Think big: scaling-up commercial energy efficiency in Canada
At COP21 in Paris last December, Canada committed to reducing greenhouse gas emissions, to be a leader in the transition to a low-carbon and climate resilient economy, and to contribute to keeping global temperature increases to below 2C.
To achieve our ambitious overall target of 524 Mt CO2 eq. by 2030, emissions from Canada’s commercial buildings must be reduced by nearly one half. But – energy use from Canada’s commercial buildings continues to rise: since 1990, overall commercial consumption increased by 27%.
To achieve our ambitious overall target of 524 Mt CO2 eq. by 2030, emissions from Canada’s commercial buildings must be reduced by nearly one half
In 2013, over 12% (86 Mt CO2) of Canadian greenhouse gas (GHG) emissions were from energy consumption in buildings, largely released from space and water heating; natural gas is the primary heating source for over half of Canada’s commercial and institutional buildings. Clearly, reducing energy consumption in Canada’s commercial building stock is critical to achieving our emissions targets.
What makes this a challenging problem to solve?
- Energy bills don’t attract attention, representing under 20% of operational expenditures
- Facility managers are busy; spending only minimal time on sustainability initiatives
- Split incentives between tenants (operating expenses) and landlords (capital expenses)
- Investors are wary of historically overestimated savings from retrofit projects
Buildings: A foundation for Canadian energy innovation
As commercial building owners and operators accelerate deployment of energy efficiency projects, we open new channels for deployment of innovative energy technologies from Canadian entrepreneurs. At MaRS, we work closely with ventures such as Circuitmeter, a simple circuit-level metering solution for cloud energy management within commercial buildings, or Nanoleaf, a leading smart LED lighting solutions company based here in Toronto.
[inlinetweet prefix=”” tweeter=”@marsdd” suffix=”#futureofenergy”]How can Canada cost-effectively reduce emissions from buildings?[/inlinetweet] Through a more holistic approach to energy efficiency in Canada, we can spark collaboration between industry and government, reward our early-adopters, and attract the private capital necessary to implement efficiency retrofits – while demonstrating the many homegrown, cost-effective technologies that can enable the transition.
To illustrate this proposed approach, we’ve segmented potential impactful Canadian activities around three vectors:
- Spark impetus to act with accessible data and well-defined benchmarking policy, including consistent national action for reporting and transparency;
- Reduce project friction by characterizing efficiency retrofit investments and showcase options for technology and business models that can enable private sector investment;
- Measure, verify and challenge by fostering a data-driven culture that pays for results, and engaging innovators in challenges, through hackathons, design competitions and more;
Action #1: Enable open access to building performance data
Canadian policy makers must align energy reporting and benchmarking policies amongst all provinces and territories. Common national access to this data would empower government to set objectives and benchmark industry performance against peers, recognize the achievements of high-performance facilities, and create a venue for sharing results and best practices with buildings across Canada.
Action #2: Create national framework for regional, building-type EUI targets
Energy-use benchmarking and reporting must be required for all large buildings, using the Energy Star Portfolio Manager platform. The government could further require national public disclosure of building performance data within two years of launch of reporting requirements, or sooner where possible. Expanding on the Government of Ontario’s Energy Reporting and Benchmarking (ERB) policy and lessons learned in New York, we recommend the program start with buildings over 50,000 square feet and reduce the size threshold over time.
Action #3: Lead by implementing retrofits to federal government buildings
In Canada, our federal government has the opportunity to play a catalytic and leadership role, with ownership or lease on almost 300 million square feet (27 million square meters) from coast to coast. By sharing the performance data from these 38,048 buildings, private owners or operators would immediately have a reference point. Subsequently, buildings owned or leased by sub-national governments could be added to the database, and large private owners or operators could then be prompted to voluntarily report performance data.
Action #4: Support national implementation of the ICP framework for Canada
With a framework of engineering standards and protocols, the deal friction of building energy efficiency retrofits can be greatly reduced. In the United States and Europe, the Investor Confidence Project (ICP) is being used to designate projects as “Investor Ready Energy Efficiency”, increasing certainty around energy savings and financial return. In many cases, building owners are reluctant to invest, as they don’t know if a retrofit project will generate enough savings to service their new debt.
Action #5: Enable project aggregation for larger institutional investors
Although costly, individual project deals are not large enough to attract these investors, but aggregation could lead to new deals exceeding $50-100m. Through better depiction (and standardization) of investment opportunities, building owners and operators can greatly benefit from financial aggregation of energy efficiency projects, as this will attract patient and low-cost capital from pension funds, sovereign wealth funds, or other large investors.
Action #6: Support initiatives that aim to match project benefits to actual costs
These initiatives should include consumer rebates, supply chain incentives, and innovative financing options. Property Assessed Clean Energy (PACE) loans can allow government to fund the up-front cost of energy efficiency retrofits, which are paid back over time by the property owner. PACE loans are available in many regions across the United States, and have been quite popular in Colorado and California. Similarly, some municipalities can offer Local Improvement Charges (LICs) to effectively finance capital investments, to the benefit of certain residents, and collect repayment through a long-term surcharge on a property tax bill.
Action #7: Demand measurement & verification; pay for results [GHG/energy]
Through new and existing energy efficiency programs at Natural Resources Canada, the Government of Canada can instill a culture of data-driven ‘pay for performance’, that insists upon proper measurement and verification of savings – as what is not measured, is not changed. Ensuring that both emission and energy savings are quantified and verified, will empower the federal government to prioritize existing initiatives with demonstrable results. This will also empower federal government to embark on new initiatives that can show early verified results, that could lead to ‘quick wins’ in emissions reductions pre-2020.
Action #8: Expose energy efficiency challenges to competitive innovators
As building owners and operators are well aware, a plethora of technologies and platforms exist for energy efficiency in buildings – and yet there are continually new, and more cost-effective designs and business models under development in Canada’s cleantech innovation ecosystem. Entrepreneurial spirit and competition will drive new solutions. However, without proper exposure to the challenges and objectives of government policy, innovators are forced to watch from the sidelines as engrained solutions are given preference without proper consideration of innovative alternatives.
The Advanced Energy Centre submitted these recommendations to the Government of Canada in June, and will continue to support the market’s transition to high-performance buildings in Canada with new initiatives throughout the year.