On Wednesday, Premier Wynne launched the full version of the Ontario Government's $8.3 billion Climate Change Action Plan – this time to applause. Happily, it seems, policy makers were listening closely to the stream of criticism following last month’s leaked draft.
Rather than the “command and control” approach emphasized in the draft, the Government stressed that this plan is not about controlling how we use energy, but about "creating the conditions that provide choice [giving] consumers and businesses more reason to reduce their carbon footprint.”
The Government wants to create the context where it is easier for businesses and individuals become more energy-efficient, and accelerate the shift to a low-carbon society, and there are lots of powerful and progressive tools the Government has considered to spur real carbon savings from transportation to land use to energy.
What we at CoPower are most excited to see is the Green Bank.
Ontario is right to focus on financing to deploy readily available low-carbon energy technologies in buildings. There are plenty! From energy optimization software, to LED lights, to better heaters and chillers, to air and ground sourced heat pumps, there are (as an economist might say) $20 bills hidden all over our built environment.
And while the mandate of the Green Bank is "to deploy and finance readily available low-carbon energy technologies to reduce carbon pollution from Ontario buildings. " One element of the Green Bank is missing: The Green Bank's ultimate mandate should be to make itself obsolete.
The ON government alone does not have enough money in its coffers to finance and coordinate the tens of billions of dollars needed to retrofit the millions of homes and thousands of buildings in the province. (simple math below).
So - the role of the new Green Bank needs to be to create the conditions necessary to encourage the flow of private capital.
The upfront cost of solar, geothermal, and efficiency projects is one of the biggest barriers to deployment identified time and time again (here; here, or here). Third party financing from banks or from an online platform lender like CoPower helps homes and businesses pay for this upfront cost in return for a steady payment stream from the power sold over the coming years.
There is nothing inherent in financing renewable energy and energy efficiency that will prevent mainstream capital from flowing in. It's just new ( has perceived risk) and in some cases not yet at scale. So the “usual suspect” investors: banks, pension funds, and other private investors -- are not yet up to speed.
As described in a previous post, the Green Bank has lots of tools to help cross this risk/reward gap like credit guarantees, loans, and aggregation.
And if it is successful, we won't need a Green Bank in 5 years because all our banks and lenders will implicitly be green.
** Rough assumptions: an average home solar PV system costs ~$20,000; a home ground source or air source heat pump about $20,000 and various energy efficiency upgrades in homes ~$20,000.
There are ~ 4,000,000 homes in Ontario, plus another 1,000,000 apartment.(1)
Assuming each home in Ontario can benefit from a $30,000 retrofit, that means
4,000,000 x 30,000 = $120,000,000 ($120 billion).
Plus 50,000 commercial and institutional buildings (2) that can easily have $1,000,000 retrofits
$1,000,000 x 50,000 = $50,000,000. ($50 billion)
For reference: total Ontario 2016 budget was $130B in spending.