Evidence of meeting #47 for Environment and Sustainable Development in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was program.
A recording is available from Parliament.
Conservative
Branden Leslie Conservative Portage—Lisgar, MB
It's still a large sample, but you're saying that we should have a larger one because we have a real-life experiment going on.
Associate Professor of Economics, Carleton University, As an Individual
We need more—exactly. In particular, for example, when it comes to those individual retrofits, if we want to identify the most effective retrofits.... We had difficulty in what we would term the “confidence interval”. The smaller the sample you have, once you start breaking down the data of the individual retrofits, the more variation you'll have statistically, and it will be more difficult to say what is the most effective retrofit to recommend to a given household, given that there's so much household heterogeneity that the models, almost by definition, cannot capture. The benefit of getting large samples of data is they reflect the heterogeneity of Canadian households.
Conservative
Branden Leslie Conservative Portage—Lisgar, MB
One of my fears when we have these big-number projects is that at the end of them, it's going to be, “We spent this many millions of dollars on something.” What would you want to see before saying that a retrofit program delivered savings as promised? What is the simplest way to identify that?
I know, obviously, that your work is critical in this space. Is it a matter of, for those who do it, having energy bills submitted and then doing some sort of adjustment for colder and warmer climates? How do you think this functionally works?
Associate Professor of Economics, Carleton University, As an Individual
The way to do this is to build in a randomized control trial before you even deploy the program. This is what we were pitching to Natural Resources Canada. It took us a couple of years, but we eventually overcame the reticence. At the moment there are some changeovers. As I understand it, the OEE might be shifting to Environment Canada.
Really, it was all about setting up a randomized control trial in which you're comparing the status quo methodology based on the HOT2000 model. The HOT2000 model is a very old model. It's over 30 years old. I work with engineers who have basically told me there are newer models available, so even that model itself....
You want to compare the status quo to an alternative in which you use large samples of anonymized utility customer data and develop algorithms based on past adoption characteristics and the characteristics of the households using property assessment data that are publicly available. Then you compare these two approaches—the updated algorithm to the status quo. That enables you to identify what the benefit is of shifting to that statistical approach.
One of the colleagues I've been working with, speaking to different folks in government, conducted, using U.S. data, a simulation study that was able to find that it went from I think a 56% realization rate to an 80% realization rate. Of course, we need to test that in the field and complete a randomized control trial. That would be the way to deploy a program and identify the best and most welfare-enhancing way for households to participate in meeting net zero and decarbonization.
Conservative
Branden Leslie Conservative Portage—Lisgar, MB
That would help us down the road in figuring that out as we develop more programs.
Associate Professor of Economics, Carleton University, As an Individual
Absolutely.
Conservative
Branden Leslie Conservative Portage—Lisgar, MB
Ultimately—I hope you would agree—it would be of value to have the government release that data so we can see what was saved for the economy and for individual families who are embracing these programs, these new technologies and these retrofits, versus what was spent. Then we can identify whether this a good use of taxpayers' money and if it actually worked in the real world. Is that a fair assessment?
Associate Professor of Economics, Carleton University, As an Individual
Absolutely. That's the scientific method, but it would also help us figure out how much we should be allocating to the residential building sector versus other sectors of the economy.
Liberal
The Chair Liberal Shannon Miedema
Thank you very much, Mr. Leslie.
We'll now turn to Mr. Fanjoy for six minutes.
Liberal
Bruce Fanjoy Liberal Carleton, ON
Thank you, Madam Chair.
Thank you to our witnesses for joining us for this important study.
I brought forward this study on home energy retrofits because I've seen the difference that reducing demand in a home can have in electrifying all of the things that require energy. When I realized how powerful it was, I was disappointed that I could do only one house.
I'm looking forward to your testimony, Dr. Papineau, on how we recognize that each retrofit is different and that there can be variation in workmanship, which determines how effective a retrofit is. In virtually every case, I think we're talking about degrees of savings; we're not talking about failure.
Associate Professor of Economics, Carleton University, As an Individual
It's not in every case, but yes, in many cases.
Liberal
Bruce Fanjoy Liberal Carleton, ON
We want to increase the success and do more. How can we scale up retrofits so that more Canadians can benefit from reduced energy costs and we can help address our emissions?
Associate Professor of Economics, Carleton University, As an Individual
At the moment, I think there are some very clear beneficial technologies.
Heat pumps should be offered in a targeted manner, but in a very large-scale program. That's what I would recommend. Again, the evaluation is built in.
Air sealing, we found, was a very high-return set of investments. Households don't tend to save a lot, but it is a very high-return investment for households. Combining higher upfront-cost technologies with lower-cost retrofits that will immediately be seen by people in their homes would be beneficial.
I really think that to get to a point where we're confident that we can scale up and deliver reduced energy prices, or at least energy prices that are not increasing, we need to be basing our retrofit packages.... Maybe I'll give you a bit of background. In the current system, when someone completes an energy audit, they're shown their energy efficiency road map, and they're recommended a set of measures. Currently, these are the data that we use, and the way that these recommendations are presented to households is what led to the 60% realization rate. We want to get much higher than that.
To scale up, we need to identify a better road map. That will deliver benefits to households. Naturally, as long as our energy prices are not going up, if there are some rebates being offered to them, we could even set up a study where we're identifying the elasticity of another.... How much does another rebate dollar actually increase participation? You can build in, in a very well-designed study, ex ante, a mechanism to identify what is the best way to scale up. That's what I would recommend for the path forward.
Liberal
Bruce Fanjoy Liberal Carleton, ON
Thank you.
How do you see home energy retrofits fitting in with the government's electrification strategy and our goals to double the electrical grid in the next couple of decades?
Associate Professor of Economics, Carleton University, As an Individual
I'm currently working on a project to identify the realized consumption of heat pumps in the city of Toronto. We have a collaboration with Toronto Hydro. I don't necessarily see, at the moment, any conflict between energy efficiency retrofits—the goal of Canada to continue to deploy these programs—and electrification.
In the last iteration of the greener homes program, you were not eligible to get a rebate for a gas furnace, and that's the right thing to do, I think. Promoting heat pumps over gas furnaces is correct. Once again, at scale, we want to be able to identify the correlation between the characteristics of any given home and their savings from heat pumps. That's a question we need, again, big data to answer so we can give a set of targeted retrofit recommendations to households that will deliver benefits to them.
Liberal
Bruce Fanjoy Liberal Carleton, ON
You mentioned the community of Medicine Hat and that there were a number of retrofits there. We often hear that heat pumps don't function as well in cold weather. I've had one for five winters now in Ottawa. It's pretty cold here in winter, and it has never failed me. The experience in Alberta with heat pumps—I'm talking about cold weather heat pumps—is proven now. Is that correct?
Associate Professor of Economics, Carleton University, As an Individual
Yes, I would say so. I have some colleagues who have adopted heat pumps in Ottawa, and they don't have any backup systems.
If you let me, I'll mention a small anecdote that leads into contractor training.
My parents live in Vancouver, B.C., and their AC conked out last summer. They asked a contractor to come in and give them recommendations. Their furnace was a bit old as well. The contractor in Lower Mainland Vancouver told them they should get a heat pump. My father said, “We're going to get a heat pump.” I said that was great. He said, “The contractor said I need a furnace backup. It will be free for me because they're going to give me $5,000 for the furnace. It will be zero.” I was shocked, because in Vancouver, that is completely not a rational decision. The name of this company was Pioneer gas. I don't know if they somehow....
Anyway, that's just an anecdote for you. My time is up.
Liberal
The Chair Liberal Shannon Miedema
Thank you, Mr. Fanjoy.
Mr. Bonin, you have the floor for six minutes.
Bloc
Patrick Bonin Bloc Repentigny, QC
Thank you for joining us, Ms. Papineau.
Can you provide a brief explanation on how green building renovations to reduce carbon emissions and improve energy efficiency can help lower the cost of living and boost affordability?
Associate Professor of Economics, Carleton University, As an Individual
I'll respond in English, because I took all my economics courses in English.
Associate Professor of Economics, Carleton University, As an Individual
Thank you, but I'm not that skilled when it comes to using economics terminology.
It's a question of the upfront costs versus the bill savings. What you really want to ensure is that you're incentivizing folks to understand what the bill savings are over time, because people have a tendency to focus on the prices that are most salient to them. That salient cost, unfortunately, is the upfront cost of having to purchase a heat pump for several thousand dollars. Of course, that heat pump is very energy-efficient, and it might help you save significantly on your bills over time, but that message has not necessarily percolated to households in certain segments of the housing sector and to lower- and middle-class folks. For them, that's going to be a completely impossible investment without rebates, which is why I am in favour of continuing energy efficiency programs. The question is, to what extent can you make the case about affordability to those households to convince them to adopt them?
Bloc
Patrick Bonin Bloc Repentigny, QC
Do the programs currently in place benefit homeowner households? Do they cover everyone, or are they aimed only at low‑income individuals, with no real programs for the middle class?
Associate Professor of Economics, Carleton University, As an Individual
The ecoENERGY program was open to everyone, but the homeowners had to make the investments.
In our study, we wanted to avoid the problem of landlord-tenant split incentives.
As a result, we excluded from our study apartments and multi‑family residential buildings, such as townhouses. We really focused on the single‑family housing sector. We found that middle‑income households had the highest participation rate. However, this segment of the population's performance in terms of reducing energy consumption was nearly the lowest compared to other participants.
That implied to us that there was some combination of unobserved selection and of the characteristics of the energy performances of the houses that was leading the households that participated a lot to have lower savings. We concluded that because this was not a study in which we completed a randomized control trial, there was some unobserved selection. That's a typical problem you're going to end up with if you don't deploy a randomized control trial beforehand.
We can't test our hypothesis because this was ex post data, but it's likely that folks were planning a renovation anyway, like replacing a furnace or getting an energy-efficient AC, and thought they might as well get a rebate. That causes an issue for identifying which households should be adopting these investments and getting the rebates—and not because they would have done it anyway. We don't want to be identifying free riders. We also want to make sure that households that have the lowest incomes are getting targeted rebates.