Green Energy Act and Condo Retrofit

Originally Published in Condo Business News, April, 2009 - see original

By Chris Chopik
Imagine the south facing façade of every condo tower filled with solar panels. Panels poised to harvest the power of the sun to provide the electricity grid with enough energy to completely offset the cost of air conditioning the entire tower. Not only is it possible, but it makes financial sense. While the time to market will be mired by the Condominium Act and supply chain development lag, there may be opportunities to take tower renewal to new platitudes of energy performance.

The Green Energy Act is touting 50,000 jobs, the closure of coal fired plants and a prosperous future for Ontarians and Ontario Industry. Within the act are myriad implications to the condominium business. A portion of the Green Energy Act is the mandatory time of sale energy label. This means that every house sold will require a kilowatt and BTU per square foot rating, like a fuel efficiency label on a vehicle litres per 100 km. While this particular label will only apply to houses, it promises to l raise public awareness of energy as another price related to real estate value. Stimulus for solar and wind development creates an environment of energy investment that will be guided by pure self interest and financial reward.

The revised feed-in-tariff makes solar and wind energy production secure and profitable investments. Feed-in-tariff refers to a guaranteed purchase price for energy produced from wind, solar and biofuels. The FIT program creates a strong and guaranteed revenue stream which allows investors and community stakeholders to partner to create renewable power generation. The price for solar energy in Ontario starts at an amazing $ 0.80 per Kilowatt hour. To give a residential example, according to Ontario Solar Manufacturer, Arise Technologies, investment in a three Kilowatt Solar array will yield a guaranteed return estimated at nine per cent. That is fair money on a technology which has a 20-25 year warranty, a much longer life expectancy and no mechanical parts to fail.

In speaking with Hunter Milbourne he confided, “I am personally converted with solar PV installed at my family cottage but I have been surprised at the lack of interest from the public in paying a premium for LEED accredited projects.”
In contrast, Jim Lord of EcoVert Corporation, is finding “condo boards are taking a keen interest in going green.” EcoVert is a consultancy dedicated to condo retrofits and LEED Building consulting. The EcoVert team is excited about the possibilities presented by the green energy act. Recognizing that the GEA allows solar investment to achieve a return of 13-18 yrs, resulting in free energy production for the remaining life of the panels, there are a number of obstacles.
“Surprisingly we’ve found no shortage of solar installers, but there are restrictions within the Condominium Act that limit the ability of well intended boards to act in the interests of owners.”
Section 112 of the Condominium Act allows the board of a newly-created condominium to terminate three types of contracts within 12 months of being elected to replace the board appointed by the developer: an agreement for the provision of goods or services on a continuing basis, an agreement for the provision of facilities to the corporation on other than a non-profit basis, a lease of all or part of the common elements for business purposes.
This provision was included in the CA to prevent developers from entering into non-arms’ length and “sweetheart” deals at the expense of the condominium’s future occupants and owners.
However, it has the unintended consequence of eliminating investment by third parties in green energy systems and assets that require long-term amortization. The effect of this restriction, together with the omission from the enforcement provisions of the CA of certain remedies for the benefit of creditors of a condominium, has affected third party financing for energy efficiency projects to such an extent that banks and other private sector commercial lenders are not willing to participate in energy-efficiency projects, such as geothermal systems, or in making secured loans for energy-efficiency enhancements to new developments. These concerns have been raised to Minister Smitherman’s team.
There is no doubt that the Green Energy Act will have a compelling and lasting impact on Ontario’s condo energy-scape in the coming years. When obstacles are removed, emerging condo developments and existing building energy-generation-retrofits will move to the mainstream. This emerging market will have a strong influence on the future of condo real estate valuation.

(At time of original publishing) Chris Chopik is a Realtor and vice-chair of the Toronto Real Estate Board’s Green Task Force.