Directionally challenged

Tesla-Roadster-blue

Dream on, Alex…dream on.

Where energy policy is concerned, transportation is a tough nut to crack.

Energy end use falls into three broad categories: Industry, buildings, and transportation. Ontario consumption is roughly equal in each. So far, Guelph’s Community Energy Initiative (CEI) has focused on buildings. Industry already gets a lot of love from Conservation and Demand Management (or Demand-Side Management, if you’re talking about natural gas rather than electricity). Plenty of CDM/DSM incentive dollars are available to industrial enterprises, since energy consumption is concentrated and a single efficiency project can go a long way. Industry has gotten some CEI attention as it can be both a supplier and customer of a thermal energy utility, and again big demand is concentrated in a relatively small space.

Transportation has been largely left out in the cold. This is because any incentive program will be difficult to formulate for a specific target population, and will struggle to produce a fast payback.

Transportation is, by definition, mobile. Vehicles plying the streets of Guelph are either based here, or they come here from somewhere else. A program aimed at reducing transportation energy use may be aimed at the home base for a vehicle, or alternatively at the destination. It’s difficult for a municipality to justify a program that will primarily affect vehicles that drive here from elsewhere (fuel trucks, say), nor does it make sense to target vehicles that are based here but spend a good chunk of their life outside of the City limits (because they commute to Kitchener-Waterloo or the GTA, for example). Ideally a program would pick out the vehicles that are based in Guelph and rarely leave Guelph, but that’s a tall order.

Another challenge is how to devise a program to reduce energy use for transportation with reasonably quick results. You can stimulate active transportation by providing bike lanes, and Guelph is doing this (recently winning a silver award for being one of Ontario’s most bike-friendly cities). You can also plan urban development so that people don’t need to drive so much to clear their to-do lists, and Guelph is doing this as well. However, these are programs that pay off only in the medium to long term. Transportation energy usage stubbornly resists the quick-win improvement.

It is tempting to score a short-term victory by stimulating uptake of a particular energy-efficient technology. However, picking technology winners is something that governments have rarely done well, whether this is for a particular player in a given industry, or for an entire sector. As an example of the former, the Obama administration got burned by a US$536 million loan guarantee to the solar company Solyndra, which went bankrupt in 2011. As for the latter, if you’d surveyed the market for alternative vehicle drive systems fifteen years ago, you might well have bet on fuel cells. A survey of today’s urban streets would yield exactly zero examples of such vehicles.

If you get into the game before the market has pronounced judgement, it’s a great way to lose your shirt. If you wait too long, the incentive will not change the outcome from what would have happened anyway. Timing is key.

These days, a number of alternative fuel technologies are showing broad market acceptance. For small vehicles, electric drive systems are becoming ever more prevalent, starting with hybrid electric vehicles (HEVs) like the Toyota Prius, then moving on to plug-in hybrid electric vehicles (PHEVs) like the Chevy Volt, and then true electric vehicles (EVs) like the Nissan Leaf and my own personal dream car, the now-out-of-production Tesla Roadster (I know, I’m dreaming in technicolour if I think I’ll ever afford such a ride on a municipal employee’s salary). For larger vehicles, Compressed Natural Gas (CNG) shows a lot of promise.

HEVs and PHEVs offer energy efficiency improvements over traditional internal combustion vehicles, but they both still have gasoline engines. Money spent on gasoline fuel leaves the community, never to return. EVs, however, run exclusively on electricity, which can be generated locally, injecting cash back into the community rather than bleeding it away to faraway refiners and producers. This makes EVs the most attractive target out of the three for an incentive program.

Two key barriers to EV adoption are range anxiety and cost literacy. Although the “fuel” for EVs is everywhere that society is found, the chargers – Electric Vehicle Supply Equipment (EVSE), to use the industry jargon – are far from ubiquitous. Prospective owners worry that they might get stuck somewhere en route with a dead battery. A program to provide more EVSEs, either at home base or typical destinations (malls, say, or employee parking), can alleviate this so-called range anxiety.

Cost literacy is another barrier. Car shoppers look at sticker price, but that has nothing to do with their ability to pay. When costs are expressed as a monthly payment, they can actually be compared to a household budget. However, with EVs, this cost is only part of the story. The base cost is higher, but the operating cost is peanuts. I attended a seminar at the Waterloo Institute for Sustainable Energy, where I learned that when cost is expressed as total monthly figure – fuel included – EVs win hands down against comparable internal combustion vehicles. An incentive program could be geared at simply clarifying this fact for car purchasers.

For larger vehicles, electric drive is still seems iffy, Edmonton’s choice to test electric buses notwithstanding. For this category, Compressed Natural Gas (CNG) is attractive. After a false start in the 1990s, this technology appears ready for prime time. It’s still a fossil fuel, true. However, a CNG vehicle produces 20% less greenhouse gases than a comparable diesel or normal gasoline vehicle, and virtually zero NOx, SOx, and particulates. It also has a significant cost advantage – CNG would be the equivalent of $0.45/L gasoline. Even with gas prices as low as they currently are (by recent, not historical standards), that offers a competitive return on the cost to convert existing vehicles, or the incremental cost to choose a new CNG vehicle over the gas/diesel model.

With all that said, HEVs, PHEVs, EVs, and CNG vehicles don’t hold a candle to the revolutionary possibilities of another emerging transportation technology. More on that in my next post.

Best of both worlds

Canada vs Germany energy efficiencyAccording to the World Energy Council, the average Canadian uses more than twice the energy of the average German. You read that right. Twice.

Guelph’s Community Energy Initiative aims to cut per-capita energy consumption by 50% from 2006 levels by 2031. Sounds ambitious, doesn’t it? However, you could rephrase that to say that Guelph is on a journey so that by 2031, it will arrive at the place that Germany occupied two decades before.

That sounds a lot less ambitious.

As I’ve explained in three of my last four posts (this one, this one, and this one), Guelph is embarking on a program called GEERS – Guelph Energy Efficiency Retrofit Strategy – to ensure that, despite an anticipated 50% increase in population, our overall energy consumption will actually drop from 2006 to 2031. GEERS will start by overhauling our residential buildings, yielding 20-40% decreases in energy use, and move on to the ICI (Industrial, Commercial, and Institutional) building segments after that. GEERS aims to retrofit between 2,000 and 3,000 homes per year between now and 2031. By the end of that time, Guelph will start looking a lot more like Germany as far as building energy efficiency goes. Over 38,000 dwellings will have been touched, and the sustained annual energy savings will be $120 million.

That’s a huge boost for an economy the size of Guelph’s. However, that doesn’t even speak to the direct and indirect benefits of the program itself. During the course of the 16 years that the program runs, it will result in over $30 million per year of spending, most of which will stay in the local economy. That’s a total of about half a billion dollars invested in Guelph, all in the name of keeping more energy dollars in the city.

The first beneficiary will be construction contractors. Based on what Guelph’s building department has told me about the volume of building permits for renovation work, GEERS could increase the size of this market by a factor of ten. If we assume it takes a team of three labourers one week to complete a retrofit project, the volume I mentioned above will yield somewhere between 120 and 180 full-time labourer jobs. Supervisor jobs will be over and above that amount, probably 30-45 jobs, to say nothing of management and back office positions.

Construction contractors will also see a profitability boost, since they won’t need to incur sales and marketing costs to win jobs – they’ll see a steady stream of projects from GEERS just for signing up, as long as they maintain quality standards. They will also see better utilization of human resources and equipment since there won’t be any staff sitting idle waiting for deals to close, giving another profitability fillip.

Contractors will also see a boost to their current, non-retrofit business. Homeowners that have been putting off a major renovation will likely decide to jump, once they can get a contractor mobilized to their home for GEERS. Let’s face it – most folks don’t get excited about the prospect of better insulation, weather stripping, furnace, water heater, thermostat, and (to a lesser extent) windows. However, if you already have a contractor on site, you can save big on extending the project scope to include stuff that GEERS won’t cover – granite countertops, new kitchen cabinetry, and a bathroom makeover. GEERS will provide a direct stimulus for work like this.

Along the same lines, financial institutions will see benefits. Since GEERS won’t cover this extra work, homeowners will use traditional methods of financing home renovations. This means that the big banks will see more home equity line of credit business.

Suppliers will see a boost as well. GEERS will cut deals for bulk pricing, and will likely mandate local warehousing operations to ensure reliable supply of product. Such operations will bring more jobs to Guelph. Some suppliers may even need to set up manufacturing facilities – a Euro-spec window producer is the most likely of these – bringing even more jobs.

GEERS will also help out the utilities with their Conservation and Demand Management (also called “Demand-Side Management”) programs, which some prefer to call “negawatts”. Paradoxically, it costs the utilities less to accommodate new demand not by bringing new energy supply online, but by reducing consumption. (More on that voodoo in a future post.) At any rate, the utilities have incentives available for many energy-saving measures, and GEERS will be implementing some of these exact measures. That means more dollars injected into the program, lower costs for the property owner, and a big fat check mark beside utility energy efficiency targets.

Contractors, banks, suppliers, and utilities – not coincidentally, the same cast of characters that I spoke about previously in the context of the EcoEnergy for Homes program – should all rejoice when GEERS hits the streets. But wait, there’s more.

GEERS may well stimulate the local real estate market as well. If a seller can give their home a boost in value which is effectively free, why wouldn’t they? We may even see people making a habit of buying a home, doing a GEERS retrofit and other quick face-lift measures, and flipping it again for a tidy profit. The market may take some time to adjust to the idea of the extra ongoing cost of the LIC, but soon it will become as pervasive as water heater rental.

Prevailing wisdom is that being green comes only at a significant cost, either in dollars, lifestyle, or comfort. GEERS gives the lie to that idea. It will deliver a stronger economy by cutting the flow of dollars bleeding out of the city to pay for imported energy, and it will deliver a stronger economy by creating well-paying, long-term employment for the energy efficiency industry. It will also take a big bite out of our collective greenhouse gas emissions. The best of all possible worlds.

 

KISS

Keepin' it simple

Keepin’ it simple

Three weeks ago I ranted (politely, I think) about past residential energy efficiency retrofit programs, namely Canada’s EcoEnergy for Homes program. After a one-week tangent celebrating an economic development win for Guelph’s Community Energy Initiative, I came back last week with a post about how the Guelph Energy Efficiency Retrofit Strategy (GEERS) will remove an economic barrier to home energy upgrade projects. This week, I’ll explain how GEERS promises to deliver that oh-so-treasured but oh-so-elusive quality, simplicity.

To recap and summarize my rant about the complexity of EcoEnergy for Homes, if this had been a product, it would have been a Windows PC. GEERS, on the other hand, promises to deliver a Mac.

I’m not gonna lie. I hate PCs. It wasn’t always so – I used to scoff when my mother extolled the latest in the long stream of Apple computer products she used for her graphic design business. Clearly the WinTel duopoly was superior, since it dominated the business world in general. Macs were reserved for artsy types like musicians and, well, graphic designers. I didn’t consider the many hours of productivity I had lost wrestling with hideously complicated settings – ever delved into editing autoexec.bat or config.sys? – chasing down and installing obscure drivers, and expunging the latest in an endless stream of malware. I didn’t know any better so I assumed that was just the way things were.

Not quite four years ago I had a conversion experience. My girlfriend (now my wife) succeeded where my mother had failed, convincing me that Apple computers were a better choice. Having spent some time on her iMac, I had to admit there were advantages. Changing settings was a breeze. Programs and peripherals installed and configured themselves with ease. And nary a virus in sight. Ere long, I had seen the light. I had become a Mac person.

EcoEnergy for Homes was a Windows product in Mac user’s world. If you decided to take part in the program, you would find yourself having to deal with five different and, for the most part, hitherto unknown parties: banker, energy auditor, contractor, equipment and materials vendors, and utilities. It was impossible to know if you were getting a good deal, since the pricing was unfamiliar to nearly everyone. There was no fun factor – how much enjoyment do you get out of joist pocket insulation? Some people enjoy the idea of managing a contractor, and maybe one day I’ll actually meet such a person. And I’ve never met anyone that enjoys the uncertainty inherent in phrases like “please allow 6-12 weeks for delivery”.

The whole process felt a bit like installing a piece of Windows software. How long did I spend researching alternatives, without even really knowing what I needed? How many hours had I spent staring at that maddening progress bar, wondering if the next few pixels would take ten seconds or ten hours? And when the install was complete, how many times did I discover that what I installed wasn’t at all what I expected or wanted? Similarly, after the contractor’s work was finished, the energy auditor performed the second blower door test, and then I waited. And waited. I began to despair of ever receiving my incentive cheque. Finally it arrived, and it was less than I expected. Close, but still less.

Much like life with Windows, it doesn’t seem like the program designers had spent much time thinking about the user experience. We plan to make the GEERS experience different.

First, we plan to provide a single point of contact – an actual human being. This person will explain the program to you, handle your registration, and follow up as you make your way through the process. At some point there will be a hand-off to a project lead, but that transition will be clearly explained and transparent. You will be able to participate in the program without getting into the messy details of dealing with a multitude of different parties.

Second, the product and pricing will be simple. In many cases, there will be a single package of retrofit items including insulation, weather-stripping, windows, furnace, water heater, and comfort controls (i.e. a programmable thermostat). You won’t need to spend a lot of time getting to know the entire offering, unless you choose to. If you’ve already implemented a particular measure you’ll be credited for that item, but we expect most customers will end up with the standard basic package. Pricing will be based on the type of home (e.g. 1975-era single-family house vs. historical semi-detached) and the square footage. Period.

Third, you will be able to choose from some cool options. Rooftop solar, be it PV or thermal (or both), will be one. Another will be a charger for an electric vehicle. A third will be a rainwater harvesting system. Others will be re-roofing, a ground-source heat pump, micro-CHP, and more.

Fourth, the project will be simple. The installation will be a black box. Someone else will handle everything – you as the homeowner won’t need to get involved if you don’t want to. With GEERS, you won’t have to become an expert on home energy retrofits, energy-efficient products, and managing a contractor in the same way that if you own a Mac, you don’t have to become an expert in configuring, administering, and troubleshooting a computer. It just works.

Fifth, payment will be simple. There will be no extra bill to pay. The cost of the project will translate into a Local Improvement Charge (see last week’s post for more about that), which is just an additional line item on your property tax bill. Presumably you were planning to pay that anyway, since nasty things happen if you don’t. Also, the price is expressed directly as an annual or monthly cost (depending on which payment schedule you use). It’s easy to match that up with your income, and therefore your budget.

GEERS will be all about stripping away the complexity that drove people away from previous programs. Next week I’ll talk about the way we expect GEERS will take shape, and the benefits it will bring to Guelph.