Tag Archives: PAPER

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.

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.

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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.

Time to reboot municipal/provincial approach to residential energy conservation

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