Government Operations Committee on March 19th, 2013

[Dave Seymour]

I have further information, if you don't mind. Those projects, on average, were an eight-year simple payback—I had to limit what I showed on that slide. Most of those projects earned incentive monies from the utilities that were available, gas or electric. You put those into the equation. All those projects ended up with an average of eight-year simple payback as the hurdle rate.

[Bernard Trottier, Conservative, Etobicoke—Lakeshore, ON]

Were those the low-hanging fruit, though?

[Dave Seymour]

No.

[Bernard Trottier, Conservative, Etobicoke—Lakeshore, ON]

With the next set of projects in the portfolio, are we looking at 10- to 20-year paybacks?

[Dave Seymour]

That's where it needs to go, as well.

To accomplish some of that facility renewal I referred to, that infrastructure renewal, you're going to have to look at broadening the term. By using that energy savings, over a longer period of time, to pay for more capital investment to make those buildings perform better, they'll be around for a little longer.

The other thing, with some of those examples, is that I would suggest that at least four or five of them were early projects; that is, the focus was probably a little shorter term. I know one or two of those where we could go in and easily spend another $3 million or $4 million making further improvements that would fund themselves.

[Bernard Trottier, Conservative, Etobicoke—Lakeshore, ON]

Thank you.

My next question is for Mr. Mueller and Mr. Carpenter, and it is about standards. I think they're very important.

In your presentations you mentioned at least four standards: LEED, BOMA BESt, Energy Star, and building EQ. It can get somewhat confusing and somewhat time consuming to do all of this certification.

Do you have any suggestions? Do we need to rationalize some of the standards, to make it simpler, if we're going to give concrete guidance? The fifth one, I suppose, is the numerical targets you talked about.

Some of the people who support BOMA BESt say these standards are complementary. I suppose they might be, but there might also be some overlaps. Can you comment on the use of standards?

[The Chair, NDP, Pat Martin]

Could you keep your comments brief, please, sir. We have very little time.

[Thomas Mueller]

In terms of the standards, you have to distinguish. There are rating systems, such as LEED, BOMA BESt, and Green Globes. These are considered rating systems, whereas Energy Star or the building EQ from ASHRAE are standards. LEED references Energy Star. And they reference ASHRAE's standards. So we're trying to bring harmonization to the market that way. I can really appreciate that it creates confusion.

We're supporting LEED. LEED is a rating system that's now internationally recognized. It exists in 130 countries. It had an enormous uptake not only in North American but also globally. The other rating systems just haven't seen that. They don't have the infrastructure, the support, and the know-how to continuously develop globally as LEED has.

This is a very good.... It has become, if I can say, Canada's standard bearer for green buildings in North America, and it's on track to become that globally, as well.

What the representative from BOMA was referring to was that we, in fact, let the market decide what rating system to use to ensure it meets its needs. Between the rating systems, there are significantly different levels of stringency and rigour.

When you talk about BOMA, it is a good entry-level system, as we'd call it, through which building owners would get into the game, and then once they've used it for a while, then they kind of graduate, as I said before, and go to LEED for existing buildings, which is more stringent and more demanding.

We leave it to the market, actually, to decide which one is the best one, which one to choose. But we invest in LEED and a number of other ones, tools that we have, which I don't want to mention because it becomes even more confusing. We see that it would actually unify the market in a certain way to a certain level of performance in buildings and standards.

[The Chair, NDP, Pat Martin]

Mr. Mueller, I hate to be cutting you off all the time, sir, but we'll have to wait to get other comments on that question in future questioning.

Mr. Denis Blanchette has been waiting for his turn.

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

Thank you, Mr. Chair.

I would like to thank our guests for their presentations. This is very enlightening.

We often hear about LEED and BOMA BESt certification for new buildings. However, the federal government does not have a lot of new buildings. As a result, if we want to move forward, we will have to take care of the older buildings and even the heritage buildings.

You work in engineering and you work with standards. In your view, what quick gain could the federal government make with renovations?

Mr. Carpenter, would you like to start?

[Stephen Carpenter]

As said in my presentation, there is the LEED EBOM—that is, LEED for existing buildings—which I think covers what you're talking about. The LEED EBOM mandates that you be essentially in the top 30% of energy-performing buildings.

I think that's a very easy implementation step, mandating the LEED EBOM. Then the energy targets and numbers we are talking about are for existing buildings. I think that setting a target, mandating to the operators of those buildings that they need to make renovations to get to those numbers, would be effective.

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

That means that we should continue using the LEED-EBOM standard for a certain category of buildings. What are we supposed to do for the others? How can we adapt our facilities? In practical terms, what are the technologies, the tools, the targets that we should aim for? It is good to meet standards, but there are also other tools and technologies. Do you have any suggestions?

This question is for everyone.

[Stephen Carpenter]

In terms of the technologies, first off, as I mentioned in my slides, is the recommissioning of buildings. I dare say that most buildings are not performing optimally, and recommissioning will let them do so.

I'm sure David could speak to a large number of measures that can be retrofitted to buildings to bring down their energy performance. I guess the reason for the emphasis on the energy target is that it gives you an endpoint that you want to get to.

David, maybe you would like to speak to some of the technologies.

[Dave Seymour]

When I was listening to your question, the first thing that came to my mind was that there are many departments that have many different buildings in their portfolio, or buildings that they occupy, whether it's a portion of a building or the entire building. The first step is to take a look at all of those buildings, bring the stats to the table in an Excel spreadsheet—it's really simple—and just look within their own portfolio at what they are paying per square foot for energy. This is a very simple analysis of what it's costing them, what energy they're using.

Out of that, you start to pick off what the big uses are, where the problems are or where the opportunities are—there are never any “problems”—and start working it from there. There is an abundance of re-commissioning exercises sometimes referred to as low cost or no cost types of measures. There is a large number of individual companies or of specialists who can be brought in to take a look and size up the opportunity. It isn't that difficult.

So even within government departments, there's an opportunity to identify, even if they don't have a benchmark, how they are doing within their own set of buildings and spaces.

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

Thank you very much.

Mr. Mueller, you talked about what is going on in Europe right now. They have much stricter standards in terms of energy savings per square foot. How do they do that? Is it simply because they have the political will to do so? Are the technologies up to the challenge? How do private companies react to those types of standards? In other words are the market and politics in sync with each other right now in Europe?

[Dave Seymour]

As a quick comment, if we paid the same price for energy that they pay, we'd be getting there too.

[Thomas Mueller]

That's probably a very good lead-in, as it's driven by resource scarcity and the price for energy. How they get there is quite interesting. In Europe, they actually design the buildings, the building envelope, way better than we do in North America. They spend a lot of time, a lot of effort, to design very substantial envelopes, with triple-cased windows and.... In Canada, which is a cold-climate country, you see top-to-floor glazing in office buildings. You can only achieve so much energy efficiency with those types of buildings. They are using more punch-out windows, and the envelopes are way better.

So they invest in the envelopes; we don't invest as much in envelopes. We invest more in our technology, in heating and cooling ventilation, and in renewable energy. So there's a bit of a difference in how they design.

As to cost, I was just in Europe and I've seen buildings that are designed to what they call passive house standards—they do it for houses and for commercial and institutional buildings. I've seen buildings that use 28 kilowatt hours per square meter per year, and they're constructed at a cost of €1,000 per square meter; that's $1,300 per square meter, or $130 dollars per square foot.

So it is possible, and everybody accepts it, because there's an EU directive, and of course there are the lifecycle savings on the energy.

[The Chair, NDP, Pat Martin]

Thank you, Mr. Mueller.

Thank you, Monsieur Blanchette.

Next, for the Conservatives, Kelly Block.

[Kelly Block, Conservative, Saskatoon—Rosetown—Biggar, SK]

Thank you very much, Mr. Chair. I'd also like to welcome our guests here.

Just in a few short weeks we have been opened up to, I feel, a whole new world. I won't say your industry is confusing, but I am struggling to understand the relationships between the consulting firms—also those who are developing the rating tools, the benchmarking tools—and those who are developing standards.

Many of our witnesses have defined their mandate in terms of either promoting green solutions, changing industry standards, or working to advance them. I am wondering if you could describe for me how companies like yours actually influence not only governments but even the private sector as well to adopt the best practices that you've been talking about.

[Stephen Carpenter]

Listening to the last bit of conversation, one of the great eye-openers for me—and again I mention my handicap of having a technical background—was that I came into this thinking that we'll make buildings more energy efficient. We'll do it for essentially the financial return, and the economics will speak for themselves, and everyone will go ahead and do it.

I have found that while there will be some success there—and Ameresco has demonstrated that—to get where we need to go one must go beyond that and I've discovered it's about the marketing department. The marketing department pulls the strings in most organizations, and that has been the real success of things like LEED.

We talked about some of the large developers, Oxford Properties, Brookfield Properties, Cadillac Fairview Corporation and so on. When I started my business, I thought I would never be sitting in a boardroom with any of those people. Now those are the people who are sitting in the boardrooms all the time. That's because the marketing department has said that if they want tenants to lease their buildings, if they want to show from a corporate sustainability point of view that they are leaders, they need these rating systems. That's why I was really promoting the aspect that we need the labels on buildings. We need the rating systems like LEED. That will promote things.

[Thomas Mueller]

With regard to the rating systems, LEED in Canada has been developed and delivered by us. We're a non-profit organization. In the United States it's the U.S. Green Building Council. It was developed in the U.S. and then we adapted it in Canada to meet Canadian standards, climate, culture and so on, and we are delivering it in both official languages.

The best way to describe LEED is as a consensus standard. It's people from the industry, people like you, Stephen, other designers and engineers, and product manufacturers who come together. They are all members. They're stakeholders in the industry and every so many years LEED is updated and they contribute and say where the industry should go, where the thresholds should be, and what the targets should be.

So before a LEED rating tool comes onto the marketplace, there are sometimes years of discussion on what it should be, and it's piloted in the industry to make sure that it works. Then it is changed and piloted again, and sometimes changed again to make sure that the industry can actually use it, and that it is not so high a standard that nobody can use it, and it's not so low that it's meaningless.

It is that kind of consensus standard. LEED, in that regard, is actually unique because it has the stakeholders in the buy-in on a very large scale. That helps to continuously improve it and to make sure it still works, that it is relevant to the industry and continues to move forward.

[Dave Seymour]

The only thing I would add is that people generally want to know where they stand and how they are doing. So if you have a benchmarking system in place, or if you can just do it within your own portfolio to find out if they're all consistent or if you have a couple of buildings that are real problems, there is instant feedback on performance. There is a little bit of competitiveness. There is a little bit of “I can do better, I can be the best, I can improve. Look at what I'm doing”. It's a feedback source that a lot of building owners and property managers want to know about.

I agree with Stephen's comment about the marketing department. If I can use that information as a marketer of space or marketer of buildings to get a better dollar for the space, I'll do what I can, and that information is very precious.

[The Chair, NDP, Pat Martin]

Kelly, you have about a minute left, if you like.

[Kelly Block, Conservative, Saskatoon—Rosetown—Biggar, SK]

I'm just going to follow up with a little bit more of a technical question. It's for you, Mr. Seymour. It is about the energy performance contracts. You've talked about moving from perhaps a seven-year return on investment to something broader.

I'm just wondering if you could describe for me what goes into determining the payback period. You may have started to answer that in response to one of my colleagues' questions. Could you just talk about that and maybe how you're going to expand or broaden the payback period?

[Dave Seymour]

Sure. The essence of the performance contract is the savings, that is, what savings can be achieved? From there, it really is up to the client in terms of how long they want to have that annual savings stream focused on paying back the capital, the principal, and the interest. If their tolerance is only eight years, the project will be a certain size. But if they can broaden that out to maybe look at a 20-year term—and we are starting to see some projects of that value—they can achieve a whole lot more with that larger scope, that larger budget. They can start to look at replacing a chiller, maybe improving or replacing the entire mechanical system. That is really only enough budget money to upgrade it, not replace it.

There are some decisions there that the customer, the owner, the manager of the facility can make. It's not something we prescribe. It really is about what the customer is willing to look at, what they can entertain within their own limitations and constraints.