The Canadian government can enable intensive residential building decarbonization through stronger regulations, fiscal support and fostering a supportive industry for deep retrofits, according to a report by the Pembina Institute.

A deep retrofit covers upgrades to building systems and equipment such as transitioning from gas-powered furnaces to heat pumps, or increasing insulation.

In Deep Retrofit Supply Chain Analysis, the Calgary-headquartered clean energy think tank asked dozens of deep retrofit providers in Canada about the barriers and opportunities to grow the deep retrofit supply chain.

As the Canadian buildings sector is responsible for 13 per cent of the country’s greenhouse gas emissions per year, residential deep retrofits can play an important role in reducing Canada’s climate impact, the report states.

Deep retrofits provide “safe, affordable, climate-resilient homes that have a lot of benefits beyond energy efficiency,” according to report co-author Raidin Blue, an analyst in the buildings team at Pembina.

A deep retrofit achieves a 50 to 70 per cent reduction in energy consumption, cuts greenhouse gas emissions by 80 to 100 per cent, and handles climate adaptation and mitigation, he said in an interview with Sustainable Biz Canada.

The Pembina Institute says four to six per cent of Canada’s building stock needs to be decarbonized per year to meet 2050 decarbonization goals.

Challenges for the deep retrofit supply chain

The Pembina Institute asked 80 deep retrofit providers across Canada, including mechanical equipment and design experts, about the barriers they face and the solutions they want. Of the 80 participants, 59 provided sufficient responses.

The survey found lack of demand and regulatory barriers as the top two obstacles in the broadest sense. “Simply, the builders who own these businesses that do these retrofits, they’re not seeing a strong enough signal from the government they should be expanding operations to do more business,” Blue said.

The main hurdle to scaling up deep retrofits is the lack of regulation requiring deep building decarbonization. The next three barriers relate to building owners, who are said to be turned off by the high premiums for deep retrofits, are unclear about the benefits of a deep retrofit, and find deep retrofits complex and confusing to navigate.

How to support the supply chain

To facilitate the deep retrofit supply chain, respondents on average requested more regulatory backing. The top three supports listed are:

• setting energy performance standards for buildings;
• requiring disclosure of energy performance to build consumer awareness and inform policy and program design to drive demand; and
• pushing demand with government and utility incentives for deep retrofit programs.

Other sought-after policies are related to training and education (trades upskilling, awareness of support, digital literacy), technology (building performance monitoring) and logistics and planning.

The report also found difficulty in attracting skilled labour is a barrier to the scale-up of deep retrofits. However, it goes on to state with proper regulation and support, the building industry is prepared to invest in ramping up residential deep retrofit projects.

For the real estate industry, respondents indicated financiers and industry players need more information about the value of deep retrofits, as well as more sharing of building performance metrics in real estate listings, appraisals and transactions.

The least demanded supports are related to accessing foreign markets and the need for more diversity training.

Recommendations

To address the demands to build up the deep retrofit supply chain, the Pembina Institute has four suggestions for all levels of government.

The first is to establish market certainty by mandating decarbonization of buildings through energy performance standards and disclosures of energy performance.

Blue said the federal government should “honour its commitment to make amendments and alterations to the sustainable building code so all buildings, not just new ones, are safe, healthy, resilient homes that are affordable to heat.” He also urges provinces adopt and implement building codes, and governments to embed resilience standards in building codes.

Next, the Pembina Institute recommends clarifying the benefits of deep retrofits to encourage market demand with policies like supporting market development teams to ease the customer journey.

Third, governments are urged to cooperate with each other and work with utilities to increase the grants and incentives for deep retrofit technologies.

Finally, a more inclusive industry culture could be fostered by raising awareness for and removing impediments for “equity-deserving groups.” The report suggests social procurement policies to increase the number of women in the sector.

Blue said reaching the 2050 decarbonization target would require retrofitting approximately 600,000 buildings per year in Canada. An investment of $10 billion to $15 billion per year would be needed over the next 20 years to finance such an endeavour.

Despite the high cost, he said the economic opportunity is “significant,” as it would generate more than $40 billion in economic development per year. Every dollar into deep retrofit incentive provides $2 to $5 in tax revenue, he said, while every dollar into climate adaptation for infrastructure saves $3 to $6 in recovery costs.

“This is not a matter of doing something for fun . . . It’s a matter of bringing our buildings up to meet the challenges of climate change . . . It might seem unrealistic or a daunting task, but that doesn’t prevent us from having to actually do it to make sure people are safe.”