Canada’s Renovation Wave A plan for jobs and climate Madi Kennedy and Tom-Pierre Frappé-Sénéclauze July 2021 photo: Roberta Franchuk, Pembina Institute Robertaphoto: Pembina Franchuk, Canada’s Renovation Wave A plan for jobs and climate Madi Kennedy and Tom-Pierre Frappé-Sénéclauze July 2021 Contributors: Ralph Torrie and Brendan Haley ISBN 1-897390-50-5 ©2021 The Pembina Institute All rights reserved. Permission is granted to The Pembina Institute reproduce all or part of this publication for non- 219 19 Street NW commercial purposes, as long as you cite the Calgary, AB source. Canada T2N 2H9 Phone: 403-269-3344 Recommended citation: Kennedy, Madi and Tom-Pierre Frappé-Sénéclauze. Canada’s Additional copies of this publication may be renovation wave: A plan for jobs and climate. The downloaded from the Pembina Institute website, Pembina Institute, 2021. www.pembina.org. Pembina Institute Canada’s Renovation Wave | i About the Pembina Institute The Pembina Institute is a national non-partisan think tank that advocates for strong, effective policies to support Canada’s clean energy transition. We employ multi-faceted and highly collaborative approaches to change. Producing credible, evidence-based research and analysis, we consult directly with organizations to design and implement clean energy solutions, and convene diverse sets of stakeholders to identify and move toward common solutions. ————————————————— pembina.org ————————————————— twitter.com/pembina facebook.com/pembina.institute Donate to the Pembina Institute Together, we can lead Canada's transition to clean energy. Your gift to the Pembina Institute directly supports environmental education and innovative research that advances understanding and action on critical energy and environmental issues. pembina.org/donate Acknowledgements This report was made possible in part with the financial support of: The authors would like to acknowledge the contributions of external reviewers: Nat Gosman, Katherine Muncaster, Norman Gludovatz, Bryan Purcell, Keith Burrows, Fatima Crerar, and Brendan Haley. Pembina Institute Canada’s Renovation Wave | ii Canada’s Renovation Wave A plan for jobs and climate Contents Executive summary ............................................................................................................................. 1 1. Introduction ................................................................................................................................. 2 1.1 The role of electrification and low-carbon fuels ............................................................... 3 1.2 Beyond fuel-switching: meeting multiple objectives through deep retrofits ............... 4 1.3 Job creation and economic stimulus ................................................................................. 5 1.4 Public support needed to scale up retrofits ................................................................... 10 1.5 Market development and innovation strategy ............................................................... 12 2. Canada’s renovation wave ........................................................................................................ 13 2.1 Depth, pace, and cost of upgrades required: a heuristic model .................................. 13 2.2 Model results: investments needed, dollars saved, jobs created ................................ 16 2.3 Public investments needed ............................................................................................... 19 3. Recommendations .................................................................................................................... 24 Appendix A. Modelling assumptions ............................................................................................. 27 Appendix B. Summary of Retrofit Costing Literature Review .................................................... 33 Appendix C. Types of incentive programs .................................................................................... 37 List of Figures Figure 1. Characteristics of deep retrofits ........................................................................................ 5 Figure 2. Jobs multipliers by industry ................................................................................................ 6 Figure 3. Workers in construction by wage and gender ................................................................. 8 Figure 4. Challenges and barriers for women entering trades ...................................................... 9 Figure 5. Conceptual model of retrofit wave: fraction of vintage building stock fuel-switched each year, 2020 to 2050 ........................................................................................................... 14 Figure 6. Heat pump performance and typical heating load for selected cities ........................ 30 Pembina Institute Canada’s Renovation Wave | iii List of Tables Table 1. Key impacts of proposed retrofit scenario plus commercial retrofits ......................... 17 Table 2. Economic growth and job creation for residential and commercial retrofits, by province ..................................................................................................................................... 18 Table 3. Economic and carbon impacts of the renovation wave in the residential sector, by province ..................................................................................................................................... 19 Table 4. Funding gap, by province ($ billion/year) ......................................................................... 22 Table 5. Incremental cost of retrofits .............................................................................................. 28 Table 6. Post-retrofit gross thermal output (KWh/m2) .................................................................. 29 Table 7. Annual system heating efficiency, including back-up energy ........................................ 30 Table 8. Floor area of commercial and institutional buildings, by province .............................. 32 Table 9. Summary of total and incremental retrofits costs for single family homes based on modelled and actual case studies .......................................................................................... 33 Table 10. Summary of total and incremental retrofits costs for MURBS based on modelled and actual case studies ............................................................................................................ 34 Table 11 Summary of costing assumptions ................................................................................... 36 Pembina Institute Canada’s Renovation Wave | iv Executive summary To meet climate targets, we need to eliminate carbon pollution from Canadian homes and buildings before mid-century by phasing out on-site combustion of fossil fuels and powering buildings with clean energy. Fuel switching to clean electricity (from wind, solar, and hydro) is the most scalable and market ready way to provide low-carbon energy to buildings. Fuel-switching should be paired with additional measures to reduce overall energy use, improve air quality and thermal comfort, and increase resilience to extreme weather events and earthquakes. Addressing this climate liability will require an additional investment of about $400 billion, and will unleash a Canada-wide 20-year retrofit wave that will yield generous economic, social, and environmental returns. Investments in the retrofit economy are very effective means to accelerate economic recovery. This is because the actions needed to decarbonize buildings — manufacturing and installing windows, installing air-source heat pumps, adding insulation, etc. — are labour-intensive, and create jobs where people live: in big cities, suburbs, and small towns. These are well-paid jobs in the trades, in manufacturing, and in professional services, for small-scale contractors and larger firms. To provide an estimate of the scale of this opportunity, and of the public investments needed to realize it, this paper presents a heuristic model of how Canada’s buildings can be retrofitted over the next 20 years. Priming the pump for this transformation will require public investments at an order of magnitude above funds allocated to date. We estimate the public investments needed to meet these objectives at about $10 to $15 billion per year, every year between now and 2040 (or until appropriate regulatory drivers are in place). These investments will create up to 200,000 long-lasting well-paid jobs, generate more than $48 billion in economic development each year, and pay for themselves twice over through increased tax revenue. Paired with a rapid decarbonization of our electricity grids, these retrofits will allow us to decarbonize most of our buildings by 2040. Because of the energy efficiency gains of deep retrofits, electrification of the residential sector can be achieved without increasing the total electricity use, leaving headroom for further electrification of transport and industry. Pembina Institute Canada’s Renovation Wave | 1 1. Introduction To meet climate targets, we need to eliminate carbon pollution from Canadian homes and buildings before mid-century by phasing out on-site combustion of fossil fuels and powering buildings with clean energy. Fuel switching to clean electricity (from wind, solar, and hydro) is the most scalable and market-ready way to provide low-carbon energy to buildings. Fuel-switching should