Natural Resources Committee on Nov. 8th, 2018

[Stephen MacDonald]

That's a great question, and it's one we are asked quite a bit.

Our job, as we like to think about it, is trying to convince and incent people to do something they otherwise wouldn't do on their own. We use a mix of tools. Financial incentives are one of the tools, but we also use education. We use financing in some cases. Incentives are a way to transform the market. If you think about energy-efficient products or technologies that have gone to the market, incentives are a way to transform the market, to increase adoption of those technologies at a rate they otherwise wouldn't be adopted. When Canada is looking to make its transition to a low carbon economy, one of the roles the federal government can play is to help accelerate the transition to those low carbon technologies.

In our business we offer incentives on a wide range of energy-efficiency products, but the types of products we offer incentives on today are not the same products that we offered incentives on five years ago, because the market is transforming. Part of our job is to stay in touch with the market. What's happening with the price of energy-efficiency technologies? Are they becoming more widely adopted, so we can put our efforts on those technologies that require a bit more help?

[Amelia Warren]

As you can imagine, when we go into an industrial facility, for example, even if you think about yourself as a homeowner, energy efficiency may be one project you're considering, but you probably have in mind a list of projects you may like to do in your home. It's the same thing in a business.

Often when we're looking at the return on investment, when we're looking at the payback, when we're making those calculations for a business, to put that energy-efficiency project at the top of their list, because they have limited resources and they're only going to be able to implement three projects this year, our incentive can make the difference to shorten that payback time or to improve that ROI. Then they are able to get that project on the list this year and it is in the top three that move forward. Without those incentives, the payback is too long, and it means they wouldn't make that decision. Again, the idea is how we get them to take action through those incentives which they otherwise wouldn't take. Being able to shorten that payback period in a competitive environment is an important part of it.

[Ted Falk, Conservative, Provencher, MB]

Sure. What kind of a return are you looking at? Are you looking at a five-year payback on an investment or is it three years, two years or one year? I'm a business guy, so I understand that. If something makes economic sense for me and I can save energy by investing a few dollars, then if there's a five-year payback, I'm going to give it serious consideration. If there's a one-year payback, it's a no-brainer.

[Amelia Warren]

It depends on the business, but typically, there wouldn't necessarily be a set payback period. Whether we're working with small businesses or we're working with larger businesses, we have flexibility in the incentives that we offer. We would have maximums that we can't go beyond because, at the end of the day, it is public money that we're spending.

[Ted Falk, Conservative, Provencher, MB]

What kind of return should a business owner who owns an industrial building expect if he is making an investment?

[Stephen MacDonald]

It really does depend on the type of energy-efficiency project you're putting in place. If you think of a retail building, you're using energy to heat and cool the building, for lights, computers and whatnot. You can make some relatively low-cost changes, for example, lighting or smart thermostats, which will have a relatively quick payback. In some cases, you're looking at less than a year payback on those products.

You could also look at what we often refer to as deep retrofits. For that building, you could look at heavy insulation in that building, glazing the windows, putting in building systems and controls. Those types of projects have a much longer payback and you're into the five-year or ten-year period. It really does depend on what type of an initiative you put forward.

[Ted Falk, Conservative, Provencher, MB]

I'm curious why government would need to intervene in those kinds of situations. If it's a good business decision for a business to reduce their energy costs and there's a viable and economic payback on this investment, they should be able to do that simply through education.

Mr. Finet, I know you want to—I'm barely going to get to you, so I'll let you move into that one.

To me, it just doesn't make sense why a government would want to take tax away from people and then have them apply to get an injection into their business to become energy efficient. Why not just leave them with the money and create awareness that they can make that investment because it's a good business decision to do that?

[Jean-Pierre Finet]

I would say it's risk. Much of the time, risk is what refrains businesses from moving ahead; whereas, the payback periods in the institutional sector, like the federal and the provincial government, go up from seven to 11 years for the payback period. Again, we should push that a bit more, if we want to go into deep retrofits.

[Ted Falk, Conservative, Provencher, MB]

I know my time is up.

[The Chair, Liberal, James Maloney]

You have about 30 seconds.

[Ted Falk, Conservative, Provencher, MB]

Okay.

Do you actually write out cheques? Have you written out cheques to people?

[Jean-Pierre Finet]

Yes.

[Ted Falk, Conservative, Provencher, MB]

Your program works.

[Jean-Pierre Finet]

Not personally, but my members in ESAC have.

[The Chair, Liberal, James Maloney]

That would be a good place to stop.

[Jean-Pierre Finet]

I could give you examples. If we did not, then we wouldn't put our money where our mouth is. To come back—

[The Chair, Liberal, James Maloney]

I'm going to have to cut you off there.

[Ted Falk, Conservative, Provencher, MB]

I'd like an answer, but the Chair's been very lenient.

[The Chair, Liberal, James Maloney]

We might get one.

Go ahead, Mr. Cannings.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

I'll pick up where Mr. Falk was going.

What I understand from what he was saying is that perhaps awareness should be enough and we don't really need to make these investments. When we heard from the Canadian Home Builders' Association, and when I talked to them in my riding, they really noticed a big increase in their business when these incentive-type funding projects, such as eco-energy retrofit, were in place. You mentioned the leveraging on industrial and commercial properties. In that program, it was something like the government would invest a dollar and there would be four or five dollars spent by the homeowner. That's where I see some of the benefit of why it makes eminent sense to do these.

To change gears a bit, Mr. Finet, right off the top, you mentioned that 90% of your business is with government and 10% is with private. What's the reason for that?

[Jean-Pierre Finet]

The payback period.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

The payback period? It's that risk—

[Jean-Pierre Finet]

It's what Mr. Falk was talking about earlier.

In the private sector, usually 18 months they will take, no problem. Above that, it takes a bit more arm-twisting because there's also the risk factor that adds to it and some of them don't know if they're going to last two years sometimes. I would say that it's mostly the risk factor, but in the institutional sector, we don't have this.

When talking about deep retrofits, I don't want to forget one deal that one of our members has done, for instance, Engie in Ohio with the University of Ohio. They've done a deal for 50 years at $1.25 billion. They're taking care of all the energy efficiency there for the next 50 years. This is a long-term deal. This is a lot of deep retrofits.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Okay.

I want to move to Efficiency One and ask about the Nova Scotia examples you're giving. Most of those are with homes and not with commercial buildings. What are those incentives? How do they work? I mentioned the eco-energy retrofit. Is it something like that, where people do an audit and then get a grant? Is that something we could expand to cover some of the funding gaps you mentioned?

[Stephen MacDonald]

Before I speak to how the programs work, I will say that on the residential side, the federal government has recently come to the table through, as I mentioned, the low carbon economy fund to put some additional monies into that sector. I mean, more can always be done, but there has been a recent expansion of activity.

As to how our programs work on the residential side, for a homeowner, for example, we will come and do an initial audit of a home. We do a base-level assessment of that home's energy efficiency. We give the homeowner a report of the energy efficiency opportunities that are available in terms of upgrades they can make and investments they can make. If they increase the level of the home's efficiency to a certain level, we will provide them a financial incentive to help them get there, if you will. That's generally how it works on the residential side.

I want to come back, if I can, to the discussion around why there are incentives. I mean, why don't people do it if it just makes sense? This might be a simplistic example, but there are lots of examples of situations where people or businesses or companies should make rational decisions and they don't. I know I should eat better and work out more, but I don't, even though I know it's the right thing to do.