Case Study: Helping Maritime homeowners boost energy efficiency

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Summary

Household energy use is a significant contributor to Canada’s carbon emissions. In the Maritimes, where fuel oil and fossil fuels are common sources of heat and electricity, this effect is especially pronounced. Improving home energy efficiency and installing clean energy sources can make a difference, but the upfront costs are often a barrier. In three municipalities in P.E.I. and Nova Scotia, a new program is offering financing to homeowners to help them retrofit their houses for better efficiency — and to save money on energy costs, too.

Background

Household energy use makes a significant contribution to Canada’s carbon footprint. Nova Scotia, P.E.I. and Newfoundland and Labrador in particular stand out among all the provinces and territories as having the highest household GHG emissions per capita. One key reason for this is that it is common in the region to use fuel oil to heat homes. In Nova Scotia, as well, electricity predominantly comes from burning fossil fuels, contributing greatly to the province’s emissions. Households in Atlantic Canada spend more on energy than in any other province.

All this means that there is a huge opportunity in the Maritimes to make substantial reductions in GHG emissions by helping households reduce their energy usage and shift toward cleaner energy sources. 

The challenge

While rebates are available for energy-efficient home upgrades such as improving insulation and installing solar and heat pump systems, upfront costs are still high and not accessible to all Canadians.

One way to bridge this gap is through a PACE (property assessed clean energy) program. Common in the U.S. and spreading into Canada, PACE is a means to finance building retrofits on private property to increase energy efficiency and the use of renewable energy.

In 2020, a group of three small municipalities — Charlottetown and Stratford in P.E.I. and Wolfville, N.S. — teamed up with community interest corporation PACE Atlantic to design and launch a regional PACE program. The goal: to empower homeowners to take action on climate change by upgrading their homes — and to save them money at the same time.

Approach

The three municipalities launched their PACE program, branded as Switch, in July 2021. Thanks to funding from FCM’s Community Efficiency Financing initiative, they were able to start offering homeowners interest-free loans with no upfront costs on up to 20-year terms for energy-efficient retrofits. Residential property owners can apply for project loans including:

•  Solar panel installation
•  Heat pump installation
•  EV charger installation
•  Improving insulation
• Replacing windows and doors

To cover administration expenses, loan amounts include a fee of 5 percent of the total project cost. Program administration is part of the appeal for homeowners: Switch staff don’t just guide them through paperwork and the process of finding and hiring a contractor, but also help them access federally funded free home energy assessments and rebates from provincial efficiency organizations. In addition, each participant is assigned an energy concierge, who oversees the project from start to finish.

One goal of these partner municipalities was to have participation from a wide range of demographics. With this in mind, they set a target that 15 percent of participants should be low-income qualified (with an annual household income of up to $55,000).

All projects are designed to be cash flow positive, meaning that homeowners should see monthly savings on their utility bills that exceed the cost of loan repayments. 

Results

Together, Switch Charlottetown, Switch Wolfville and Switch Stratford have become the fastest-growing PACE programs ever in Canada. As of mid-June 2022, Switch Charlottetown and Switch Stratford had: 

•  Provided almost $2 million in financing for 131 completed projects
•  Signed another 177 project agreements
•  Reached 1.4 percent of all eligible dwellings in Charlottetown and 3.5 percent in Stratford

Of these homes reached, around 30 percent sign more than one agreement — that is, complete more than one project to achieve deep energy retrofits in their homes.

In its first year of programming, Switch achieved a total of:

•  332 homes committed to be retrofitted
•  $6.2 million in committed capital to be distributed and invested by homeowners
•  $565,000 in annual energy cost savings
•  1,062 tonnes of annual CO2e reduction

The Switch programs continue to grow in impact and as of November 1, 2022, they have a total of 586 projects underway or completed, including:

• 148 solar panel installations
• 238 heat pump installations
• 73 insulation installations
• 127 other installations (e.g., EV chargers, HRV systems, doors and windows)

Benefits

One additional benefit of reducing fuel oil usage in a community is lessening the likelihood of environmental damage due to accidental spills. In Wolfville, the two main water sources are drilled wells in a dense urban setting. One of the goals of Switch Wolfville is to protect these assets.

The Switch program is also developing employment opportunities in the region. One year in and the program has created more than 130 jobs, and there are projections for that number to grow to more than 210 by early 2025.

In addition, social equity and accessibility were built into the program. Participants in each community are from a wide range of demographics and neighbourhoods, and an estimated 15 to 20 percent of homeowners taking part in the program are from a low- to middle-income bracket. The value of retrofitted homes in the program ranges from $90,000 to $470,000.

One advantage of Switch over similar programs is that there is no minimum project cost, and in fact, about one-quarter of jobs completed have had a cost of under $5,000. Lower-income homeowners who install solar panels in darker times of the year — when there is less sun to provide power to their new system — have access to a layaway program, whereby loan payments are deferred until spring.

Lessons learned

The value of working together has been a major component of the Switch program’s success. Participating municipalities and PACE Atlantic CIC had complementary capabilities and neither could have run the programs without the other. 

One factor in getting elected officials and communities on board has been the multiple benefits offered by the program: not only does it have positive environmental effects, but it saves participants money and provides work for local businesses. Emphasizing all of these benefits helps to get buy-in from stakeholders with a wide range of priorities.

Next steps

Switch is currently transitioning from a pilot funded by municipalities to a sustainable, long-term program funded by private capital, though PACE Atlantic CIC will continue to administer it. This will allow them to continue to offer the program and to scale up the number of home retrofits in these communities. While this means that financing will no longer be 0% interest, the ROI for homeowners on their projects has typically been between 20 and 40 percent, meaning that there is room in budgets for participants to pay interest on loans while still saving money overall.