Throughout the Committee’s study, witnesses commented that while enhancing energy efficiency in buildings involves certain costs, it leads to a number of benefits. In that context, the benefits and the costs should be weighed in deciding on the energy efficiency measures that should be implemented. A cost-benefit analysis can help building managers decide whether to retrofit an existing building, or to construct a new facility. In addition, this analysis can help determine which energy efficiency measures will lead to the desired cost reductions.

A. Costs

As part of a strategic planning process, a cost-benefit analysis can inform building owners and managers on how to enhance energy efficiencies in their buildings and achieve cost reductions. There are costs associated with implementing energy efficiency measures in new building construction, energy retrofits to existing buildings, and in obtaining industry-recognized certifications for buildings.

1. Cost-Benefit Analysis

A cost-benefit analysis is one tool that can be used to achieve energy efficiencies and cost reductions in federal buildings. A PWGSC official spoke about research conducted by her department and the National Research Council Canada (NRC) that was designed to indicate the costs and benefits of various kinds of changes to improve energy efficiency in buildings in order to identify the most cost-effective investments that the department can make.[62] According to an official from NRCan:

If a particular department has a particular interest in a technology, they will express that interest. Then the private sector will return with the feasibility of how it could be included and what the economics would be. The department would have the final say. In some cases, the extremely good economics of other measures will help more leading-edge measures make more sense, so you can bundle these together in an overall investment.[63]

As part of the planning process for investments in energy efficiency measures, a PWGSC official mentioned that portfolio managers take into account a variety of factors, such as possible sources of alternative energy and the energy regime used in a given location.[64] Along the same lines, according to an official from NRCan, the FBI program requires that a feasibility study be conducted in relation to the buildings that are being assessed for potential retrofits.[65] He indicated that, “[NRcan is] looking at all energy sources, from the investigative, the scientific, perspective, as to what’s available and the cost effectiveness.”[66]

As part of a cost-benefit analysis, Mr. Karakasis indicated that the federal government should consider not only the cost of moving, the cost of building versus the cost of renovating, but also the cost of disposing of a building.[67] Brian Staszenski (General Manager, North America Office, Global Resource Efficiency Services) provided an example of an analysis done in order to decide on whether to retrofit an existing facility or purchase a new building. He explained: “What we did with that facility was a capital asset plan, looking at a 25-year horizon. …[The client] decided to keep [the facility] because we showed them how energy efficiency measures can [reduce] some of that capital cost.”[68] In particular, the analysis took into account the cost of keeping the facility up to standard over time.

2. New Building Construction and Existing Building Retrofits

According to Ryan Eickmeier (Director, Government Relations and Policy, Real Property Association of Canada), one of the key challenges to achieving an energy-efficient building may be the up-front construction or retrofit costs, which can be significant and can be a barrier for both the private and public sectors. Mr. Eickmeier informed the Committee that — from the perspective of constructing a new building — the cost of an energy-efficient building is increasingly affordable because of innovative building techniques, the ability to set rents at a level to offset any expenditures incurred to be more energy efficient and savings in energy costs.[69]

While new building construction can be cost-effective, major energy retrofits to existing buildings can be cost-prohibitive, depending on the age of the building, and the extent and difficulty of the work that is required.[70] As well, the need to relocate tenants while retrofits are occurring can increase costs. According to Mr. Eickmeier, “for privately owned buildings, with long-standing government tenants, major energy retrofits do not always carry a sound or attractive business model.”[71] However, he also said that, “through minor retrofits, through [upgrades to] lighting, through turning off computers [and] through timed power turnoffs throughout the night,” changes can be implemented at areasonable cost.[72]

No federal funding was allocated for the achievement of targets under the Federal Sustainable Development Act; with the result that departments were expected to achieve those targets within their existing budgets. According to a PWGSC official, based on the standard options available, today’s building upgrades are inevitably more energy efficient, whether the upgrade involves the replacement of a heating, ventilation and air conditioning — or HVAC — system or of a chiller.[73] He added that “austerity measures drive all of us to look hard at reducing […] operating costs, and enhancing energy efficiency is now a lower-cost option.”[74] The official also said that reduced operating costs that result from the implementation of energy efficiency measures are part of the reason why these measures can be considered a lower-cost option.[75]

3. Certifications

In addition to the cost of constructing energy efficient buildings or retrofitting existing buildings, there are costs[76] for both initial certification and subsequent re-certifications associated with rating programs, such as BOMA BESt and LEED. According to Mr. Shinewald, the BOMA BESt certification is exceedingly cost-effective and relatively low in cost when compared to other building certification programs.[77] According to an official from PWGSC, there are advantages and disadvantages to each rating program, including BOMA BESt and LEED; as a result, the department has adopted different rating programs for different buildings.[78]

B. Benefits

Achieving an energy-efficient building can have a number of benefits, including cost reductions, a reduced environmental impact both outside and at the workplace, and positive effects on job creation.

1. Cost Reductions

According to Dave Seymour (Vice-President, Eastern Region, Ameresco Canada Inc.), during a period of fiscal constraint, there may be a focus on cost savings in the short term. However, energy efficiency projects should be focused on longer-term savings and benefits.[79] Several witnesses told the Committee that the implementation of energy efficiency measures can lead to significant cost savings. According to an official from NRCan, the 80 federal retrofit projects completed under the FBI program have saved $43 million each year in energy operating costs.[80] Similarly, the U.S. government has benefitted from the implementation of energy efficiency measures in the buildings[81] it operates. In particular, since 2005, the U.S. government has invested $3.1 billion in energy efficiency measures under its energy management program; the result is an estimated $8.5 billion in costs savings over the life of these measures.[82] According to an official from Shared Services BC, the Government of British Columbia’s investment, in 2008, of $75 million in capital funding over three years to retrofit existing provincial public-sector buildings is estimated to be generating approximately $12.5 million in energy savings annually.[83]

Regarding the value of rating programs, Mr. Mueller informed the Committee that building certifications are one way in which to ensure a good return on investments in buildings.[84] Pension funds, like those in relation to teachers, are mainly motivated by the return on the investments that they make. According to him, if investments in buildings occur, teachers’ pension funds must invest in energy-efficient buildings, and the preferred rating program — in both Canada and the United States — is LEED.[85] He also said that large commercial landlords use pension funds to invest in buildings, and the rates of return on those investments exceed 10%. In his view, “[constructing] a new, Gold-certified LEED tower in Toronto in the downtown financial district costs about 2% more to build [than a non-certified building] and the returns are over 10%. So the math is pretty straightforward.”[86]

2. External and Workplace Benefits

Witnesses identified several external and workplace benefits associated with increasing the energy efficiency of federal buildings, including lower greenhouse gas emissions, reduced water consumption, and less waste. Several witnesses told the Committee that energy efficiency gains in buildings lead to savings in relation to energy costs. According to an official from NRCan, federal buildings retrofitted under the FBI had, on average, 20% in energy savings.[87] Similarly, a PWGSC official indicated that, from the perspective of the department’s Real Property Branch, energy intensity use reductions of 20% were achieved from 2001 to 2010 as a result of FSDS targets.[88] In comparison, the U.S. government indicated that federal agencies subject to the energy intensity reduction requirements of the National Energy Conservation Policy Act reduced energy use per gross square foot in federal buildings by 16.4% in fiscal year 2011[89] relative to fiscal year 2003 (preliminary data).[90]

Building occupants also benefit from energy-efficient buildings, which can potentially improve the health and well-being of employees. Mr. Mueller spoke to the Committee about a NRC study that concluded that those who work in LEED-certified buildings are positively influenced by the buildings’ certification.[91] According to the NRC study, ratings by building occupants in relation to overall environmental satisfaction were significantly higher for LEED-certified buildings, as were ratings in relation to satisfaction with ventilation and temperature.[92] The NRC study reported that ratings by occupants indicate that LEED-certified buildings provide a better basic level of thermal comfort. Finally, in referencing the same study, Mr. Mueller stated that “the reasons for using LEED is that it results in a better performing workforce and less absenteeism, and because it also helps attract top talent from an employer perspective.”[93]

3. Job Creation Effects

While the Committee’s witnesses did not indicate the number of jobs created by increasing energy efficiencies in federal buildings, they did comment that implementing energy efficiency measures and conserving energy are labour-intensive; and as a result, leads to employment opportunities that are large and often regional.[94] Wayne Rogers (President, Luminescence Lighting) provided an example:

There’s absolutely no question that doing energy efficiency projects will increase employment. Just as an example, the project in Prince Edward Island was about a $150,000 lighting retrofit and 50% of that would have been labour. Of course, the luminaires had to be constructed, so there was a 50% labour component to it as well.[95]

Witnesses highlighted the existence of both direct and indirect employment effects associated with energy efficiency projects. That said, it is the net employment effect that must be considered, as using less energy means that fewer people are required to produce the lower amount of energy that is being demanded. As Peter Love (President, Energy Services Association of Canada) explained, “[s]ome of the studies look at a net impact… Typically, the numbers people tend to come up with range from 7,000 to 9,000 jobs per billion [dollars spent] direct, and about the same indirect.”[96] As an example, he made reference to the energy retrofit project for the Empire State Building, which resulted in about 7,000 jobs per billion dollars spent. He noted that, when compared to a coal-fired plant project that would create about 970 jobs per billion dollars spent, it was a 7:1 ratio in favour of energy efficiency projects.[97] As well, he highlighted that NRCan has recently undertaken a study on the employment benefits of implementing energy efficiency measures.[98]

An official from the Government of British Columbia informed the Committee that, “[r]esearch in 2012 by PricewaterhouseCoopers pointed out that our offsets portfolio and the investments the public sector has made in that regard stimulated an estimated $320 million in capital spending, $240 million in provincial [gross domestic product] contribution[s], just below $50 million in contribution[s] to government revenue, and … the creation of 2,800 jobs.”[99]