Energy benchmarking is a powerful policy tool that has been successfully applied in jurisdictions around the world. As part of the Building Value project, TAF’s Director of Policy & Programs, Bryan Purcell, presented to the Ontario Legislative Assembly’s Standing Committee on General Government on this important policy. Read the transcript:
The Chair (Mr. Grant Crack): Next on the agenda, from the Toronto Atmospheric Fund, we have Bryan Purcell, who is the director of policy and programs. Welcome, sir. You have 10 minutes to make your presentation, followed by three minutes of questioning from each of the parties.
Mr. Bryan Purcell: Thank you, Mr. Chair. As mentioned, my name is Bryan Purcell. I’m the director of policy and programs at the Toronto Atmospheric Fund.
The city of Toronto and the province of Ontario established TAF in 1991 to focus on reducing greenhouse gas emissions and air pollution. We invest in urban solutions to climate change through loans and grants for innovative projects as well as through the development of policies and programs to support transformative change.
I’m here today to speak specifically on the proposed amendments to the Green Energy Act which are included in Bill 135. These amendments are intended to enable the development of an energy benchmarking policy for large buildings in Ontario.
We’ve been an active supporter of energy benchmarking as a best practice in the real estate industry for about 10 years. Over the past two years, we’ve done extensive research and consultation to explore the potential benefits of a municipal or province-wide benchmarking policy. We believe that an energy benchmarking policy offers significant environmental and economic benefits, and can provide a critical foundation to enable the city and the province to achieve their long-term climate change mitigation goals.
In cities like Toronto, about half of the greenhouse gas emissions arise from energy use in buildings. The majority of this is from energy used to heat buildings and hot water, and then the balance comes from all sorts of other things: lighting, ventilation, air conditioning and various end uses. Achieving Toronto’s and Ontario’s ambitious climate change goals will require dramatically improving the energy efficiency of our buildings. We’re making some progress, but not nearly enough.
Here in Toronto—the context that I know best—the total energy used in our buildings today is about the same as it was in 1990. The combined effect of all the city’s policies and programs and the utility programs and the federal and provincial efforts has been just enough to offset the impact of all the new buildings that have gone up in the city. This is a real achievement, considering the tremendous growth that we have experienced in Toronto and other parts of the province over those 25 years or so, but it highlights that achieving our long-term climate goals requires realizing deep reductions in that energy use even as we continue growing our population and economy and therefore our building stock.
So what is an energy benchmarking policy? Simply put, it’s a policy that requires large buildings to track and report on energy use and greenhouse gas emissions. It applies to buildings of a particular size and type, and creates a database of comparable data that can be used to track benchmark building performance and track the evolution of that performance over time.
Here in Ontario, we already have a successful benchmarking policy that applies to the broader public sector. It has been in place for some years. The proposed amendments would allow for the extension of that policy to other sectors, to be spelled out in future regulations.
Energy benchmarking policies is a powerful policy tool that has been successfully applied in jurisdictions around the world. We’ve seen a wave of this across North America recently, including in New York City, Boston, Philadelphia, Chicago, Atlanta, Seattle, San Francisco and then the entire states of Washington and California. So it’s not a novel or a radical idea.
While most of these policies are a bit too new to have a real evaluation of their impacts, New York City’s policy has been around for five years, approximately. A recent evaluation by the US Department of Energy of the policy’s impact found that over its first four years, it contributed to achieving a cumulative total of $267 million in energy cost savings, while helping to generate over 7,000 person-years of employment.
We’ve all heard the old adage that you can’t manage what you don’t measure. Benchmarking goes a bit beyond measurement to include comparison to other buildings. As one US real estate professional put it to me memorably, people play differently when someone starts keeping score. Simply providing building operators with reliable information about their performance relative to their peers has been demonstrated to stimulate significant improvements in performance over time. We’ve seen that with voluntary programs here in Ontario and around the world, and we’ve seen that in the early days of policies that have been rolled out in many jurisdictions.
Studies in Toronto and other cities show that the worst-performing buildings typically use about five times more energy per square foot than the best-performing buildings in that real estate class. You can imagine that when building owners and operators hear that their energy costs may be five times higher than their competitors, they’re motivated to find out why and to take action to improve their performance.
Additionally, making energy performance data available strengthens market incentives as well for improvement in building performance. As building operators begin thinking more about how improving their energy performance and reducing their carbon footprint could improve their building valuation or help attract and retain high-quality tenants, it creates new market incentives that help us address the problem.
We’ve been exploring this policy with the city of Toronto for some time, and some of the research they’ve commissioned found that a benchmarking policy, just in the city of Toronto, had the potential to support emissions reductions of three million tonnes cumulatively over the next 20 years, making a meaningful contribution to our climate targets. The same research found potential for $1.9 billion in cumulative energy savings over the same period, making the city a more affordable place to live and operate a business. Finally, the policy was found to have the potential to support up to 10,000 person-years of employment cumulatively by 2035.
How does energy efficiency and benchmarking support job creation? There are three ways, to keep it simple. First, people are employed directly to plan and implement capital improvements and operational improvements in buildings, as people get exposed to their performance information and are motivated to take action. Second, these efficiency projects indirectly support a broader ecosystem of economic actors: manufacturers, distributors etc. Third, the dollars that were being wasted on energy and utilities are redirected towards more productive and labour-intensive sectors of the economy, supporting new jobs in various areas.
But while benchmarking policies can create substantial reductions in energy use and emissions in their own right, I feel that in the long term their greatest strength is as a foundation for the development of smarter policies and programs to help us address our climate change challenge. Over the next generation, we need to reduce the carbon footprint of our buildings by 80%. This is a monumental challenge and it’s compounded by a lack of information about how the building stock performs currently and how that changes across time and space. Regionally, in different sectors of the economy, we don’t have a clear picture at any level of government. So it truly is something like trying to drive with a blindfold as we try to move toward our long-term greenhouse gas reduction targets and the transformation to a low-carbon economy.
An energy benchmarking policy will create a comprehensive database of building energy use information that will be of critical use to policy-makers at all levels of government—municipal, provincial and federal—as well as utilities, researchers and other stakeholders. It will allow us to develop 21st-century conservation programs and policies which are evidence-based and address the real challenges of specific regions, real estate sectors and building types.
It will provide unprecedented ability to evaluate program and policy effectiveness over time so we can continually improve the way we respond to this problem based on real data. It will allow us to map energy data geographically at a neighbourhood scale to assess opportunities for district energy systems or other neighbourhood-scale sustainability solutions, which will become more important as we move along this journey to a low-carbon economy.
We’ve been working closely with the city over the past two years on research and stakeholder consultation on this type of policy, and when we became aware that the province was considering rolling out this type of policy at a province-wide level, staff at the city and the ministry quickly began collaborating on that stakeholder consultation. I want to say that the staff at the city and at the Ministry of Energy have done a tremendous job engaging and consulting with stakeholders from various sectors, including the real estate sector, but also utilities and many other sectors as well.
There were a number of public forums held in major cities around the province, and the overall response from stakeholders was quite positive; I was surprised at how positive it was. One key point that we heard, though, was that real estate stakeholders strongly preferred that a policy be implemented at the provincial level rather than at municipal levels, because many of them, of course, hold real estate holdings across municipal boundaries and they felt that they could gain most by a consistent policy that applied to their whole portfolio. That would make it simpler for them to manage compliance and make best use of the data,
We really encourage the province to move forward with that type of policy, and we’re encouraged to see it as part of the package of legislative updates to the Green Energy Act that are part of Bill 135.
The Chair (Mr. Grant Crack): Very good, sir. Thank you very much. We shall start the line of questioning from the official opposition. Mr. McDonell.
Mr. Jim McDonell: Thank you for coming out today. You’ve had a chance to review different programs in some of the larger cities like New York. Any recommendations, or does anybody have a better system than the others, that we’d have a chance to review what’s going on and learn from them?
Mr. Bryan Purcell: Yes, that’s a great point. We have the benefit of being able to learn from the experiences of many other cities and states that have implemented this kind of policy. I think we have learned some critical lessons, looking at those experiences.
One of the first was to implement it in stages, starting with the largest buildings, which is something I know that the ministry staff has been considering. That allows us to make sure that we have the systems in place to collect and use the data properly, and also starting with a smaller subset of buildings that have really sophisticated management capability to comply, and then we can improve over time.
Another thing we’ve heard was that we need a grace year. We learned from the other jurisdictions where the data is held privately and not shared broadly for the first year after compliance. That gives building owners a chance to address their performance if they wish to, and also to screen out any bad data that might be in the system.
We heard a lot, too, about the need for various data quality controls like periodic auditing of a sample of the buildings or data verification to make sure that we’re getting good data.
The biggest thing that I think we learned was that this works best when we can—at least eventually—achieve automated data uploading directly from the utilities, at the customers’ request, to the benchmarking program that is specified. That eliminates human error and makes compliance that much easier for building operators. I think there is some view in the ministry towards ensuring that we get there, within a few years, with our utility partners.
Mr. Jim McDonell: We’ve spent something over $1 billion on these smart meters, but they seem, right now—again, last week, I had somebody come in. We’re having huge issues on the ability for the utility to actually go in and see if the power is even shut off. It’s not there.
Is there technology that we’re looking at that would produce this information? Would it require replacing this somewhat expensive system that we’ve put in place?
Mr. Bryan Purcell: I’m pleased to say that implementing this won’t require any changes to metering technology that’s currently in place because it’s not intended to collect real-time data. That’s the big difference.
Any time you’re looking for real-time data, you need sophisticated metering, and then you can run into some issues, of course. There’s a learning curve. But this relies on the same data that is used for billing purposes by the utilities: the existing data from existing meters.
Generally speaking, there’s no need for new metering technology. The one challenge we have is that some large buildings have multiple meters: for example, suite-metered condominium buildings. The province has no intent, I believe, to collect those meters individually. So utilities need a process to aggregate that data to a whole-building level, so that building owners can understand what their entire building uses, rather than individual meters within that building. That’s critical.
We worked with Toronto Hydro to explore their ability to do that. They’re pretty well there. I think that can be solved with the other utilities. It’s basically a data-management exercise to aggregate buildings with the same address that have multiple meters to just one number so that that this data can be reported to the building owner without any privacy issues relating to individual accounts.
The Chair (Mr. Grant Crack): Thank you very much. I appreciate it. Mr. Tabuns?
Mr. Peter Tabuns: Mr. Purcell, thank you again for being here today. You mentioned earlier that there is an incentive factor that propels building owners to increase their efficiency performance when you have this kind of benchmarking. I think you mentioned this before, but just for clarity: What impact does that have on the percentage of energy consumption?
Mr. Bryan Purcell: Right; great question. We’ve seen a range of data. Generally speaking, the number that we find is that regular, ongoing participation in a benchmarking process generates about a 2%-to-3% annual improvement in energy performance. That varies a bit. We expect that, over time, it will taper off when people had been doing that for a long period of time. Then it becomes a way of maintaining that energy performance. It’s a small average improvement in performance, but the key is that it gets implemented across an entire building stock or a very large number of buildings, achieving pretty significant results.
Mr. Peter Tabuns: Okay. I don’t have a further question. Thank you very much.
The Chair (Mr. Grant Crack): Thank you. We’ll go to the government. Ms. Vernile.
Ms. Daiene Vernile: Thanks very much, Bryan, for coming in and sharing this information with us. I think it’s a very ambitious goal that the Toronto Atmospheric Fund has set a target of an 80% reduction in greenhouse gas emissions by 2050. You should be commended for that.We talk about large buildings. We know that, in Ontario, large buildings are generating 19% of the greenhouse gas emissions measured in 2013.
I love your adage that, “You can’t manage what you don’t measure, and when you keep score, you play the game a lot differently.” We’re asking building managers and owners to report and disclose voluntarily. Is that enough, to do it on a volunteer basis?
Mr. Bryan Purcell: That’s a good question. We’ve looked at the success of voluntary programs around the world, and the general trend we’ve found is that they max out at about 15% to 20% of the building stock that they’re targeting. That’s the best that you can really hope to get through a voluntary program. So I think the intent, or at least the subject of consultation from the ministry and the city, has been to have a mandatory program. One of the reasons we think that is necessary is that we just don’t think it’s possible to get beyond about 15% to 20% of buildings participating through a voluntary program. They are also difficult to sustain over time because they’re usually driven by non-profit organizations that cannot budget for that on a continuing basis.
Ms. Daiene Vernile: Building managers may say to you, “We like the idea of investing in our building and making it more energy efficient, but what’s that going to cost?” But when you spend the money, you see the results later on, don’t you?
Mr. Bryan Purcell: Absolutely. In several ways, we’ve been financing energy-efficiency projects and buildings in Toronto and beyond for many years. I’ve always earned a reasonable rate of return on those investments, along with benefits for the building owners we work with. Beyond that, with market conditions as they are today, every $1 you can reduce utility costs in a commercial building—other things being equal—gives you $10 to $15 of additional building value. So even if building owners are thinking to sell their property before they realize a payback from energy savings, it’s almost a stronger business case because of the improvement in asset value.
Ms. Daiene Vernile: This might be a difficult question, but, for a typical building, if you do invest to make it energy efficient, how quickly do you see your payback?
Mr. Bryan Purcell: It depends on the level of ambition that you take with the project. What we invest in usually is projects that try to achieve a 20% to 30% improvement in energy performance and reduction in greenhouse gas emissions. We usually see a payback in the range of seven to 10 years with that type of project.
Of course, buildings that target very specific things—low-hanging fruit—can achieve very quick paybacks, sometimes within a year. Lighting, for example, has a very quick payback. For those who want to go very ambitious and get a 50% reduction, you’re maybe looking at closer to a 15- or 20-year payback. So it really ranges on the level of ambition that you have with improving your performance.
Ms. Daiene Vernile: With a lot of buildings it’s not so much that they don’t want to do it, it’s what the cost is, right?
Mr. Bryan Purcell: Absolutely. One of the reasons we’ve focused a lot on financing, to make sure that those who want to move forward can access funds from investors to implement these projects, is because, if they’ll pay for themselves and the financing costs, then a lack of financial resources from the building owner shouldn’t be a barrier to participating. We do financing ourselves, but we’ve also helped the city of Toronto to establish a financing program for the rental apartment sector that provides financing for energy retrofits that’s linked to the property tax system. They repay through the property taxes over up to 20 years. We’ve worked to help other municipalities launch similar programs. We hope to see that happen.
Ms. Daiene Vernile: So save money and save the environment.
Mr. Bryan Purcell: Absolutely.
The Chair (Mr. Grant Crack): Thank you very much. We appreciate you, Mr. Purcell, coming before committee this afternoon and sharing your insight.
Mr. Bryan Purcell: My pleasure. Thank you for your time and attention.
Source: Ontario Hansard, 2016-02-22
