Assessing Key Features of Residential Energy Retrofit Financing Programs

Residential energy retrofits offer substantial opportunities in Canada for greenhouse gas (GHG) emissions reductions, job creation and residential energy savings. Many residential energy efficiency measures are cost-effective with favourable payback periods and investment returns, yet up-take of these measures has been lower than expected due to persistent market barriers.


This brief explores the case for using financing programs to promote energy efficiency actions in residential applications, and experience with these programs to date.


Key Messages:

  • Residential energy efficiency measures offer cost savings, substantial low-cost greenhouse gas (GHG) emissions reductions and important local economic development opportunities.
  • From the perspective of homeowners and tenants, energy retrofit improvements can be challenging. To achieve energy cost savings, a substantial up-front investment is often required and financing may be difficult to obtain.
  • From the perspective of program operators and policy makers, designing programs that reach the available opportunities while also being financially sustainable has been challenging. In order to reach further into the market, previous programs have been built on rebate and subsidy platforms, and consequently have been vulnerable to ongoing funding commitments and continuing political will.
  • Residential energy retrofit financing programs that seek to address both the financial sustainability concerns of the programs’ operators and the investment concerns of residents have been implemented in limited jurisdictions. These financing programs generally take two forms: on-utility bill financing, in which residents repay the cost of energy efficiency retrofits on their utility bill, and property-tax financing, in which residents repay the cost of the investment on their property tax bill.
  • Until recently, few of these programs have had enough longevity from which to derive best practices, but a growing body of experience now offers an opportunity to evaluate the efficacy and importance of financing programs’ key design features.
  • One particular question for the design of new financing programs relates to the transferability of the financial liability from resident to resident when there is a change in occupancy or ownership. The absence of such a mechanism could be seen as a reason financing programs might not have been implemented more widely. However, case study analysis shows that while transferability is important, it is perhaps less important than it has been perceived to be. Well-designed programs can have substantial success without mandatory transferability mechanisms.
  • The amount of economic, environmental, and social opportunity available in residential retrofits provides justification for communities and utilities to move forward by implementing the best program within their context and jurisdictional authority now.
  • New programs in British Columbia, Manitoba, Ontario and Nova Scotia may set the stage for much wider adoption of energy efficiency financing mechanisms in Canada.