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How to spark energy innovation in Canada without new money

CEEA’s McDonald to co-chair Montreal roundtable on energy efficiency and promote energy efficient buildings

By Elizabeth McDonald

The upcoming national energy innovation roundtables pose an exciting opportunity and a challenge for anyone working in the energy sector. We have to be smart and thrifty – truly innovative — because Natural Resources Canada has been clear that any ideas coming from these brainstorms must be executed with existing resources. As a co-chair of the energy efficiency roundtable in Montreal on December 4, I know my energy efficiency colleagues can take on the innovation challenge with the budget constraint caveat.  Why? Because energy efficiency has already proven it is making a difference around the world.

Energy efficiency is a powerful public policy tool
NRCan’s discussion paper for the five roundtables refers to the International Energy Agency’s (IEA) recent Energy Efficiency Market Report 2013 which highlights how energy efficiency increasingly delivers outcomes that address important public policy challenges in terms of climate change and economic growth.  In 2011, the total global investment in energy efficiency was similar in magnitude to supply side investment in renewable or fossil fuel electricity generation. The IEA estimates that investment in key energy efficiency markets worldwide was US$300 billion in 2011.

Each roundtable participant has asked to answer three questions. These are some of my thoughts.

Q.    Which energy technology areas offer the greatest potential returns for economic and environmental performance in Canada and export growth opportunities globally?

A.    Building codes and procurement models
Since taking over this job I have learned that buildings present a real opportunity to reduce GHG emissions. And it’s not just new buildings but also through intense retrofits of existing buildings. The building sector accounts for 30 to 40 per cent of global energy and offers the greatest potential for low-cost reduction of GHG.  According to the Global Buildings Performance Network, the building sector could decrease energy use for heating and cooling by more than 40 per cent despite a 100 per cent increase in floor space by 2050. Building codes are the essential tool to maximize this opportunity and Canada has done an excellent job in this area.

I believe, particularly in terms of retrofits a big step forward in terms of innovation would be adopting a new procurement model. Historically energy retrofit procurement models have focused on awarding contracts to the qualified supplier who presents the lowest design/construction management costs. This approach does not effectively align the interests of owners and professionals when it comes to incentivizing innovative, “lean” projects that generate the most possible value to the owner. Instead, it often encourages professionals to spend less time on the design of an innovative deep energy retrofit, opting for a simple retrofit with lower targets. Or they pursue a higher construction cost than necessary to increase profit margins.

CEEA has already strongly recommended procurement models to the Ontario government that evaluate qualified proponents based on the net present value (NPV) of the energy conservation projects they propose.  Under this approach, the qualified proponent submitting the highest project NPV (which includes project costs, government incentives, savings and the payback period) is awarded the contract.  Simply put, the firms who can design and deliver the highest possible savings using fewer construction dollars win.

Q. How can governments, industry, universities, and other stakeholders more effectively align their efforts?

A. A unified message that appeals to consumers
I am actually inspired by activities like this roundtable – the federal government is well positioned to be taken seriously by all stakeholders. That being said, these activities must result in commitments and not just words. I also believe that the private sector can assist other stakeholders in communicating the message in a responsible but more “friendly” way. If we want to stir the market we need to communicate in a different way. We need to change the conservation message – to one of dollars and cents rather than kWh changed or what I think of as “energy wonk” speak.  Consumer demand will foster innovation – and our Gandalf research indicates consumers want to save money, but they don’t feel they have enough information. We need to tailor our messages with the consumer in mind.

Q. Where should stakeholders focus their efforts in building stronger partnerships within Canada and internationally?

A. Become energy efficiency entrepreneurs
I am involved with the Alliance to Save Energy (ASE) in Washington and am one of their international advisors. They recently made a presentation to CEEA on their activities in other markets. Americans clearly perceive energy efficiency as a trade opportunity for their engineers, consultants and manufacturers in developing markets such as Eastern Europe and Asia (particularly Thailand, China, India and Vietnam).  The World Bank is included in their discussions – the bank works with the Department of Energy and they lead delegations to those targeted markets.  We need to look at energy efficiency like the Americans do. This will not undermine our efforts to sell our natural resources but actually balances our portfolio to the world.  We can be energy efficiency entrepreneurs. We need to do this strategically – a clear mission with continuous follow up to build opportunities.

Natural Resources Canada’s five Energy Innovation Roundtables include distributed power generation (Halifax); energy efficiency (Montreal); next-generation transportation (Toronto); long-term research and development opportunities (Vancouver); and unconventional oil and gas, including carbon capture and storage (Calgary). They begin at the end of November and end in early 2014.

Posted November 5, 2013

Elizabeth is the president of CEEA.

2 thoughts on “How to spark energy innovation in Canada without new money

  1. Great to see the recognition that the current procurement mentality of lowest first cost is not very applicable to the energy efficiency requests, especially from the public sector that has buildings owned by all of us and not a private sector shareholder. CABA has recently completed the research report on “Intelligent Buildings and Bid specification Process” It shows that life cycle costs must be applied. They are currently doing a paper on Life Cycle Costs for Intelligent Buildings and will be releasing it at the upcoming CABA Forum in Philadelphia. I will be presenting the ways to use Life cycle costing for Bright GREEN Buildings at the 6th Public Sector Life Cycle Costing for Asset Management Course, which will be held in Toronto on March 27 & 28, 2014.

  2. Thanks for taking the time to write this up Elizabeth.

    From the research we’ve done for the Alberta EE Alliance, there are few opportunities for really moving the EE bar forward that don’t involve incentives or regulations. If we take incentives off the table, by saying there’s no money available for them, then I’d suggest regulations would be the place for the feds to focus to make some big gains in EE.

    Of course, there’s also the need for building more capacity to advance various EE opportunities. The feds do a good job of taking a national lead on things like the EnerGuide for Homes labeling system and bringing Energy Star Portfolio Manager to Canada. These efforts (and more) should definitely be maintained.

    Jesse Row
    Executive Director
    Alberta Energy Efficiency Alliance

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