Natural Resources Committee on May 7th, 2007

[Gordon Shields]

That's a big question.

[Simon Knight]

Let me take a shot at it.

[Gordon Shields]

Okay, and then I'll complement it. Can we do a tag team?

[Simon Knight]

Pricing has always been a problem. When you talk to Europeans, they tell you about all the things they're doing in their countries. We've actually had some Europeans come across and say, “Just be careful about the context, because in Europe the price for power and energy is very high.” So there's a natural driver there for them to go to much more efficient construction practices than here. Until now we haven't had that driver. Now we're looking at addressing the issue of climate change through things like energy efficiency, so we have a different driver.

How do we communicate that to the buying public as the reason to buy net-zero energy homes? We're talking about market transformation. We're asking people to invest considerably more money in their homes, and we have to help them understand why it's required. Just the energy savings isn't enough of an argument at this point.

When we're asked how that money should be invested, if I knew exactly where prices were going to go I'd be investing heavily in the market right now--but I don't. We can see that energy costs are going to continue to rise, and there will be more of a demand for these types of homes.

We're talking here about how to accelerate that kind of deployment into the marketplace so those homes are available for the homeowner when the energy prices continue to rise. The technology is there, the builders understand how to build them, and the trades know how to construct them. The system is in place for it to become a market-driven deployment on a mass scale, but we need those incentives at the front end to get that mass deployment going.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

Mr. Knight, you say that builders have the technical know-how. I was teaching building techniques to the fathers of today's builders in the 1970s and 80s. In other words, they have had the know-how for a long time. That is not the problem. You also spoke about the cost of energy. However, in Sweden and Norway, energy costs 5¢ per kilowatt hour. The Swedes launched projects in the 1980s, and now they're building entire cities. Housing projects have been developed in certain areas of the northeastern United States, where energy is inexpensive. Would you not agree that the issue in Canada is a lack of political will?

At the time of the Trudeau administration, solar-energy projects, amongst others, suddenly mushroomed. The next government, however, introduced cutbacks, and the one that followed it, Mr. Chrétien's administration, slashed funding even further. It would seem that the current government is going to leave the matter to the private sector. That is not acceptable. In order for such projects to be successful, we have to at least foster an attitudinal shift so that people realize they have unmet needs. We have a responsibility to the whole world, but in order to live up to it, we need political will.

Do you agree with me?

[Simon Knight]

I agree with you that we need both the right price signals and political will, not just at the federal level but at the provincial and municipal levels. We also need consumers to begin to understand that they are the source of the problem and the solution to the problem. Those kinds of behavioural changes take a long time. We're asking for some incentive to help them make that more rapid transition into the marketplace. At the same time—as we've done with several of the programs we've run in Alberta outside of housing—you have the opportunity to do the larger educational piece for them because you have their attention.

As Gordon pointed out, when people are selling granite countertops, there's a much better premium on selling granite countertops than in putting solar panels on your roof. So we have to make a very good story for the consumer to understand, and we have to make a very good story so the builder understands why we're advocating that sort of thing.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you.

Mr. Gourde.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Thank you, Mr. Chairman.

The home shows that young families visit before building their first house do not focus much attention on energy consumption. They may showcase heating systems, but they tend to focus more on aesthetic matters, such as kitchen counters and cabinets. People tend to be unaware of what is available in terms of energy-efficient homes.

What concerns me—and Mr. Ouellet raised this; we have been talking about it for 35 years—is that energy-efficient homes are not really a priority for Canadians. More information is needed, but sometimes providing information does not deliver the desired result. I wonder whether simply providing information will be enough to persuade Canadians to choose energy-efficient homes. Are there kits to encourage the use of solar power and geothermics in the cities? People who get their supply from the municipal water system will not be interested in geothermics. However, let us take the example of a young couple who want to buy a house at $100,000 or $125,000 and who realize that, with all the extras, there will not be much left over for a heating system. As the cost of a heating system represents approximately 30% of the total value of a house, the couple could choose to spend less on their heating system and put more insulation around the doors.

What do you view as being the ideal system for Canadians? What could they buy, that would give them various options, so that 15 years later their investment would pay off? Is it possible to make such a promise, or is it so unpredictable that no such guarantee can be made? People know that conventional systems can cost around $10,000 and will allow them to heat their home for a certain foreseeable amount each year. Will the new systems allow us to guarantee Canadian consumers that by investing a certain amount they will make significant savings? Can we guarantee that their investment will pay off?

[Gordon Shields]

A net-zero energy home is a tool. You can't change the behaviour of the inhabitant of the house. You can have someone buy these homes and you can provide a general guarantee of how the home will perform, but you cannot guarantee what the inhabitants will do in the house. So they'll open all the windows, they'll turn their air conditioning on, and in the wintertime they'll leave their windows open again with the heating system on. But if the home is constructed in a fashion that gives them the ability to reduce their environmental footprint through energy consumption, water consumption, if it's a truly sustainably built home, that's the goal we should be aiming for.

The market will decide what kinds of homes will find their way into the community. The builder, as long as they know there's a consumer out there who is conscious of price fluctuation in their utilities or is conscious of the environmental footprint they're making on a daily basis, will respond to that customer's demand. But until we put in place a framework that supports these kinds of energy sources and these kinds of tools to enable a net-zero energy home in the marketplace, we're just merely talking about tinkering on the margins and trying to find a couple of demonstrations here and there, and never getting to the community-scale development where we can then impress upon people through a large-scale demonstration to say, “It works. It's up to you as the inhabitants to decide how to use that tool, that tool that you've purchased.”

You have in Ontario small- and medium-scale builders right now--I put Marshall Homes in the PowerPoint presentation, and you have many more--who are demanding help from us as a coalition and asking elsewhere, and this came as a result of a recent forum we had. They want to build these homes. They can't afford, clearly, to put photovoltaics on the home and be competitive with Minto or with Mattamy Homes or with Alouette Homes and other home builders out there. They have to remain competitive, but they want to do it because their customers are demanding it.

If there's a demand in the marketplace, and there's a policy decision by the government or governments to say, “Our goal is to reduce environmental footprints, to change the policy energy paradigm, to achieve certain goals, and societal benefits are going to emerge from this decision”, then that's what governments have to do to give people tools to help achieve those goals. There is a demand out there; there are builders who want to do these kinds of homes. We just need to nurture the marketplace. It will be the small- and medium-scale builders that will move the large-tract builders along, because the large-tract builders are not going to want to lose their market share. So you give incentive to the medium-scale builders to corner more market share for themselves, and I guarantee you, Minto and others, which they're doing in part because they're part of this, and they're leaders, too--this is not a slam against them. Let them compete. But if we decide that as a societal benefit we want to achieve certain goals, we have to give the tools to get those goals.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Thank you for answering one part of my question. I would like you to talk to us about the basic kit that could be used to heat homes in the future.

Generally speaking, homes are built based on the best value for money. If small contractors want to make a profit, they must keep their costs as low as possible.

If an energy-efficient heating system costs an additional $20,000 to $25,000, builders will opt for the traditional system. Small and large home builders alike earn profits by selling thousands of homes. If the prices of the homes they build are not competitive on the market, and restrict their ability to sell, builders will choose the more conventional systems. Ultimately, we are going around in circles.

Would a basic system to make these houses more energy efficient comprise solar energy combined with geothermic energy and other methods? Such a system will cost $25,000 more per home, and it will take 12 years to recover the cost.

Canadian consumers must be given the opportunity of having a cost-efficient home. This idea must be introduced when they purchase their first home, and not their second or third home, when people are in their 60s or 70s and they move to condos.

Often, over the course of a lifetime, one will have one or two homes. If the first one is not well chosen, the errors will be passed on to the next generation. Parents will advise their children on building a home. Often it is the father who advises the son on the choice of heating system. Rarely do mothers advise daughters on this subject; mothers will more likely have something to say about curtains.

[A voice]

Oh, oh! How sexist!

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

But it is the truth. Perhaps it is sexist, but it is the truth. If we don't convince the current generation by 2010 to 2020, we will find ourselves talking about the same subject in parliamentary committees by the year 2070.

[Gordon Shields]

In part I agree with you. If I understand your question correctly, what you're looking for is the number out there that we can reach to help pursue that cost premium for the home, and then help to try to reduce that cost premium and eventually allow the technology to be competitive. Is that correct?

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

How many homes are required?

[Gordon Shields]

What does it take? I don't think there's a magic solution to that. The National Renewable Energy Laboratory in the United States produced a report recently for the United States zero-energy home program, as it's referred to down there. They did a zero-energy home impact study, and the outcome ultimately was that if you don't act now, you're not going to transform the marketplace by 2030.

So it doesn't matter what the price is right now. What they're trying to say is that you've got to start now to implement tools, to initiate tools to begin to transform the marketplace. There's not a number that they can land on. They have homes in California; they have homes in New York State; they have homes in other parts of the United States. They all have different cost premiums. They all have different markets.

But what they are doing is leveraging some federal-, state-, and municipal-level support. All that is to say that they're trying to transform the marketplace, but they've got to do it now. There's going to be an impact from zero-energy homes in the United States. It's part of their energy strategy, their security strategy. There's a reason they're doing this.

We have different reasons, possibly, but the point is that if we sit and bicker or discuss how we make this cost effective by a certain timeline, we're going to get caught in the trap of never being able to accelerate integration of these tools into the marketplace and letting the market decide for itself.

It could be five years from now that solar PV is cost effective, depending on how fast it's deployed. That's unrealistic, notwithstanding that silicon is expensive, but the price of PV on a global scale is dropping. So the point is that if we act now, we're not getting caught in this trap of what if or how do we get to reduce our costs faster? Let the market decide that as quickly as possible by giving some intervention from government in the short term.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Gourde.

Thank you for the answers.

Mr. Allen.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you, Mr. Chair.

I have just a few questions. I'm trying to understand the numbers in your presentation here, where you talk about the net-zero home energy plan benefits. It talks about total greenhouse gas reduction of 325 megatonnes through 2050, and then new power generation, 13,700 megawatts through 2050.

From net new homes, is that the savings? Is that what you're getting at there?

[Gordon Shields]

The 13,000 megawatts is new production from PV, for example, on a cumulative basis. In our view, you generate three kilowatts in year one, you add that to year two, and add that to year three. It's cumulative production we're talking about. It's not just every year; you build on it. The point is that it's a production number.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

We've talked a lot about incentives and that kind of thing to stop the bleeding, if you will, and to go to these new net-zero homes. But every day we're putting out a big inventory of existing homes. What is the strategy for converting? How do we get those homes, at some point in time down the road—?

It's like the old car program. The auto dealers will tell you that it's better to take an old car off the road than to actually try to get new efficiencies on some of the new cars, because you're looking at a 37:1 ratio.

Have you thought much about how you would transition this whole inventory of houses we have out there to something good by 2030 or 2050?

[Gordon Shields]

Are you talking about how we would address the retrofit market to be equal to how we address new residential? Is that what you're saying?

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Yes, I mean the houses that are built with marble tabletops.

[Gordon Shields]

There is a price difference for integration in the retrofit market. The reason we approached the new residential market, in part, is because we think it's more cost effective. It is more cost effective to integrate photovoltaics, for example, in the building. Integrated photovoltaics become part of the rooftop. You lower the cost of building materials at the front end, as opposed to a retrofit, where you're talking about installation on the roof, so you have a roof plus the panels.

What do you do about the retrofit market? That's a big challenge. Right now, the EQuilibrium initiative, thankfully, has helped bring some light to that. One of the proponents and one of the winners of the EQuilibrium program is out of Toronto. It's called Now House, and it is a retrofit of one of the old wartime buildings that were allocated to veterans when they came home after World War II. People reside in these homes still. As part of this project, they're looking at retrofitting this home to a near-zero energy standard. That's what I think the retrofit market is ideal for--getting near zero. You want them to upgrade the energy efficiency in the home, ideally, and maybe integrate an on-site generation source to help get to near zero.

You can get to net zero, mind you, more cost-effectively with the new residential marketplace. The focus on the new residential marketplace is because we don't want to make the same mistakes as we are currently. We don't want to be in the same hole we're in right now with the energy efficient homes we build today.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

You led me into my next question, which is about the on-site renewable energy.

I'm a big proponent of distributed generation. But I have a question on that. One side of me says, yes, we should be looking at these programs for on-site generation. But I have some reservations about that, because I think the best way to deliver that program has to be through the provincial utilities. At the end of the day, if someone is putting out some kind of generation on the customer side of the meter, whether it be wind or whatever it happens to be, and they're tapped into the grid as well, the grid is the supplier by default. By definition, the utility is going to be picking up the slack if this doesn't work, or if the wind doesn't blow, or whatever has to happen. At the end of the day, don't the utilities have the best integration of that compared to the federal government?

[Gordon Shields]

Yes, but the federal government still has the lever of tax instruments or other incentive options to help support that kind of deployment. And it sends a signal to the market that the Canadian government is going to help support this kind of energy generation for the future.

You're right. Provincially, utilities have a major role to play. In Ontario, as an example, right now, they have the standard offer program. It is a leading jurisdiction now across North America, and indeed the world, I would suggest, on the implementation of this program.

Interconnection with the utilities is now regulated, and people have an understanding. Suppliers and homeowners will have an understanding of how the system will evolve and that consumers will have a choice. They'll wake up and be able to say that on their next home, or on their existing home, if they choose, they want to put panels on the roof. And they won't have the barrier of an LDC—local distribution company—hat doesn't understand or doesn't wish to entertain that kind of interconnection. In fact, they may have an LDC that is keen on doing this, because it helps to reduce their peak load. There's an understanding, therefore. It's not so much how I can interconnect, but how fast I can interconnect. It's their right as homeowners to want to put this on their rooftops.