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Financing Energy Efficiency Upgrades

Canada’s First Ministers are developing¬†a pan-Canadian framework on clean growth and climate change. One of the most important contributors to a lower carbon future is investments in projects that reduce the amount of energy we use. To date, financial incentives have been a common policy instrument to encourage energy efficiency retrofits in the built environment. However, achieving significant emissions reductions in a cost-effective manner to governments will require an expanded use of financing mechanisms.

In 2016, Canada’s Energy Ministers examined a study to examine¬†different innovative financing mechanisms used to promote energy efficiency upgrades in the housing and buildings sectors with a focus on various initiatives in Canada, the United States (U.S.) and the United Kingdom (U.K.). Best practices were identified for models that align savings with the cost of loan repayments through repayment on utility bills or property tax bills, as well as traditional credit sources from financial institutions, other suppliers and governments and their agents.

The study found that across Canada, experience with energy efficiency financing is varied. While a few programs have an established track record of success, many are relatively recent. Some approaches, such as on-bill financing, have been successful in some jurisdictions but have gained little traction in others. Other approaches, such as local improvement charges, have had mixed results but show promise. Given this diversity of experience, it is likely that maintaining flexibility in program delivery will be important so that jurisdictions are able to leverage successful initiatives and lessons learned to develop successful programs for the future.

Research also suggests that successful financing programs need to be complemented with program support and other tools to address the range of barriers that home and building owners face in undertaking efficiency retrofits. Many jurisdictions have indicated that more expertise is needed to identify retrofit opportunities, see retrofit projects through, and deliver effective programs. While some supporting tools already exist in Canada, additional tools are needed, including those to improve confidence in project energy cost savings and to lower the cost of capital. Finally, by placing a priority on public sector infrastructure, governments can demonstrate leadership and ensure early action in areas under their direct influence.

Envigour assisted in the planning and execution of the study. For the complete report, click here:

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