This event was symbolic for me personally because it represented the results of several years of effort and a major milestone towards the goal of building affordable high performing homes.  As the Vice-Chair of the R-2000 Renewal Committee, I’ve worked with NRCan and other builders and consultants from across Canada since 2008 towards developing the new standard. My insider position on the committee obviously helped me to time the construction of this home to be the first in Canada.

The event also focused on Urbandale’s partnership with Carleton University.  I’ve been working with the students in their High Performance Housing Group since 2009. The students were given Urbandale plans and asked to brainstorm cost effective energy efficiency upgrades as part of their design project. They’ve actually embedded monitoring equipment into the walls of our demo home to ensure it performs as intended.  At the event, we also announced Urbandale’s commitment to donate a home to be built on the Carleton campus, to be used as a research lab for emerging technologies.

Finally, we announced Urbandale will be updating our spec for all of our homes to the new 2012 ENERGY STAR^® Standard.  This is perhaps my biggest personal risk, as I’ve been pushing the company in this direction, and I’m honestly not sure how the market will respond to our changes.  Our new spec will make for a better home, this much I’m sure about, but it will cost more and I’m worried some consumers will not consider the value and opt for a cheaper alternative.

I don’t personally care much for ceremony, but I’m grateful for the Politicians who came out to the event. It raised the profile of the launch, which is good for Urbandale.  The Honourable Gordon O’Connor, Minister of State and MP for Carleton Mississippi-Mills, spoke about the role the Canadian Government played in developing the standard.  Also, I have to admit, I was pretty happy to hear the President of the Canadian Home Builder’s Association, Ron Olsen, say that Urbandale is “…building the best houses in the world.” The final speaker, Professor Beausoleil-Morrison from Carleton University, described the types of research they hope to perform and the potential for homes of the future.

I mentioned earlier that this event was only a symbolic milestone.  The focus now has to shift from the design side to the marketing side.  We know we can build higher performing homes, and the recognition certainly affirms we’re on the right track.  The next step is in communicating what we’re doing differently to the public, and hoping purchasers understand and value the hidden features we’ve put in our homes.

Rifkin notes that each Industrial Revolution can be linked to innovations in both communications and energy.  The First Industrial Revolution was characterized by steam powered printing technology, greatly encouraging mass literacy for the first time in history.  Coal was the primary source of energy for an economy based on industrial factory manufacturing and a rail system that spanned continents.  Worldwide average income and population growth increased dramatically as a result.  The Second Industrial Revolution was characterized by the advent of radio and telephone communications, and the use of electricity in homes.  And of course the automobile and interstate highways that came with it changed the way that cities were built and ushered in the oil economy.

The Third Industrial Revolution, according to Rifkin, will be characterized by the rise in Internet communications technologies and renewable energy.  What these two technologies have in common is that they both function in a distributed way.  The internet is built off of millions of computers linked together with no central power controlling it.  Similarly, Rifkin foresees a future where millions of people generate their own green electricity and share it with one another across intelligent electricity networks.

The cultural and economic implications of this are staggering.  The technologies associated with the First and Second Industrial Revolutions, such as coal and oil extraction and refining, and rail and highway infrastructure, are extremely capital intensive.  The high costs led to a hierarchical economy with monopolistic utilities controlling the flow of information and energy.  Because the sun and wind are essentially free (once the renewable energy infrastructure is in place) our society can transform to a collaborative economy where we gain more value from sharing resources rather than buying them.  By analogy, consider how traditional media such as newspapers and television are being changed by user-generated content such as blogs and Youtube (remember the Encyclopedia Britannica?).  The implications of people sharing renewable energy over a distributed grid are equally world-changing.

So what does this all have to do with homes?  In Rifkin’s vision of the future, every home will become a net-exporter of energy where we generate more electricity than we use over the course of a year.  This is what is driving us towards Net-Zero Energy Homes.  We will start by making the homes as energy efficient as possible, and then add solar photovoltaic technologies to our roofs to convert sunlight to electricity for our own uses and for exporting the leftover energy to the grid.  We are already on this path, with industry experts predicting that all new homes will be Net-Zero Energy by 2030.  In fact, many believe that the changes will happen much quicker.

Urbandale is already on the path towards building Net-Zero Energy Homes, however our focus is on production building, not custom building.   We are waiting for the necessary technologies to become available at prices that are affordable and marketable to consumers.  For example, solar photovoltaics (PV) are currently an “add-on” technology, meaning that we build a house, and then hire a third-party company to come in and install PV on the roof.  This is expensive and inefficient, and it also can increase the chance of leaks due to the necessary holes in the roof to support the PV brackets (although if installed correctly this is should not be an issue).   We currently build our houses as “Solar-Ready” so that purchasers can choose to install PV at any time after they have moved in.  The costs to the consumer are essentially the same whether we install the PV for them, or if they do it themselves later. The next generation of PV technology is called Building Integrated Photovoltaics, or Solar Shingles.  With this technology, the roof shingles themselves are capable of converting sunlight to electricity.  Although this technology is still being developed, once it becomes available it has the potential to transform the market.  The renewable energy component will truly be integrated within the house and not simply added to it afterwards, saving money and effort.

Today I’ll be doing a live chat for the Ottawa Citizen website on energy efficient construction.  My guest panelist will be David Foster, the Director of Environmental Affairs for the Canadian Home Builders’ Association.  Log in here today between noon and 1:00.

EnerGuide for Homes
The EnerGuide Rating is a measure of a home’s energy efficiency. It is calculated using the Hot2000 computer modelling program.  The computer simulation assumes standard lifestyle patterns and weather conditions so that different types and sizes of houses can be compared against each other.  An EG rating of 0 would represent the worst possible rating, a home with major air leakage and no insulation that requires a massive amount of energy to heat.  An EG rating of 100 would represent a Net-Zero Energy home, which produces as much energy as it consumes over the course of a year. A common misconception is that the EG rating shows a percentage of energy improvement (i.e. an EG 82 is 2% better than an EG 80), but this is not the case. Most new homes built to code in Ontario have an EG rating between 70 and 75. Currently, the ENERGY STAR^® and R-2000 program each have an energy target of EG 80, which is generally considered to use about 30% less energy compared to a standard house.

In 2009, the Ontario government passed the Green Energy Act, which among other initiatives, allows the government to make it mandatory for every home in Ontario to receive an EnerGuide rating before it is sold. With this information purchasers will be able to compare the energy efficiency of homes in the same way we currently compare the fuel efficiency of vehicles. This program is currently in the development stage, but a major component will be the restructuring of the EG rating to make it more intuitive and easier to compare between homes.

Ontario Building Code
The Green Energy Act also changed the Ontario Building Code (OBC) to include energy use as a component of the code, and to give the province the ability to update the minimum energy criteria every three years. In 2012, the OBC will set EG 80 as the new minimum allowable energy efficiency rating for new homes. Although this is a fairly aggressive target for a minimum standard (30% more efficient than current building practices), builders across Ontario have already shown it is easily achievable at an incremental cost of approximately $4,000.

ENERGY STAR^® for Homes
The ENERGY STAR^® program is an energy efficiency certification program for homes that are third-party tested to achieve a minimum of EG 80. In 2012, ENERGY STAR^® will update their standard to coincide with the increase in code efficiency levels.  The new ENERGY STAR^® minimum target will be an EG 83, which represents a 25% improvement over EG 80.

R-2000 Standard
The R-2000 standard is similar to ENERGY STAR^®, as it is a third-party verified labelling program for homes. However, it goes beyond energy efficiency to include indoor air quality and environmental responsibility. Since its inception, R-2000 has been supported by Natural Resources Canada as a “Best in Class” building standard.  In 2012, the R-2000 standard will be updated with a new minimum energy efficiency target of EG 86, or 50% better than EG 80.

The Transition Period
The OBC changes come into effect on January 1^st, 2012. All new permits issued after that date must conform to the EG 80 minimum, however homes with permits issued before January 1^st could still be built to the old standard.  The ENERGY STAR^® and R-2000 programs will have grace periods to ease the transition into the new standards for builders. Under both programs, builders will be able to continue to market and sell to the old standard until July 2012. After this point, all homes sold as ENERGY STAR^® or R-2000 must be built to the new standard.  With all this change, consumers interested in buying a new home have to be very careful to understand exactly what they are buying.  A new home marketed as ENERGY STAR^® in early 2012 may be built to the exact same standard as a house built to code! It will be the purchaser’s responsibility to verify if the builder is marketing the old standard or the new standard.

What this means for Urbandale Construction
Urbandale has built homes reaching the EG 80 target for many years now, so the changes to the OBC will not affect us at all. We take pride in being at the forefront of energy efficient innovation, and to stay ahead of the curve we will also be changing our building spec in 2012. Urbandale is in the process of building a demonstration home following the new R-2000 standard. Actually, our demonstration home surpasses the standard and reached an EG 88.5! The goal of this project is to learn what is entailed with building to this standard and the associated costs. Although we have the knowledge and experience to build to the 2012 R-2000 standard, I’m concerned there are not enough purchasers that would be willing to pay the necessary additional up-front costs.  For this reason, our plan is to build to the 2012 ENERGY STAR^® levels (EG 83) as our standard, and offer R-2000 (EG 86) as an upgrade option. And of course, the Urbandale version of ENERGY STAR^® will go beyond the strict definition to include the important indoor air quality features already standard in all of our homes.

The easiest way to make homes super-insulated and air-tight is to reduce the number of windows, especially non-south facing windows, since they don’t let in solar heat gains. So who has the most to lose with the increased popularity of Passive House homes? Window manufacturers of course! That’s why Velux, the world’s largest manufacturer of skylights, created a competing building standard called Active House as an alternative vision for energy efficient homes of the future.

The Active House building standard incorporates some of the same concepts of Passive House, such as insulation, air-tightness and optimal solar exposure. However, it also promotes increased natural light and ventilation through the use of, you guessed it, Velux skylights and windows. Their products feature automated controls to bring in fresh air when needed, as well as automated blinds and exterior awnings to control shading. Due to the additional windows, Active Houses cannot be as well insulated as Passive Houses and typically require renewable energy systems, such as solar water heaters and/or geothermal heat pumps, to reach similar energy targets.

Which approach is better? Well, if you’re asking me which house I would rather live in, the answer is simple, Active House hands down. While the Passive House has a singular focus on energy efficiency, the Active House expands the focus to quality of life issues, such as indoor air quality, fresh air, and natural sunlight. A cave in a mountain with one south facing window and a toaster as a heater could essentially pass as a Passive House. The flip side of course is that a Passive House could be built much more economically than an Active House. The need for expensive cutting-edge technology in an Active House makes it far too expensive for most homeowners. To date, Active Houses have primarily been built as show-homes or demonstration homes to prove the concept. Most people cannot afford this type of home until the price of the technologies used decline.

So, will Urbandale build homes to either of these standards in the future? Honestly, it’s not likely. In my opinion, neither standard is appropriate for our market. The central criteria for the Passive House standard is that a house cannot use more than 15 kWh/m2/year in heating. This benchmark was developed with Germany’s climate in mind and is very difficult to achieve with Canada’s much colder winters. For example, our walls have R-22 insulation, and to reach the Passive House standard R-60 is required, making the walls almost three times thicker. Thicker walls mean less floor space, and with today’s high land prices I think few people would be willing to make this tradeoff. On top of this, both the Passive House and Active House rely heavily on solar orientation, meaning the house must be set south facing on the lot to maximize free heating energy from the sun. This approach works very well for custom builders who build a few homes on empty lots in the country. When you are building hundreds of homes a year and developing full subdivisions, it is next to impossible to ensure that every home is optimized for Southern sun exposure.

Urbandale’s approach is to design well insulated and air-tight homes with high efficiency heating and ventilation equipment that use less energy regardless of how the home is oriented. We are mindful that there is a limit to what purchasers can afford to spend on even the most energy efficient homes, and have a package of efficiency upgrades that are both effective and affordable. The Passive House and Active House standards have their niches and may be appropriate for other builders in different markets. Any approach that reduces the amount of energy used in new homes is beneficial, regardless of how it’s branded or packaged.

I’m really excited about this project, because it will support new research into home construction and it will keep Urbandale at the cutting edge of new technologies and design techniques.

The residential construction industry is notoriously conservative when it comes to implementing new technologies.  With a few exceptions (mainly related to the way we air seal and ventilate our homes) houses built today are not that different from the way they were built twenty years ago.  Construction companies don’t typically invest in research and development, and no one wants to take a chance by putting a risky new technology in someone’s home.  The research facility that we are building will help speed up the implementation of new technologies by allowing us to test and monitor them in a real house setting so we’ll know if they’re suitable for our purchaser’s homes.

I can’t say too much else about the project right now because we’re still at the design stage.  Carleton is currently deciding which model of home they want us to build and what technologies they want to incorporate in the home.  I’ll be sure to post more on this as the project develops.

The biggest obstacle to more energy efficient homes by far is the increased upfront cost of the home.  Sure we can build super energy efficient homes, and sure they save money in the long run, but they cost more to build and if you can’t afford it at the time of purchase that’s often the end of the story.  The problem is an issue of financing.  We need to be able to borrow enough to cover the added upfront costs with the understanding that it will be paid back through the energy savings.  Banks routinely give loans for personal investments that are riskier than energy efficiency investments, but they are comfortable doing so because they have decades of experience to understand and quantify their risks.  With energy efficiency improvements, banks have been slow to get on board because until recently they just didn’t have confidence in the savings.  How would they know how much a homeowner could save from an extra 2 inches of insulation?  All they had was some computer modeling put together by eco-geeks with no way to guarantee or verify the results.  Over time however, the demand for energy efficient housing along with the allure of being able to market themselves as being environmentally conscious has prompted banks to get on board in offering these new products.

When a bank determines how much of a mortgage you will be approved for, they use an equation that looks at your monthly income minus your expected expenses.  It just makes sense that if your expected energy costs will be lower, then that means you will have more money left over to put towards your mortgage payments; therefore, you should be able to afford a more expensive home.  In theory, the banks should be able to determine your expected energy savings (through computer modeling provided by a third party) and then work backwards to determine how much higher your mortgage approval limit should be.  The Green Mortgages offered by the banks mentioned in the Citizen article don’t work this way, but they have a similar effect by offering a lower interest rate (typically 1% lower) for purchasing an energy efficient home.  In my opinion this is not the most effective way for a bank to promote energy efficient homes because it does not draw the direct link between energy savings and monthly mortgage payments, however it is a great start that will hopefully motivate more people to consider energy issues when purchasing a home.

Green Mortgages are still in their infancy.  The more banks learn about the true savings from energy efficiency the more confident they will be to offer better deals to purchasers looking for efficient homes.   One key element necessary for this to happen must be a trusted rating system to model the expected energy use in a home.  The growth of green mortgages could create an industry of unscrupulous energy modelers that claim energy savings that don’t really exist.  If the actual energy savings fall short of the expected energy savings due to poor modeling, then we could see a situation where people can’t afford their monthly payments and are forced to default on their mortgage.  This is why the government needs to play a strong leadership role in certifying the energy evaluators and verifying that the models deliver accurate results.  In a sense, the government needs to guarantee that the savings are real through their regulation of the energy modelers and evaluators.

The idea that an energy efficient home will save you money is well understood.  The idea that you can afford a more expensive home if you purchase an energy efficient home is a relatively new concept that is becoming a reality through these Green Mortgages.  If you are on the market for a new home, be sure to ask your builder if their homes are third party tested for energy efficiency, and then shop around with different mortgage providers to ensure that you’re getting the best Green Mortgage available.

At Urbandale, we consider the energy saving features of our homes as a form of future-proofing, or insurance, that protects our homeowners against rising energy costs.  Certainly it costs more to build an energy efficient home- our homes cost roughly $10,000 more than a standard home.  However, even at today’s energy prices you can save approximately $950 per year, resulting in a payback of just under 11 years[1].  In fact, if you are financing your home through a mortgage (as most homeowners do) you will be saving money from the first day you move in, because your monthly energy savings will be greater than the additional monthly mortgage payments.

What the example above really represents is the minimum possible savings because the calculations assume that energy prices stay the same as they are today.  If we assume that the CBC forecast is accurate and that energy prices increase steadily from now to 50% higher by 2020, then the payback would actually be 8 years.  Of course if there’s any scenario other than the business as usual case, such as a Carbon Tax or a period of uncertainty in the Middle East (as if that ever happens!!) then the annual savings become that much more significant and the payback becomes even shorter.

No one knows for sure what the future has in store, but rising energy prices seems to be a fact of life, as certain as death and taxes.  Considering that when people buy a new home, they typically plan on living there for 5 to 10 years or longer, it only makes sense to protect yourself by insisting on energy efficiency upgrades.  When the time comes to sell, and energy prices are 50% higher than they are today, I expect that it will become very difficult to sell a house that isn’t energy efficient.

The research that these students prepared was remarkable in many ways, but what really struck me was how grounded and practical their recommendations were.  Typically, when I look at academic approaches to building science I find their recommendations don’t take into consideration the real world issues such as trade knowledge, construction costs, and market appeal.  Add to that that these are young students, so I fully expected to hear idealistic dreams of houses covered in solar panels and other cutting edge technologies that promise to be sustainable, net-zero, emission free and completely unbuildable!

The students surprised me by being very realistic.  Every option was followed with a cost breakdown, and a discussion of the construction issues that could arise from that approach.  In some cases, options that were very energy efficient were discarded because they were not practical to build, or because they were too expensive.  The students were very aware of context, and were sharp enough to recommend different approaches depending on the situation.  For example a high performance wall assembly for a production builder needs to be different than for a custom builder that can select site orientation and also different from a demonstration home that could incorporate novel though unproven technologies.  By showing an understanding of these differences and basing their recommendations on the application, the students showed a surprising maturity and engineering savvy.

Urbandale is planning on building a high-performance demonstration home that will incorporate some of the findings put forward by the Carleton Engineering students.  I’ve also invited the students to come back to visit this home while it’s under construction so that they can see how the plans take shape or get altered in a real construction environment.  I’m very proud of the work that these students have accomplished, and I believe that these types of initiatives will continue to keep Urbandale at the cutting edge of building science technology.

About 2 years ago Urbandale entered into a partnership with Enbridge Gas (the local gas utility), Enerworks (a SWH manufacturer) and Bullfrog Power (a renewable energy provider) to promote Solar Water Heaters in Urbandale homes.  SWH is an established technology.  It’s been around for decades and it’s dead simple.  You pump a glycol solution up through panels on your roof.  The glycol gets heated from the sun and passes through a heat exchanger that pre-heats your water before it goes into your standard water heater tank.  SWH has a proven track record and has been studied to show that even in a cold climate such as Ottawa you can save around 50% on your water heating bills.

A typical SWH system will cost you around $10,000 installed.  Considering that the average Ontario family spends roughly $600 per year on water heating, this means that the typical payback is approximately 33 years – much too long for anyone to consider on strictly financial terms.  As part of our partnership, we were able to offer our purchaser these systems for only $7,000.  (We agreed to sell these systems with no mark-up in order to help promote the technology).  At $7,000 the payback dropped to only 23 years.  That’s still high, but if you consider that the cost of the system will be bundled with your mortgage, the amount you save on a monthly basis will be higher than the additional mortgage payments, so you’re actually saving money from day one!  ($25/month savings versus $23/month payments, assuming 5% interest and a 25-year amortization). We were really excited to be able to offer this system to our customers, and we told Enbridge that we expected to sell 20 systems in the first year of the program.

Unfortunately, the program did not go nearly as well as we expected.  In all we sold only three systems.  In fact, we were supplied with one system from Enbridge to give away for free, and we had difficulty even giving it away!  Purchasers felt that the systems were ugly, and they were worried about the risk of leaks (even though the systems have a very impressive track record).

The problem with SWH is that it’s just not sexy!  The systems look like a clunky afterthought, and it is more likely to bring to mind thoughts of the 1970s fuel crisis than visions of the future.  We know that customers aren’t just interested with payback because of the other upgrades they buy.  Granite countertops cost roughly the same amount and they have no payback at all.  For an energy technology to be popular, it either needs to be completely hidden and a pure financial investment (like superior insulation, high efficiency furnaces or Ground Source Heat Pumps), or it needs to be flashy and futuristic (like wind turbines and solar photovoltaics).  Solar water heaters on the other hand are just… meh.

I have been working on the best way to market energy technologies in Urbandale homes for some time now, and I feel strongly that builders need to come up with a complete package that makes sense financially and is also aesthetically pleasing.  The technologies need to be incorporated into the home right from the design stage, so that they add to the beauty of the home.  We will continue to offer Solar Water Heaters as an upgrade option, however I worry that they will never catch on in the mainstream.  They may make sense financially, but they would need to be redesigned and remarketed in order for them to capture purchasers emotionally, which is what’s necessary for the technology to be truly successful.