Energy Savings Performance Agreement – Canada

In this activity, a financial tool was designed for facilitating energy efficiency retrofitting in larger urban buildings. Property owners in Toronto, Canada, can obtain funding to invest in sophisticated retrofits via a performance-based contract. This project has tapped into the niche multi-unit residential market for energy efficiency, helping to leverage investment in low-carbon solutions. It reduces urban emissions, addressing climate change in Canada's largest city – while creating jobs and making housing there more comfortable and affordable.

Fast facts:

Two Energy Savings Performance Agreements signed with building owners; 10 more such agreements expected to be signed;
The 12 agreements amount to $4.6 million investment in energy-efficient retrofits, preventing more than 1,500 tonnes of greenhouse gas emissions annually;
30% to 50% energy efficiency improvements projected city-wide.

The problem

Cities consume more than two-thirds of the world’s energy and account for a similar proportion of global carbon dioxide emissions. Since most existing buildings in urban areas were not built with energy usage in mind, retrofitting buildings for energy efficiency represents a tremendous “supply” of clean energy in cities. It is also an excellent investment opportunity. Even so, the marketplace fails to offer incentives for property owners to implement energy efficient measures.

In Toronto alone, for example, tens of thousands of Canadians are housed in buildings that were built at the peak of energy-inefficient construction in the 1970s and 1980s, and now require significant renewal. These and other thousands of larger buildings in Toronto can potentially reduce their energy use through off-the-shelf technologies. But while single-family homeowners had been supported with a robust government incentive program, multi-unit building owners have found it difficult to access capital without having to borrow money. Even with lending available, traditional lenders offer only short-term debt financing, and energy service companies focus almost exclusively on large institutional projects.

The solution

The Toronto Atmospheric Fund is offering full financing for up to 10 years to support multi-measure retrofits of condo, apartment, mid-market commercial, long-term care, and small institutional buildings. Energy Savings Performance Agreements (ESPAs) require that the project achieves a minimum greenhouse gas emissions reduction of 10%.

Upon entering an agreement with a building owner, TAF pays up to 100% of the costs to design, procure, install, monitor, and maintain the retrofit. Owners repay TAF for installing energy efficiencies through savings of up to 30% on their energy bills. When the cost of the retrofit is paid off, the owner retains all future energy savings.

Helping the planet

Retrofitting buildings for energy efficiency reduces energy consumption; meaning less electricity needs to be generated. This translates into decreased greenhouse gas emissions, particularly in cities.

Helping people

Since suppliers of goods and services involved in retrofits are local – and include a range of professional, trade, and junior employment – the activity helps create jobs. In many cases, retrofits can substantially improve indoor air quality, enhancing the quality of life of residents. Affordable, energy-efficient housing that lowers ongoing living expenses also promotes economic prosperity and social well-being. In some cases, public safety is improved through energy-efficient outdoor lighting. Retrofitting of older buildings also helps to revitalize neighborhoods that may have become rundown.

Scaling up

TAF is working with partners to help the approach grow and broaden market share. A new company is being incubated that will put specialized ESPA financing into approximately 250 retrofits. Additionally, the program is in the preliminary stages of being broadened beyond Toronto for implementation province-wide. Eventually, TAF hopes to see ESPA offered nationally.