Government Operations Committee on April 16th, 2013

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

My last question is for Mr. Karakasis, and it is about the relationship with tenants.

You told my colleague that lease renewal was perhaps the best time to put incentives on the table. However, in the case of a 20-year lease, a long period of time will go by before something is done.

Is there a good way for tenants and owners to start to prepare gradually? After all, even if they were to start today, given the length of the lease, I would presume that any savings would end up in their pockets before a lease could be renegotiated.

Can you tell me what other kinds of incentives they will need?

[Dean Karakasis]

I think it goes back to the statement about what they do differently in Europe. There's will in Europe; there's an attitude. People are different in their approach to how they consume everything, not only electricity but garbage, everything. The cost of energy does have a lot to do with it. it's much higher, so they have an incentive to do that. When you talk about what to do in the interim, as I said before, arming personnel with knowledge is number one. What can be done? Mr. Dalgleish talked about a plan. When we talk about our BOMA BESt, one of the requirements is to have a plan, to have a strategy.

Second is building business cases for those investments, if you're going to make investments so they have a payback, so they make sense. Third is really about getting tenants to be a part of the process and to have the will to make the changes, not to consider that the money that is spent is not there and so is irrelevant.

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

Thank you very much.

[The Chair, NDP, Pat Martin]

Thank you, Mr. Blanchette.

We will now go to a representative of the Conservative Party. I yield the floor to Jacques Gourde for five minutes.

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

Thank you, Mr. Chair. I want to thank all the witnesses for being here and for sharing their expertise.

My first question is of a general nature.

Managers have to make decisions about certain buildings' energy efficiency. They have to decide whether to renovate a building completely or build a new one. It is sometimes difficult to make the right decision. They have to determine whether, over a period of 20, 25 or 30 years, it would be better to renovate or build something new.

Do you have any indicators that would help managers decide whether to build something new or renovate existing structures?

[Brian Staszenski]

I can answer that. Oh, sorry, go ahead.

[Dean Karakasis]

From our industry perspective there's always a business case to be made, and there will always be a dollars and cents analysis. From your perspective in your own buildings, you're going to have to throw in the extra decision of the idea of recycling a building, if you will. It's a very hard concept to get around. But when you abandon a building.... Ottawa's going to see a lot of movement in the next little while with renovations going on in several government departments. I think of the Bank of Canada as well, and EDC just moved, so you have to figure out a way. What is the cost of recycling a building? If it's an asset that's owned by the crown, unless you're prepared to sell it off, you're going to have to recycle that building somehow anyway.

It isn't a simple choice, but it's one I would advocate the government throw into the discussion, not only the bottom line dollars and cents cost of moving, cost of building versus the cost of renovating, but the disposition of the asset that you'll be leaving. That is something you have to throw into the equation. We do it in private industry all the time.

[Brian Staszenski]

It's Brian here. Let me add something in there.

We just dealt with a facility like that in Calgary. Do we keep it or do we buy another one? What we did with that facility was a capital asset plan, looking at a 25-year horizon. There are 25 components in a building. What is the cost of keeping that facility up to standard over five-year blocks of time? It was about $6 million, and they had a $24-million building asset. They decided to keep it because we showed them how energy efficiency measures can bite down some of that capital cost. You retrofit your facilities where renewal is coming at you, but you get the energy savings to pay for it so it becomes economical.

I want to add in something about how you crack the lease and get a building owner to help the tenant make improvements. We've been doing that with tenants who want the building owner to make changes, and the building owner says, “I don't care what your bills are. I'm passing them on to you. You have fun with them. You pay them.” They say, “Just a second. We want you to upgrade but we are going to bear some of the costs of that.” The building owner does the upgrades and will over time pass those costs on to a tenant. It's being done. It can be done. It just means you have to have a strong tenant who says, “This is what I want. I have buying power. Let's get it going.” There are mechanisms to do it. The building owner can do that work, pass it on, and they can even write it off. There are solutions out there.

That's what I wanted to add.

[Laverne Dalgleish]

Perhaps I may add to that too. I agree you do need to add something in there. In the case of my company, we actually targeted older historic buildings because we just like them. We put a value to that, and we paid extra money, if you want to think of it that way, simply because that's our desire to use an existing building, to renovate it, make it energy efficient, rather than simply going out and either buying or building a brand new building. Part of it is the philosophy that you are bringing there too.

[The Chair, NDP, Pat Martin]

Merci, monsieur Gourde.

Next, then, for the Liberal Party, we have the other vice-chair of the committee, Mr. John McCallum.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you, Mr. Chair. I'm glad you're still there, Mr. Dalgleish, because my first question is for you.

You seemed to express pessimism that Canada had fallen behind other countries in terms of energy efficiency. I wanted to ask you two things. First, why is that? Maybe it's largely to do with the higher costs of energy in Europe. Maybe it's other things. Is there some kind of action the federal government could take to reverse that decline in our performance or reputation?

[Laverne Dalgleish]

The decline that we've had in the reputation, in my opinion, is because we're not showing leadership. We're not at the front of developing new products, new systems, new methodologies. That is really an issue of where you put your priorities. The opportunity is still there. There are a lot of things that can be done to improve buildings. What I'm seeing literally around the world is that everybody's starting to take a look at buildings, and they're realizing that it's where the major energy savings are going to be done. What the federal government needs to do is to get that message out that we want to be leaders. That's going to affect organizations like the National Research Council, NRCan, and so on, so that we have the will to do something different and something better. We have a fantastic opportunity still ahead of us. I'm just not seeing that we're even considering going down the path.

[John McCallum, Liberal, Markham—Unionville, ON]

It's easy to say the federal government should show leadership, but can you tell us a little more specifically what that would consist of, what the federal government should do?

[Laverne Dalgleish]

I'll go back to my NRC example. NRC was a leader in research, and the federal government funded a lot of that research. That's why we were where we were. Over budget cuts and all the rest of things, they became...where they needed to bring money in. There's nothing wrong with that. I fully support that, but you have to tell industry. We're sitting there as part of the building industry, and we're thinking the federal government doesn't care anymore. When you start digging around, you find out that it can't be all one-sided. Industry has to pony up and bring some money to the table. Then we can go ahead with some research. But if you don't tell the people out there, we don't know that.

I have three projects going right now with the National Research Council, where I went out to my respective industries and was able to pull the money together to have the projects go forward. We will continue to do those things, but again it gets back to leadership and a vision. We just don't have the same vision at the NRC or at any of the organizations that we want to be a leader in building energy efficiency.

[John McCallum, Liberal, Markham—Unionville, ON]

I'd like to come back to the topic that has come up a little bit, which is the federal government as a leaser rather than owner of its buildings. I'd like to ask Mr. Karakasis the question, even though the federal government leases the building, I'm assuming it is responsible for paying the energy costs?

[Dean Karakasis]

The costs are all passed through, yes.

[John McCallum, Liberal, Markham—Unionville, ON]

So, the tenant does have an incentive to have lower energy costs.

[Dean Karakasis]

All operating costs.

[John McCallum, Liberal, Markham—Unionville, ON]

Yes, okay.

Mr. Staszenski said that the main way to go about this is to set performance standards for owners, so the government would have a law saying that owners of buildings which may be leased to the federal government have to meet certain performance standards. Do you agree that this would be a good solution to this issue?

[Dean Karakasis]

Creating specifications in terms of the law, you'll find this quite challenging because everything's a little bit different across this country. Quebec has its electricity coming from a different source than Alberta does and B.C. does, so there are a lot of challenges in that. But the idea, just in general, of having specifications when it comes to lease time is just good business. Creating specifications that require certain energy performance is definitely a way you can go.

[John McCallum, Liberal, Markham—Unionville, ON]

Mr. Staszenski, could you elaborate a bit because your solutions sounded very elegant and simple, but is it workable across this big country?

[Brian Staszenski]

First of all, you have buying power as the federal government, so when you approach whomever—Oxford, O&Y, or whomever—you're going to lease so much space, you've got buying power. You don't need a law.

Laws would be nice, but you just say, “Here are the standards of performance we want for lighting, air change, whatever, and we want to see that in your offer to us, and if you don't have it, we're going to shop around.”

You've got buying power, so use it.

[John McCallum, Liberal, Markham—Unionville, ON]

Mr. Karakasis, you represent those owners who would have these conditions imposed on them. How would they respond to that?

[Dean Karakasis]

I would say the same thing. He talks about standards; I talk about specifications. When you go and lease space, you say, “This is what my needs are”, and put in those specifications, call them standards, and use your buying power. It's well within your prerogative. That's what businesses do all the time. It's not so unusual. The federal government hasn't exercised that option, but certainly it's within your power to do it.

[John McCallum, Liberal, Markham—Unionville, ON]

It seems like a very good way, then. The two of you seem to agree to solve this issue of not owning the building.