What are we getting in return for our investment when we do a deep energy retrofit? Taking a close look at the different types of potential returns may reveal that it's not all about money.

In a perfect world, simple payback on a deep energy retrofit would work like this:

1. The building owner installs energy efficiency upgrades for a set dollar amount.
2. The savings on energy bills end up paying back the amount spent on the retrofit. Preferably, this happens within 5 to 10 years.

Sounds great, doesn't it? But the simple payback scenario is not so easily applied to deep energy retrofits. There are many complex details that can upset that simplicity.

For example...

• The preliminary assessment of the building may reveal unanticipated problems with structure, moisture or hazardous materials. In extreme cases, it may be less expensive to tear down and start again new.
• The deep energy retrofit of a building may not include cosmetic changes like new kitchens or bathrooms - these are the most common things that homeowners want to renovate!
• Adding one layer of components without including others - for example, adding a new heat pump without insulating and air sealing the building - may result in changes that have little affect on comfort and operating costs. This also may create a situation called 'stranded assets', where materials or technology may deteriorate prematurely because they are not behaving effectively within the 'house-as-a-system'.
• The overall cost of performing a deep energy retrofit and other upgrades may require a payback period much longer than 10 years.

THREE PILLARS OF DEEP ENERGY RETROFITS

The expectations for returns on a deep energy retrofit must include three primary considerations:

1. ECONOMIC - What kind of savings, rebates or long-term monetary paybacks will the retrofit create? Will the retrofit help to create employment opportunities?
2. ENVIRONMENTAL - How will the retrofit positively affect the local and global environment? Will the project help to reduce GHG emissions through operational and material choice carbon reductions?
3. SOCIAL - How will the retrofit affect the comfort, health and well-being of people in the building and in the surrounding community? How will the retrofit create more resilient, durable and affordable housing in the community? Looking ahead, how will the retrofit plan - energy, materials, durability - affect future generations?

Each of these pillars will affect the others and equal weight should be given, especially as Canada tries to meet emissions targets laid out in the Pan Canadian Framework on Clean Growth and Climate Change.

CALCULATING PAYBACK?

For each of the three pillars, you may be able estimate returns on the initial investment, using a variety of benchmarks.

ECONOMIC PAYBACK?

• Based on energy modelling or baseline improvements, you may be able to calculate the reduction in energy use and potential savings per unit of energy.
• Government and energy providers may offer incentives or rebates for energy retrofits, with grants and low / no interest loans.
• Paying for the entire retrofit in one shot and then spreading out the repayment over a number of years is called "amortizing". This strategy can soften the blow of a large capital cost for a deep energy retrofit, allowing for the most effective implementation of energy efficiency measures.
  
• Making an investment now on resiliency upgrades may reduce the amount of money required to repair a building after a climate related event, such as a flood, wildfire or wind storm.
  

ENVIRONMENTAL PAYBACK?

• Reduction of GHGs or 'greenhouse gas' emissions is the greatest contribution that energy retrofits on buildings can make to limiting the effects of climate change. Buildings have two sources of GHG emissions:
  • Operational Carbon - the exhaust gases generated by energy use and fuel burning, and...
  • Embodied Carbon - the GHGs that are created when building materials are extracted from nature, processed, manufactured, transported, used for construction and disposed of. This is sometimes called the "Life Cycle" of a material.
• An energy audit on an existing building can establish a baseline performance, or how energy efficient the building is currently. From there, strategies can be mapped out for reducing energy use and GHG emissions.

SOCIAL PAYBACK?

• A neighbourhood full of durable, comfortable buildings that use less energy is a more resilient neighbourhood, less affected by power outages and climate related events.
• Deep energy retrofits done today are reducing pollution and energy use for tomorrow.
• Because of our cold climate, Canada has one of the highest per-capita (per person) energy footprints in the world. If we perform low carbon energy retrofits on all of our buildings, we could significantly reduce Canada's overall GHG emissions and our impact on the rest of the globe.

The potential payback for energy retrofits touches on all three pillars. But some of the value points listed above are hard to quantify. Our way of living has created structures for assigning value to things, such as 'supply and demand', 'mortgages', 'interest rates' and 'return on investment'.

To fully exploit the value of energy retrofits on our buildings may require a broader perspective and longer amortization period that counts economic AND environmental AND social value, in the context of saving the planet for future generations.