Risk Management and Current Challenges in the Canadian Ground Source Heat Pump Industry

Transcription

1 Risk Management and Current Challenges in the Canadian Ground Source Heat Pump Industry Denis Tanguay President & CEO Canadian GeoExchange Coalition 11th IEA Heat Pump Conference 7th GSHP Business and Policy Forum Fairmont Reine Élizabeth, Montréal, May

2 1. How to Risk manage the Lack of Enforcement of Codes, Standards and Regulations 2. The Top 10 Challenges of the Canadian Ground Source Heat Pump Industry

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4 RISK MANAGEMENT Traditional energy supply and energy management model Sustainable Communities RISK MANAGEMENT RISK MANAGEMENT

5 Technical risks Energy management in the community Technology integration and land use Regulatory risks Permits, authorizations, technology awareness Competition between energy supply options Financial risks Financial participation and co-ownership of energy supply equipment Systems financing and performances

6 CGC Created in 2002, the Canadian GeoExchange Coalition (CGC) brings together all stakeholders interested in promoting the wider use of ground source heat pumps with the goal of transforming the markets. We seek to consolidate the industry with a long term vision by strengthening individual capacities and by promoting best practices in system design and installation. The CGC Global Quality Program is a voluntary program design by the industry as a mean of ensuring quality of installations and to help governments design and implement smart regulation and relevant financial assistance programs.

7 Quality Assurance The national quality program is a component of a wider market transformation initiative which includes: Training for individuals (8000 trained since 2007) Accreditation for individuals (800 +) Company qualification (400 +) System certification ( ) Commercial system registration (upcoming) The program is designed to be used as a reference for quality GSHP installation, for public tendering in the private and public sectors and by governments (municipal, provincial and federal) energy distributors, financial institutions, insurance companies, etc.

8 GeoCity Motivations Industry Roadmap (March 2012) 82 actions for the industry 31 orientations and policy recommendations for governments 8 for market stimulation 6 for smart regulation 4 regarding education and best practices 3 regarding technical issues 10 ideas discussing financing mechanisms Goal is to increase the value of properties and building stock in the municipality Help municipalities promoting green energy on their territory

9 9 Value Proposition Recognize municipalities that are actively promoting GSHP through adapted regulation and innovative financing options while encouraging quality design and installation.

10 10 Value Proposition Visual signature GéoCité / GeoCity License for the use of the trademark and logo Assistance for communication and public relations National announcement for the first signatories Technical assistance Verification / validation of system parameters Data collection Verification / validation of energy savings and GHG emission reduction

11 11 Value Proposition Report to the public and governments Energy savings and GHG reductions Geographic system referencing Database design and information bank Adapted training Course for municipal inspectors and project managers Elected officials and municipal officers Local stakeholders: builders, assessors, architects, «champions», etc.

12 12 Participation requirement Active promotion of GSHP Offering of financial incentives, tax credits, etc. Formal adoption of an inspection process and system verification Reference to the CGC Global Quality Program Residential system certification Registration of commercial systems Training and accreditation Designers Heat pump and system installers Ground loop installers Building energy performance audit Stimulate the building envelope improvements Optimize system designs

13 To be defined by the municipal government Number of participants Incentive amount, tax credit, loan, For retrofits, which fuels will be targeted Types of buildings Residential, commercial, industrial, institutional, New construction or retrofits Geographical considerations / restrictions (e.g. underground potable water) Inspection policy (% of systems, measuring, parameters, ) Cross promotion of other technologies and program Communications and announcements Others 13

14 14 Financing Options Tax credits A fixed % of the tax bill or a fixed amount spread over multiple years Recovered through increased property value Incentives Lump sum Recovered through increased property value or rent On-bill financing Where municipalities own their electricity distribution network Recovered through improved demand side management (power and energy)

15 15 Financing Options 0% / interest rate buyback* The geo citizen received a loan from a geo bank The geo city pays the interest on a portion of the loan for a defined period of time The geo citizen reimburses the geo bank for the duration of the loan Local improvement charges The geo city pays for system installations and the geo citizen reimburses through its municipal tax bill with the cash flow generated with the energy savings The loan is «attached» to the property and the the home owner. (*) CGC offers indirect financing through its partnership with TD.

16 16 Financing sources Municipal reserves Loan from the province Loan from private banks Loan from energy distributors Etc.

17 17 Advantages for the GeoCity Showing leadership of its commitment for GHG reductions Contribution to the development of green neighborhoods Value added service to its citizens Stimulates local green jobs and regional economic development at low cost Increases the fiscal base Etc.

18 18 Advantages for home / building owners Facilitated access to renewable energy Important savings Energy, CO2, maintenance Performant quality systems Added value architecture, marketing Noise reduction (self and neighbors) Access to independant energy advisors

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20 E Past and Current Situation GSHP - Units Installed - All Markets - Canada

21 Challenge 10 The Industry High first costs The quest for high COP may not be the correct approach from a financial perspective There is a disconnect between technical efficiency and financial efficiency Disappearance of many Canadian HP manufacturers in the past few years Governments do not see any potential for job creation and they lose interest in the technology By nature, the industry has little trans-national influence it tends to be driven by a few people more concerned by their own short term private interests than the overall longer term industry future

22 Challenge 9 Customers Many do not understand the technology They are lured by the «free» energy They often fail to do their homework on real cost and pay-back Customer education is lacking and this is slowly undermining the credibility of the industry Do-it-yourself! They make bad decisions and choices and then they blame third parties if something goes wrong More damages are made by customer behavior than by failing systems

23 Challenge 8 Uncertain Housing Markets Housing Starts - Canada

24 Challenge 7 Consumer Debt Level

25 avr.-04 août-04 déc.-04 avr.-05 août-05 déc.-05 avr.-06 août-06 déc.-06 avr.-07 août-07 déc.-07 avr.-08 août-08 déc.-08 avr.-09 août-09 déc.-09 avr.-10 août-10 déc.-10 avr.-11 août-11 déc.-11 avr.-12 août-12 déc.-12 avr.-13 août-13 déc.-13 avr.-14 Challenge 6 Unfavourable Exchange Rates 1,1500 $ Exchange Rate: CA $ / US $ 1,1000 $ 1,0500 $ 1,0000 $ 0,9500 $ 0,9000 $ 0,8500 $ 0,8000 $ 0,7500 $ 0,7000 $

26 Challenge 5 Regulations Regulatory authorities often have little or no knowledge of the technology banning is easier than understanding If they do understand the technology, they impose their rules but fall short of implementing them: Methanol (Ontario) Drilling (British Columbia) Drilling (Ontario) Energy efficiency regulation ENERGY STAR Not adapted to GSHP systems Creates a false sense of savings, particularly for closed loops

27 Challenge 4 Standards C448 Design and Installation of Earth Energy Systems Five-year review process questionable exclusions Energy piles, thermally driven systems, standing column wells, new products Questionable rules 70 % of design HL to supply 90 % of annual energy needs Recently changed to 65 % - 95 % Hybrid systems minimum 70 % supply from GSHP Standards organizations are driven by the priorities set forth by those financing their activities not by the industry needs They have a very narrow focus they generally have no in-house knowledgeable staff and rely on external often biased expertise They manage their «process» not the content They are not government organizations subject to public scrutiny

28 kwh or kwh eq. Challenge 3 High Electricity Prices Total Purchased Energy Services (Adjusted) Gas Electricity to to to

29 Challenge 3 High Electricity Prices $4 000 Total Purchased Energy (Real - As Billed by Utilities) $3 500 Gas Electricity $608 $295 $3 000 $2 500 $2 000 $1 500 $1 707 $3 146 $3 513 $1 000 $500 $1 215 $ to to to

30 $ US / mmbtu Challenge 2 Low Natural Gas Prices 25,00 $ Natural Gas Prices - Henry Hub 20,00 $ Crude Oil - WTI 15,00 $ 13,42 $ 12,69 $ 10,00 $ 6,01 $ 5,00 $ 0,00 $ J M M J S N J M M J S N J M M J S N J M M J S N J M M J S N J M M J S N J M M J S N J M M J S N J M M J S N J M M J S N J 1,95 $ 3,34 $

31 Challenge 1 Air Source Heat Pumps New models are extremely efficient in cold climate for a slightly higher marginal price than older models In many regions of Canada, they make more technical and economical senses than GSHP, particularly in retrofit applications where ducting work is required Depending on the relative energy prices situation, returns on investment are typically 5-8 years compared to years or more for GSHP.

32 32 Thank You! Denis Tanguay (514)