on social media sites such as Facebook and Twitter. Refer to it when commenting on the various blogs you might follow. And for my media friends out there — whether in the mainstream press or the blogosphere — please consider a review, or alternatively, I’m happy to chat about the many odd and inspiring stories in this book. Please see press release here.

Thank you all for your ongoing interest and support. BTW: Many have asked, so I’m happy to report that the e-book version of Mad Like Tesla is now available at Amazon.com.