What do Harbourfront Centre, six YMCA buildings, and an Etobicoke housing co-op have in common? Each of these Toronto buildings is shaving $25,000 a year off their energy bills– without the owners putting up any capital.
A Recent Toronto Star article highlighted TAF’s innovative non-debt financing for retrofits called the Energy Saving Performance Agreement, or “ESPA” for short. These ten pioneering projects are a win-win for building owners and investors, reducing energy costs and GHGs, and earning investors a profitable return. Avoiding the high upfront cost of the retrofit, the owners instead use energy savings to pay back the capital investment over the length of the contract. If there are no savings, the building owners do not pay, as the retrofit’s performance is backed by a specialized insurance policy.
In addition to being non-debt, TAF’s innovative financing has other key differences. Generally, the engineer walks away once the equipment is installed and the project completed. If the building owner is unhappy with the retrofit’s performance, there is no recourse. But with the ESPA, it’s a long term relationship. With TAF’s return hinging on the energy savings, TAF has a vested interest in making sure the retrofit is successful and the clients are satisfied.
Before one of TAF’s clients, the Robert Cooke Co-op signed on to the ESPA, the building had leaky pipes held together with duct tape. It looked like the heating system may not have made it through another winter, and one of two units circulating fresh air to the building was broken. But the co-op did not have the funds to purchase and install new equipment, let alone maximize their energy savings potential with energy efficient technologies. Since the retrofit, the building has seen 27% energy savings, doubled the fresh air circulation, and now has reliable equipment which has given the building a new lease on life.
Like all ground-breaking ideas, there will be some bumps in the road, especially in the early days. As an early adopter of the ESPA financing approach, the Robert Cooke Co-op showed leadership in their sector by leveraging the financing to create new value and savings for their home. They helped TAF test and refine the approach, identifying issues and challenges – like those referred to in the Toronto Star article – which TAF has addressed and learned from, and have helped improve the ESPA offering. Retrofits at the YWCA and Harbourfront Centre are now running very smoothly.
With ten retrofits under TAF’s belt, double that in the hopper, and a mature financing product in the marketplace, we are poised to make great strides in reducing emissions for large Toronto buildings while earning a great return too.
To make sure this happens more quickly and at market scale, TAF incubated Efficiency Capital Corp. (ECC), a newly launched private company focused on financing several hundred retrofits using TAF’s ESPA over the next several years.