Rethinking Energy Conservation in Ontario – Results:Home Energy Savings Program (HESP)
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HESP’s Performance
The Ontario government introduced a home energy audit and retrofit program, the Home Energy Savings Program (HESP), in April 2007. HESP rebates homeowners one-half of the cost of undertaking an energy audit (about $150). The audit recommends energy conserving retrofit measures to install (e.g, insulation, a new high efficiency furnace or windows). Homeowners then decide whether they will undertake a retrofit and choose which recommended retrofit measures they want to do. Depending on the measure selected, provincial grants of less than $100 to several thousand dollars are paid; the amount is matched by the federal government’s ecoENERGY – Retrofit Homes program. By March 2010, HESP had improved the energy efficiency of nearly four per cent of Ontario’s stock of existing homes. The $537 million program, which has been popular with Ontarians, is set to expire in 2011. The federal government’s ecoENERGY program will sunset in March 2011. The federal government stopped accepting applications to the program in March 2010.
Table 13 shows Ontarians’ response to the program. Energy savings are shown as “in-year” savings, that is, the amount of energy conserved in that year as a result of home retrofits undertaken in that year. Like many conservation programs, energy reductions resulting from HESP persist for a number of years after a retrofit is completed, and the program pays continuing conservation dividends year-after-year for many years. Thus the cumulative lifetime energy savings resulting from the program would be higher than shown here.
Table 13: HESP Performance and Annual Energy Savings
| Fiscal Year | Audits (000s) | Retrofits* (000s) | Grants Disbursed (Audits) ($ million) | Grants Disbursed (Retrofits) ($ million) | Energy Saved (million GJ) |
| 2009/2010 | 207 | 107 | 31.0 | 150 | 4.1 |
| 2008/2009 | 97 | 42 | 14.5 | 45 | 1.9 |
| 2007/2008 | 39 | 9 | 5.9 | 9.8 | 0.39 |
| Total | 343 | 158 | 51.4 | 204.8 | 6.39 |
Note: * Retrofits represents the number of households that participated and completed a home retrofit. The total number of installations, as shown in Figure 4 below, is higher because some retrofits involve multiple measure installations.
Over the first three years that HESP has operated, the most common retrofit that has been undertaken is the installation of a new heating system – replacing an old furnace or boiler with a more efficient model. Some 112,000 have been installed (one-quarter of all HESP installations), accounting for 35 per cent of the total $204.8 million paid for retrofits in the first three years of delivery of HESP. The most common retrofits are shown in Figure 4. As it shows, one of the HESP’s strengths is that a broad range of key retrofit measures to improve a home’s energy efficiency has resulted from the program.
The program has enjoyed only partial success in encouraging deeper or multiple measure retrofits. As Table 14 shows, nearly one-quarter of households participating in the program install only one measure when retrofitting their home. Slightly less than 30 per cent install two measures, and nearly 20 per cent of households participating in HESP install three measures.
Table 14: Retrofit Measures Done by HESP Participants, April 2007 - March 2010
| Number of Retrofit Measures | Number of Participants | Per Cent |
| 1 | 37,066 | 23.5 |
| 2 | 46,302 | 29.3 |
| 3 | 31,341 | 19.8 |
| 4 | 19,000 | 12.0 |
| 5 | 11,251 | 7.1 |
| 6 or more | 13,040 | 8.3 |
| Total | 158,000 | 100 |
For households that undertake multiple-measure retrofits, the most typical combinations involve installation of a new furnace and air conditioner or replacing a furnace and air sealing the home (e.g., caulking and weather stripping around doors, windows and sealing other gaps in the home’s envelope). It is not typical for multiple-measure retrofits to install insulation as one of the measures.
The most common combinations of technologies in retrofits undertaken by Ontarians participating in HESP are shown in Table 15.
Table 15: Common Multiple Measure Retrofits, April 2007 - March 2010
| Top 3 – Single Measure Retrofits | Number of Occurences | Per cent of Total Retrofits | Average Rebate Incentive ($) |
| Furnace | 26,546 | 17 | 670 |
| Windows | 2,788 | 2 | 360 |
| Attic Insulation | 2,212 | 1 | 474 |
| Top 3 – Two Measure Combinations | Number of Occurences | Per cent of Total Retrofits | Average Rebate Incentive ($) |
| Air Conditioning (AC) and Furnace | 17,984 | 12 | 233+670 = 903 |
| Air Sealing and Furnace | 6,875 | 4 | 260+670 = 930 |
| Toilet and Furnace | 2,723 | 2 | 114+670 = 784 |
| Top 3 – Three Measure Combinations | Number of Occurences | Per cent of Total Retrofits | Average Rebate Incentive ($) |
| Air Sealing / AC / Furnace | 4,952 | 3 | 260+670+233 = 1,163 |
| AC / Furnace / Attic Insulation | 1,553 | 1 | 233+670+474 = 1,377 |
| Windows / AC / Furnace | 1,499 | 1 | 360+233+670 = 1,263 |
Issues and ECO Comment
After three years of operation, the picture of HESP that emerges is that of a popular program leveraging federal government, OPA and gas utility programs with consumers’ own investments. As Table 13 shows, participation has more than doubled each year. Without a major marketing campaign, it has raised awareness of conservation. About 63 per cent of the energy savings resulting from HESP are related to heating homes with natural gas; HESP thus complements natural gas utilities’ demand-side management activities since gas distributors offer limited assistance (see section 4.2).
Overall, the program performs adequately and is particularly effective for improving the performance of older vintage homes, that is, houses constructed prior to 1970. It has also helped stimulate market penetration of higher cost efficient equipment like ground source heat pumps that currently have a low market share. The claimed energy savings are encouraging but are less than the maximum savings possible if all recommended retrofit measures were completed. The Ministry of Energy should report the actual achieved energy savings compared to the maximum potential savings.
Despite the solid performance of HESP, the ECO notes several concerns. First, the program’s fairly high level of lost opportunities – a key cause is single measure retrofits – lowers the program’s effectiveness. To date, about one-quarter of households participating in the program install only one measure when retrofitting their home.
Second, as with other programs reviewed, HESP provides another example of the need for measurement of results, especially now that Ontario may be the sole program provider. There are concerns related to verification of the claimed energy savings. The ministry has been evaluating and analyzing various elements of the program, but does not have a formal evaluation protocol (see section 2.0). It relies on the federal government’s calculation of household savings from estimates produced by the modeling software used in the audit. No sample bill analysis, metering or other verification is done to confirm the accuracy of the estimates. The ECO believes the ministry should survey a sample of retrofitted homes to determine the accuracy of the calculations.
Third, although the ministry has conducted some cost-benefit analyses, the program’s cost-effectiveness is unknown since factors like free ridership, spillover and persistence effects, which are under development, are not yet available. Considering the large amount that will be spent on the program ($537 million), information should be provided to judge whether HESP has produced acceptable per household savings at a reasonable cost.
A final ECO concern is the program’s reach. In the first three years that the program has been operating, it has retrofitted four per cent of Ontario’s existing housing stock. Accordingly, it will take decades to upgrade the entire housing stock. To build a robust conservation culture, the program would have to be scaled up (or the market somehow otherwise transformed) to achieve large energy savings and contribute meaningful emissions reductions to Ontario’s climate change targets.
HESP is ending in March 2011, however, eligible program participants have until March 2012 to complete the retrofits. Currently, Ontario is forecasting large budget deficits for coming years, and it is therefore possible that the program will not be renewed because of pressure to reduce spending. Facing these financial pressures, the government has perhaps three options: let the program end (encouraging its adoption by a third party like gas utilities); renew the program with its current design (using tax or ratepayer money); launch a redesigned successor program (e.g., providing only audits, or lowering grant amounts, or targeting older high consumption homes).
The ECO believes that some form of home energy retrofit program should continue to be offered in Ontario. Since much of the existing housing stock was built before there were energy performance standards in the Building Code, great opportunity exists to improve the efficiency of the residential sector. Uncertainty about the program’s future will negatively affect conservation capacity in the province – the existence of companies that perform audits and retrofits. The ECO urges the Minister of Finance to inform Ontarians as soon as possible whether the government will continue to deliver a program.
Currently, there is no publicly available data about the program. A report on the HESP’s performance should be made public, detailing its operation and cost-effectiveness, and providing independently verified energy savings and GHG reductions. If the government decides to continue HESP or offer a renewed program, going forward the ministry should issue an annual report. This report should use a methodology compatible with those used by the OPA and distribution utilities to report savings, and the report should show how the program accounts for adjustment factors like free ridership. If the program is ratepayer funded, the report should demonstrate the system-wide benefits achieved, as well as the balance (over or under spent ratepayer contributions) held in special fund accounts established to pay for the program.
If the government decides to withdraw from delivering a home retrofit program, the ECO believes that it should assist third parties (private sector, utility or non-governmental sector) with direction on administration of the program. There is a large amount of existing program data. The Ministry of Energy should make this data available (after ensuring confidentiality of program participants) and assist these parties to establish a program design. An “open source” approach to data could lead to program innovation and effective design.
The ECO urges the ministry to assist third parties to scale up the program by enacting supportive policies, for example, passing a regulation to require the Green Energy Act, 2009 provision for mandatory energy ratings at time-of-sale of a property. This would equip some 213,000 resale homes annually with information to undertake a retrofit, and is the sort of value added policy support that government should provide to build capacity and assist market transformation to a high efficiency residential sector.
