Federal budget to include revamped Greener Homes Grant

The federal government is developing a more targeted approach to its Canada Greener Homes grants program, aimed at addressing obstacles for low- and moderate-income households

The Greener Homes Grant program as it stands is shutting down—not because it failed, but because it exceeded expectations. CTV News photo.

This article was published by The Energy Mix on Feb. 15, 2024.

By Mitchell Beer

The federal government is developing a more targeted approach to its successful Canada Greener Homes energy retrofit grants, aimed at addressing obstacles for low- and moderate-income households that were identified in the original program, Natural Resources and Energy Minister Jonathan Wilkinson confirmed this week.

The update “is expected to be one of the few new climate-related commitments in this spring’s federal budget,” which will focus primarily on the cost of living, and will go beyond income eligibility requirements, the Globe and Mail reports this week, based on an interview with Wilkinson.

“The government is trying to quickly design a significantly different program, both because of lessons learned during Greener Homes’ clunky rollout, and to tailor the new initiative to the needs of its intended recipients,” writes climate policy columnist Adam Radwanski.

“One key difference that Ottawa appears to have settled on is that, unlike the existing program, the new one won’t require grant recipients to pay retrofit costs themselves and then be reimbursed. The public funds will be upfront instead,” Radwanski says. “Another is that the government wants the new program to help tenants, too, not just homeowners,” with a mechanism to ensure that energy cost savings are passed on to renters in low-rise buildings (but not high-rises).

The program may shift to include heat pumps as a climate resilience measure, and Ottawa will also try to “simplify and expedite the way grants are awarded,” he writes.

Wilkinson said officials’ thinking on the program refresh are “not finished, but reasonably far advanced,” with some decisions made and others still in progress. The release date for the budget has not yet been announced, but Ottawa’s fiscal year runs April 1-March 31. Finance Minister Chrystia Freeland tabled last year’s budget on March 28.

Last week, at least one energy advisor was warning of “massive fallout” in Canada’s home retrofit work force as Ottawa announced it would soon be closing applications for the existing Canada Greener Homes Grants. At the time, a spokesperson for Wilkinson told The Energy Mix a second phase would emphasize energy retrofits for low- and moderate-income households, and that NRCan hoped to announce details in the next couple of months.

Since it launched in December, 2020, NRCan said at the time, Greener Homes received more than a half-million applicants looking for home energy retrofit grants of up to C$5,000, plus $600 to help cover the cost of before-and-after energy audits. The program drew 34.2 per cent of its applications from Ontario, 20.8 per cent from Quebec, 12.3 per cent from British Columbia, 10.6 per cent from Alberta, and 8.7 per cent from Nova Scotia.

With more than 165,000 grants already issued, and the rest of the audits and retrofits still in the queue, Greener Homes “has supported over 75,000 jobs in the retrofit economy, ranging from jobs in construction, made-in-Canada manufacturing, home energy auditing, sales, clean technology, and financial services,” the release stated. “The program has propelled a transformational and lasting shift in consumer preferences for more energy efficient homes and a robust made-in-Canada green buildings supply chain,” while saving an average of $386 and cutting 1.2 tonnes of carbon emissions per household per year.

Too Successful to Continue

Now, the program as it stands is shutting down—not because it failed, but because it exceeded expectations. Officials underestimated the public appetite for energy upgrades like windows and doors, air sealing, insulation, solar panel installations—and above all, heat pumps, which accounted for nearly half of the paid-out grants to date. The release says the grant program will help 250,000 households buy the devices over the next few years.

But the cost of heat pumps drove the size of the average grant up to $4,200, “significantly higher than initially expected,” NRCan wrote last week. Meanwhile, the department spotted a flaw in the original program design that made it difficult or impossible to fund energy efficiency work in the homes that need it most, requiring homeowners to pay thousands of dollars up front before applying for reimbursement for their retrofits.

In recent weeks, word on the street was that delivery agents for the Greener Homes Grant were being instructed to honour any requests they’d already received for home energy audits, but stop accepting new applications. Program partner Enbridge Gas has already closed its application portal in Ontario, and applications in other provinces will be shut down in two weeks.

“The enormous popularity of the first phase of the Canada Greener Homes Grant illustrates Canadians’ desire for their homes to be affordable, comfortable, and sustainable,” Wilkinson said in a release. “We are readying the next phase of the Canada Greener Homes Initiative to offer more accessible supports to families across the country who need it most while continuing to take action on climate change.”

‘The Machinery of Government’

But that didn’t explain the gap between programs, or remedy the anxiety it produced for energy auditors who’d signed up for training or started small businesses to throw in with Greener Homes—especially when Wilkinson signalled months ago that Ottawa knew the program was burning through its budget faster than expected.

“Yes, we’ve actually started to exhaust the funds earlier than what we had anticipated, and that’s largely a function of the popularity of the program,” he told CBC last fall. But “we have a certain budgetary envelope. We have to exhaust or utilize that envelope before we can ask the minister of finance for additional money.”

“It’s a fair question,” the spokesperson for Wilkinson told The Mix last week, when asked why the new program wasn’t ready to roll by the time those funds ran out. “The machinery of government takes time,” but “we’re really focused on duplicating the success of the first phase while making it better,” she said.

NRCan got lots of feedback on the need to make Greener Homes more easily available to low- and moderate-income households, the spokesperson added. “If you want to do something right, it’s better to take a couple of weeks and make sure it’s a program that is really meeting the needs of Canadians, rather than rushing something out half-baked,” she said. But “it’s certainly our intention to get the next phase of the project off the ground, money in peoples’ pockets, and jobs on peoples’ calendars right away…that’s certainly in our minds.”

Boom, Bust, and Disruption

Brendan Haley, policy director at Efficiency Canada, said the announcement will produce “what many people were warning about, which is abrupt disruptions and this boom/bust dynamic which causes a lot of uncertainty and can cause a lot of havoc within the industry.” Whether or not the grants as they stood were exactly the right vehicle to get energy retrofits done, “we should not expect any pause in the effort. Affordability problems exist, climate change still exists, so why should we not have consistent support for retrofits in this country?”

In 2021, Efficiency Canada’s national retrofit mission report “outlined the need for a long-term approach that moves away from one-off programs,” Haley recalled. The approach “allows for experimentation and mid-course corrections in the nature of the programs, and the types of supports could perhaps change over time. But with a consistent mission, and the public sector being there to play a consistent role until we hit net-zero emissions.”

While the emerging plan to focus on low- and moderate-income households is a “very good deal,” it still isn’t clear what form the program will take or how it will function, he added. “There needs to be a big enough budget that they will not have the somewhat unexpected problem of having to close the program early again. A low- to moderate-income program needs to be free. It needs to have no administrative barriers. The retrofit measures need to really focus on affordability, which means insulation and air sealing, not just heat pumps. So a very well-designed low-income program could avoid some of the problems that we saw with the Greener Homes Grant.”

Haley said any federal department responsible for finances or budgets should have its own reasons to like a program that deals with energy costs and climate pollution in tandem.

“Affordability is the primary concern of Canadians now, and energy retrofits, in particular, can be anti-inflationary if they’re done well,” he explained. “You’re helping people consume less expensive energy. Then on the supply chains, you’re working with a sector which is largely construction and trades, where we want more people to enter and we need to find a way to make that sector more streamlined and productive. There’s also an opportunity for consistent public support to train up new people through the energy retrofit sector, who then become experts in the field and add to our ability to do the things we want to do in this country.”

But “you don’t achieve any of those things by creating a boom/bust dynamic in that market.”

Anxiety vs. Opportunity

Ahead of last week’s announcement, CBC reported that a newly-burgeoning energy audit industry was worried about mass layoffs in the months ahead if the Greener Homes grants were cut off. “There’s going to be a massive fallout,” said Stephen Farrell, owner of Calgary-based VerdaTech Energy Management and Consulting, whose company now conducts about 600 audits per month in Alberta and B.C.

“We’ve just increased the number of energy advisers across Canada dramatically. Millions and millions and millions of dollars was spent training new energy advisors,” he told CBC. “I would suggest we can lose about 70 per cent of them. They’ll go out of the industry.”

The spokesperson for Wilkinson pointed out that dire assessment was published before NRCan announced that a second program phase was under development. The backlog of applicants already in the system will generate audit and retrofit business for years, and auditors will also be in demand for two other federal programs—the Canada Greener Homes Loan Program and the Oil-to-Heat-Pump Affordability Program—and for separate programs run by provincial, territorial, and local governments.

“There are still hundreds of thousands of audits that will still need to be done across the country,” she said, and the program has also raised the public profile of energy retrofits as a way to cut home heating and cooling bills as well as reduce climate pollution.

“A lot of those folks are hiring energy auditors to figure out where they can find those financial savings,” she said. “There’s a whole industry now that has spring up that is not 100 per cent reliant on these programs,” and “even without the government programs, that demand is not going anywhere.”

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