Tag Archives: energy efficiency

Toronto closer to launching Ontario’s first PACE pilot program this fall

retrofitLast November I reported that Ontario Premier Kathleen Wynne, who at the time was minister of municipal affairs and housing, approved changes to the province’s Municipal Act and City of Toronto Act, basically empowering all municipalities in Ontario to use a financing tool called a local improvement charge (LIC) to help property owners finance energy- and water-efficiency projects for their homes. This has enabled the creation of what some call Property Assessed Clean Energy (PACE) programs, or alternatively Property Assessed Payments for Energy Retrofits (PAPER). I recently wrote a large feature on such programs called “The PACE Makers” in the latest issue of Corporate Knights magazine.

Shortly after the legislative amendments took effect, a group of 22 municipalities formed the Collaboration on Home Energy Efficiency Retrofits in Ontario, or CHEERIO for short. These municipalities have pooled resources as part of a unified examination of PACE/PAPER program design, legal issues and communications challenges. The group is also doing market research to find out what homeowners across the province think about the new funding mechanism, and what lessons can be learned from early efforts in the United States. Bottom line: they don’t want to re-invent the wheel, but they want it to offer a much smoother ride.

All of that is context for what I really want to highlight in this post. Earlier this week a report from Toronto’s City Manager (as well as Deputy City Manager and Chief Financial Officer) recommended that city council create a by-law that authorizes the use of LICs to fund energy-efficiency and water conservation measure on private properties as part of a new Residential Energy Retrofit Pilot Program, which aims to be up and running this fall on a voluntary basis. It would be the first of its kind in Ontario.

Single-family homes and multi-unit residential buildings can participate — specifically, up to 1,000 houses and up to 10 multi-unit buildings. The city is making $20 million available to fund energy assessments and installation costs, which will be repaid through LICs. Owners of single-family houses will have between five and 15 years to pay back the loans through a charge on their property tax bills, while multi-unit residential building owners will get five to 20 years. “The repayment term would be geared to generally reflect the anticipated operating cost reductions (i.e. energy or water savings) and useful life of the retrofit measure(s),” according to the report. This time around, the city won’t be issuing bonds to raise money for the program. They will tap into a Working Capital Reserve, monies from which will be transferred to a Local Improvement Charge Energy Works Reserve Fund that will give out the loans and be replenished through LIC payments.

“The program is projected to stimulate job creation, increase housing affordability through operating cost savings and annually avoid 5,000 tonnes of greenhouse gas emissions,” according to the report. “The primary focus of the pilot program is to test the market receptivity to this new financing mechanism, its ability to accelerate the uptake for investment in energy efficiency and evaluate how it aligns with the city’s economic development, housing quality and affordability and environmental sustainability objectives.” The idea is to also demonstrate that such a program can be revenue-neutral for the city.

This is terrific to see, and kudos to councillor Mike Layton for leading the push within council. The program will be considered by Executive Committee on July 3, and, depending on what it decides, the full city council will consider it on July 16. Let’s hope all councillors see the huge potential and importance of such a proposal. If Toronto can get this pilot right, it can set the stage for much broader deployment across the city, with the potential to snowball across the province. It would also lend momentum to efforts at getting other Canadian provinces to create enabling legislation, as well as efforts to expand the program to commercial buildings.

Sorry Mr. Jevons, your energy efficiency paradox really isn’t

We hear all the time about the virtues of buying more energy-efficient light bulbs, appliances, homes, and vehicles. By using less energy, such things save us money, take stress off the power grid, and help us reduce our consumption of fossil fuels.

But there are some who question whether energy efficiency is everything it’s touted to be. Specifically, they point to the idea that there is a large rebound effect to increased energy efficiency. The concept here is that when we use products that consume less energy, we end up using more of the product or using more products – or both.

When we buy a more energy-efficient car, we drive more. When we install more efficient light bulbs, we’re more inclined to leave the lights on longer. If the end result is that gains in energy efficiency are offset by increased energy use, then what’s the point?

This dilemma was first explored in 1885 by British economist William Stanley Jevons, which is why the rebound effect is often referred to as the Jevons paradox. These days, critics with mostly libertarian leanings cite it as a reason to discontinue “ineffective” government-funded energy efficiency programs.

The Washington-based Institute for Energy Research, which has reportedly received funding from the likes of Koch Industries and ExxonMobil, made that argument last month in a 43-page report.

“The pervasiveness of energy efficiency rebounds illustrates that attempts to plan or direct energy policy toward desired goals will likely fall short of expectations,” it asserted. “Instead of imposing energy efficiency mandates, energy policy should embrace market prices and disruptive innovations to guide energy to its most valuable uses.”

In other words, policies attempting to phase out inefficient lighting products? Bad. Mandating fuel-efficiency standards for vehicles? Ineffective government meddling. Make power plants cleaner and more efficient? Let the market decide.

The research institute’s study rightly ruffled the feathers of the American Council for an Energy-Efficient Economy, which this week tried to set the record straight: Claims of 100 per cent rebound, it said, “do not stand up to scrutiny.”

The council released its own detailed report – a kind of study of available studies – that looked at both direct and indirect rebound effects.

Direct rebounds include the example of driving a more efficient car more often, ultimately using up any potential fuel savings. An indirect rebound occurs when money pocketed through energy-efficiency savings is spent on something else, such as a big-screen TV, which ends up consuming more energy – both through its production and everyday operation.

The council didn’t dispute that such rebounds exist, and that they vary depending on the product or action. But it concluded that critics of energy-efficiency programs were grossly exaggerating the size of the rebounds. It found that direct rebounds were generally 10 per cent or less, and indirect rebounds – while “less well understood” – were estimated at 11 per cent.

“Even if total rebound is about 20 per cent, then 80 per cent of the savings from energy efficiency programs and policies register in terms of reduced energy use,” it said. “And the 20 per cent rebound contributes to increased consumer amenities and a larger economy. These savings are not ‘lost’ but are put to other generally beneficial uses.”

On top of this, it would stand to reason that the rebound effect would be smaller in an environment of rising energy prices. Indeed, higher gasoline prices are driving many people to purchase more energy-efficient vehicles.

In this sense, efficiency is being embraced as a way to cope with energy inflation; a way to maintain current levels of consumption, not drive more of it. If gas prices never changed, it might be a different story, but most people just want to be able to drive back and forth to work and keep their gas bill manageable.

Former CIBC chief economist Jeff Rubin has argued that the genesis of the economic crisis we’re currently in has to do with high oil prices, and that reality of rising energy costs will make it difficult for countries – such as the economic basket cases in the eurozone – to achieve the kind of growth they need to recover.

Along this line of thinking, it would seem that greater energy efficiency – with one measure being energy consumption per unit of GDP, or “energy productivity”—represents one way for countries to cope with rising oil prices and achieve the kind of growth that can help whittle down debt and balance budgets.

Greater energy efficiency, in this respect, could play a large role in lifting us out of our global economic doldrums.

I’m sure even Mr. Jevons would agree.

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

PACE financing for commercial buildings has “irreversible momentum,” says Carbon War Room chief Jigar Shah

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.


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.

Residential solar thermal systems get huge incentive boost

The Canadian government boosted its incentives for home energy retrofits yesterday by 25 per cent for most items, which the Ontario government said it would match. It’s all part of an effort to stimulate “green” home renovations as part of a larger effort to kickstart economic activity.

I said “most” items because solar thermal hot water systems got an even greater boost. The current rebate is $500 from the federal government, matched by a further $500 from Ontario. The feds increased its rebate dramatically to $1,250. So if Ontario matches, as it says it will, that will mean anyone who purchases and installs a residential solar hot water system will get $2,500 back. Not bad, considering you can get a system for as low as $6,000.

Expect more “thermal” and energy efficiency announcements from Ontario in the coming weeks. Here’s my article in the Star if you want some more details.

DOE: Combined Heat and Power a compelling but underutilized source of energy efficiency

The U.S. Department of Energy’s Oak Ridge National Laboratory just put out a report on the potential of combined heat and power (CHP) deployments in the United States and has concluded that it is one of the “most proven and effective near-term energy options” available to reduce CO2 emissions, improve energy security, relieve grid congestion, make industry more competitive, and create green-collar jobs. Continue reading DOE: Combined Heat and Power a compelling but underutilized source of energy efficiency