How to launch a retrofit mission in the next federal budget

The federal government has a clear mandate to accelerate GHG reductions and create a net-zero emissions future. To do that, we need to retrofit almost every building in Canada to be highly energy efficient and to use zero-carbon energy sources.

Accomplishing this task in less than three decades requires a dramatic scale-up in the number of buildings undergoing comprehensive energy and GHG saving improvements. The traditional financing, incentive and marketing programs that encourage incremental energy savings are not up to the task.

Finding the right mix of business models, market transformations, and technologies that enable us to accomplish deep retrofits at scale will require a process of discovery. Yet, this does not mean building retrofit policy can be shelved for more study. Indeed, the sooner we launch on-the-ground initiatives, the faster we can trigger new learning about transformative retrofit solutions that are key to informing a national net zero emissions building strategy that works.

This blog calls for the federal government to launch a mission-oriented approach to building retrofits in its next budget by funding the creation of market development teams focused on developing transformative retrofit solutions.

The policy context

The most recent mandate letter for the Natural Resources Minister includes a priority to “develop and implement a National Net-Zero Emissions Building Strategy to achieve net-zero emissions from buildings by 2050, with interim milestones”. This new policy agenda links building policy with a clear zero-emission end goal, which has thus far been missing from incentive and financing programs.

The mandate letter also appears ready to consider large-scale retrofit approaches via “launching a community level net-zero emissions homes initiative”. This is referring to the 2021 Liberal Party platform commitment to model an initiative on the Dutch “energiesprong” program that started with the mass retrofit of affordable housing to build economies of scale and new business models.

The role of market development teams

Energiesprong is implemented by market development teams. These are intermediary organizations that work to re-shape retrofit markets. They can do this by organizing and aggregating together actors on the demand side (i.e., building owners and users) and then spurring supply side innovations in areas like manufacturing or contractor business models. In the Netherlands, these teams have shown that retrofits can be achieved at lower cost and faster through economies of scale and coordination, which has led other jurisdictions like France, the UK, and New York State to launch their own at-scale retrofit initiatives.

It will be important to create these teams in Canada as soon as possible because it will likely take at least a year for the teams to undertake adequate planning and community outreach. Developing transformative retrofit projects will require significant up-front efforts for design and community outreach and supply-demand coordination, or else they will end up falling back onto standard ways of doing things.

Thus, the federal government should not wait to launch an energiesprong inspired initiative until the completion of the Net-Zero Emissions Building Strategy. Rather, the strategy will be made stronger if it can be informed by the on-the-ground experience of market development teams.

The Atmospheric Fund, the Pembina Institute, and the ReCover Initiative have been seeking to play a market development team role in Canada. They estimate that a $100 million fund could launch about 10-15 market development teams or “retrofit accelerators” across Canada, and such funding should continue annually to grow a diversity of new teams over time.

A commitment to scale

Budget 2022 should also send the signal that the federal government is committed to transforming retrofit markets by building economies of scale. The whole idea behind energiesprong is that markets are transformed when they scale. This is what enables lower costs, manufacturing changes, creation of new businesses, new technologies on the market, learning by doing, and the attraction of new workers to the retrofit space.

Government leadership is needed to trigger the economies of scale. A dedicated funding stream for this objective is needed because truly game changing retrofit approaches are unlikely to fit within the parameters of existing government programs which will have restrictive budget cut-offs, an inability to consider multiple benefits, or difficulty shouldering risks associated with new technologies or business models.

A $5 billion initial capital commitment in the next budget to support transformative and large scale retrofit projects would signal that the federal government is committed to building scale and innovation in this space. This would be less than 1% of the low-end estimate of nominal mass retrofit costs – a bargain if these funds demonstrate the potential for a take-off in deep retrofits which opens up opportunities for more private and public sector action.

A governance model relevant to national retrofit mission

Finally, market development teams can play a role across multiple building types and regions. It would be a mistake to narrowly associate market development teams with an energiesprong model solely focused on affordable housing and technological solutions like prefabricated walls (although that is a great lead market and promising technology).

The market development team is a governance model with broader relevance because it is principally focused on re-shaping markets and discovering innovative retrofit solutions. It is possible to create market development teams focused on finding innovative retrofit solutions in markets such as single-family dwellings and commercial buildings. The relevant solutions might not involve industrialized manufacture of exterior panels as seen in affordable housing. They might, for example, consider a better way to identify building specific challenges through up-front monitoring or shifting traditional HVAC contractors into home performance consultant business models. The role market development teams can play within the governance of a larger innovation policy approach is spelled out in Canada’s Climate Retrofit Mission report that I co-authored with Ralph Torrie.

Time to learn through action

We know retrofitting our buildings for a net-zero economy is a massive task on a short timeline. Funding the creation of market development teams is a concrete action the federal government can take in its next budget, which will trigger learning for its Net-Zero Emissions Buildings Strategy about the transformations required to prepare Canada’s buildings for the future.