Decarbonizing Canada’s buildings with the Building Decarbonization Alliance

Canada's building sector accounts for 30-40% of the nation's energy use. Bryan Fannigan from the Building Decarbonization Alliance joins thinkenergy to share how the sector can align with Canada's emission reduction goals. From policies and grid impact studies to strategies helping steer towards a net-zero status by 2050. Listen in to learn about the practical challenges with decarbonizing existing infrastructures and innovative approaches to support the transition to more sustainable building practices.

Related links

• Bryan Flannigan on LinkedIn: https://www.linkedin.com/in/bryanflannigan/
• Building Decarbonization Alliance: https://buildingdecarbonization.ca/
• The Transition Accelerator: https://transitionaccelerator.ca/
• Concordia Plan/Net Zero: https://www.concordia.ca/sustainability/net-zero.html
• The Canada Green Building Strategy: https://natural-resources.canada.ca/transparency/reporting-and-accountability/plans-and-performance-reports/departmental-strategies/the-canada-green-buildings-strategy-transforming-canadas-buildings-sector-for-net-zer/26065
• ITER fusion energy project: https://www.iter.org/
• Trevor Freeman on LinkedIn: https://www.linkedin.com/in/trevor-freeman-p-eng-cem-leed-ap-8b612114/

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Transcript

Trevor Freeman  00:07

Hi. Welcome to think energy, a podcast that dives into the fast, changing world of energy through conversations with industry leaders, innovators and people on the front lines of the energy transition. Join me, Trevor Freeman as I explore the traditional, unconventional and even up and coming facets of the energy industry. If you've got thoughts, feedback or ideas for topics that we should cover, we'd love to hear from you. Please reach out to us at thinkenergy@hydrooottawa.com.

Hi everyone. Welcome back. You really can't overstate the importance of buildings in our lives. We eat, sleep, work, learn and socialize in buildings, among many, many other things, a huge percentage of our lives takes place inside buildings. In fact, most of us probably have to make a conscious effort to actually spend time outside of buildings. I know that I try to make a point of spending time outside every day, and I have to be conscious about it, because it might not otherwise happen, and as a result of that, centrality in our lives, buildings are major users of energy. Some estimates say that around 30 to 40% of energy use in Canada is associated with buildings, and they're also a major source of greenhouse gas emissions. So around maybe 18% or so in Canada, that means that the buildings themselves and the way we build them, the way we heat them, the way we use them, are an important part of our efforts to decarbonize and to further the ongoing energy transition. Supporting this effort is the main goal of the building decarbonization Alliance. Spun out of the transition accelerator, the building decarbonization Alliance is a nonpartisan coalition that works to inspire and inform industry and government leadership, accelerate market transformation and really get the building sector on track to meet Canada's emission reduction goals. They focus on convening conversations, conducting analysis and identifying some of the barriers to building decarbonization, and then working with partners to overcome them. And I think that's a really important part. Joining me today as my guest is Brian Flannagan, who's the executive director of the building decarbonization Alliance. Brian brings more than three decades of leadership and consulting experience all focused around reducing emissions and improving the energy efficiency of the built environment. Prior to joining the organization, he's played leadership roles across a number of different leading energy and environmental consulting firms. He spent time working with the Federation of Canadian municipalities and helped launch the Green Municipal Fund. Brian Flannagan, welcome to the show.

Brian Flannagan  02:47

Thanks for having me. Trevor, this is great.

Trevor Freeman  02:50

So why don't we start kind of right with the basics? Can you give us an overview of the building decarbonization Alliance and the work that you are doing alongside your members?

Brian Flannagan  03:00

Yeah, thanks. Well, you know, as you said at the top of the hour, without kind of repeating the background or there, we're a nonpartisan, not for profit organization whose goal it is to really advance sort of market transformation, thinking about it from the perspective of, you know, creating a prosperous economy for Canada, having buildings that are a place where people want to invest, and the long-term goal is that we got to get them. Get to net zero. Global factors dictate that if we don't act on that, we're going to get left behind. And so, for those purposes, we want to bring the market along and align it toward this goal. And so, this alliance that we have is just that we have partner organizations who support this vision to have the building sector decarbonize between now and 2050 to meet those objectives that are set nationally and internationally, for that matter, and we work with those partners to sort of align the narratives around this and to put in place in the long term, the tools and policies that we need to support that. So, our main approach is really to convene those stakeholders around the issues that we see, to tackle some of the sticky narratives that are there. You know, any market transformation involves incumbents that have lots of good reason to maintain the status quo. So that's a feature of a system that we have to acknowledge, and it's something that we recognize we have to adjust those narratives to really advance, advance the common objective, right? And so, we work with that kind of vision, with our stakeholders, to really try to overcome, identify and overcome the barriers to getting to that goal. We kind of focus on a couple of key areas given, you know, the ability decarbonization space, the ecosystem is vast. Lots of market actors already out there, lots of other not for profits, lots of other organizations that are working really, really hard to advance this as well. And so, we tend to focus on kind of four main areas, making sure that there's policy support at various levels of government, and understanding which policies might be effective and which ones might be less so, and trying to advance the ones that. High leverage looking at the grid impacts of electrifying buildings, because it's undeniable that if you switch from fossil combustion of fossil fuels to electricity, you require a clean electricity system that has to have the capacity and be robust enough to support that. So, we want to be clear about that. We want to really address that in a cogent sort of way, and then really mobilizing and activating the sector to implement these changes and to find the solutions, because many of the solutions are at the intersection of different subsets of the of the sector, whether it's banking and finance or whether it's development community or the utilities, every market actor has a role to play to find solutions. Is very rarely one sub sector that can really act to, you know, to overcome a barrier. And so, we try to work at the intersection of these different groups. And by convening the players, we can roll up our sleeves and kind of get to that. And then, last but not least, you know, this is a very complex sort of question in terms of, how do we get there? What are the pathways? It kind of reminds me of nutrition, medicine, things like that, where, you know, at one instance, it's great to eat eggs, and another instance, terrible to eat eggs, and then it's good. To eat eggs. And then it's good to eat eggs again, because the evidence is shifting right, and we have to follow the evidence. We have to understand that the systems are complex and that various investments in the grid will alter the landscape. And so, we're working really hard to increase the analytical capacity of the sector, to model and to be able to understand how this will really play out when you have exponential sort of technological advancement coming to play. And you know, different investments and different dynamics that are bearing out as the sector decarbonizes, which is, it's really complex, and so we need better tools to be able to grapple with that. So those are the four sort of main areas, and it's a heavy lift. We arrive on the scene with great humility, recognizing that we stand on the shoulder of many, many other organizations who've come into the space trying to take a slightly different approach by bringing all the players together and trying to find some common understanding of how we how we get this done. You know, we have to do something different. We've been doing energy efficiency for four decades, give or take with the programming that we've had, and it's been very effective. I don't think there's any more old T 12 light bulbs anywhere that worked. That's great, but we need to do something different now to get fossil fuels out of the buildings for heating purposes, right? That's the goal.

Trevor Freeman  07:18

I'm glad you brought up the complexity side of things. I think when we look at buildings and decarbonizing buildings at first blush, you can think, Okay, well, change out systems. And you know, there are carbon intensive systems and low carbon systems, and obviously we need the latter, but getting those systems in our buildings, and getting buildings that work well with those systems, and getting tenants that interact with those systems, well, is that complex kind of quagmire? And so really glad you brought that up, and we'll probably talk more about that as we go. I do want to also highlight you mentioned kind of working with other organizations and partners, and specifically, I know you guys are affiliated with but somewhat unique from the transition accelerator. So, talk a little bit about the transition accelerator and how your work with them. Sort of overlaps, but is unique.

Brian Flannagan  08:09

Yeah, absolutely. Well, so we're, we are housed within the transition accelerator. We are basically a branded initiative of the transition accelerator. You know, we could stand alone as our own, not for profit and be separately incorporated, but from an efficiency and a sort of effectiveness perspective, the decision kind of was made to stay within the transition accelerator as an organization and so I think it's very effective, because that allows us to leverage, you know, the communications, knowledge mobilization and broader infrastructure for HR and things Like that of the transition accelerator. So, the transition accelerator, is a Canadian not for profit as well, and its focus is very similar to the BDS focus. However, it's elevated to the to an economy wide level. And so, the transition accelerator is interested in finding pathways to net zero for all sectors of the economy. So, I think transportation, the electricity system itself, decarbonizing the grid, looking at low carbon and Net Zero fuels and how those might impact other sectors, heavy industry and aviation and transportation sectors, as well as looking broadly at the overall state of what is the future economy going to look like. The whole point of this is to position Canada internationally as a global leader in this transition, recognizing that other nations are acting, and we have a competitive position to play. And that has to happen by looking across all the different sectors. And so, the objective is really to set that 2050 vision, identify the pathways for the different sectors of the economy. Buildings are one of which and then to kind of advance the whole thing along recognizing as well. I guess what's really important in all of that is that there's a huge interaction between the different sub sectors, right? So, transportation and buildings are a great example. You know, if everybody electrifies EVs, there's an immediate impact on how we electrify the heating systems in the buildings, and then it has a huge impact on the grid immediately as well. And so. The intent with the transition accelerator as an umbrella organization housing all of these activities, is that we capture those dynamics. And when I talked about the analytical capacity, you know, the models that we're building, the end use models for each of the sub sectors, the ideas that they eventually connect, and they that they are able to have a whole of economy sort of flavor to them. And so, it's been a very, very effective relationship. I think it seems to work well, and that vision and idea seems to be materializing as we get going. It's been two years so far, and I can say that it's been just a fascinating journey to be exposed to those other sector dynamics as well.

Trevor Freeman  10:36

Yeah, I know on this show, we talk a lot about the different parts of, as you said, all of society that need to be decarbonized. Obviously, buildings kind of comes to the forefront often and so specifically around buildings talk us through this maybe kind of a basic question, but, you know, help our listeners understand. Why are buildings so important? Why is the decarbonization of our built environments so important when it comes to decarbonizing all of society?

Brian Flannagan  11:05

Yeah, I mean, that's, that's the, that's the crux of the question, right? Well, there's a bunch of reasons. I mean, if you think about it, the building, this is where we live, right? These are our homes. These are, this is where we go to work. This is our place as a business. From an economic perspective, organizations arrive in jurisdictions for the purposes of meeting their overall objectives, and if you require energy intensive sort of production, or if you want to have a big workforce, you want to house your workforce in buildings that align with your objectives. And increasingly, those objectives feature a low carbon kind of future, right? And so just from that perspective, it's important for us to kind of get aligned with the global trend toward this, to make sure that we have the investments that we need and that we want to attract, and we want to have places where people can live that are aligned with those kinds of values. But from an emissions perspective, it's hard to kind of overstate how important this sector actually winds up being the building sector emits about 90 megatons, give or take, of direct scope one emissions. And if you factor in the grid emissions, that result from being buildings being connected. So, the grids across Canada, it's about 120 megatons. There's digits there that we could go into. But to put it into context, that's about the same as all of the vehicles on the road. So, when we think about how important it is to electrify the fleet of vehicles that we're all driving, the building sector is the same. It's the same level of importance. And if we think about all of the work that we've done to decarbonize our electricity system over the years, eliminating coal plants and those kinds of initiatives that we that we hear, are in the news recently, the building sector emits about twice as much as all of that. And so, the context is that buildings are pretty vast in terms of the overall emissions, and when we think about where those emissions come from, ultimately, it's combustion of fossil fuels for heating our buildings. We're in a cold climate in Canada, case, a lot of energy to heat buildings, and because of the abundance of the resource and a bunch of policy decisions that have been made decades ago, you know, we're in a situation where we've got an abundant and relatively inexpensive source of fossil fuel to heat our buildings. It's about 1500 petajoules, I guess, give or take. And ultimately, we need to move to eliminate that over time, or to largely eliminate it. I mean, I think there's always going to be a bit left in the system. There's, you know, it's, it's a very complex and daunting task, because the building sector itself is very diverse. The buildings last a really long time. It's not like, you know, technology change, where you have, if you want to change a phone, you can upgrade it from one year to the next. It's small. It fits in your pocket. It's easy to manage, but buildings are constructed to last hundreds, 100 years. 50 years is the typical lifespan. But, you know, we have lots of buildings that are very, very old, and it's a slow kind of system to turn over. It's a slow inventory to turn over. So, it's a really big challenge, a lot of a lot of emissions from the sector. And so, it rises to the level of really needing close attention and a different approach than what we've been taking in the past.

Trevor Freeman  14:04

Yeah, and one of the things I like about focusing on the building sector is it's one of those areas where efforts to decarbonize, efforts to improve the way we use energy in our buildings, obviously have some carbon impact, but that's not the only benefit that they have. There are sort of other ancillary benefits that that building owners and tenants can realize as a building goes through a decarbonization process. Talk to us a little bit about some of those other benefits and why a decarbonized building is a better building to be in.

Brian Flannagan  14:39

Yeah. Well, I mean, I guess there's, there's a couple of things. I'll take a step back from it and talk about retrofits and deep retrofits versus regular retrofits, you know, and what it winds up looking like in terms of benefit streams. We've, I think, in the past 40 years or so. I think since the since the 80s, we've been doing retrofits that are ostensibly about reducing operating cost. Ostensibly about making sure that we don't have to build out our energy systems bigger than they need to be. It's always about the avoided cost of energy. That's the way our incentive programs have been set up. And so, we've had lots of projects over the years that make buildings more efficient at consuming the energy that they do consume, which is a really important objective. And so, you get, as I mentioned, all the lighting projects that we've done, and we've done three waves of lighting projects, different fluorescent technologies, and then CFL technologies, and then now led technologies. And those are kind of project-by-project retrofits that happen because the building owner says, well, wow, if I do that, I'm going to reduce my utility costs, and I'm also probably going to save maintenance costs, like LED lighting technology really reduces the maintenance costs associated with taking care of the light bulbs. It's a cost reduction exercise, right? What's different about decarbonization is that we don't really have those cost signals, those pricing signals, are just not the same. It's not the same dynamic anymore. And so, you have to bring into play long term energy and social and governance paradigms. You have to bring in long term pricing signals, long term risk. You have to bring in long term market decision making in terms of the global factors that we were talking about earlier, right? And so, you know, it requires a bit of a vision, and it requires acting on the policy environment that's in place. And in order to really make those projects work, you have to take a much longer-term view. You have to look at the overall state of the capital renewal of the building. You have to look at all of the different systems at the of the building at once. And that's where we get into the term a deep retrofit, right? And so those kinds of projects can yield tremendous benefits when they're undertaken correctly and over time, in an individual building or inner portfolio of buildings, and so we get this bundling effect of things happening all at once to really make the space more comfortable at the end of the day, though, what, what the whole objective needs to be, is just eliminating the fossil fuel combustion. And it happens that when you do that at the same time as doing some other things like envelope work or fenestration, or, you know, better, control systems or demand response kind of technologies, then you get this sort of convergence of factors. And so, you know, we to get to the part about the benefits there. We definitely see long term operating cost savings when, when people switch to heat pump technologies, the heat pump is an incredibly efficient it is an energy efficiency measure itself. It's three times, give or take, more efficient than other approaches. And so, you get that long, long term operating cost savings in most in most of the country. The prices vary across the country, but you do get those obviously, if you're taking that approach and you're managing your portfolio with that your portfolio or your home with that longer term vision, you're getting capital renewal, and you're having maintenance and reliability improvements, and we think that it really improves on the value of the asset over time. It's an area that requires further study, actually, because we don't really know how much more value is baked in. There just haven't been that much track record in Canada of having these kinds of retrofits take place, but the so-called green premium, we think, is there as a real benefit to taking this kind of an approach. And notwithstanding that you know, you're renewing all your mechanical systems, you're taking measures to update the envelope and things, you're going to have a more comfortable, better controlled environment. If you're if you're a commercial building owner that's tenanted, your tenants are going to feel more comfortable. The control of the facility can have less complaints and all this kind of thing. If you're a homeowner, you're going to be in a modern, comfortable home that has a heating system. I mean, fossil combustion systems tend to come on and blow really hot, whereas heat pumps tend to stay kind of fully loaded and steady and have this comfortable people report that it's just a much more comfortable kind of system. And I think, you know, over time, people are going to start to see that this is the way a house should be. We're kind of not there yet. The sex appeal of all of this, in terms of the mindset of especially homeowners, I just don't think is there yet. But we're trying really hard to get to a spot where people look at those, you know, retrofitted systems and those modern systems as being sort of the way that it's supposed to be, and this is how comfortable a home is supposed to feel, right? So those benefits are all there, but I think, as I mentioned, what's less clear is, you know, for a commercial building owner, what exactly is the real ROI to fully embrace this approach? I think those are still areas of further study, and the straight-line connection between those things. I wish it was more, a little bit more clear, but we're working on it. That's a part of a study that we're trying to do to really elucidate those types of benefits as well.

Trevor Freeman  19:31

Yeah. Well, I think that's again, to go back to your first answer of the building the analytical capability of the sector to really understand these benefits that I think we intuitively feel are there, but we need the data to back that up, and we need to be able to quantify it, and I think that's really important to tell those stories to be able to help building owners, help homeowners, help the folks that are making decisions, build the case, to really be able to. Say, Yeah, this is the smart move. It's smart to move in this direction. So, it's great to see that you guys are working on that absolutely. So, you know, we've talked through in the last little bit here, some of the reasons why it is so important to decarbonize our building sector. We've talked through some of the benefits of decarbonizing that building sector. But to your earlier point, we're not there yet. We haven't seen massive steps in this direction. There are clearly barriers to this. There are sort of reasons why building owners might hold back or wait or sort of say, hey, not this time around. I'll do it next time. What are some of those barriers that you've come across in the building sector that kind of get in the way of folks making the decision to decarbonize?

Brian Flannagan  20:43

Yeah, well, that's interesting. You know, there's the framing of the question itself. Is, there's a lot of benefits. It really makes a lot of sense. But why isn't it really happening, right? And the reason for our existence, if this was easy or obvious or self-evident, we wouldn't need organizations like ourselves and you and I wouldn't have to, you know, ruminate and put this information out into the world, it is difficult, and what's promising and what's interesting, before I get into barriers, is that there's a lot of instances where this actually really does make sense, you know, and we don't, I don't know that we necessarily publicize or talk about it enough, but you know, if you're on fuel oil, if you're if you're on the East Coast, where there's a lot of fuel oil still in the system, and your home is heated with fuel oil, it absolutely makes sense to switch out to a heat pump. Now, you know there's a first cost consideration that needs to be born, but thankfully, there are programs that really support overcoming those first cost barriers, but your operating cost savings will be impactful from an affordability perspective. It makes total sense to do it today. And so, anybody that's currently heating with fuel oil should really look at that business case for them personally and their own personal economics. But in most places in the country, if you're on fuel oil, it makes sense to switch right now. You know another case that makes a lot of sense is if you're on electric resistance heating. Many of us are in Quebec. I'm located in Quebec, you reduce your electricity consumption by about two thirds, you're gonna save on your electricity bill. And you know, to boot, you're probably gonna wind up with cooling that you don't already have on. So, there's a real added benefit of having summer cooling, which increasingly a lot of us need, right? And so, there's a lot of times where it’s kind of really does make sense if a homeowner has an existing gas furnace that's aging, and they don't have air conditioning now, and they're finding that the summers are a little bit warm, and they need to replace their furnace. I mean, that's a lot of ifs if this, but I think a lot of people are actually in that situation. If you're in southern Ontario and you need to replace your aging gas furnace, switching to a heat pump for the air conditioning part of it in a hybrid system. It totally makes sense to do you're going to buy the air conditioning unit anyway. You're going to have couple of tons of cooling in your in your building, in your home. You may as well make that a heat pump and run it in the spring and in the fall to offset some of your gas bill. Right? And so, there are instances where it really does actually make sense, but you'll notice that my statements are sort of couched in a lot of if this, if that feels like which comes back to the complexity. That's a hard message to sell to homeowners. Contractors have to be on it. Contractors have to be making these recommendations. And the system is not quite there yet where everybody has this aligned narrative about where it makes sense to do it. So those are the things that I think are making up, making it hopeful. You know, we see, also see university campuses for altruistic sort of long-term vision reasons. We want to be a test bed. We want to be a leader. We want to be example. We want to have our students understand what this new global dynamic is going to be. So, we see, you know, universities like Concordia with a plan for Net Zero to be a net zero campus by 2040 you know, does that, is there an economic reason for that? Like, I think it'd be hard to make a financial case that those investments make sense on their own merit, but it's backed by this real vision to have leadership. And so, the budgets and the financial considerations, those constraints are loosened to allow for that vision to take place. And we see that with municipal governments too, you know, they have a long-term view about their assets, and about community energy planning and those kinds of things. And so, there's lots of reasons why, where it does make sense and where movement is happening, you know, but outside of those kinds of obvious cases, I would say that the primary barrier is ultimately still a financial one. If you look at the different considerations to go into replacing your heating, replacing fossil fuel combustion with heat pump technology, or electric all electric, non-emitting technologies. It's expensive. You know, the first cost is high. And if you, many of us now in the space have gone through the exercise of getting contractor quotes and understanding what the cost of doing it is, the upfront cost can be pretty high relative to just replacing with the status quo. And so that's a real barrier for a lot of Canadians, particularly in the current environment that we're in. You know, affordability, inflation, the pocketbook issues have been at the fore, and so overcoming that initial sort of wait now what? How much is it going to cost? It's a real. Concern. And that's one of the approaches at the BDA is really to try, like, we really can't sugar coat that. We have to actually just get to work out what it's going to take to bring that first cost down. So, things like getting to scale and, you know, having the technologies kind of advance, and having products come in that are less expensive in the marketplace to the scale is just really important.

Trevor Freeman  25:19

If I could jump in that that getting those costs down, is that just a matter of time, or is there something that you in your work, or we in sort of more broadly in society, can do to sort of push that faster, to get those costs down quicker?

Brian Flannagan  25:34

Well, I think accelerating the transformation is the idea. I mean, that's the global statement. So, there's a certain rate at which this might scale, and it's kind of going to be painfully slow. And getting the cost down will be painfully slow. The idea of accelerating it, by putting in place policies, and by aligning all of our kind of narratives, and having people moving toward this objective in a more everybody rowing in at the same time, I think, is the idea accelerating that and bringing it in faster will help us to get to that point. It's an extremely simplified thing to say, but ultimately, that's what we have to do, right? And there's certain things that just are kind of confounding. You know, we sell a lot of air conditioning units. I think it's about 400k by our last estimate. I'm not sure about that, that exact spec, but I think it's about 400,000 air conditioning units in Canada every year. The cost difference to make those heat pumps, from a technology perspective, is the reversing valve in that piece of equipment. It's a couple 100 bucks. We've talked to lots of our manufacturer partners about sort of what this would look like if we weren't buying air conditioners anymore, and instead, we're just putting in heat pumps. So, the incremental cost there's actually quite low. We could probably have a setup where everybody's buying heat pumps instead of air conditioning units for their summer cooling requirements. And then what happens when you do that? Suddenly, you've got 400,000 more heat pumps coming into the market, and you've got 400,000 more installations happening that are heat pumps instead of air conditioning so people are getting used to it, contractors are getting used to it. And those kinds of things can kind of ratchet it up and make a step change, you know. So, I think advancing and getting to scale involves kind of deploying those types of things where there's high leverage and where it's an easier case, and it's kind of some of what the BDA is trying to do is find those things that have this incremental leverage point that really gives us a step change to advance the market transformation in a way that was a little bit faster than it otherwise would be, right? So that's, that's the first cost barrier is, is one, and it's very real. I would hasten to add that in some instances, the buildings also require changes. You know, you have buildings that have a certain electrical configuration for the capacity that is required with the fossil fuel heating system if you're going to add electric capacity, that could necessitate panel upgrades and other service upgrades to the facility. So those costs are also really real, and there's lots of policies, and there's technical standards associated with that that need a close look so that practitioners in the space have clear guidance on when those things are required and not required. And I wouldn't, I wouldn't say the word there yet, in terms of that consistency of approach and consensus on how to do that. But those factors are very real. Those are some of the barriers on the first cost notwithstanding that on the operating cost side, it's, it's also complex, because across the country we have vastly different electricity and natural gas rates owing to the different configurations of the energy systems in each of the provinces, you know. So, we've got provinces like in Alberta, where natural gas costs are extremely low and electricity costs are relatively higher than, you know, next door in British Columbia, the rates are just closer in British closer together in British Columbia. And so, when you're contemplating a switch from one to the other, the gap just isn't as far to jump across. And so those dynamics play out across the country in very real ways. So as a homeowner or as a business owner, the economic drivers are just very different. And so, it's challenging because you can't just make a generalized statement to say, yes, it's less expensive to do this without also adding, if you happen to be in Quebec, it's not true in Alberta, right? So often what we get is confounding messages where people say, well, hang on a second. You said it was affordable, but I'm in Calgary, so it's affordable. Like, yeah, you're right. It's not yet affordable there, and we have to work to address, you know, those are all nuances in the statements that we make that that causes to have to really dig in and differentiate, sort of the different scenarios under which it's beneficial. But that barrier is, is a very real one, and maybe this is the last one that I would add, is that for building owner or portfolio buildings, or for just a homeowner, we just don't have the policy drivers that really align around this idea. You know, the urgency in the sense that this, that there's a movement toward getting this done by having policies at the municipal, provincial and federal level, kind of aligned toward this objective. So, if you look at the different the patchwork of sort of political leanings across the country, there just doesn't seem to be a strong alignment. And so, if you're if you're trying to manage the long-term sort of investments that you're making in a building portfolio, you'd kind of be forgiven for saying, well, wait a minute, this program was in place, or this policy was in place, and now it's not in place. And you know, the carbon tax is a great example of that recently, where you were just seeing the erosion of that idea as a long-term driver to investments. And now, with the current political environment that we're in, it's really just an open question, what is going to happen to the tax at all? And so, from a business perspective, I think that represents a real sort of that uncertainty and policy direction is also a big barrier that we need to we need to get to grip with.

Trevor Freeman  30:44

That's a great way to transition into this next question that I've got for you. So last year, it's 2025, when we're recording this. So, I can say last year now, you guys released a jurisdictional scan on I kind of think, like policy and drivers around building heating decarbonization. So, I want to dive into that a little bit. Let's start by having you talk through some of the key findings of that report. What did you find when you looked across sort of jurisdictions about what's happening with building heating decarbonization?

Brian Flannagan  31:15

Yeah. Well, what's interesting to stand back from for a second is that. So, this report is a jurisdictional scan, and the intent is really to provide a roundup of the various the ways that the various actors at different levels in the policy landscape implement conditions that ultimately reduce emissions in our buildings. Buildings, it's important to note, are largely a provincial jurisdiction. You know, the building codes, the development processes, a lot of the regulatory framework that they operate within the utility framework. So, all the utilities that the buildings are connected to are generally a provincial policy question. And so, when you when you look at what are the policies that are in place, you would expect that provincial policy would would have to lead the way, because buildings are primarily a provincial jurisdiction. Municipal governments have a big role to play when you think of all of the zoning and the bylaws that apply and the development requirements that apply at a municipal level. So, I mean, municipalities actually have quite a lot of power in with respect to buildings, but they are a subset of provincial governments and have to operate sort of at the best of the provincial requirements. And then when you think about the federal level, federal level really doesn't have a whole lot of jurisdictions on buildings. They can set equipment standards, and they can set environmental regulations through the environmental act, but so when you have to kind of stand back from it, and our goal with the report was to say, well, how does this all play it? What does it actually wind up looking like in terms of decarbonization policies? And what we can kind of look at is, how do you actually implement a policy that would reduce emissions? Well, you can focus on the energy source itself, and say, you’re not allowed to have gas in your building. So, this is like a gas band. This is a pretty heavy stick that you would wield, which, which is one way to do it. You can focus on the equipment and say, hey, you're not allowed to have an oil system anymore. So, you're not focusing on the energy source, but you're focusing on the piece of technology itself. You can focus on the energy performance and say, you're building, given the size of your building, or the shape of your building, or what the building is for your building shouldn't use this much energy, or should use less than this much energy. So, you can put a line in the sand there, or you can focus on the emissions and say, similarly, for that size and shape of building, or type of building, your building shouldn't emit more than a certain amount. And what, what our findings are is that it's sort of all of the above out there, you know. And at the municipal level, we see quite a lot of action of different municipalities trying on different sort of approaches for size, and there's no clear trend as to which of those particular mechanisms seems to have favor. It's sort of a bit of a bit of a mix in terms of all of that. But at the highest level, you know, we have the federal government sort of setting a context, or setting the stage with national model energy codes, there's a commitment for them to release an emission-based code. And that's a welcome sort of direction. It's been in the works for quite a while. We have policy in terms of investments for, you know, low-income retrofits, and we have loan programs and those kinds of things that continue to be on the scene with the green building strategy, which is also welcome and really necessary. Actually, when you think about the kind of context that we're in around affordability, we also see some commitment to look at the idea of the equipment and regulating. There's a commitment to put in place a framework to look at regulating some of the equipment. So, there's a little bit of distance in terms of the direct action there, but at least there's some acknowledgement that the federal order can begin influencing the scene I mentioned at the provincial level, that you know, there's a certain that's where the jurisdiction really is for buildings, and this is where we kind of see quite an absence of real progressive policy. What we see in British Columbia, quite a lot of activity, and Quebec, quite a lot of activity, and Ontario, a couple of measures, most notably, I guess, the requirement to report on building energy. So, this is the idea of looking at the energy performance of the buildings. But outside of those three jurisdictions, we don't really see a lot of progressive policy to really act on the idea of carbon emissions directly from buildings. And then at the municipal level, we see in Ontario, the City of Toronto is trying to, is proposing to look at building performance standards, which would be a sort of an energy and emission sort of threshold mechanism. But then in British Columbia and Quebec, we see just a lot more activity, many more municipalities within those jurisdictions trying on different mechanisms for size. We have, like in Quebec, we have Laval in Montreal and Prevost and regional governments as well. So, the Metropolitan Community of Montreal putting in place various tools to try to curb emissions. And in in British Columbia, there's just way more activity. There's a different sort of setup there in terms of what municipalities are and aren't allowed to do. And so, we see like there's Saanich in Vancouver and North Vancouver and Victoria Whistler, all of these municipalities are putting in place various tools to try to direct what the future should hold in terms of building emissions, whether for new construction or for existing buildings. And notably, we also see some interesting, just interesting kind of mechanisms, like in in British Columbia, flight adjustment on taxation, tax relief for heat pump technologies, which isn't it's not a regulatory sort of approach in the true sense of that. But it's an economic lever that I think can be, can be helpful and sort of send the right cumulative signals to allow market actors to kind of act.

Trevor Freeman  36:50

I think, I mean great answer. Thanks for that, Brian. It really does highlight kind of a theme, I guess, if you will, that comes up on the show often of there is no one solution, and you can take that statement and apply it to any part of the decarbonization ecosphere that you want. There's, there's no blueprint for how we're going to do this. It's going to be sort of a mix of a bunch of different policies and strategies and, you know, carrots and sticks and levers and whatever analogy you want to use that we're going to need. And it's interesting to see, as you highlighted different jurisdictions, different parts of the country, are at different spots, and some, you know, further down that journey than others, for different reasons. And again, coming back to your comment about building that analytical capability to really understand what is working and why, and is it, is it specific to this region or this, you know, whatever climate region or economic region, that that policy or that structure works, or is that something that can be applied across a broader swath of the economy or our society? So really interesting. I'm going to cherry pick something here and dive in and say, you know, we talked a little bit about heat pumps. So, heat pumps, obviously, are a super important technology for decarbonizing some aspects of building heating, specifically on the smaller scale. So residential homes are a great example. We really need to see more heat pumps that's going to be one of the main ways that we decarbonize home heating, looking at, sort of what's happening across the country at the various different levels of jurisdiction. Are there specific frameworks or strategies that you think are really essential to support heat pump adoption as an example that we can sort of look at?

Brian Flannagan  38:39

I mean, I think, I think your, your lead into the question is actually the answer that I would have given you know, there is, there just isn't one sort of tool or approach that will universally drive this thing, certainly not when you talk at a national level. A lot of the discourse that we have internally at the BDA is that this is a regional issue. You know, it really is a, I think, at the end of the day, municipal by municipal approach to things, given the local conditions. And when we, you know, we talked about some of the barriers earlier around pricing. So notionally, anybody that's in a jurisdiction with provincial level utility like British Columbia or Quebec has the same pricing, right? But in Ontario, that's not the case. Like local distribution companies have different pricing structures. Just depends on if you're in Ottawa or Kingston, Cornwall or Toronto, it's just the pricing is just different. Now we have gas utilities that are more uniform across Ontario, so that pricing is similar. So, it really winds up being a regional question. And if I said, you know, Trevor, I want to I want to call a contractor and I live in Hamilton, that's a different question than saying, I want to call a contractor and I live in Saskatoon. Is the HVAC industry the same in both of those places? It's just not like the. Capacity of the industry to influence your decision and the knowledge that they have. And by the way, Saskatoon is a heck of a lot colder, right? So, the question of, you know, will this, will this heat pump actually work for me in my climate up in Saskatoon, is a different question than if you're sitting in Windsor, where your cooling load is probably more of a concern these days, right? And so, we have to, I think we have to get away from the idea that nationally, there's going to be one sort of thing that will really wind up driving the change the electricity system and the gas system. The energy systems in each of the jurisdictions are so different, and the local constraints on labor force, the local affordability considerations with the economics of a given industry, if you're in Alberta or if you're in Newfoundland, the socioeconomics are just very different. The affordability questions are more or less pressing across the country, and so I think there isn't one sort of tool or policy that could rule them all. We need a sort of a wide range of different options to look at that recognize those local and regional kind of considerations. And interestingly enough, going back to the transition accelerator and the kind of approach that we take, we actually have a different vertical. We call them verticals. So, the building vertical is one, but we have a different vertical called regional pathways, where we have a whole other team that's just out meeting with jurisdictions at a regional level to try to understand what exactly are those local constraints that impact on the different economic sectors, buildings being one of them, and we tap into that kind of stream all the time. I mean, that said, I don't think you'll let me get away without providing some kind of answer. I do. I do. I do. Really think that the ways that the utility systems are regulated are a big deal. You know, right now, I think it's fairly safe to say that we live in a utility regulatory environment that was geared to accelerate the expansion of the gas system several decades ago, and the pricing and how connections are made, and how that's reflected on the rate base versus the developer. There's a lot of things that are kind of baked in that where it's not really a level playing field. I think equalizing some of those policies across the country would be extremely helpful. I mentioned earlier that our past sort of energy efficiency retrofit environment has been advanced mostly on the idea that we want to avoid the cost of adding new generation. Well, clearly, if we're talking about electrifying our buildings, adding new generation is a given. We have to do that. And so obviously that paradigm doesn't work when we're talking about fuel switching rather than energy efficiency. And so, we need to have that regulatory space around utilities take a different approach to just looking at the avoided costs. And we see this. This is happening, but it's just it's painfully slow, because those sectors are cautious by definition, and they need to be. But we have to have a new set of programs and a new sort of set of economic tests and tool boxes that allow incentives to start flowing for these kinds of retrofit projects based on a new sort of set of business-as-usual scenarios. You know, if we decarbonize only with air source heat pumps, it's going to lead to a certain set of costs and certain set of investments. If we decarbonize with more ground source heat pumps, it's a different set. And there's a difference there in terms of the price and impact on the energy system and rate payers. And so, capturing that dynamic, I think, is really will be, will play an important long-term function outside of that, you know, any mechanism. And this is why that sort of patchwork of municipal tools that are being deployed is interesting. Any mechanism that just sends a signal to the market that emitting carbon from your buildings is going to have a pricing consequence or a consequence in terms of what you can and can't develop. Any of those market signals are helpful, even signals that those things may eventually come into play, like what the federal government has done, that sort of we commit to putting in place a framework to look at the eventual change of the structure. Even those kinds of statements can help influence the narrative around decision making for what future risk looks like to building owners and so, you know, building performance standards, I think, are really interesting. I've seen the difference that it makes in the discourses that we have with players that are in Vancouver, and it the idea that eventually we're going to have to pay more to emit it's a powerful motivator. But I have to hasten to add, you have to make sure that the market can respond. You don't want to have those kinds of policies in place without also making sure that you've got the HVAC industry ready, you've got the labor force to get the job done, because then you have policies that fail, right? So, any of those kinds of policies, I think, are interesting to see implemented and tested and understand the degree to which they actually drive the market.

Trevor Freeman  44:58

Yeah, I think you've done a great job of, of really helping paint that picture of even a simple challenge, you know, simple in quotation marks, obviously, of getting more heat pumps into more buildings requires different roles at different levels. And so there's that sort of federal role to, you know, again, understand what, what are the levers that a federal government might have knowing that some of the specifics around buildings are not in their jurisdiction, but helping to support predictability when it comes to pricing signals, for example, like a price on carbon, or supporting sort of national workforce training to get more contractors out there to support installations, down to sort of the provincial energy policy level, down to the municipal level of how do municipalities support their citizens, their residents, and making these changes in their buildings and the levers that they have? And I think there's a role for all those levels to play. It's just understanding where are those sorts of sweet spots to put pressure on and to sort of push towards that, that action that ultimately is up to building owners and tenants to take. Great thanks for that. Brian. So, a couple last questions here. As we, as we near the end of our conversation, I do want to take a minute and just sort of put ourselves in the headspace of a building owner. So, someone that has a has a building, let's say, a commercial office building, and is looking to take steps towards phasing out fossil fuel use in their buildings. They want to decarbonize. What are some of the strategies that you've observed in your work that that really do work from that building owner perspective, what are some of those steps that they can take to move towards decarbonizing their building?

Brian Flannagan  46:47

Yeah, it's a good question. I think it depends on who the building owner is. You know, as an if we're talking about a residential kind of homeowner, the idea, I think, is just to start getting start making long term plans and budgeting what this is going to look like, and taking it into a consideration when you're, you know, planning the various renovations that you're going to have at your home. Most people renovate for specific reasons that are outside of just, hey, I want to do the right thing by the environment right lots of my friends, of lots of people in our circles do that. They're the thin edge of the wedge of sort of early adopters that do it for truly altruistic reasons, right? But most homeowners don't operate in that way. And so, the idea is to, you know, really begin looking at, well, how old is my furnace, and when do I think, I might need to replace it? And to start putting in place the decision making early so that you're not caught off guard with a surprise replacement. I think the biggest tragedy right now is that a lot of people are replacing their furnaces because they're in an emergency situation. You know, the heating season is upon us, and you know, a contractor comes and just says, hey, listen, there's no time to start entertaining alternatives. We got to get your system in place. And they replaced within with a like for light gas furnace, and that thing is going to be in place for 1520, years, right? So, we're now at 2045, and so, you know, the urgency of the idea of avoiding those emergency replacements as much as possible is really, really critical. So, for a homeowner, I would say the steps to take are, you know, look at it from a long-term perspective. Where is the industry going in 10 years, if you want to sell your home, is it going to be better or you're going to be better off or worse off if you've got the most modern and best technology in place for your building, can you demonstrate that you've made investments that are in line with this idea? I think those kinds of things are important considerations to make and to begin budgeting forward appropriately. You know, because it is a little bit more expensive on the first cost, programs are difficult to navigate, so it takes time and energy to kind of understand what those program environments are and what you're eligible for grants. But it's sort of that doing that work up front before you get caught off guard is important. And I would say if anybody wants to add an air conditioner, if anybody's contemplating getting cooling to deal with our summer heat situation that's present in many parts of the country. It's really, really beneficial to strongly consider adding a heat pump in that moment, I think, for commercial building owners, you know, it's a similar thing, but it's but it's elevated to a higher sort of long term capital planning exercise, the idea of what we call decarbonization plans, building and portfolio decarbonization plans, this is a field that's really growing among consultants and architect and engineering firms to offer a service to help building owners understand how all these pieces fit together, and to be able to decarbonize their building stock in a logical, sort of sensible way, based on the current state of the building in its overall capital replacement needs, and especially looking for synergies between the bigger projects, like envelope upgrades and the bigger projects having to do with the end of equipment life, making sure that that end of. Life moment is again captured in a similar way to what we just talked about with homeowners, so that you're not in a situation where your choices are limited. And I think, you know, ultimately, a lot of it for bigger portfolio owners, has to, has to come back to some of the ESG kind of impetus. And really trying to understand, in addition to that, what that dream premium would look like for them, you know, and kind of how it aligns with their corporate values and the financial criteria that get baked into the project. And we know that there are a lot of projects, for example, when geothermal systems are put into place, where you're freeing up mechanical space that can then deliver revenue additional revenue streams. And so, the direct sort of cost comparison of before and after isn't necessarily obvious, and that's why having decarbonization plans that try to bring in those value streams as aggressively as possible can really be helpful.

Trevor Freeman  50:57

Yeah, I think I mean, the main takeaway for me from that is, is plan. Think about this ahead of time, do your analysis. And it's something that I know in the work that that I'm involved in here at Hydro Ottawa. It's something we talk to our commercial customers, especially a lot about is spend the time to create the plan so you're not caught off guard. You know what you're going to do. You know what your strategy is, and you can implement it doesn't have to be done overnight, and the context will change, right? You know, new programs will come into play. Existing programs will leave. There will be different times where it makes sense to do different projects. But if you have that plan, if you know what the strategy is, then you're, you're well set up. So maybe one last quick question. You know, the idea of programs coming and going. It's not always a straight path when it comes to policy, and as much as there's been some exciting things happening in the last little while when it comes to policy and the regulatory framework around decarbonization, so we've had a price on carbon in Canada for a while. We know that things ebb and flow, and so we are likely looking at least a federal election this year here in Canada, likely a provincial election here in Ontario, where we're speaking from. And these things can change policy and policy can ebb and flow. How does the decarbonization effort handle changes in policy, changes in prioritization from the different levels of government that we talked about, you know what? What is the strategy when it comes to those changes as we move forward?

Brian Flannagan  52:36

Yeah, it's a great question. I mean, especially, especially in the times that we're in for the listeners. You know, this is the day after Prime Minister Trudeau announced his resignation, and there's a lot that's happening. I think the strategy overall is, it's quite simple, but it's to recognize that this has always been the case. You know, municipal and provincial and federal governments across the country are changing on different timetables all the time, the alignment of sort of ideological approaches to dealing with the climate crisis are in flux, and have been in flux the whole time, you know, and so I think it's incumbent on us, and this is, this is part of the approach that will be saved. The BDA, the building decarbonization Alliance, is trying to take a different approach. I don't know that we're there in terms of truly embodying that Spirit just yet. It's a work in progress. We're still very new, but the idea of really embracing that we have to be able to work with an incumbent of any political stripe or leaning, including gas utilities, who are powerful incumbents here, who have every reason to want to continue what they're doing, we have to find logic and rationale to drive us, commonly toward a net zero objective for all of the international, global competitiveness positioning issues that we talked about earlier. Right? It's not easy to do that, because climate ideology has traditionally sort of been a left leaning ideology, and I think it's difficult to overcome that and work with different ideologies. But you know, when you have a populist sort of idea saying, hey, people can't afford a house, or people can't afford their energy bills, those are statements that resonate with people, and we have to. We can't come along and say, oh no, this is totally affordable, this is easy, this is a slam dunk. You just electrify your building, like spend $20,000 on a heat pump. You should be able to do that like that is not in touch with the reality of what a lot of people feel. So, I think it's the strategy for us is to recognize that we have to be able to truly address those concerns with evidence and with science and with technologies that actually deliver the goods, we think that there's a strong case for many of those things, like cold climate heat pumps work that question. I think that question is largely resolved, and if you don't have exactly the technology that you need put in a hybrid system for now. That's fine in 15 years when you replace it, the cold climate heat pumps then, or even going to be better, you know? So, there are things that we can put to bed, but we have to be able to if that isn't the case, if it's not actually affordable in a given jurisdiction, we can't walk in and say, hey, well, why aren't you guys doing this? This is affordable. It's not and I think those political ideologies often tap into those different elements where we don't have the narrative fully baked as powerfully as we should to counter, you know, whether it's questions of energy system reliability or energy choice is another sort of theme that comes out. You can't tell me which heating system I'm going to use. Well, I don't need to convince you if you already believed that it's just fundamentally better, you know. And we see this with electric vehicles, actually, the transition there has been interesting where the strategy is to say, hey, this electric car is like, way better than an internal combustion car, you know. Credit to Elon Musk for bringing out a vehicle that was just faster than anything else. Any piston head would just look at that and say,