KISS

Keepin’ it simple

Three weeks ago I ranted (politely, I think) about past residential energy efficiency retrofit programs, namely Canada’s EcoEnergy for Homes program. After a one-week tangent celebrating an economic development win for Guelph’s Community Energy Initiative, I came back last week with a post about how the Guelph Energy Efficiency Retrofit Strategy (GEERS) will remove an economic barrier to home energy upgrade projects. This week, I’ll explain how GEERS promises to deliver that oh-so-treasured but oh-so-elusive quality, simplicity.

To recap and summarize my rant about the complexity of EcoEnergy for Homes, if this had been a product, it would have been a Windows PC. GEERS, on the other hand, promises to deliver a Mac.

I’m not gonna lie. I hate PCs. It wasn’t always so – I used to scoff when my mother extolled the latest in the long stream of Apple computer products she used for her graphic design business. Clearly the WinTel duopoly was superior, since it dominated the business world in general. Macs were reserved for artsy types like musicians and, well, graphic designers. I didn’t consider the many hours of productivity I had lost wrestling with hideously complicated settings – ever delved into editing autoexec.bat or config.sys? – chasing down and installing obscure drivers, and expunging the latest in an endless stream of malware. I didn’t know any better so I assumed that was just the way things were.

Not quite four years ago I had a conversion experience. My girlfriend (now my wife) succeeded where my mother had failed, convincing me that Apple computers were a better choice. Having spent some time on her iMac, I had to admit there were advantages. Changing settings was a breeze. Programs and peripherals installed and configured themselves with ease. And nary a virus in sight. Ere long, I had seen the light. I had become a Mac person.

EcoEnergy for Homes was a Windows product in Mac user’s world. If you decided to take part in the program, you would find yourself having to deal with five different and, for the most part, hitherto unknown parties: banker, energy auditor, contractor, equipment and materials vendors, and utilities. It was impossible to know if you were getting a good deal, since the pricing was unfamiliar to nearly everyone. There was no fun factor – how much enjoyment do you get out of joist pocket insulation? Some people enjoy the idea of managing a contractor, and maybe one day I’ll actually meet such a person. And I’ve never met anyone that enjoys the uncertainty inherent in phrases like “please allow 6-12 weeks for delivery”.

The whole process felt a bit like installing a piece of Windows software. How long did I spend researching alternatives, without even really knowing what I needed? How many hours had I spent staring at that maddening progress bar, wondering if the next few pixels would take ten seconds or ten hours? And when the install was complete, how many times did I discover that what I installed wasn’t at all what I expected or wanted? Similarly, after the contractor’s work was finished, the energy auditor performed the second blower door test, and then I waited. And waited. I began to despair of ever receiving my incentive cheque. Finally it arrived, and it was less than I expected. Close, but still less.

Much like life with Windows, it doesn’t seem like the program designers had spent much time thinking about the user experience. We plan to make the GEERS experience different.

First, we plan to provide a single point of contact – an actual human being. This person will explain the program to you, handle your registration, and follow up as you make your way through the process. At some point there will be a hand-off to a project lead, but that transition will be clearly explained and transparent. You will be able to participate in the program without getting into the messy details of dealing with a multitude of different parties.

Second, the product and pricing will be simple. In many cases, there will be a single package of retrofit items including insulation, weather-stripping, windows, furnace, water heater, and comfort controls (i.e. a programmable thermostat). You won’t need to spend a lot of time getting to know the entire offering, unless you choose to. If you’ve already implemented a particular measure you’ll be credited for that item, but we expect most customers will end up with the standard basic package. Pricing will be based on the type of home (e.g. 1975-era single-family house vs. historical semi-detached) and the square footage. Period.

Third, you will be able to choose from some cool options. Rooftop solar, be it PV or thermal (or both), will be one. Another will be a charger for an electric vehicle. A third will be a rainwater harvesting system. Others will be re-roofing, a ground-source heat pump, micro-CHP, and more.

Fourth, the project will be simple. The installation will be a black box. Someone else will handle everything – you as the homeowner won’t need to get involved if you don’t want to. With GEERS, you won’t have to become an expert on home energy retrofits, energy-efficient products, and managing a contractor in the same way that if you own a Mac, you don’t have to become an expert in configuring, administering, and troubleshooting a computer. It just works.

Fifth, payment will be simple. There will be no extra bill to pay. The cost of the project will translate into a Local Improvement Charge (see last week’s post for more about that), which is just an additional line item on your property tax bill. Presumably you were planning to pay that anyway, since nasty things happen if you don’t. Also, the price is expressed directly as an annual or monthly cost (depending on which payment schedule you use). It’s easy to match that up with your income, and therefore your budget.

GEERS will be all about stripping away the complexity that drove people away from previous programs. Next week I’ll talk about the way we expect GEERS will take shape, and the benefits it will bring to Guelph.

Rethink

In my post of two weeks ago, I described some of the issues with past residential energy efficiency incentive programs, particularly EcoEnergy for Homes. I promised more info about a program Guelph is devising to address those issues. After a one-week delay to trumpet a good news story (and after resisting the temptation to devote this week’s post to celebrating recent accolades from the Toronto Star), here are the goods on GEERS – Guelph Energy Effficiency Retrofit Strategy.

Nearly a year ago, we commissioned Garforth International Inc. to create a plan to tackle the problem of energy efficiency in Guelph. This plan would rethink past incentive programs and create an entity that would address their shortcomings. The plan would be tied directly into the targets for residential energy efficiency that were set in the Community Energy Initiative. That plan is now complete and we’re working through the process of implementing it.

The two key issues with EcoEnergy for Homes were economics and complexity, so today I’ll look at how GEERS will address the first of these.

Homeowners are reluctant to invest in energy efficiency because the payback period may be longer than the length of time they expect to stay in the house. The first of the two houses I retrofitted under EcoEnergy for Homes had a project payback of eight years. Had I known that I would be moving out of there in a few short years, I wouldn’t have gone ahead with the project. When I sold the place, I had to pay off the home equity line of credit I’d used to pay for the project. I have no idea what the value of the house would have been absent the retrofit, but my best guess is that I wound up short a few thousand dollars.

GEERS will likely take advantage of a financing mechanism called Local Improvement Charges (LICs). This tool has been used to facilitate a user-pay model for municipal infrastructure. If a street requires new pavement, water mains, and sewers, LICs can be used to have the property owners on that street pay for the project, rather than every citizen in the entire municipality. I moved into a new house back in ’99, and shortly afterwards my street was torn up, new water mains were installed, new sewers went in, and new asphalt and sidewalks were laid down. My next property tax bill had a new line item: A Local Improvement Charge to cover the cost of these improvements. At that time, LICs were mandatory, and could only be applied to traditional municipal infrastructure.

The scope of LICs changed in 2012, allowing them to be used on a voluntary basis for energy projects. A property owner could, if the municipality permitted LICs for this purpose, request permission to undertake an energy project – a major energy efficiency retrofit including insulation, triple-glazed windows, and a high-efficiency furnace, say – and pay for it on their tax bill.

The amortization period would be matched to the usable life of the asset, so twenty years or so. The interest rate would be somewhere around what the municipality pays for debt. That’s a way better deal than you would get on a home equity line of credit. Also, in the case of energy efficiency retrofits, the payments match up much more nicely with the savings on utility bills.

Another advantage for the LIC – and probably the post important one – is that the financing is attached not to the property owner, but the property. The significance of this may not be evident at first, but it becomes clear when you think of what happens when the property is sold. With traditional bank financing, like my home equity line of credit, the debt must be completely repaid when the property changes hands. With the LIC, the financing is transferred automatically to the new owner when the property tax roll is updated to reflect the new ownership.

This completely changes the decision process for the property owner, Now, I no longer have to worry about whether the retrofit project will pay for itself before I choose to pull up stakes. I complete my project in year one, the savings on my energy bills start right away, as does the charge on my tax bill. If everything works out properly, the savings are bigger than the LIC payment and I wind up ahead – all without paying anything out of my own pocket. I don’t have anything to do with the initial sticker price of the retrofit project, so payback period no longer means anything to me. I get a more comfortable home, a more valuable home, lower utility bills, all for a modest ongoing charge on my property tax bill.

Here’s the kicker. The LIC is fixed – it will never increase. However, my savings stream will grow over time since energy costs are rising – faster than inflation. That means that every year, my project – I hesitate to call it an investment, since I didn’t actually invest any money – is worth more. If you look at page 18 of Ontario’s Long Term Energy Plan, you’ll see that the average monthly household electricity bill will rise by nearly two thirds, from $137 to $210, over the 18-year period from 2014 to 2032. And that’s just electricity – we haven’t even talked about the savings on natural gas bills. The value of the project just keeps going up and up.

LICs have their detractors. Mortgage providers have expressed concern over the fact that they represent a senior debt obligation, meaning that a homeowner in financial trouble would have to pay off the LIC before tackling the mortgage. That is true. However, the LIC reduces household energy costs and so actually reduces the risk of the mortgage, since the homeowner now has lower utility bills. That means that every year, the homeowner has more money, not less, in their pocket than their less forward-thinking neighbour that decided to give the LIC retrofit project a miss. More money makes them less likely to run into financial trouble, so they’re a better credit risk with each passing year. Mortgage lenders should cheer, not jeer.

Next week I’ll delve into the way GEERS will make the energy retrofit process much simpler. Stay tuned.

 

Get ready to Ramboll

Welcome to the Promised Land

Last week I hinted that I would be talking more about GEERS in this post, but breaking news – especially good news – trumps prior plans.

In case you didn’t see my tweet yesterday, Guelph’s Community Energy Initiative (CEI) got a big shot in the arm from across the pond. Danish District Energy leader Ramboll Group announced that it was setting up shop here. This is a tremendous economic development win for the city, but it’s only the beginning.

The origin of this news flash dates back to 2007, with the creation of Guelph’s CEI. The plan set a goal to use District Energy (DE) to produce significant energy efficiency gains for the city. (If you need a DE primer, I recommend my prior post Git ‘r Done.) At the time, this was a bold and, at least on this continent, unique proposition. Many cities had DE systems – some, like Veresen’s system in London Ontario, dating back nearly a century – but no city stated its intention to build out a citywide DE network.

Fast forward to 2013. As part of the implementation of DE, Guelph commissioned and published a District Energy Strategic Plan. This document stated a more specific goal – to meet at least 50% of the city’s heating needs using DE by 2041. This was even more bold and ambitious than the CEI objective, and placed Guelph’s plans even further beyond anything any other North American city had in the works.

Then in February of this year, a Guelph delegation consisting of me, Mayor Karen Farbridge, Chamber of Commerce President Lloyd Longfield, and Guelph Municipal Holdings Inc. General Manager Rob Kerr, travelled to Germany to participate in the Transatlantic Urban Climate Dialogue Plus. While in Berlin, our delegation met with a number of leading companies in the European DE market. Ramboll Group was one of them.

We described Guelph’s plans, and delineated how the CEI has enlisted a broad cross-section of the community and enjoys widespread and enthusiastic support as a result. We expressed our conviction that the DE market in Ontario, across Canada, and indeed in all of North America is on the verge of explosive growth. This growth will be driven by rising energy costs, increasing urban densification, and growing concerns over the effect of fossil fuels on our climate. We positioned Guelph as the gateway to a market that was about to blossom.

Our case was well received. Each of the three companies agreed to visit Guelph to explore the opportunity further.

In May and June, we hosted delegations from each company. Our European colleagues learned more about the details of our plans, and heard about the prior month’s visit by the Minister of Energy to announce two Combined Heat and Power (CHP) projects totalling 18 megawatts of electricity production. They also toured the city, saw the elements of the DE network that were already in place, and cased out the areas where we planned to continue building this new thermal energy utility.

We soon learned that our estimates of the cost and difficulty of implementing the system were out of whack. North American DE players are project focused, and the costs reflect this. Their European counterparts are program focused and are willing to offer prices with a long-term view. In other words, when ordering, say, 100 metres of DE piping as part of a program to lay over 100 kilometres, a North American company will offer a price for the 100 metre quantity; a European one will price based on the full 100 kilometres. By partnering with our new European friends, we stood to reap the benefits of significant bulk purchase pricing.

Another factor which was out of whack was our understanding of the ease of constructing a DE network. The first thing our Danish friends pointed out was that our roads are straight. So what? At first we didn’t understand why this was relevant. Of course our roads are straight. Aren’t all roads? And why does that matter, anyway?

European cities are, generally, ancient. At least more ancient than the automobile, which is the main reason for straight roads. European cities tend to be constructed along natural features, like rivers, deltas, lake shorelines, or seashores. Pipes are straight. Laying them along Mother Nature’s curves and bends is nightmarish, but it’s par for the course in the mature European DE market.

In North America, straight lines predominate – except for in the centres of the cities that were first settled on the east side of the continent. As you travel west, and as you travel out from the centre of older eastern cities, you find – you guessed it – straight roads. And since DE networks generally follow roadways (like other infrastructure such as water mains, sewer lines, buried cables, and so on), straighter means cheaper.

Another factor is the width of our roads. In European cities, at least in the downtown areas, drivability is clearly an afterthought. Negotiating some of the narrow lanes in anything larger than a Fiat Uno is a hair-raising experience. Installing any infrastructure means that the roads will be shut down for the duration of the work. Crews are lucky if they can find a route for the pipe that doesn’t interfere with existing services.

Our roads don’t feel that wide, but only because most of us haven’t experienced European ones. In some parts of Guelph, our Danish visitors gaped at wide roads, wide shoulders, and wide ditches – for the first time in their careers, they considered that they could run their pipe without halting traffic. It was a completely new and astounding idea for them.

The bottom line is that Guelph – and indeed all of North America – is the promised land for DE. It didn’t take long to reach agreement with all three companies. Ramboll is just the first – more good news is coming to Guelph, more economic growth, more jobs, and an exciting future at the forefront of a huge new market.

Blind alley

In my last post (which also happened to be a speech I gave for last week’s launch of Project Neutral in Guelph) I pointed out that the city is hemorrhaging money to pay for energy. By 2031 the annual bill will reach half a billion dollars. Guelph is not alone – every city has to pay for the energy it uses. Since no North American city has achieved energy self-sufficiency, most of that cash leaves town.

Guelph is a growing city. The Province of Ontario’s Places to Grow Act of 2006 committed the city to a 50% population increase over the ensuing 25 years. That means adding nearly 60,000 more citizens, and 20,000 more dwellings to accommodate them. Growth in population has traditionally been tied directly to growth in energy consumption, so as long as the two go in lockstep, we would expect Guelph’s energy consumption to grow by 50% from 2006 to 2031.

Guelph’s Community Energy Initiative commits to breaking the link between population and energy. It states the goal that all growth in energy needs for the residential sector will be met by efficiency. In other words, if a new house is built, the energy it uses will come not by generating and importing more energy, but by all the existing housing using less.

Energy efficiency programs, in which utilities work with government to encourage homeowners to use less, are nothing new. One of the most recent such programs was the EcoEnergy for Homes program. It achieved less than 10% penetration. Unfortunately, that’s not enough for the program to be considered a success.

Why was EcoEnergy for Homes a blind alley? First, the economics were problematic. Second, it was maddeningly complicated. I went through the process on two successive homes, so I got to know the details pretty well.

Economics first. The return on investment for an energy retrofit is reasonably good, but not fantastic. The fact that the risk is near zero, and so should be rated alongside, say, Canada Savings Bonds, didn’t register with me at the time. If it had, I would have realized that it was a fabulous deal – normally you only get moderate returns with moderate risk, but this was a moderate return with very low risk. Sweet. If I’d only seen it.

Rather than return on investment, some people look through the payback lens. An investment with a return of 10% pays for itself in ten years. With the incentive cash considered, my payback was eight years or so. That made me hesitate – was I certain that I’d stay in my house long enough to get my money back? (As it turned out, I didn’t stay in either house long enough.) The payback looked worse if I took interest costs into account. More on that in a moment.

So much for economics; now on to the complexity problem. The initial step was to learn about the program. The marketing for EcoEnergy was pretty good, but I expect they threw buckets of advertising cash at it to achieve that level of awareness among prospects. There was no personal touch, no way to ask questions other than a FAQ file.

The next step was to get financing. No bank offers a home energy loan program, so the only way to finance the project (if you don’t have a stack of cash gathering dust somewhere, and who does) is with a home equity line of credit. If you’re pushing the limits of your creditworthiness, you’ll never convince your banker that you will be able to pay for the loan out of the savings on your energy bills, so you may never get out of the gate. Fortunately, I had credit to spare so I got the money I needed.

Next, I needed an auditor. Most people hear “auditor” and run for cover, so seeking one out seemed like masochism. I eventually learned that energy auditors are nice folk, but I’d never done business with one before. Plumbers, yes, electricians certainly, but energy auditors never once. Fortunately I was given a list of approved suppliers, which helped the process along, but it was still terra incognita.

Now on to contractors. Many people have done home renovations and so have a favorite. I’d gotten badly burned on a re-roofing job, so even if dude hadn’t gone bankrupt and skipped town, I wouldn’t have sent another contract his way if my life depended on it. Figuring out the good guys from the bad, the experienced from the fly-by-nighters, and the everything-under-one-roof shops from the subcontract-all-you-can guys…well, it’s a nightmare.

Next is suppliers. My contractor had specific brands of furnace, air conditioners, and water heaters that he liked, so I was stuck with those. I could have tried another brand, I suppose, but I would have gotten a line like, “Well, I can install that one if you want, but I don’t really know it that well/I’ve had trouble with them in the past/their new product line just isn’t as good as it used to be”. The cynic in me figured that low volume of purchases meant no bulk discount which meant tighter margins for the contractor. Anyway, how many furnaces does the average person buy in a lifetime? How do you know the good from the bad?

Finally was the incentive process. The auditor took care of it, which was nice, but it took forever for my cheque to finally arrive. There were no guarantees that I would get the money I expected. It was all very nerve-wracking.

What’s really needed in a home energy retrofit program is simple, low-cost financing that is matched to the investment itself, and a turnkey process that requires minimal effort on the part of the homeowner.

It just so happens that Guelph is planning to deliver exactly that. To find out more, tune in next week.

[By the way, if you landed on this page because you were looking up the 2011 movie directed by the unfortunately named Antonio Trashorras, you landed in the wrong place. And you need to get a life.]

The Big Tent

If energy is the lifeblood of the economy, Guelph – like most communities – is haemorrhaging.

As of 2010, Guelph was spending $500 million per year on energy – electricity and natural gas for buildings and industry, as well as gasoline and diesel fuel for transportation. Where does that money go? A small amount stays in town, to pay for local gas stations, wires and poles, natural gas pipes, and so on. However, that sum is really just rounding error on the total bill. Almost all of the money leaves the city and never comes back. If we take electricity out of the picture, most of what’s left also leaves the province, since local sources of oil and gas are minimal. If the money leaves town, it doesn’t help anyone in town. Energy is a huge drain on the local economy.

If we do nothing, by the time 2031 rolls around, inflation and population growth will have at least doubled the annual spend. A billion dollars will be bleeding out of town every year.

It doesn’t have to be that way. All we need to do is make more, and waste less. We know we can do this, because others have. We can do it without sacrificing comfort and utility. Here in the City of Guelph we have a plan to get there, and we call it our Community Energy Initiative. It has two main parts: Local energy generation, and energy efficiency.

First, we rely almost completely on energy imports. Whether it is electricity coming from Bruce Nuclear or Niagara Falls, natural gas coming from shale deposits in Montana, or oil coming from Fort McMurray bitumen, virtually all the energy we use comes from elsewhere. To pay for it, money leaves our pockets and then leaves town.

However, new technologies mean that we can provide more for ourselves. Combined heat and power technology allows us to use the same fuel – natural gas to start, but eventually locally sourced biomass and biogas – to produce both warmth and electricity. (I like to call this getting a second squeal from the same pig.) Solar energy can also be used to produce both heat and electricity. District energy allows us to take waste heat from industry and supply it to homes, businesses, and other organizations so they don’t have to produce it themselves by burning natural gas.

We already have a combined heat and power plant supplying the West End Community Centre, and two more plants were approved back in April – one at Polycon in the northwest industrial park, the other in the Hanlon Creek Business Park. We have solar thermal panels above the back patio of the Wooly and on top of the River Run Centre and Fire HQ, and, solar photovoltaic panels on top of the Lawn Bowling Club and next to the Speedvale Water Tower. We also have a district energy network growing around the CHP plant in the south end that I already mentioned, and around the Sleeman Centre, which will soon provide heat to the next phase of the Tricar high-rise condo complex at the corner of Wellington and Mcdonnell. This is to say nothing of the DE system that’s been heating the University of Guelph for more than a hundred years. By 2041, half of Guelph’s heating needs will be supplied by district energy.

Second is the matter of energy efficiency. We use far more energy than we need to. If you look at a typical Canadian building through a pair of infrared goggles, it is a kaleidoscope of reds, oranges, and yellows representing embarrassingly large amounts of radiated, wasted energy. A European building will boast a few shades of cool blue. Leading European cities are nearly twice as energy efficient as Guelph is.

Europe hasn’t achieved this through some kind of sorcery, and it’s not as if Europeans are inherently more thrift minded or environmentally friendly. It all comes down to this simple motivating fact: Energy is very expensive in Europe. People, businesses, and other organizations have responded rationally to high energy costs. They have adopted policies, technologies, and behaviours to help them do as much, or more, with less. If we do what they have done, we can achieve what they have achieved.

I’m a fan of Earth Hour and I do my best to participate each year. However, contrary to the message that Earth Hour sends, conservation does not mean freezing in the dark. It just means figuring out ways to reduce how much we waste.

In the near future the City of Guelph will be launching a program called GEERS – Guelph Energy Efficiency Retrofit Services – to help overhaul our existing buildings and stop them from bleeding precious energy.

Earlier I mentioned that Europeans used a combination of policies, technologies, and behaviours to achieve leadership in the energy sector. Policies like the Community Energy Initiative and GEERS, technologies like district energy, and behaviours like participation in Project Neutral will help Guelph to get there too. I encourage everyone to learn more about Project Neutral and how it can help all of us to use less energy, save more of our hard-earned cash, and leave behind a smaller footprint.

It’s an understatement to say that there was an unexpectedly large turnout for the People’s Climate Mobilization on September 21^st of this year. Some of you may have been on the steps of the old Guelph City Hall for the local version of that event. This demonstrated that many people care deeply about climate change. However, “many” is not the same as “all”. For many other people, climate doesn’t matter – or it doesn’t matter as much as jobs, wages, interest rates…in other words, the economy.

Climate is the small tent – rightly or wrongly, not everyone cares about it. The economy is the big tent – everyone gets money somehow, spends money somehow, and has to find a way to somehow make the two numbers match. To make meaningful progress on the climate issue, the conversation must move beyond the environment, and encompass the economy.

Energy is where the environment meets the economy. As a city, we can work together so that by 2031, we will be wasting far less energy, and producing far more of our own, and maybe, just maybe, keeping half a billion dollars right here in Guelph.

That’s a future we can all get excited about.

Postscript: The annual numbers for energy spend (present day and anticipated in 2031) were originally understated by 50%. This has now been corrected.