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Towards Carbon Neutral & Net Zero Energy for Residential Buildings in BC

Sub-Committee Meeting – Financial Tools and Incentives May 21, 2014 John Madden

Director of Community Planning and Development

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Acknowledgements

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Sub-Committee Members

Tracy Casavant Executive Director, Light House John Madden Project Director, Light House Joanne sawatzky Project Manager, Light House Joy Chen Building Analyst, Light House Souri Riazi Research Analyst, Light House Wayne Ward Technical Director, BRE UK Svend Andersen GHG Accounting and Protocols Advisor

Project Team

Alan Sung Vancity Brendan McEwen City of Richmond David Hutniak Landlord BC Jordan Fisher FRESCo Katherine Rossokha BC Hydro Nigel Protter BCSEA Svend Andersen GHG Accounting Services

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Agenda

Time Discussion Items 9:00 – 9:10 Welcome & Introductions 9:10 – 9:30

• Study Objectives
• Process and Timelines
• Preliminary Research Findings
• Challenges and Opportunities

9:30 – 10:30 Expert Working Sessions 10:30 – 11:00 Summary and Next Steps

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Study Objectives

Engage governments, utilities, building and the real estate industry across the Province to develop a cohesive and strategic road map to advance carbon neutral and/or net zero energy for residential buildings*.

* with a focus on BC Building Code Part 9 buildings

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Study Approach

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Definitions

STEP 2: Meet remaining energy demand with no (or low) carbon energy generated

• n
• r
• ff-site

STEP 1: Squeeze energy demand, usually to a pre-defined target CARBON NEUTRAL BUILDING STEP 2: Meet remaining energy demand with renewable energy generated

• n-site

NET ZERO ENERGY BUILDING

• Carbon Neutral Building

– A building which significantly reduces energy consumption combined with the increased use of low carbon energy sources to meet the remaining demand.

• Net Zero Energy Building?

– A building which significantly reduce energy consumption combined with the use of renewable energy generated on-site to meet the remaining demand.

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Advisory and Sub-Committees

Advisory Committee (Expert Round Table)

Subcommittee

• Financial

Mechanisms & Incentives Subcommittee

• Technologies

Subcommittee

• Education,

Awareness & Capacity Building Subcommittee

• Policy,

Codes & Regulations 8

Sub-Committee Objectives

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 Policies, Regulations & Codes  Technologies  Financial Tools & Incentives

• What is the financial cost / benefit to meeting established

targets?

• Where the costs were considered to be incrementally

significant higher than business-as-usual, or where challenges regarding distribution of benefits existed, were incentives required? If so, what type of incentives?

• What incentives were used to drive market-level strategies?

 Education, Awareness & Industry Capacity Building

Select cities in different Climate Zones

• Zone A: ≤ 3500 HDDs

➠ Vancouver, HDD18max(1971-2000): 2960

• Zone B: > 3500 to ≤ 5500 HDDs

➠ Kelowna, HDD18max(1971-2000): 3869

• Zone C: > 5500 to ≤ 8000 HDDs

➠ Fort St. John, HDD18max(1971-2000): 5893

• HDD18max - The standard method for

calculating the Degree Day Daily mean;

• Daily mean = (Daily max + Daily min) ÷ 2
• HDD18max (1971-2000) – The average of

HDD18max value from 1971 to 2000

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Residential Building Typologies



Structural Type of Dwelling and Collectives Reference Guide, 2011 Census:

• Detached Houses: Single Family Dwellings
• Attached Houses: Duplex, Semi-Detached and Row Houses
• Multi-Unit Residential Buildings: Apartments
• Moveable Dwellings:

Detached Houses Mobile Homes Semi-Detached (vertical division) Duplex (horizontal division) Apartment < 5-storey (horizontal & vertical division) Apartment ≥ 5-storey (horizontal & vertical division) Row House (vertical division) 11

Define Characteristics of Housing

House Characteristics Typical Rating Building Standards / Codes Unimproved Older house 0 to 50 Pre 1970’s Building Code Partially improved Older House 51-65 1970’s – 1980’s Building Code Fully improved Older House 66-75 1990s Building Code Typical New House 68-82 Current Building Code Energy Efficient House 80-90 R-2000 House Super energy-efficient House 91-100 Net Zero Homes

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Matrix of Climate Zone & Typologies

 Statistics Canada, 2012

• Single detached houses are the most common housing type except in BC.
• The average occurrence of single detached houses across BC is 47.7%.

Climate Zone A B C House Types BC Average Vancouver Kelowna Fort St. John Single-detached

47.7% 33.8% 56.5% 59.0%

Semi-detached house

3.0% 2.2% 4.6% 5.4%

Row house

7.4% 9.0% 5.4% 7.8%

Duplex

10.4% 14.2% 7.2% 1.4%

Apartment, < 5 storeys

20.5% 25.6% 19.9% 13.9%

Apartment, ≥ 5 storeys

8.2% 14.5% 1.6% 0.9%

Moveable and other houses

2.8% 0.7% 4.7% 11.7%

Distribution of housing types in BC climate zones, by # of buildings

47.7% 20.8% 28.7% 2.8%

BC Distribution, Total # of units

Detached Attached Apartments Mobile Homes 67.9% 10.0% 19.4% 2.7%

BC Distribution, Total Floor Area

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Matrix of Climate Zone & Typologies



NRCan database, 2011

• Almost 74% of dwellings were constructed after 1977.
• About 25% of all types of residential buildings were built in 1984 -1995.
• The age of the house may reflect different construction types and hence

determine the building characteristics and performance.

BC dwellings Age Distribution, by # of buildings (%)

Before 1946 1946– 1960 1961– 1977 1978– 1983 1984– 1995 1996– 2000 2001– 2005 2006– 2010 2011– 2011 Single Detached 4.3 5.6 18.9 13.6 24.5 12.2 7.4 11.9 1.6 Attached 2.2 2.3 7.7 12.7 29.7 10.4 12.9 18.9 3.1 Apartments 3.9 4.1 14.7 10.2 24.8 12.1 8.1 19.6 2.4 Mobile 5.2 3.9 23.3 9.7 20.5 12.5 9.5 13.2 2.1 10 20 30 40 50 60 70 80 90 100 Percentage 14

Why is energy efficiency for buildings important?

 Electricity is a growing operating cost

• Inclining block rates; average increase of 4.4%/yr*

 Major source of greenhouse gases

• 55% of Vancouver GHGs

*2010 forcast; pre-BC Hydro-review

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Setting Targets and Step Changes

SET SETTING TING TAR ARGET GETS & PERFORMANC S & PERFORMANCE E > > OUT OUTCOM COMES ES  Adopt baseline performance based on similar climate zones and building types  Define quantitative targets for carbon and energy performance  Define “step changes” and recommendations

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Matrix

Type Physical Characteristics (Age, Floor area, Units) Example Type Baseline Site EUI (kWh/m2) Baseline Total Energy (GJ/household)

Detached

• Less than 4,200 sf
• Two-storey with basement
• 2x4 or 2x6 exterior walls,
• R12, R20 or R28 batt insulation
• Attic insulation: R28 or R40

178 81.2 Attached

• Size from 800-1,200 sf
• Two to three storey
• 2x4 exterior walls, R12, R20 or R28

batt insulation

• Attic insulation: R20

175 81.2 Row House

• Size from 1,600 sf, newer units

with finished basements 2,400 sf

• Two to three storey
• Exterior Walls: 2x4 stud walls with

R12 batt insulation

• Attic insulation: R-21

(NRCan data combine these two housing types in one category)

Apartment

Up to 3 stories (Part 9 only)

153 49.8

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Barriers to Retrofitting Buildings

$

Source: Institute for Building Efficiency Survey, 2012

Financial Tools and Incentives

$

1.Property Assessed Clean Energy (PACE) 2.Energy Service Companies (ESCO’s) 3.Toronto Atmospheric Fund (TAF) 4.On Bill Financing and On Bill Repayment through utilities

Property Assessed Clean Energy (PACE)

$

Toronto Atmospheric Fund (TAF) Energy Saving Performance Agreement

$

Energy Service Companies (ESCO’s)

$

On-Bill Repayment Financing

$

On-Bill Financing

$

Benefits Challenges No up front capital cost for the owner Limited availability at this time Very competitive interest rates Often the first mortgage lender’s approval is necessary to alleviate the primary debt holder’s concerns in the event of default In some cases (tariffs) investment and repayment link to the property not the

• wner

Utilities may limit the loan amount, so more expensive retrofits may be precluded Utilities may be reluctant to embrace

• n-bill financing as it shifts the loan

administration burden to them

Innovative Financial Incentives and Mechanisms Key Principles for Success

• Minimize risk to those undertaking the energy

efficiency capital investments

• Induce the market by making the ROI shorter

by lowering the costs associated with the investment

• Generate on-going dividends after the capital

expenditure is paid off

• Bundle incentives with regulatory /code

changes to balance the “carrot and sticks”

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Sub-Committee: Working Sessions

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Discussion Questions

What incentives should be used to support market-level transformation? Where should financial tools and incentives be focus to achieve greatest impact? What level of financial support is required to achieve Carbon Zero/ Net Zero Energy within residential sector?

* with a focus on BC Building Code Part 9 buildings

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Identify innovative financial tools and incentives that effectively move the residential sector toward CN/NZE…

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• Loans, rebates
• Reduced energy rates for achieving energy reductions (tiered based on usage)
• Tied energy efficiency to property tax rates
• Energy tax (the higher the energy usage tied to a tiered tax)
• On-bill financing through utilities or 3rd party financiers. They need to provide

competitive interest rates and terms

• Clean Energy Mechanisms geared to residential sector
• PACE.
• Non-secured loans. Key save and AFC intermediary financing institutions to provide

home energy loans and credits associated. Coupled with loan loss reserve funds

• Incentives tied to meeting specific outcomes or targets
• Income tax credits or taxation related incentives
• Leveraged incentives (combined with government incentives)
• Non-financial incentives (for example Energy Advisors to help home owners make

decisions around deep energy retrofits

• Process and regulatory incentives. Fast tracking permitting. Thicker walls are not

calculated as part of FSR or height (exclusions for energy efficiency measures such as solar installations excluded from height calculations

Identify innovative financial tools and incentives that effectively move the residential sector toward CN/NZE…

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• Low income incentives with energy efficiency kits
• Guarantees or competitive financing packages tied to energy efficiency upgrades
• CMHC Mortgage Insurance tied to EE upgrades
• Energy efficiency equipment tied lease agreements (washer and drier upgrades)
• Credit unions have expressed interest in major equipment upgrades.
• Important to look at existing programs success and failures. Define why they failed

and how they are structured. Partly non-financial considerations and factors that contributed to the success or failure.

• District Energy connection policy (i.e. required connections to District Energy

including Lonsdale Energy Corp, SEFC Neu, Little Mountain, etc. Benefits the developer and owner. Requires smaller mechanical rooms,

• Additional zoning permissive rights tied to energy efficiency.
• Allowing landlords to raise rents above regulated rent increases if they upgrade

energy efficiency.

• Establish “Green Funds” specifically geared to energy efficiency infrastructure. Need

common program administrator that forge partnership between utilities. Local government, and non-profits

• Green Facilitator to link to incentives and programs and help owners/tenants through

the process.

Priorities, Roles and Responsibilities for Stakeholders

Stakeholder Key Priorities What is their role and responsibility in moving financial tools/incentives forward?

Governments Financial Institutions Builders Utilities Energy service companies Manufacturers/ Trade associations Non-government Organizations

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Milestone

2010 2020

33% GHG reduction

2030

?

2040

?

2050

80% GHG reduction

Policies and Regulations Technologies Financial Tools and Incentives Awareness, Education and Capacity Building

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Milestone (example)

2010 2020

33% Reduction in GHG’s drom 2007 levels

Regulatory framework and support schemes Market facilitation and transformation Technology development and R&D

2030

What is the step change?

2040

What is the step change?

2050

80% Reduction in GHG’s below 2007 levels Market Support schemes to achieve technology uptake? Regulatory framework preparing large-scale integration of PV into grid Building Codes and standards…prescriptive and / or performance based targets? Framework for full market competition with priority access to the grid Energy standards taking into account solar PV building regulations and

• bligations

Training and education for skilled workforce needed for the following areas…?

Increased R&D funding to accelerate cost reduction and transfer to industry Enhanced system applicability of PV and related technologies and products Enhanced storage technologies Smart grid and grid management tools Research into concepts for ultra high performance/low-cost approaches

Key actions and respective leading roles for: Government stakeholder Market stakeholders (Demand) R&D and industry stakeholders (Supply)

Source: International Energy Agency www.iea.org/roadmaps 32

Next Steps

• Follow up Sub-Committees

– Technologies (completed) – Policies, Regulations and Codes – Education, Awareness and Capacity Building – Financial Tools and Incentives

• Summarize Input
• Draft Directions
• Advisory Committee #2 (Round Table) end of

June

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