Blind alley

Dead-End-Good-Ways-To-Make-Money1In 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.]

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10 thoughts on “Blind alley”

  1. Alex ,sorry I missed the launch of project neutral .Had it on the calendar but did not notice till next day.
    I am also assuming the half billion is for the total energy use for all residential ,city owned assets and ?

    Mike

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    1. Pity you missed the PN launch, but you’ll have the chance to participate, and that’s the main thing!

      The half billion is all-in: all buildings (residential and industrial/commercial/institutional), all industry, and all transportation. The original $250M figure came from the CUI report, and I applied a conservative escalator for population growth and price inflation.

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  2. Yup – Alex, energy retrofit programs are typically not simple for the home owner or the contractor. And we really do not know if the work – no results are tracked – so contractors really have no idea if they did a good job.

    Wow – I love the One Knob concept! Let me say that one more time WOW!

    Kathy, thanks so much for this link. I love how the author explains the problems with all the energy efficiency programs I have seen so far.

    I like the idea of making the contractor determine the savings and then being tracked. This means it really has to work. And home owners will need to track what their energy costs are so they get the incentives.

    I would love to chat more about how the GEARs program could be set up to be really effective.

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  3. Great points. Although ecoENERGY was better than nothing, and at least initiated some homeowner awareness of green retrofits, I think the more critical thinking we analyse it with, the better systems we can build for the future. To give them some credit, they just upgraded the rating system to include Net Zero, into a linear scale a homeowner can understand.

    I would like to add one part of the ecoENERGY blind alley that affects many homeowners: lack of design ability and knowledge of what to do. GEERS will address some of this with packages, which I await the unfolding of in next week’s installment!

    The One Knob concept had some appealing points. I live in a 1916 house with a 1″ plaster lathe cavity. My ecoENERGY “auditor” told me there was nothing I could do to make it better, and the ecoENERGY program would not give me an incentive for filling the cavity with pour formula 1/2 pound foam. Just the kind of complexity and rigid program that he describes.

    I did it anyways, and my entire gas bill dropped from $168 a month to $86 a month, on a yearly average annual billing system. The 1″ of 1/2 foam didn’t add much insulation, but it completely sealed all the drafts, shut off the stack effect, and reduced the cold wall effect, allowing me to have more comfort while reducing my thermostat setting from 70 to 68.

    The One Knob idea would have paid a good incentive for my results. GEERS would have made it much easier for me to do. There are maybe 5,000 more homes like mine in Guelph to go. Let’s get cracking!

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