HER&D Mentality
Woodside_finished_whole_house_refurb
Woodside_finished_whole_house_refurb

 Want to reduce greenhouse gas emissions in Ontario? There is no greater opportunity than within the nearly 5 million homes across Ontario, which is why the Ontario Home Builders’ Association has been an advocate of the Ontario Ministry of Energy implementing a mandatory energy rating and disclosure system.  

If implemented, this Home Energy Rating and Disclosure (or HER&D) would require Ontario homeowners to get an energy performance rating for their homes and then be required to disclose that rating to prospective buyers. 

HER&D is seen as a way to make the province’s residents more aware of how energy efficient their homes are and, in theory, help to fast-track home energy retrofits. In turn, anyone selling their home could theoretically command a higher price or, at the very least, help them keep up with the Net Zero Joneses living next door. The numerous spinoff benefits include increased jobs, while reducing energy demands and helping the province to meet its long-term conservation targets. 

The concept of a home energy rating system isn’t exactly a new one. More than 30 countries, including the entire European Union and Australia’s Capital Territory, have similar programs in place with varying degrees of success—success based largely on the extent to which these different countries and regions are providing financial support for energy retrofits after a home has been audited.

With the right mix of policies and incentives, Ontario Home Builders’ Association Senior Technical Advisor Pauline Lip says the upside could be tremendous for the province’s home builders and renovators. “Not only is it a huge opportunity (for those doing energy retrofits), it’s the single most effective ways to combat climate change,” observes Lip. “Of Ontario’s 4.9 million existing homes, 4.1 million were built prior to the year 2000. In other words, over 80% of stock are aging homes, most of which are  energy inefficient.”

Considering the number of homes potentially in need of energy retrofits, Jamie Adam, OHBA Renovator’s Council Chair, says HER&D could have a dramatic impact in terms of business opportunities for builders or renovators looking to either supplement the existing work they do or perhaps even specialize in this area. 

“It’s not unlike the auto industry and electric cars right now,” says Adam. “You have a few automakers spending time developing the market and you can see they’re beginning to make progress to the point where electric cars will be a lot more prevalent in the near future. I think it’s going to be the same for our industry if an energy rating system is established—the taps will be turned on. It doesn’t mean you’ll be making millions right away, but if there’s a label on someone’s house that says it has a much better energy efficiency than the house next door, the purchaser of that home will be more willing to pay a premium for it.” 

Consistent with this observation, the Ministry of Energy states that in the European Union, home energy ratings together with retrofits have translated into increase resale values of 2%-8%. 

Elizabeth McDonald of the Canadian Energy Efficiency Alliance (CEEA), a national not-for-profit group that promotes energy efficiency, says Ontario is better positioned than any other province to embrace a home energy rating system. “You’ve got one of the hottest residential markets in the country in Toronto, and the economy here is stronger than other parts of the country right now. And for most people their home is still the biggest investment they’re going to make. So it’s important for people to realize there are things you can do with your home to, first of all, lower your carbon footprint and, second, to reduce your energy costs.” And if Ontario “gets it right,” McDonald notes, it will establish an important precedent for the rest of the country to follow. 

BEAR TRAPS

Of course, there are no guarantees the province will get it right. “There are lots of issues,” cautions Michael Lio, president of buildAbility, a consulting firm that focuses on implementing innovation in the building industry. “The province just announced $100 million (in February) to help finance energy retrofits. But my advice to government is to tread carefully. There are big bear traps, and if they’re not careful in terms of what program they introduce, we’re going to have a mess on our hands.” 

And while the Ministry of Energy plays up the need to create a market and create a need for an estimated 1,900 energy auditors, Lio feels that energy audits are an unnecessary hoop for homeowners to jump through before actually tackling upgrades that will help to lower their energy bills. The other concern Lio cites is that once consumers get set recommendations to improve the energy ratings of their homes, “how will they be protected from renovators who say to the homeowner, ‘My brother-in-law can switch out your furnace and insulate your basement and you’ll get a great deal?’ And then when the work is done, how does the consumer know that the installer has actually put in an air barrier before they insulated?”

The most obvious starting point to help ensure renovations are properly done would be for the government to mandate that any energy retrofits done in the wake of an energy audit be completed by a RenoMark professional renovator. Corey McBurney, president of EnerQuality, says there’s also a compelling case for renovators serious about focusing on energy retrofits to gain additional training in this area. 

“We developed a pilot program called the Green Renovator Project in 2013 to provide builders and renovators with the skills and know-how they need, consisting of five courses and an exam that had 43 participants. But then the whole system that would fund such a program ground to a halt,” says McBurney. “But with a combination of HER&D and a good incentive program for retrofits, the timing could be right to relaunch this program.”

MONEY TALKS

Russell Smith of Parity Projects, a London, UK-based firm that specializes in energy retrofits, knows full well how important government incentives are when it comes to getting homeowners on board with spending money on upgrades that are tied to lowering their energy bill, instead of opting for a new kitchen or bath. The UK launched what was known as the Green Deal in 2013 and, says Russell, “things were going really well for a couple of years (the company did energy retrofits for over 150 homes). But the government wasn’t pushing the policies very hard, and since 2015 they’ve been pulling every incentive one by one. The theory of the new government (the Conservative party came to power in July 2015) is to divest money instead of growing this opportunity. So it has had a backward impact on installations.”

Now, with greatly reduced funding, Russell says they’re left with two types of homeowners. “The ones who can see themselves in the house for a long time know it makes sense for them to lower their energy bills, and they’re willing to pay for this work out of their savings. And then there are the ones that are still willing to spend 30k on a kitchen instead.” 

Smith says the other challenge the UK faces, which ties in with the need to actively support a more comprehensive home energy rating and retrofit program, is the problem of ‘fuel poverty.’ “It’s when people are spending more than 10% of their disposable income on energy and having to choose between food and heat. It’s an issue that affects 5 million out of 24 million homes in the UK.” In Canada it’s called energy poverty and according to the Fraser Institute, it affects more than 1 million Canadian households.

Whether it’s giving homeowners who can afford to do the work more of a reason to choose energy retrofits over a new bathroom, kitchen or entertainment room, or helping those who don’t have the money to live more comfortably with lower energy bills, “what we need is to have low-cost loans and incentives available,” Russell says.

Other Euro-member countries such as Germany and Austria have had aggressive incentive programs in place for several years. Germany, for example, offers grants or loans of up to 75,000 euros, while Austria offers subsidies that top out at 100,000 euros. As a report produced by the Austrian Institute of Construction Engineering points out, “the amount of money is substantial.” 

Incentives not only support energy retrofits for existing homes, but the building of new homes that are more energy efficient. Susanne Geissler of the Austrian Energy Agency says all nine regions in that country have embraced what are known as energy performance certificates, which are supported not only by aggressive incentives but also a rigorous process to ensure the money for energy retrofits is well spent. “The Salzburg region has a very interesting scheme,” says Geissler. “They award a grant and pay after completion, provided the invoices show that the money was used as planned. And they require an energy performance certificate as proof (of the improved performance).” Grants of up to 20% of renovations are managed by an online platform that includes a database that lists qualified staff both for doing the energy audits and for sourcing builders and renovators. This effectively removes unqualified auditors, renovators and builders from the picture.

As for the economic impact of these programs, in the case of Germany’s initiative, coined the CO2 Rehabilitation Program, the program in 2013 was responsible for up to 440,000 jobs, according to the country’s Federal Ministry of Economic Affairs and Energy. The program also contributed to a growing demand for everything from more architects and civil engineers to skilled employees in the construction industry. And in Austria, the Salzburg region in particular provides a shining example of just how successful the country’s incentive program has become. Since 2009, when 30% of homes were built to higher energy standards, the program has gained traction to the point that by 2015, 80% of new homes were tied to the program and built to the prescribed energy performance.  

HER&D’ING IN THE RIGHT DIRECTION?

So where are we at with HER&D in Ontario? In an interview late last year, Premier Wynne told a CBC reporter, “We will be putting money into green investments that will help people to retrofit their houses. We know right now that the greatest emission of greenhouse gases comes from our building sector and transportation. So if we can find a way to help people to retrofit buildings—if we can find a way to construct buildings in Ontario more efficiently, we will reduce greenhouse gas emissions. But that’s going to require investment. (But) having a retrofit program that will help people to do that is something that I absolutely hope I will see in Ontario.” 

In February, the Ontario government announced a $100 million retrofit program to help homeowners complete upgrades, such as their furnaces, water heaters and insulation. But as reported by the media, details regarding a start date, eligibility rules or rebate amounts were not provided. Then in March, the federal government under the new Liberal administration launched its first budget, promising to earmark $2.9 billion over five years to address climate change and air pollution issues. Included in this was $128.8 million over five years for Natural Resources Canada to “deliver energy efficiency policies and programs.”

But several questions remain in the wake of both announcements. To what extent will the federal and provincial governments work together to come up with a tangible solution with respect to home energy ratings and energy retrofits? Is there enough ‘stomach’ to implement a program such as HER&D, which could face a backlash both from homeowners and realtors? And is there enough money on the table to bring such a program to fruition? 

Just a day before the federal budget was announced, Ontario’s Ministry of Environment and Climate Change Executive Director Alex Wood admitted to OHB that he was “well aware” of the multiple challenges of implementing a program such as HER&D, including the fact that not everyone in the province is on board. “Right now, there are a lot of ideas on the table. The process we’re going through every day is to take a hard look and doing a due diligence of cost and benefits, including retrofits and disclosure (HER&D). But I can’t tell you when they’ll come up with a final action plan because our job here is really to coordinate the action plans that various ministries put in place. For instance, with the Ministry of Municipal Affairs and Housing, if we go with a retrofit or rating disclosure initiative, it will be done through the tools they have.”

Whether it’s HER&D or some other iteration, Wood says “we want people to (commit to this) path as an energy auditor or a contractor specializing in energy retrofits. We want to create a market for that. So yes, in the short term we’ll promote these initiatives based on government policy. But over the long term, we want people to take this on themselves.” 

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