Government Operations Committee on March 5th, 2013

[Wayne Rogers]

I think we've come up with conservative numbers that are used in Alberta, which are coal-based in terms of the CO2 emissions. What we've done is to take a simple look at how much energy can be taken out of the lighting system from a building. The average would be one watt per square foot, or 10 watts per square metre, 10¢ a kilowatt hour, and 3,000 hours per year.

Now this isn't anything more than a broad brush to give us a sense of what the starting point might be and whether it is worthwhile pursuing. The numbers are going to vary from province to province, but it could be part of a more significant study.

[Denis Blanchette, NDP, Louis-Hébert, QC]

Thank you.

I would now like to speak to Mr. Love.

My questions will be similar to the ones I have already been asking. I am trying to determine the impact of potential savings in addition to the benefits of reducing greenhouse gas emissions.

Do you know of any models that take into consideration all of the factors that the federal government would have to deal with, like the age of its real estate, for example? Earlier I mentioned costs, energy production and so on.

Do you know if there are any relatively comprehensive methods that would allow us to make these types of calculations?

[Peter Love]

Yes. I'm quite involved here in Toronto, as are the other people on the panel, with an initiative called the race to reduce. It's a voluntary program to reduce energy consumption in office buildings in downtown Toronto by 10% by 2014. We've decided to adopt a metric that's been brought into Canada by Natural Resources Canada. It's called the Energy Star portfolio manager, and it's been used in the U.S. for a few years now. It is a way to monitor exactly what you're talking about, the environmental savings.

One of the features that is particularly important in Canada when you look at greenhouse gas emissions and environmental reductions, especially from electricity, is that we do not have one electricity system in Canada. We have 9 or 10 very different ones that are not that well connected. We have some entirely fossil-fuel based systems in Alberta, Saskatchewan, and much of the Maritimes. We have some totally hydro-based systems in B.C., Manitoba, Quebec, and Newfoundland. And, we have one mixed system, which is in Ontario. Thus with greenhouse gas emissions and saving electricity, when people tell me that this is what it is in Canada, my first question is what part? I ask because the impact is very different. It is important across all parts, and there is some trading back and forth.

Anyway, portfolio manager, from Energy Star, which NRCan is using, is what we began to use in Toronto for our evaluation, and I'm sure it's beginning to be rolled out for federal buildings as well.

[Denis Blanchette, NDP, Louis-Hébert, QC]

Thank you very much.

[The Vice-Chair, Conservative, Peter Braid]

Thank you, Mr. Blanchette.

I'll turn the floor over to Mr. Gourde for five minutes.

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

Thank you, Mr. Chair.

I would like to thank the witnesses for being here this morning.

I would like to continue in the same vein as my colleague, Mr. Blanchette.

When plans are being made to repair a government building, it makes sense to utilize the energy-saving solutions your businesses are proposing. As Mr. Love explained, we want to save energy and reduce greenhouse gas emissions. However, when you do your calculations regarding available energy—hydroelectricity in Quebec, electricity in other provinces, mixed sources or coal, for example—is this taken into account during building evaluations?

The Government of Canada has buildings in every province. Do you factor in the price of electricity and the fact that the federal government pays the province's market rate? Or do you take into account the possibility of using greener energy and the fact that it may be cheaper or more expensive to do so?

For example, if we chose to use renewable energy, say wind or solar power, but it costs more, do you factor that into your calculations?

[Peter Love]

Good question. Yes we do, and it's provincially-based. When we do a project in B.C., we're looking at the cost of electricity and natural gas, so when they do a payback calculation for B.C., it's based on B.C. numbers.

Typically though, these reports have focused on the financial side. They have not focused as much on the greenhouse gas emissions side. It's not a requirement. This is why portfolio manager now is a way that we can bring in provincial emission factors. It's even a little bit more complicated than that, especially for Ontario. It not only depends on where the electricity is being used in Ontario, but also on when. Because we have a mixed fleet in Ontario, sometimes there are more emissions at certain times of the day and some seasons of the year than others. That's not as much the case in other provinces where it's all hydro, all gas, or all fossil. There's less variability.

It's a bit more complicated in Ontario, but certainly portfolio manager, as I understand the tool, was designed for 50 states. Again, they have various electricity generation fleets. It is going to give you specific information. I know NRCan is working on making sure that those emission factors are correct for each province.

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

I believe that the United States is currently starting up new natural gas fired plants and the price of the electricity being generated is very competitive. Prices are even lower than what we are currently paying here in Canada through a variety of systems.

Could that jeopardize projects in certain buildings where you have already done the calculations? Could that extend the amortization period, given that electricity could be 20% to 25% cheaper with these new options? You may have taken into account inflated energy costs and the fact that the costs may increase over the coming years, but there is more competition in energy production and that could jeopardize certain projects.

[Peter Love]

It's a bit of a complicated question, but natural gas right now is very inexpensive at $3.50 per million BTU. It was $10. In Europe it's $12, and in Japan it's $16. So we have huge price variations, and right now it is at a low price. So for someone building a new natural gas plant, combined cycle cogeneration plant, it is very energy efficient and can produce electricity very cheaply.

How cheaply they'll be able to produce it in five or ten years time, when Canada might be paying more of an international price.... I don't think we'll pay the same as Europe or Japan, but as natural gas begins to be more of an international resource like oil, I'm sure the oil industry would love to see a very different price for natural gas. That's why there are huge discussions in Canada on LNG and exporting gas.

Again, when we do the evaluations, we're looking at the actual price of electricity in each province. Some provinces have less expensive electricity. Those that are blessed with hydro resources that were built a number of years ago, such as Manitoba and B.C., have relatively low electricity prices. When we do an evaluation of a project in Manitoba or B.C., it's very different in terms of the payback compared to the electricity in Ottawa or Toronto.

Natural gas and oil are about the same, but with electricity there are regional differences. When we do those evaluations and the payback periods, they're based on the price of electricity in the city where the project is located. It's not a national number.

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

Thank you.

[The Vice-Chair, Conservative, Peter Braid]

Thank you very much.

Ms. Duncan, you have the floor.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Thank you for your thoughts on that.

Interestingly, to follow up on that question, the experience in Alberta is that even though people are becoming energy efficient, the price is going up because they're paying for the long range, including export power lines and third-party brokers. So trying to build more cost-effective sources doesn't look like the answer. The answer is to bring down the need.

I have two follow-up questions.

One is a follow-up question to for my colleague Mr. Albas' question. He seemed to be suggesting that retrofitting was expensive. But isn't it more fiscally responsible? I look at the numerous examples you've provided on the cost savings over time for the retrofitting of federal facilities. Isn't it more fiscally responsible to reduce energy and water bills over time, since it's the taxpayers who are paying those bills?

Related to that, I'm wondering if each of you could give me an idea of what you see as the one or two key barriers to getting the federal government thinking of measures. I had noted that there was talk about a third of the buildings being done, but I think that's a third of owned buildings—or maybe that's even Public Works and DND. Public Works said that Canada has space in 40,000 buildings. I don't think we've retrofitted a third of those.

So I'm keen to hear what each of you would suggest are the one or two key measures that you think we could recommend to the Government of Canada to incent more measures towards energy efficiency at the federal level.

I know you've given us a lot of information, but I'm curious to know—

[Peter Love]

I'll start.

The major barrier I see to that is what's called an agency problem, where you have somebody, or one institution, responsible for capital expenditures and another, maybe in the same department but a different part of the ministry, who is responsible for operating costs. We see this with landlords and tenants in the residential sector. We see it in office buildings.

The person responsible for making the upfront investment does not get the return on investment, because it's the operator or the tenant who gets that. That is why it's a major feature of the green lease that REALpac has. You try to overcome that agency problem.

I would suggest that's part of it. I think Mr. Rogers referred to that, where people know what they should be doing, but there's that head office in Toronto saying it's sort of a drag; we're sort of paying the same amount that we did last year; it's just too complicated and they're just causing problems.

In the federal government, there are some people who are very knowledgeable about it and would like to do it. But it's as if I'm asking for this project, and it's quite a bit of money, and yes, it's going to save money over a 10-year period, and yes, it's guaranteed, but I haven't really done one like it before and the person who did one in our department three years ago is now somewhere else. There's no corporate memory of it any more.

That agency problem is a difficult one, and it's not just in the federal government; it's in the private sector, as well. It's a problem that people refer to.

Again, the other thing you could do is to set a target and actually have an implementation plan. It's better to benchmark your buildings: who owns them, what's their energy performance right now on a watts-per-square-foot basis, what's the lighting? Here are the relatively low-hanging fruit, here are the things we won't get to for a long time, but here are the ones we should be taking on in the next five years. That would not be a difficult project to undertake.

As I said, there may be some progress from it, and I will find out if there is.

[John Smiciklas]

I'm going to go back here and bring some of my personal experience, as I said, as an auditor for about 20 years.

Yes, there is this problem of operations versus capital. In the private sector and the government sector, you have people who say “I'm procurement. I have to spend less money. That's going to cost more in operations. I don't care because that's not my budget.” That does happen, and it happens everywhere.

What you tend to get is the behaviour that you provide people with incentives for. If the incentive is at a macro level, which is “We want to get the cost savings down, we want to set goals and targets”, and you give people a process to do that, then you tend to get the behaviours you want and the overall betterment that's desired, be it in government or private industry. You get what you're actually looking for.

When you silo things, you tend to get people looking after their own best interest rather than the interests of the whole organization. By giving a process, goals, and targets, people will get there in a very cost-effective manner.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Thanks.

Mr. Eickmeier.

[Ryan Eickmeier]

I would agree with everything that was just said. I'll break it down into two silos if I may. The first is obviously cost on the major retrofit side, and we've talked about that. The second is a little bit of misinformation on what we'll call the minor retrofit side.

I'll go back to 2009 when we brought forward to our members a program called the energy benchmarking program. Originally it was called 20 by '15, which was a target for them to meet 20 equivalent kilowatts per hour by 2015. That was at a time when we had very little idea of what each building was doing in terms of energy performance so there was a lot of fear out there. What they found was that through minor retrofits, through lighting, through turning off computers, through timed power turnoffs throughout the night, a lot of these targets were achievable at a reasonable cost.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

So it was in operations, which is something we really haven't talked about, but it's something you had in your materials.

[Ryan Eickmeier]

It was in operations, and just in changing the behaviour of tenants. Tenants have to be a key partner in this initiative.

[The Chair, NDP, Pat Martin]

Thank you, Mr. Eickmeier.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Mr. Rogers didn't get a chance—

[The Chair, NDP, Pat Martin]

Mr. Rogers, would you like to give a brief response?

[Wayne Rogers]

I would add that we should just keep it simple. It has to be simple. I would suggest that we use an education model whereby the government puts together a program to go around to every department, to every complex, to provide a level of education as to what can be done. Then you say, “Here guys, get it done yourselves. Hire a professional consultant”. As professional engineers we are all obligated to perform in a professional way to provide some guidelines and then to sign off on and certify what the department has done.

They can dream up all kinds of great things to do, and they know where their problems are. They do not need a lot of analysis. They know that their chiller is broken. They know that they're having to spend a lot of money replacing ballast on their lighting luminaires.

Then if you coach them it's very much like our kids going to school. The kids at school get taught to be energy efficient. They come home and they teach their parents to turn the lights off. So when the parents go to work they don't leave the lights on in their office. It's pretty straightforward.

[The Chair, NDP, Pat Martin]

Thank you very much, Mr. Rogers.

Mr. Jay Aspin for the Conservatives.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

Thanks, Mr. Chair.

Welcome, gentlemen. I'm very impressed with all the materials you brought and your expertise. I wanted to take advantage of that with perhaps an overview question. This is such a key area with energy costs going the way they are. It's a key way we can save money. In your estimation—and I will give each one of you free licence—what can the Government of Canada do better? Are there any mechanisms that can be used? There was talk a little earlier of the agency problem, the left hand and the right hand, the silo problem. That's certainly understood, but is there anything that you think, with all of your experience and the material you brought, that the Government of Canada could be doing in a better way to achieve better energy efficiency?

John.

[John Smiciklas]

I'm going to say there are a couple of things. One is to have clear goals, clear targets. We need the opportunity and the tools to reach those targets. We need a competitive and benchmarking process. It's amazing what you do when you have buildings competing against each other and understanding where they are. It's one reason we put together our annual energy environment report, which highlights the performances of very good buildings but also gives an overall score that shows where they might fit within the general population, and nobody likes to be last.