Energy Efficiency for Homeowners

Josh McLean and Chris Ling

Case Summary

As a Kyoto Protocol signatory, Canada has initiated some programs to reduce greenhouse gas emissions. The EnerGuide for Houses (EGH) program provided a financial incentive to encourage homeowners to increase the energy efficiency of their homes (related to heating and cooling). Despite the allure of government grants and the financial benefits from energy savings, the number of homeowners following through with upgrades in the EGH program was relatively low. This research examines why homeowners took part in the EGH program and what types of barriers they encountered during, or prior to, renovations. 75 participating homeowners in Halifax Regional Municipality (HRM) were surveyed, and 8 experts were interviewed. Financial reasons were the main reason for taking part, while also being the main barrier to completing upgrades. An analysis of this case suggests some recommendations for a successor to the EGH program.

Sustainable Development Characteristics

The frequency and intensity of extreme weather events will continue to increase (leading to environmental, economic and social impacts) unless atmospheric greenhouse gas (GHG) levels are reduced. There is “a very high confidence” that natural ecosystems are already changing due to the impacts of climate change (Parmesan and Yohe, 2003). Examples of potential climate change impacts include more droughts, melting of mountain glaciers (Hyder (ed.), 2005), human health impacts from disease and air pollution, rising sea levels from melting polar ice, impacts to ecosystems and forests from changing weather patterns, and the associated economic impacts resulting from these changes (David Suzuki Foundation, 2006).

Reducing the use of fossil fuels will help reduce the severity of climate change impacts (Office of Energy Efficiency [OEE], 2005). Relative to Canada’s GDP, the country produces 25% more GHG emissions than the average for the industrialized world (Bramley, 2005).  On a per capita level, Canada is the second highest user of energy compared to other International Energy Agency countries (Luxembourg being the highest and the United States the third highest) (Natural Resources Canada [NRCan], 2005a). As a signatory to the Kyoto Protocol, Canada agreed to reduce GHG emissions by 6% below 1990 levels between 2008 and 2012 (Government of Canada [GOC], 2005). In November of 2002 Canada developed a Climate Change Action Plan with goals of reducing GHG emissions by 240 megatonnes per year. The federal government later ratified the protocol on December 17, 2002 (Canadian Broadcasting Corporation [CBC], 2006).

In April 2004 Environment Canada reported that Canada’s 2002 GHG emissions were already 28% higher (731 million tonnes of GHG emissions) than the Kyoto target to be reached by 2012 (572 million tonnes). In 2005 the federal government increased its original reduction targets to 270 megatonnes per year by 2008-2012.  The following year, Natural Resources Canada announced cuts to many climate change projects, following a change from the former Liberal government to a Conservative government. The latter claimed it would halt Canada’s participation in the Kyoto protocol as part of their election platform. More recently, in October of 2006 the federal government unveiled its new Clean Air Act, a ‘made in Canada’ approach that did not include the Kyoto protocol (CBC, 2006).

Whether or not the federal government honours their commitment, the Kyoto protocol is not a final solution to the climate change problem. In fact, by 2050 global GHG levels should be 50-60% lower than 1990 levels in order to stabilize the GHG levels at twice that of the pre-industrialized area (GOC, 2005). Other groups, including the Pembina Institute and the David Suzuki Foundation, recommend even greater levels of reductions, 80% by the year 2050 (Bramley, 2005).

Approximately 17% of Canada’s energy use comes from the residential sector (NRCan, 2005b). This sector includes 4 types of housing: apartments, mobile homes, single attached homes (duplexes and row houses), and single detached homes (GOC, 2004). The majority (64.5%) of the residential buildings in Canada are single detached homes (7,191,540), followed by apartment buildings (18.5% - 2,061,257), single attached homes (15.5% - 1,721,416) and mobile homes (1.5% - 195,176) (NRCan, 2005c).

Critical Success Factors

Promotion of the program is crucial to recruiting homeowners, in Nova Scotiamany were unaware of the top up grants from the province, and this may have resulted in more upgrades being implemented.

The key component of the EGH scheme is not the grant available to homeowners, but the access to the audit opportunity and recommendations for improvements and advice. Although financial aspects of energy efficiency are the most important motivation, this relates to cheaper energy bills in the long term, rather than the grant in the short term.

Community Contact Information

Josh McLean
e-mail: mcleanojosh@hotmail.com or jmclean@clean.ns.ca
tel: (902) 420-8803

What Worked? 

1. The energy audits were a popular component of the program, with many respondents saying they would consider paying for an audit even if it was not part of a wider grant program.
2. The advice and the recommendations are more important than the grant, the majority of homeowners would have upgraded their homes with or without the grant – the key factor is the audit and advice.

What Didn’t Work?

1. Loss of support from the federal government is clearly a major problem, and most of those surveyed felt it was a poor decision.
2. There is a low number of homeowners conducting a ‘B’ audit and thus accessing the grant funding. This is due to the planned upgrades not having been completed, or that the homeowners thought there was no prospect of having achieved significant energy savings, thus not getting a significant grant and making the second audit unnecessary.
3. Some homeowners felt that there was not enough time given to complete upgrades to qualify for the grant.
4. Most homeowners felt that many upgrades were prohibitively expensive.
5. Many homeowners were not aware of the availability of matching funding from the Government of Nova Scotia to complement the EGH grant.
6. The grant process is confusing as it is difficult for homeowners to predict how much grant they will receive before they start the renovations.

Financial Costs and Funding Sources

Under the EGH grant program interested homeowners paid a fee (typically $150) to receive an energy audit on their home. The actual value of the audit was approximately $300; with the federal government subsidizing half of the up front cost.

A federal grant of up to $4,580 was then given based on the change between the A and B ratings – average grant $780 (2005 figures).

Originally the grant was available for a homeowner’s principal residence. In July 2005 the grant level was increased (up to $4,580 from $3,348) and landlords also had the potential to receive this grant for any of their low-rise residential buildings that met the criteria for the program (NRCan, 2005d). In the 2004-2005 fiscal year over 77,000 homes in Canada received an EGH evaluation, and over 17,000 grants were awarded, worth over $10 million (NRCan, 2005a).

Additional energy efficiency incentives also became available to Canadians participating in the EGH program. For example, $100 grants were automatically available for homeowners who replaced older gas or oil-fired heating systems with Energy Star rated systems. The Canadian Mortgage and Housing Corporation (CMHC) offered a 10% rebate on CMHC mortgage loan insurance premiums when buying a house with an EGH rating of 80 or higher, or when renovating an existing home and increasing the EGH rating by at least 5 points (and having a minimum rating of 40) (CMHC, 2005). Some organizations offered zero or low interest loans to help finance the cost of the renovations. For example, the VanCity Credit Union in British Columbia offered low interest loans when borrowing money to pay for upgrades recommended by the EGH program (VanCity, 2006). The Government of New Brunswick, in addition to a $50 rebate on the cost of the EGH visit, also offered either a zero interest loan up to $10,000 to help pay for EGH related renovations, or an HST rebate on the cost of renovations of up to $1,500 (Efficiency NB, 2006). Other financial incentives, as reported by Green Communities Canada [GCC] (2006c), existed for most provinces and some territories, and were normally offered through the provincial/territorial governments, utilities, gas providers, banks or credit unions.

The Government of Nova Scotia provided $4.5 million to support the EGH program incorporating:

1. Matching the federal grant up to $1,000;
2. Providing a rebate on the cost of the EGH A visit ($150) and an additional $400 to the available federal and provincial grants, for single seniors with incomes of less than $25,000 or to seniors with family incomes less than $40,000 (Nova Scotia Department of Energy [NSDE], 2005a); and
3. An energy savings kit (valued at $50) that contained products and materials to reduce energy use, up to $100 per year.

Following the cancellation of the Federal Program the Government of Nova Scotia has implemented the following:

1. A provincial EGH grant of up to $2000;
2. Any low to modest income citizens with single net incomes of less than $25,000 or family incomes of less than $40,000, were provided a rebate on the cost of their EGH visit, and an additional $400 was added to the EGH provincial grant; and
3. An energy savings kit (valued at $50) to all EGH participants (NSDE, 2006a).

As of November 2006, the province also offered the following:

1. A $200 rebate when purchasing an efficient wood burning appliance (pellet stove or an Environmental Protection Agency (EPA) certified wood stove);
2. A 10% discount on the installed cost of a solar hot water heating system;
3. Up to a $750 rebate for buying an energy efficient oil burning furnace or boiler and indirect hot water tank;
4. Rebates on high efficiency natural gas heating equipment (although natural gas was only available in a small geographical area); and
5. Either a full or partial subsidy to pay for EnerGuide for New Houses (EGNH) evaluations (NSDE, 2006b).

The average income of homeowners taking part in the EGH process is higher than the average for HRM, $78,000 as opposed to $46,946 (Statistics Canada, 2006) suggesting that there is a financial barrier to uptake of the scheme – suggestions to improve this have ranged from upfront interest free loans to larger grants and other financial support.

Research Analysis 

1. As the prime motivation of people to take part in an EGH or equivalent program is to reduce energy bills it seems essential to stress the link between energy efficiency and saving money in any education or publicity program for energy efficiency – rather than the environmental benefits that these programs can provide.
2. The EGH program suffers from a lack of partnership between the three levels of government, utilities and other energy providers.
3. There is currently a disconnect for homeowners between high energy bills and programs perceived as ‘environmental’ that espouse energy efficiency. A stronger link needs to be made in publicity between these two perspectives.
4. Other problems in achieving upgrades is the time to complete them and the lack of available contractors – a suggestion is that the EGH administration could link homeowners to contractors able to carry out the relevant improvements.

A summary of recommendations drawn from this research for the EGH program is as follows: 

Detailed Background Case Description

The Federal context

EnerGuide for Houses (EGH) is a residential energy efficiency program developed in the 1990’s and initiated in 1998 (GCC, 2006b). In August of 2003 NRCan initiated the ‘EGH Grants for Homeowners’ program in an effort to further reduce energy use (and associated GHG emissions) in the residential sector (GCC, 2006a). Under the EGH grant program interested homeowners received an energy audit (‘A’ audit) on their home. A certified auditor checked the home for areas of inefficiency relating to heating and cooling. This included an investigation of the levels of insulation throughout the house, measurement and documentation of all windows, doors, heating, hot water, cooling and ventilation systems, and a blower door test that determined the level of drafts in the home. The house received an initial energy rating between 0 and 100. Typically, the older the home the less efficient it would be, and therefore the lower the rating. Upgrade options were modeled in a software program to determine the level of potential energy savings. A report was given to the homeowner with recommendations on how to improve the efficiency of the home, by presenting upgrade options in terms of their level of anticipated energy savings. Homeowners then had up to 18 months to complete the desired upgrades, after which a second evaluation (‘B’ audit) determined the new EGHrating.

A federal grant of up to $4,580 was then given based on the change between the A and B ratings. The grant was based on the margin of change in the energy efficiency of the home rather than the amount spent on upgrades. By 2005 the average grant awarded to homeowners was $780 (NRCan, 2005d). The following upgrades could improve the space heating or cooling energy demands of the house, and thus the rating: adding insulation, draft proofing, upgrading old windows and doors, and upgrading heating, cooling, ventilation and domestic hot water systems. On average, upgrades could help houses older than 25 years save 35% of energy use (OEE, 2005).

The Nova Scotia experience

From 1990 to 2001 the total emissions from the Nova Scotia residential sector grew by 8.2% (Hughes et al., 2005). NSDE (2005b) provides similar results, with GHG emissions increasing by 10.5% between 1990 and 2003; a rate of increase that was identified to be less than many other provinces. Average energy use in homes in NS includes: space heating (64%), water heating (20%), appliances (12%) and lighting (4%) (NSDE, 2005c). By 2005 only 1% of the homes in Nova Scotia had received an EGH evaluation (Lipp and Cain, 2005).

In an effort to further reduce energy use, Nova Scotia ‘piggybacked’ onto the EGH program to promote energy efficiency upgrades in the province. On October 12, 2005, the NSDE announced its Smart Energy Choices program. Part of this program included an energy savings kit containing:

• Lighting: 2 LED night lights and 3 compact fluorescent light bulbs (CFLs)
• Water Conservation: 2 faucet aerators and 1 low-flow showerhead
• Draft proofing: 1 package of foam gaskets for outlets, child safety caps, a roll of v-strip weather stripping and a storm window kit (NSDE, 2006c).

As of March 2006, despite the available grants, the number of homeowners who had followed up with their B visit was relatively low. For example, Clean Nova Scotia (CNS) is a non-profit environmental organization who had conducted many of the EGH audits in HRM. By March 2006 the level of B visits (homeowners applying for the grant) was approximately 20% (McKegney, pers comm., 2006). Similar observations were noted by Bird (2006), where in Waterloo Ontario, one of the EGH delivery agencies (Residential Energy Efficiency Project) had evaluated over 6,300 homes since 1999. However, by October 2005 only 12% had conducted enough upgrades to receive a B visit and grant. This figure of 6,300 homes includes those that had been evaluated before the grant existed, although the trend of a low level of B-visits is similar. Although grants existed, to truly discover how to help homeowners reduce energy use it is necessary to understand the motivations of homeowners and the barriers that exist to increasing the home’s efficiency (Dodge, pers. comm., 2006).

Post Federal EGH cancellation

On May 12, 2006 the new Conservative federal government cancelled the EGH program (GCC, 2006a).  This cancellation affected those who had not yet taken part in the program. Homeowners who already had their ‘A’ visit by that date were still eligible for the federal grant. However, the 18-month timeline was cut short for many, as all files were required to be submitted to NRCan by March 31, 2007. Therefore, past EGH participants were encouraged by NRCan to have their ‘B’ visit completed by February 28, 2007 (NRCan, 2007). Since the cancellation of the program some provinces and utilities have taken steps to reinstate the program in their area. On October 3, 2006 the NSDE announced that it would be reinstating the EGH program at least until March 31, 2007. The NSDEalso offered additional incentives for purchasing energy efficient products.

In addition to these programs, NSDE’s ‘Smart Choices for Cleaner Energy – The Green Energy Framework’ report outlined plans to participate in the anticipated federal EGH for Low Income Houses program, among other efficiency initiatives (NSDE, 2005d).

Taking part in the program

According to a survey of 75 homeowners that had taken part in the EGH program the main motivations (in order of frequency of response) for taking part in the program were:

1. To help reduce energy bills
2. To gain knowledge
3. To improve the home’s energy efficiency
4. To get the government grant
5. To help the environment
6. To improve comfort within the home, and
7. Because it was recommended by a friend or relative.

Those taking part that undertook and planned the following energy efficiency upgrades: