How BC Could Finance Home Energy Projects

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Originally published on the ECOreport

British Columbia doesn’t have anything like the PACE program, which allows Californians to finance solar panels, energy-saving windows, and other energy efficiency projects through their property taxes. A new study from the Pacific Institute for Climate Solutions (PICS), at the University of Victoria, shows that on-bill financing (OBF) performed the same way in Manitoba, the United States and the United Kingdom. The new PICS white paper—Cheaper Power Bills, More Jobs, Less CO2—explores how BC could finance home energy projects.

AQPH0aGzcZIQJJO4j4kCWFqnrJHwd7XOP1YlBeeGg4c-1038x576More Successful Programs

BC has already tried OBF programs, at Colwood and in the South Okanagan, but failed to attract many customers.

Comparing these ventures to more successful programs in Manitoba and Tennessee, the report found the BC programs lacked several key ingredients.

The authors of Cheaper Power Bills, More Jobs make three recommendations. First, the provincial government must champion energy efficiency “undertaking strong promotion at the launch of the program.” The criteria for loans should be more relaxed than  typical bank requirements. Secondly, accredited contractors who can submit applications on behalf of customers need to be involved.

“Having industry contractors trained in OBF makes a huge difference in terms of grassroots promotion, plus they can remove entrance barriers by helping with the paperwork thus ensuring fast processing turnarounds, and ultimately uptake. OBF has been a huge success, for example, in Manitoba that retrofits 5,000 houses a year, and it can work here too,” said co-author Carter Williamson.

An OBF Program Offers BC…

If an OBF program is carried out as this is done, the authors believe it could provide BC with:

  • A steady 12,000 homes retrofitted per year.
  • Energy savings of 4 TWh after 20 years, which would help the province meet the rising demand for electricity.
  • Three million tons in total (direct and indirect) GHG reductions over 20 years.
  • $60 million annually in additional economic activity.
  • 600 to 1,080 direct and indirect full-time jobs (i.e. building/maintenance and construction related).

The ECOreport submitted a number of questions to Carter Williamson and these are his answers:

Q/ You called the pilot projects in Colwood and the South Okanagan “failures.” Is that because of “the very low uptake from utility customers”? Is there any other sense in which they were failures?

Screen-Shot-2015-10-01-at-5.46.58-AMCW: Thirty OBF programs were reviewed to identify factors of success. Success of a program is primarily about achieving its targets, which could be defined as market penetration, loan amounts or renovation volume, energy savings or low default rates. These metrics were selected as indicators of success as they, as evidenced in the research done, capture a wide breadth of quantifiable elements that distinguish successful programs from failed programs.

The indicators of success identified are not standalone elements, and in order for an OBF program to be successful, all areas must be satisfied. Initial success may arise if an indicator of success is missing; however the program will likely fail in the long-term given their interdependence.

Because the pilot programs in BC did not achieve meaning numbers for these factors, they were deemed unsuccessful.

Q/ How certain are you that the decreased energy demand as a result of the retrofit will actually lower energy costs so that there’s little-to-no net change in utility bills until the loan is paid off?

CW: The best method to ensure upgrades and retrofits done to a home provide the most value, a home energy audit could be completed. A home energy audit would ensure upgrades that provide the most savings are completed first. This would provide the greatest opportunity to maintain the status quo with each utility bill. However, we do not recommend that pre energy audits be a formal requirement to join an OBF program. This is because they may act as an entrance barrier to join the program and decrease participation. Many home owners in OBF programs throughout North America skipped the pre energy audit and were happy with how much their utility changed. Evidence of this is the high number of home owners who reenter the program once the loan is paid off.


Q/ You mention 12,000 houses being refitted a year, do you have a specific area in mind where this would happen?

CW: Ideally I would like this program to cover the entire province. The 13 year old, $290 million OBF program in Manitoba proves that on bill financing is a powerful tool to expand access to capital to homeowners, make energy efficiency affordable and drive demand for the adoption of energy efficient practices.

Q/ How would you suggest the BC government (rather than BC Hydro) champion and marketing face of energy efficiency?

CW: The government’s initial role with this program would be to promote OBF and be its champion. This will give credibility to Fortis BC and BC Hydro with respect to them acting as lenders. Initially, residents of BC were hesitant to use loans from utility companies, as they were suspect of the utility companies’ motives for offering loans. It was interpreted by consumers as a way for utility companies to make more money.

On June 3, 2010, the Clean Energy Act became law in BC. This comprehensive act covered multiple areas including greenhouse gas reductions, job creation, and increasing energy efficiency. The government’s efforts to meet the standards of the Clean Energy Act can be used as a platform to raise initial awareness of OBF and its benefits for homeowners.

Government must be a champion of this program as utilities in BC are fragmented primarily between two companies: BC Hydro, a crown corporation, and Fortis BC, a private entity. Having two different organizations with different governance and goals (public versus private) may be confusing to potential OBF customers, and may limit an OBF program.


Q/ You mentioned relaxing loan requirements. Should the provincial government guarantee the loans?

CW: No. A provincial guarantee adds additional unnecessary costs. Default rates are extremely low, Manitoba for example has a default rate of 0.48%. The cost of covering defaulted loans is built into the interest rate, so the utility companies can build a reserve fund to pay for defaults without causing the government to incur any unnecessary added costs.

Q/ If loan applications are made by the trades, rather than homeowners, who pays them? The utility?

CW/ To make the process of applying easier, the loan applications are filled out and submitted by the tradespeople (with homeowner consent). Once the homeowner agrees the work is completed to their satisfaction and the utility company has inspected the work, the utility company pays the contractor directly, and adds the loan payments on to the homeowners next bill.

Q/ What happens in the case of a sale, does the loan go with the former owner or stay on the house?

CW: An on-bill loan may be attached to the individual or the meter. Most of the current on-bill programs associate the loan with the property or consumer. Meter attachment, also called on-bill tariff, is designed to achieve three key objectives: (1) automatic transfer of the tariff between consumers; (2) survival in foreclosure of a first mortgage on the property; and (3) off-balance sheet treatment for non- residential participants.

Q/ What happens in the case of a default?

CW: There is an inherent risk of default when money is loaned. Ideally the default rate would be zero, however it should be noted though that default rates with on bill financing programs are extremely low. Manitoba for example has a default rate of 0.48%.

In the rare event of default, the utility providing the loan would go through the same process they go through now for unpaid utility bills.


Q/ You mentioned loans of as little as $5,000 being available in Manitoba. How successful is the program and have there been any problems?

CW: Manitoba Hydro’s Power Smart Residential Program is a successful program that has consistently had an uptake of approximately 5,000 participants yearly, with yearly loan amounts of approximately $29 million. MH operates one of the most successful OBF programs in North America in terms of loan volume. In 13 years of operation, the program reached 15% of households within its target market with a total loan volume of $290 million and an astonishingly low default rate of 0.48%.

Manitoba Hydro has been able to avoid large problems because over the years the Power Smart Residential Loan program has been operating, it has undergone various changes. The changes were results of creating a dynamic program that adapts to the needs of the public. The changes have included the amount of capital available for financing, eligible projects, and loan interest rates.

Top Photo Credit: Riverside Energy Installation in Kamloops BC

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Roy L Hales

is the President of Cortes Community Radio , CKTZ 89.5 FM, where he has hosted a half hour program since 2014, and editor of the Cortes Currents (formerly the ECOreport), a website dedicated to exploring how our lifestyle choices and technologies affect the West Coast of British Columbia. He is a research junkie who has written over 2,000 articles since he was first published in 1982. Roy lives on Cortes Island, BC, Canada.

Roy L Hales has 441 posts and counting. See all posts by Roy L Hales