“We can’t keep trying to do retrofits in the way we were doing them in the 1980s and 1990s and expect to bend this curve,” said Ralph Torrie, head of research at Corporate Knights, at part four of our Earth Index event series tracking the “say–do” gap between Canada’s climate action and targets. Torrie estimates we will need to spend between $14 and $48 billion per year to achieve net-zero buildings by 2035, roughly on par with the $20 to $40 billion spent in Canada each year on routine maintenance and repairs. 

“This cannot be our parents’ retrofit program,” Torrie said.

By 2030, existing Canadian homes will be responsible for 90% of residential emissions, so it won’t be enough to just ban gas hookups in new developments. Decarbonizing this sector will require an unprecedented scale of fuel switching to heat pumps and deep retrofit programs for existing buildings, he added. 

Our general mindset has to change, panellists said. We have to stop thinking that the building industry’s emissions will gradually decline and realize that they must descend down a number of steep steps, said Akua Schatz, vice-president of market engagement and advocacy at the Canada Green Building Council. This will mean taking on an aggressive schedule of deep retrofits rather than depending on constant incremental ones. “You don’t have many chances. So every step matters,” Schatz said. 

We also need to stop thinking of housing affordability and climate compatibility as opposing goals, said Steve Mennill, chief climate officer for Canada Mortgage and Housing Corporation, as deep retrofit programs will be central to bringing down the energy costs of the more than 2.8 million households in Canada that spend a disproportionate amount on energy, and sometimes have to choose between heating their homes and eating. 

This has been particularly apparent in Heiltsuk First Nation in British Columbia, where leaders say an initiative to install heat pumps in homes has reduced residents’ heating costs and brought more energy sovereignty to the community. “It costs less to save a kilowatt than to generate one,” Leona Humchitt, a member of the Heiltsuk Tribal Council, told the panel. The community has installed heat pumps in more than 150 homes and hopes to complete retrofits in all 420 of its residential buildings. 

Climate compatibility

Mennill pointed out that we need different solutions for retrofitting private rental housing, community housing and private homes. He said private rental housing needs greater access to capital, the community housing sector needs greater support through subsidy programs, and we need to look at ways to make these changes more affordable for homeowners. “Right now, your cost of capital as a homeowner, if you’re going to do a retrofit to your house, is basically the same [as] if you’re purchasing a new or existing non-climate-compatible house.” 

Either way, when it comes to retrofitting multi-unit buildings, Mennil says both mitigation and adaptation need to be top of mind. “It’s not sufficient to consider just one or the other,” he told the panel. Reducing a building’s emissions needs to be done in lockstep with preparing it for the rising threat of floods and storms. 

Barriers abound

One of the biggest and most obvious barriers to building owners taking on deep retrofits is asking them to pay for them out of pocket. “This needs to be a public service,” said Julia Langer, CEO of the Atmospheric Fund. Her organization is pushing for a fund to support these kinds of projects. 

Building owners also simply don’t have the technical and financial expertise to carry out deep retrofit projects, which have lots of moving pieces. In an effort to help them navigate this process, the Atmospheric Fund has launched what it calls retrofit accelerators. “If you want to go deep in terms of retrofits, we need to ‘multi-solve.’ We can’t just look at the carbon,” Langer said. “We’ve got to look at social aspects, resilience, [and] financial aspects all together.” 

In commercial real estate, Jamie Gray-Donald, senior vice-president of sustainability at QuadReal Property Group, said it will take more policy certainty from governments and much better data-gathering to rapidly decarbonize the sector. Gray-Donald said that the real estate sector is 20 years behind others when it comes to the type of data it has but that for every dollar invested in energy and carbon data, it’s possible to see a three- or fourfold return. “Once you have really granular stuff, amazing solutions open up,” he said.

Building innovation

While retrofitting existing buildings will make up the largest chunk of decarbonizing the real estate sector, research is underway to make constructing new developments carbon neutral. A Toronto-based start-up called Promise Robotics is working to use robotics and artificial intelligence to reduce the carbon footprint of building new homes. 

And last year, Vancouver-based Nexii Building Solutions became Canada’s fastest company to reach “unicorn status” (when a start-up gains a value of $1 billion.) The company manufactures building panels made with a proprietary material called Nexiite, which it claims will reduce the building process’s carbon emissions by a third and cut energy demand to heat homes by 55%. 

From an energy-source standpoint, Enwave has been working to install what’s called GeoExchange technology in thousands of new homes in North America. This system harnesses thermal energy from the ground to heat homes during the winter and cools air during the summer. 

Catherine Thorn, a senior director of community energy planning at Enwave, noted another major hurdle to decarbonizing Canada’s buildings: builders are still being compensated with rebates for installing carbon-intensive natural gas infrastructure. Thorn said that if the developer isn’t planning to use natural gas, they’ll still be asked to install gas infrastructure and won’t receive any rebate if it isn’t used. “It’s a very big mismatch in incentive in what we’re trying to achieve,” she said. 

Regulate and subsidize it

Governments across the world have varying records on their efforts to decarbonize buildings. The City of New York has upped its ambition on cutting building emissions, with a piece of legislation called Local Law 97. This bill will require most buildings with more than 25,000 square feet to meet standards on both energy efficiency and greenhouse gas emissions by 2024, and stricter limits will be enacted in 2030. Langer said Toronto is exploring the idea. 

On the national level, some G7 countries have introduced robust retrofit subsidy programs. In 2020, the Italian government introduced a 110% subsidy for green retrofits that in turn boosted the country’s gross domestic product by 0.7% last year and created 153,000 jobs. 

Canada, in contrast, has been a laggard in this area. The federal government’s modest retrofit program for homeowners that launched in May – the Canada Greener Homes Grant – has struggled to keep up with demand, having received more than 180,000 applications, according to The Globe and Mail. The program reimburses homeowners for up to $5,000 in retrofits and has processed payment to only 1,227 applicants as of January 18. 

We can’t keep trying to do retrofits in the way we were doing them in the 1980s and 1990s and expect to bend this curve.

-Ralph Torrie, head of research at Corporate Knights

In December, the Prime Minister’s Office released mandate letters to cabinet ministers that signalled that retrofitting buildings would be part of the government’s plans to cut emissions, following similar commitments made during the recent election campaign. 

Schatz said some of the key government commitments to watch in this area will be making the electricity system net-zero by 2035; implementing a national zero-emissions building strategy; creating a net-zero building code by 2024; and launching a National Infrastructure Assessment (an evolving document that will guide Canada’s infrastructure) that includes buildings. 

The clock is ticking on the federal government’s pledge to axe emissions by 40% to 45% below 2005 levels by 2030. Since there are just over 400 weeks until that deadline, achieving this goal will involve taking a wrecking ball to Canada’s building emissions, and doing it swiftly. 

“We’ve got to start behaving like this is the emergency we’ve been saying it is,” said Torrie. “We’re out of time.”

The post How to nail down the green renovation revolution appeared first on Corporate Knights.

Building emissions are rising

For most municipalities, heating and cooling buildings is a major source of climate pollution (namely, greenhouse gases, refrigerants and soot), though only 12% of Canada’s total. While both new and existing buildings have become more efficient in recent decades, these gains have been more than offset by increases in population and customer demand for more space. That helps explain why emissions from buildings have increased 9.5% since 1990. It’s also one of the reasons that Canada’s emissions increased again in 2019, directly contrary to our international commitments under the Paris Agreement.

Yet in the challenging journey to net-zero, eliminating emissions from heating and cooling buildings is one of the easier tasks. Older buildings, in particular, waste large amounts of fossil fuels, largely because so much air and energy leak through their walls, roofs, floors, doors and windows. We already have the technology to fix this and would reap many benefits from doing so.

Most people would prefer to live and work in buildings that are draft-free, warm in the winter and cool in the summer, that are inexpensive to keep that way and non-polluting. A source of renewable energy, such as solar panels or geothermal heating and cooling, can add self-sufficiency and resilience. In the 2021 Texas blackouts, owners of efficient homes with their own solar power avoided the misery and broken pipes that plagued so many of their neighbours.

Then why do existing buildings so rarely receive meaningful energy upgrades, even when they are renovated? My last report as Ontario’s Environment Commissioner, A Healthy, Happy, Prosperous Ontario: Why We Need More Energy Conservation, showed that challenges with financing the upfront cost are one of the main obstacles.

Why PACE financing works

Municipalities can play a key role in providing access to attractive financing for the incremental costs of energy retrofits, because of their ability to unlock PACE financing programs. PACE programs lend willing property owners the funds needed for upgrades through low-interest, long-term, fixed-rate loans secured through a property tax mechanism. The owner’s utility savings help pay back the loan, which can stay with the property or be paid out when it is sold. (This is important since the average homeowner moves every few years, while deep retrofits can take a decade or more to pay back. The purchaser automatically takes over the loan obligation.) In some cases, utility savings make retrofits cost neutral to the homeowner. The owner also receives improved comfort, higher resale value, and reduced capital equipment costs, and knows they are doing something about our greatest crisis.

PACE programs remove several significant barriers: property owners don’t have to put money up front, their credit rating may not matter, interest rates remain low, and they don’t have to keep paying back the loan if they move. For lenders, the loans are low risk because they’re secured through property tax, which has low defaults, high priority and adequate security.

Well-designed PACE programs make good financial and environmental sense, although they require patience. For example, Halifax Solar City photovoltaic systems cost an average of $20,000, for estimated savings of $57,000 over 25 years. A study for Our Energy Guelph calculated that a $3.2 billion investment in community energy – two-thirds of it in building retrofits funded through PACE – would yield $4.9 billion over 30 years, through energy savings, carbon price savings and electricity sales. Plus, the retrofits would slash carbon emissions and make homes more comfortable.

There are at least 34 clean-energy financing programs available across Canada. Halifax Solar City was the first, launching in 2013. It has financed most of the solar water heaters and PV systems in its city. Yet, despite many pilot projects and an alphabet soup of programs,[iii] Canadian PACE programs have not achieved either speed or scale. Instead, they run into obstacles that should be easy to fix. For example, half of all applicants to Toronto’s Home Energy Loan Program (HELP) were unable to proceed with their retrofit because their mortgagee didn’t consent. U.S. PACE programs have been leaving us in the dust, despite the environmentally hostile leadership of the Trump years.

Given the need for urgent, transformative change, what could  help Canadian PACE programs takeoff?

1. Ensuring that mortgagees cannot block PACE loans for energy upgrades.

There is no legitimate reason to allow mortgagees to block PACE loans for energy upgrades. Property tax default rates are low, and properties that have undergone PACE upgrades have a lower-than-average default rate. Equally important, according to a study in the Journal of Structured Finance: energy upgrades are the only renovation that yield a larger increase in property value than they cost. This obstacle could easily be resolved by legislation or by provincial governments setting up a loan-loss reserve to protect mortgagees. In the meantime, municipal councils can ask local banks and credit unions for formal commitments to automatically consent to PACE upgrades.

2. Encouraging private sector funding of PACE loans.

Few municipalities have the spare capital to fund PACE themselves. Some compete for federal government funds via the Federation of Canadian Municipalities (FCM), plus local government dollars and perhaps a little private capital. (Ottawa, for example, has a pilot project combining FCM funding with a loan from the Vancity Community Investment Bank.) This approach cannot provide enough money to scale. It’s great that the federal government has increased the FCM Green Municipal Fund to approximately $1 billion, including a $300-million Community Efficiency Financing Plan. But it could take more than $800 billion to retrofit all existing buildings across Canada.

The private sector can provide money at this scale, and is indeed eager to do so, but is having trouble finding appropriate programs to fund without excessive risk or administrative costs. PACE programs could be a good fit. They can qualify for municipal green bonds, which are finding strong market appetite at better-than-usual rates. An inexpensive government loan-loss reserve would make these programs especially appealing and would minimize interest rates to homeowners.

In addition, private sector funding is less at risk of disruption by elections. Reducing political risk could improve contractor capacity, supplier capacity, customer awareness and customer confidence.

3. A multi-municipal entity with economies of scale.

One of the factors that has fuelled U.S. PACE growth to over US$8 billion is an independent third-party administrator that serves many municipalities. This makes it easier for municipalities that  want a PACE program but lack administrative capacity, technical expertise, know-how and capital, or simply want to reserve their borrowing power for other things.

Purchasing, marketing, administration and borrowing are all cheaper at scale. A mission-driven administrator can ensure that these programs are focused on the public good and not on predatory loans. A common entity can tap sources of private funds, such as pension plans, that prefer to lend amounts far too large ($50–100 million) for most individual municipalities.

Our Energy Guelph hopes to fill this role in Canada. If they, or a similar organization, succeed, Canadian municipalities may be able to grow their PACE programs at unprecedented speed to unprecedented size, and kick-start building retrofits across the country. After all, on the road to net-zero, funding building retrofits is one of the easier problems.

Dianne Saxe is one of Canada’s most respected environmental lawyers, with a Clean50 award, a Ph.D. in Law, and a Law Society Medal. She was a popular Environmental Commissioner of Ontario, reporting to the Legislature on environment, energy and climate. She now heads SaxeFacts, hosts the Green Economy Heroes podcast, is Deputy Leader of the Ontario Green Party

The post Canada’s buildings are a climate drag – can they pick up the pace? appeared first on Corporate Knights.

The endeavour will require concerted action from governments, banks and other lenders, asset managers, developers, landlords and tenants, and individual homeowners.

“Buildings are the biggest source of emissions in cities and so a huge opportunity for meeting our climate targets … but we have to get on with this with alacrity,” Julia Langer, chief executive of Toronto-based Atmospheric Fund, told an online panel Wednesday. “We certainly see things from the perspective of ‘all hands on deck.’ ”

Langer was one of several speakers at Financing the Green Building Wave. The virtual roundtable was the last in a series called Building Back Better Together that Corporate Knights co-hosted with the Embassy of the Federal Republic of Germany in Canada.

Like Canada, Germany – and, more broadly, the European Union – is targeting emissions reductions for new structures and existing ones, including industrial, commercial, institutional and residential buildings.

In Canada, buildings account for 12.7% of annual greenhouse gas (GHG) emissions, with most of that coming from the burning of fossil fuels for heat. In Canadian cities, buildings can account for 50% of annual emissions, Langer noted.

The federal government has committed Canada to achieving net-zero emissions by 2050 and on November 19 introduced legislation that enshrines that commitment, with a number of transparency and accountability measures built in. The Liberal government has also pledged to adopt a new target for 2030 that will be more ambitious than the current pledge to reduce GHGs by 30% from 2005 levels by that year.

To meet that goal, Finance Minister Chrystia Freeland is expected to announce a number of measures in the fall economic update she will deliver on Monday, including the likelihood of grants and zero-interest loans for homeowners to invest in energy efficiency.

Earlier this fall, the Canada Infrastructure Bank (CIB) announced that it’s allocating $2 billion to help the owners of large buildings finance energy-efficiency retrofits, whether in the private or public sector.

The CIB will cover upfront costs for audits and feasibility studies to reduce risks for other investors to pursue deep retrofit projects, the bank’s managing director for investment, Frederic Bettez, told the webinar on Wednesday.

It will look to bundle projects in order to kickstart a market for project aggregators and then securitize loans and sell them off as green bonds or other sustainable finance products. Bettez said the CIB is hoping that, within five years, the market for financing large-building retrofits will develop to the point that banks and other lenders will no longer need that federal risk-sharing.

Until now, it has been energy utilities or Crown corporations that have supported energy-efficiency programs, said Brendan Haley, policy director for Efficiency Canada, a non-profit advocacy group.

Often, those efficiency efforts were meant to avoid the need for new and more expensive sources of energy supply, such as new power plants, he said. However, the appeal was limited because the goal was low-cost energy savings, rather than deep emissions reduction.

That’s changing.

Last year, the federal government allocated $1 billion to municipalities through the Federation of Canadian Municipalities, which has launched a community energy-efficiency program that supports residential retrofits. Some jurisdictions are also allowing homeowners to finance home retrofits through their property taxes.

Haley said it is critical to connect national institutions that finance deep retrofits with emerging local and regional funders, such as green banks and municipal programs, to forge a coordinated approach and a well-functioning retrofit financial market.

In Germany, 20% of the country’s annual GHGs come from buildings, Ambassador Sabine Sparwasser said. Retrofits can reduce the energy consumption of older buildings by some 80%.

“Retrofitting has become a very important part of our German climate strategy,” she said, adding that the EU is insisting its member states adopt aggressive policies. The country expects to see 200,000 jobs created over the next decade through its retrofitting policy.

It’s not just a matter of improving the energy efficiency of old buildings, but also switching fossil-fuel-based heating with heat pumps and other electric options, noted Sabrina Schulz of Berlin’s Das Progressive Zentrum.

She noted that zero-interest loans are an ineffective policy tool when rates are already so low. Similarly, tax rebates can provide benefits for higher-income homeowners who are willing to finance the work themselves, but those programs provide little guarantee that the money spent will yield real emissions reductions. Grants are critical to ensure a broad program of deep retrofits, Schulz said.

Last spring, Corporate Knights produced analysis recommending that the federal government spend $20 billion over the next two years to kickstart a self-sustaining deep retrofit ecosystem that could save $20 billion in annual fuel and electricity costs by 2030.

Langer argued that governments at all levels need to be part of the effort. Ottawa tends to provide financing, while the provinces control building codes and home building standards, and municipalities deal with zoning issues and some green standards.

While an investment in energy efficiency may pay for itself over time, there are plenty of challenges to making it happen, Langer noted. Energy costs in Canada are low by global standards – especially for natural gas – “which means retrofits and efficiency haven’t been priorities,” she said. At the same time, the disaggregated nature of the building sector – with millions of owners of individual properties – can make it difficult to achieve economies of scale.

Despite that, “the business case for deep retrofits and net-zero new buildings is positive,” Langer said. “There is a return on investment.”

While there is a lot of focus on retrofits, Canada still has a long way to go to ensure new buildings are built with energy efficiency in mind in the first place, said Andrea DelZotto, executive vice-president at Tridel, one of Toronto’s largest condominium developers.

She said building an energy-efficient condo tower can add anywhere from a 1 to 6% premium on construction costs, and the developer then has to find ways to recoup it. “There is no mechanism for developers to get back the capital they’re putting in to make these buildings work better,” she said.

Clearly, grants and other market incentives won’t be enough to decarbonize the building sector. Governments at all levels will have to adopt stricter codes and standards to drive the industry to innovate and invest.

The post How to trigger a net-zero building wave appeared first on Corporate Knights.

Keeping our buildings lit, heated and cooled accounts for 20% of Canada’s greenhouse gas emissions. In some provinces, emissions from buildings are growing faster than every other source except transportation. If Canada is to meet its 2030 GHG targets, older buildings, which make up three quarters of this nation’s built form, will need to be retrofitted over the coming decade.

Banks, of all businesses, should appreciate the cost savings those retrofits can bring. Through 2018, property manager BGIS completed a three-pronged retrofit for CIBC banking centres across Canada, which has yielded an impressive 28 to 30% cost savings on energy outlays.

According to Greg Woodhouse, managing director, engineering, the project began with a complete conversion to LED lighting, most of which involved changing bulbs or replacing fixtures such as pot lights. The life-span is seven to 10 years.

The second aspect of the project involved deploying more efficient and sensitive control systems that rely on networks of temperature, airflow, humidity and CO2 sensors, all of which are linked wirelessly to a centralized control system.

These sensors replaced older thermostats that set temperatures based on single-point readings and produced the familiar phenomenon of super-cooled bank branches. By using more linked sensors, Woodhouse says, BGIS property managers have more ability to fine-tune settings and thus achieve savings. “I can efficiently right size the load in the space at any time,” he says. “We can dictate when the fan operates and doesn’t, and the speed.”

Finally, the retrofit included the replacement of end-of-life roof-top HVAC equipment with high-efficiency components: fans, compressors, condensers and burners. The new HVAC has greater functionality, Woodhouse notes.

The upshot is that BGIS has greater ability to find efficiencies with the so-called set point without compromising comfort and fresh air flow into the branches.

The investments have cut, on average, $6,200 in energy costs per year per banking centre, and that figure doesn’t include further savings on operating expenses.

In addition to energy cost savings, the project trimmed GHG emissions at branches across the country, especially for operations located in jurisdictions such as Alberta and Saskatchewan, where coal or gas are used to generate power.

Spotlight: CIBC Retail Retrofits

Buildings: 30 retail banking centres across the country

Energy savings: 28% across 30 pilot sites to date

Payback period*: Average payback of all initiatives is 4.5 years

*not including utility or other incentives

The post Building innovation: Going green pays off for one of Canada’s Big 5 banks appeared first on Corporate Knights.

To this end, Public Services and Procurement Canada and its property manager, BGIS, developed the GHG Options Analysis Methodology in 2016. On simple projects, instead of replacing existing equipment with the same technology, alternatives are evaluated to maximize carbon reductions while remaining cost neutral over a 25-year life cycle. When Radford asks for money for more complex projects, he presents Treasury with the following four options:

1. Design to meet minimum departmental commitments
   Design to achieve cost-neutral GHG emission reductions
2. Design to achieve maximum GHG emission reductions
3. Hybrid of two and three.

“Generally, they go for [number] four,” Radford says. It is making a big difference. “If we stay on the current path, and the investments continue to flow, we will hit carbon neutrality in the 2030s,” he says.

One of the quickest ways to get big energy reductions is by using artificial intelligence to make buildings smarter.

Spotlight: Smart lights

Building name and address: Library Square Tower, Vancouver

The gist: The Alec lighting controllers are installed as standalone or networked devices easily programmed by its phone app or from a workstation. Each device is capable of daylight harvesting, learning occupancy patterns of space use, energy metering, program scheduling, and much more. This makes it easy to automate switching lights off anywhere and anytime they don’t need to be on.

Cost of project (estimate): $196,273

Energy savings (estimate): 30% of the lighting energy in the first year alone

Payback period (estimate*): 4-6 years

*not including utility or other incentives

Spotlight on green building innovation is produced in partnership with the Building Energy Innovators Council

The post Spotlight on green building innovation: Library Square Tower, Vancouver appeared first on Corporate Knights.