Yes. Thank you very much.
I appreciate the opportunity to come and speak to you. My name is Peter Love and I'm the president of the Energy Services Association of Canada. J.P. Finet is the vice-president responsible for our Quebec office.
I will make some comments in English. J.P. will add to them, and if there are questions, J.P. can respond to those in French. He may respond to the ones in English, too, depending on how hard they are.
I wanted to give you a bit of background on our industry because we think we can play an important role here.
We represent what's called the ESCOs, the energy service companies. There is a number of them in Canada. Many of them are large companies that you would recognize: Siemens, Honeywell, Johnson Controls, Trane. These are large multinational companies that do many things. One of the things they do is a guaranteed energy service performance contract. That's what we're here to talk to you about.
Our association was created in 2010 to advocate the use of these performance contracts. Most of these contracts are in the public sector, for government buildings, hospitals, universities, colleges, or schools. They've been used in Canada for over 30 years. The industry accounts for about $300 million a year in doing these projects. We've done about 280 of them over the last 10 years. It's an existing industry. It has been here for a number of years, and the essential feature of these contracts is that it's a competitive industry. As much as our members would love to think they can get a sole-sourced contract, it's all for public entities, and so it's bid, and there's a competitive process.
They do a detailed assessment of the building. They identify the measures that they think should be undertaken. They undertake those measures. They guarantee that the energy savings from those measures are sufficient to pay back the project, and if they're not, they make up the difference.
As part of this process, they spend quite a bit of time as well in monitoring the project to make sure it's on schedule and on budget and making sure that the performance guarantee is being met, because they're actually guaranteeing it with their own money. They are obviously very conscious of that. It's a guaranteed project.
They also spend quite a bit of time in terms of commissioning the project once the equipment has been installed to make sure it's working correctly. They also spend quite a bit of time in education, talking to the staff and the custodians who are actually operating the building. It's one thing to talk to the CEO or the CFO about the project, but it's also really important to talk to the people in the mechanical room and the electrical room so they understand the system that's put in place and can fully utilize its benefits to achieve the results we're looking for.
That's the nature of the industry. Some of you may know that Natural Resources Canada has had a program to promote the use of these contracts in the Canadian government. It's called the federal buildings initiative. I don't have to tell you what the acronym is. It's an unusual one, but that's what they've called it, and it has been very successful.
The program has a qualified bidders list of companies. They have to fill out information to ensure that they are qualified to do this work and NRCan maintains it on an ongoing basis. They have model RFPs, model contracts, and they actively promote these sorts of contracts to departments to achieve energy efficiency.
Almost a hundred projects have been done over the last 25 to 30 years. It has gone up and down. It's in a real upswing right now. The former assistant deputy minister of defence, Jaime Pitfield, committed to having all 35 of Canada's military bases retrofitted to increase their energy efficiency. Some of those RFPs have already been issued and some have already been contracted. You're going to see that work in almost every one of your ridings, and in every one of your provinces at least. That's under way.
We've actually just come from a meeting with Treasury Board. As you may know, the Office of Greening Government Operations is now part of Treasury Board. It is interested in using these contracts and this type of solution to achieve the government's greenhouse gas emissions reduction target and in working with us to do that.
That's a little bit of background on our industry. I'd be delighted to take any questions on that and give you more background on it. However, I think the main thing we wanted to come and talk to the committee about was the role our industry could play in encouraging innovative technology and in encouraging new companies with innovative technology that are approaching you and have opportunities. We would love to see these technologies included in the performance contracts that we do. This is something our members would be very interested in including.
However, because it's unproven technology, we would not be able to take on the performance risk of those technologies. Our suggestion is that that risk be taken on by the government in some fashion. We don't have an exact idea of what that would be, but in some way a contract would be structured so that the winning bids using a performance contract would include some elements of these technologies. They would be then tested as part of this performance contract. We would be delighted to see how that technology, or those groups of technologies, are performing and then report back on whether they're better than expected, they're about the same, or they really had problems.
We see this as an ideal opportunity to be a testing ground for these new technologies. Often our members can get a price on these new technologies, so that's not a risk; we know going in what the price is. It's the performance that we just don't know how to guarantee.
That's our main suggestion: that the government could address those types of performance risks. Some of these technologies, as well, may not be at mass-production size, so their pricing may be a little bit higher than it would be once they became more mainstream. Again, there's a little bit of risk...well, it's not risk; it just means the project would be a bit more expensive, but we think that expense could be included in contracts.
You had three questions. One of them was the types of risks the federal government could address. I think that performance risk is the key one for our industry. In terms of best practices, we think the federal government's FBI program is a best practice. We do a lot of work with provinces, and we highlight this as a best practice when we're talking to people across the country. We know that the Quebec government is looking at some version of an FBI program to promote the use of performance contracts in Quebec. We're talking to B.C., Ontario, and Alberta, which in particular are looking at this. You have a best practice. It's not perfect—it can be improved—but certainly it is something that's very effective.
The other element of best practice that we identified in our presentation was the idea that Alberta has a borrowing act. They actually encourage school boards to borrow money for energy efficiency, but there is a condition that they must get a performance guarantee. There was a recent report in Alberta that recommended to the government that it extend that to other public entities—hospitals, schools, and universities—to encourage them to borrow for energy efficiency, but to have a performance opportunity.
I think there's a list of products that you already have, so we'd like to work with you on that. As I said, I think the FBI program could be encouraged to help us in the de-risking of that technology. We think that would be a great vehicle to use.
I know my time is almost up, so I'll just end with one comment about performance contracts.
A lot of people believe, first of all, that ESCOs are financial institutions. They're not. They are indifferent to who provides financing. If the federal government has money it wants to invest in these projects, we're delighted to use that instead of just going to banks, insurance companies, or life insurance companies.
The other thing is that these contracts are cost-effective, especially when you look at the cost of multiple contracts, multiple RFPs, multiple winners, multiple losers. The cost to a department of managing all those contracts and all those negotiations is very high. NRCan, in its 25 years of experience, has found that the cost of these performance contracts is about the same as conventional costs, yet they get a lot more done. They're more comprehensive, and of course the big thing is that they're guaranteed by the private sector.