posted August 13, 2007

From the public record

Toronto's Energy Retrofit Program

by Henrik Bechmann

Toronto's Energy Retrofit Program was initiated in 2004 with a $20M budget (Phase I), and subseqauently increased by $15M (Phase II) to a $35M budget. Most of the initial $20M was spent before 2007, and the rest is scheduled to be spent by 2009. CELOS is interested in determining the effectiveness of the program as applied to Parks Forestry and Recreation assets, with a particular interest in the Arenas Retrofit Project.

The scope of the program covers City Arenas, Firehalls, and Exhibition Place (Phase I), and Transfer Stations, Homes for the Aged, Police Facilities, Child Care Centres, Parks, Yards and Sport Fields, Ambulance Stations, and Parks Pools and Community Centres (Phase II). Very general information about the program can be found on the Toronto website for the Energy Retrofit Program, the Arenas Retrofit Project, and the Civic Centres Retrofit Project. We have assembled further details from publicly available Toronto City Council and Committee documents, as summarized in the Appendix to this article.

The Arenas Retrofit Project (just over $10M) was awarded as a "turnkey" operation to a company named Cinergy (a.k.a.Vestar Ltd., and Optimira Energy Inc.). City Council has mandated that 30% to 40% of the Energy Retrofit Program be awarded to Toronto Hydro Energy Services Inc. (THESI), and the rest is awarded to other companies, such as MCW Custom Energy Solutions Limited.

We initially searched for details of the Arenas Retrofit Project (the Cinergy contract), but found that information for this was typically subsumed in documents about the broader Energy Retrofit Program, so to expedite the process we opted to assemble information about the latter.

Our main conclusion is that it is impossible to have confidence in the results of this program based on publicly available documentation. There are several reasons for this:

• Documentation is hard to find. The website pages reference above have no links whatever to detailed program or documentation. The only method we were able to find was to undertake a laborious process of searching City Council Documents. These documents themselves have no publicly available index by category.
• Documentation availability is inconsistent. Documents such as budget analysts documents are not always readily available. Sometimes referenced foundation documents such as the frequently referenced A Framework for Establishing an Energy Retrofit Program and Financing Strategy are not available.
• Background detailed documentation is not available. With very rare exceptions, detailed background documentation is simply not publicly available. Council and Committee agendas, minutes, decision documents, and staff reports tend to be very general. Requests for proposals, evaluation documentation, performance documentation, audits, etc. (if they exist) are not publicly available.
• Sources of information presented as facts are not referenced. For example the basis for spending requirements for Phase II of the Program is not disclosed, nor is the supporting documentation referenced.
• Business Cases are weak or not disclosed at all. Although the documentation indicates that business cases are required for detailed project approvals, these are not available, and substantial general business cases are not put forward.
• Forecasts and estimates are weak or self-referential. The cases put forward rely heavily on assumptions of energy cost reduction and carbon emission reduction. Although notions of maximum gains are mentioned in relation to forecasts presented, this weakness is not reflected in presentation or selection of less than optimal alternative contingencies. In short the cases for these forecasts are extremely weak. In some cases the savings are asserted simply by general assertion of contractual requirements - self-referential.
• Performance reports are entirely missing. We have not been able to find a single instance of, or reference to, any independent verification of energy savings or carbon emission reductions.

Furthermore, the general evaluations we have been able to find often refer to success in obtaining funding and spending money, rather than success in meeting program objectives. In at least one case we found references to actual savings that were in fact references to forecasts (themselves weak). In other words one forms the impression that the main concern of the documentation stream is furthering the flow of money to conform to Council wishes, without commensurate attention to outcomes. We are very concerned that forecasts repeated often enough are eventually mistakenly taken by readers as fact.

In view of the fact that the city's main decision makers are presented with the documents we have found as their main guides, this raises the disturbing possibility that this program (and others) are in fact not well controlled at all. And general experience suggests that programs that are not well controlled tend to contain much waste.

Follow-up on these concerns would presumably involve working with the designated administrator of the program, The Energy and Waste Management Office.

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Appendix: Program Summary

The following Energy Retrofit program summary was assembled from material in documents available on the toronto.ca website, organized according to basic management categories. Documents were found through Google and Toronto.ca search engines, typically using search terms like "Energy Retrofit Program". In the case of Google searches, search terms were prepended with "site:toronto.ca".

Background

The Energy Retrofit Program is part of the City's Energy Management Program^cl001.pdf, including

• energy supply
• energy retrofit
• energy information tracking and montoring

From an administration committee document:^{it001a.pdf p2}

In April 2000, City Council adopted the Environmental Plan (EP), a comprehensive document containing sixty-six (66) recommendations on land, air, water, governance, sustainability, energy, transportation, green economic development and monitoring.

The following energy goals/targets are included in the EP:

(i) a 20 percent reduction in carbon dioxide (CO2) emissions by 2005 from 1990 levels; and

(ii) departments to reduce energy use in their operations and in City buildings and facilities by at least 15 percent by 2005.

The Commissioner of Corporate service is to

(a) obtain prior Council approval to enter into water and energy retrofit contracts that exceed existing delegated signing authorities;

(c) where possible, develop self-financing arrangements through water and energy savings derived from the water and energy retrofits;

Subsequently Council approved the Energy Management Program (EMP) for City facilities.

The approved recommendations include establishment of the Energy and Waste Management Office (EWMO), and budgetary considerations:

...as a matter of policy, annual program budgets be adjusted, after repayment of any required financing, to reflect savings derived from water and energy retrofit projects in City buildings and facilities, and these funds be set aside in a separate account pending Council determination of how they are to be used.

There are frequent references in documents over several years to a document entitled A Framework for Establishing an Energy Retrofit Program and Financing Strategy, which we have not yet been able to find in the public record.

There is also reference to the Energy and Conservation Responsibility Act:^{it025.pdf p39}

Bill 21, the Energy Conservation Responsibility Act, was introduced to the Ontario Legislature in November 2005. The Bill includes the Energy Conservation Leadership Act, which has implications for Ontario municipalities, including the City of Toronto.

The Energy Conservation Leadership Act will require municipalities to prepare, implement, and report on annual energy conservation plans, including prescribed energy conservation targets. The Act will also require municipalities to consider energy conservation and energy efficiency in their acquisition of goods and services and when making capital investments.

Planning

From the city's Arenas Retrofit Project page:

The arenas retrofit project began in 2004. This initiative is a cross-divisional effort involving the Energy & Waste Management Office (EWMO) in Facilities & Real Estate, and Parks, Forestry & Recreation. This project falls within the larger Energy Retrofit Program.

The arenas project includes:

• feasibility studies to determine the practicality of various technical improvements
• engineering and design of technical improvements
• installation of new, energy-conserving technologies
• monitoring and verifying savings
• training City of Toronto staff to operate and maintain new equipment

The proposed energy and water retrofits will result in reduced operating costs, increased energy and water efficiency, facility improvements and reduced CO2 emissions. The retrofits will see improvements at over 100 City-owned indoor and outdoor arenas. The improvements include:

• updating lighting systems so that they're more efficient and brighter
• providing advanced building automation systems to control lighting and ventilation
• installing heat recovery systems to reduce waste of heat energy
• reducing drafts and leaks around windows, walls, and doors
• improving the efficiency of rink refrigeration equipment
• installing solar water heating systems
• upgrading heating, ventilation, and air conditioning systems
• correcting electrical system power factors

Regarding Phase I of the project:

As described by the Commissioner of Corporate Services to the Administration Committee in April 2005:^{it003.pdf p4}

Project	Description	Status/Cost	Savings
City Arenas	Energy retrofit program to improve the energy efficiency of the City’s indoor and outdoor arenas	Contract signed with Cinergy in December 2004 in the amount of $10.2 million and will take approximately 2 years to complete.	$1,350,000 annually 8,000 tonnes CO2 emission reduction annually
Firehalls	Energy retrofit program to improve the energy efficiency of the City’s approximately 80 firehalls	Council approved a project to be negotiated with MCW Energy Reduction Services in the amount of $3.6 million. This project is underway and will take two years to complete.	$438,000 annually 2,600 tonnes CO2 emission reduction annually
Exhibition Place	Energy retrofit of 5 facilities at Exhibition Place.	Contract to be signed with Toronto Hydro Energy Services Inc. in the amount of $1.4 million. This work is to commence in 2005	$ 148,000 annually 880 tonnes CO2 emission reduction annually
Exhibition Place	Installation of a Trigeneration system serving the National Trade Centre and adjacent buildings	Total cost is estimated at $4.4 million. This work is to commence in 2005	$550,000 annually 3,100 tonnes CO2 emission reduction annually
Exhibition Place	Upgrade of the lighting system in the National Trade Centre	Total cost estimated at $800,000. (not yet approved)	$175,000 annually 1,000 tonnes CO2 emission reduction annually
Total		$20.4 million	$2.661 million in savings and 15,580 tonnes

From a policy and finance committee document:^{it027.pdf p4}

An estimated 19% reduction in energy and water consumption as a result of this project should result in annual net savings of $1.35 million with a simple payback period of 7.23 years.

From (for example) Policy and Finance committee^{pof040506.pdf p31}

(5) energy and water cost savings to be realized annually of up to $0.350 million in 2005, $1.0 million in 2006 and $1.35 million in 2007, for a full annual savings of $1.35 million be budgeted separately in the operating budgets of Parks and Recreation and other arena facilities and used to fund the full debt service costs of the projects and that any excess savings annually be contributed to a separate corporate account according to the policy adopted by Council in the report entitled “A Framework for Establishing an Energy Retrofit Program and Financing Strategy”;

Regarding Exhibition Place:^{cl030.pdf p4}

	2004	2005	2006	2007	2008	2009
Projected Energy/Operating Savings ($000)		4.5	84.0	148.7	148.7	148.7

Savings are assumed to equal debt service impact because contract will require that actual project expenditures will be limited to those that in aggregate are projected to generate savings sufficient to repay project financing over ten years.

Regarding the Phase II project:^{cl003.pdf p276} (We haven't been able to find specific council approval for Phase II as a whole, though there are several references in analyst documents^{eg. an_capergretro.pdf p10}).

Emphasis in the following added

ERP Funding Required for Additional Projects

In order to continue with the plan to improve energy efficiency in City buildings and to reduce energy use by a target amount of 15 percent, additional ERP funding will be required. Energy retrofit projects are still to be developed by the end of 2006 in most of the City’s energy consuming Divisions and ABCs. The following is a very preliminary list and estimate of the potential energy retrofit opportunities in a number of City Divisions and ABCs. It should be noted that this is not an inclusive list and that there will be changes and additions to this list as the program is developed and the respective business cases are assessed.

Facilities	Project Costs	Annual Savings	Payback
Transfer Stations	$750,000	$93,750	8 Years
Homes for the Aged	$2,500,000	$312,500	8 Years
Police Facilities	$2,750,000	$343,750	8 Years
Child Care Centres	$500,000	$62,500	8 Years
Parks, Yards and Sport Fields	$2,000,000	$250,000	8 Years
Ambulance Stations	$500,000	$62,500	8 Years
	$9,000,000	$1,125,000	8 Years
Parks Pools and Comm Ctrs	$6,000,000	$750,000	8 Years
Total ERP Funding Request	$15,000,000	$1,875,000	8 Years

The 2006 preliminary list of projects for additional ERP funding has a project cost of $15 million. All the projects would be subject to the existing ERP approval process with one of the main criteria being that the simple payback period be no more than 8 years.

The project that is ready to moving forward is the energy retrofit of the City’s pools and community centres in the Parks, Forestry and Recreation Division and a request for proposal is ready to be issued. It is expected that the cost of this work will amount to approximately $6 million with annual energy savings of $750,000 providing for an 8 year payback. The 2006 cash flow of $1.5 million is for the feasibility study on the City’s pools and arenas at a cost of $0.250 million and $1.250 million for construction. Cash flow of $4.5 million will be required in 2007 to complete the project.

The 2006 Capital Budget Briefing Note: Energy Retrofit Program (ERP) - Energy Savings Estimate^{Energy_Nov16-_7.pdf} lists anticipated energy savings, evenly distributed over the years 2007-2015.

Organization

Management

Variously

• the Commissioner of Corporate Services, and
• the City’s CFO and Treasurer ^{cl001.pdf page 9};

or

• Commissioner of Corporate Services,
• the Commissioner of Economic Development, Culture and Tourism
• and the Chief Financial Officer and Treasurer;

or

• Commissioner of Corporate Services and
• the Commissioner of Economic Development Culture and Tourism in consultation with
• the Chief Financial Officer and Treasurer and
• the City Solicitor ^{pof040506.pdf p31ff}

Administration

Variously,

"An Interdivisional Team has been established with representation from the following: Financial Planning, Facilities & Real Estate, Toronto Atmospheric Fund and the City Manager’s Office." ^{it003.pdf p.7}

The Energy and Waste Management Office^{it003.pdf p2}

Implementation

Vestar Ltd ^{Optimira Energy Inc.}, a.k.a. Cinergy, was awarded a turnkey contract for roughly half the Energy Retrofit program (Phase I), the Arenas Energy and Water Retrofit Project ^{cl003.pdf p274}.

Toronto Hydro Energy Services Inc. (THESI): "As previously directed by Council, THESI is to be sole-sourced for approximately 30 to 40 per cent of all retrofit work"^{it003.pdf p5}. In a staff document the city clerk indicates that as of 2006 THESI has been awarded over 30% of $30M of work since 2002.^{cl021.pdf p3} This document covers Energy Retrofit Services for Police Headquarters, St. Lawrence Market and Other Buildings by THESI.

This leaves 20% - 30% ($4M to $6M) for other service providers.

For example in 2007 MCW Custom Energy Solutions Limited was awarded a $2.44M contract for retrofit of 21 Fire Stations.^it002.pdf

Finance

Total $35M.

Summary^{cl003.pdf p274} (reference to Cinergy added):

Project	Total Project Cost	City Capital	FCM Funds $8.75M	Other Funds (TAF)	Grants & Incentives
City Arenas	$10,212,964**	$7,564,000	$2,521,000		$127,317*
Firehalls	$2,977,036	$2,007,777	$669,259		$300,000*
Exhibition Place. Retrofit	$1,610,000	$1,020,000	$340,000		$250,000*
Exhibition Place. Trigen	$4,400,000	$2,325,000	$1,075,000	$1,000,000
Exhibition Place. NTC Lighting	$800,000	$600,000	$200,000
Total	$20,000,000	$13,516,777	$4,805,259	$1,000,000	$677,317*

• **Cinergy
• *preliminary estimate and subject to change

FCM = Federation of Canadian Municipalities; TAF = ?

The following is a summary of the $20 million ERP approved cash flows:^{cl003.pdf p275}

	2005	2006	2007	Total
Cash Flow	11,515,000	7,682,000	803,000	20,000,000

Plus an additional $15M

The proposed cash flow for the $15.0 million of energy efficiency projects is as follows:^{cl003.pdf p277}

ERP Phase 2	2006	2007	2008	2009	Totals
Pools & C Cs	$1,500,000	$4,500,000			$6,000,000
Projects TBD		$2,000,000	$5,000,000	$2,000,000	$9,000,000
Totals	$1,500,000	$6,500,000	$5,000,000	$2,000,000	$15,000,000

Primarily debt. For example $9.9M as part of a $100M debt financing package ^{law0762.pdf p9}, $5.14M as part of the same package for arenas ^{law0762.pdf p13}

Implementation

From the city's Energy Retrofit Program page:

Facilities undergoing energy retrofits have a detailed energy and water audit and a feasibility study performed. The study provides an inventory of energy-using equipment, an analysis of energy records and energy consumption patterns.

The feasibility study identifies:

• the energy efficiency opportunities
• the energy and cost savings that are estimated for each recommended energy efficiency measure
• the total project implementation costs
• the simple payback period
• the reduction in green house gas emissions

In consultation with facility staff, the EWMO considers the feasibility study for a facility and decides on which recommended measures could be implemented.

Once all measures are implemented, the success of the project is determined by monitoring, tracking, measuring, verifying and reporting the performance of the project to determine the energy savings compared to the average energy use and operation of the facility prior to the implementation.

For the arenas retrofit (Cinergy project), the following implementation protocol was identified ^{(it001a.pdf p.4)}

• contract negotiation
• completion of detailed energy audit/feasibility study at each facility
• review of audits and recommendations
• completion of grant applications
• engineering, construction scheduling
• implementation

An example of this process is indicated in a report to the budget committee:^{it009.pdf p4}

National Trade Centre Lighting Project

Staff at Exhibition Place have had an ongoing concern with the performance and efficiency of the lighting system in the National Trade Centre. The lamp ballasts are no longer being manufactured which has caused a maintenance problem. Improved energy efficiency can be obtained through the installation of new fixtures and or new lamps and ballasts

Proposed Retrofit

The main auditorium is lit using three types of metal halide high intensity discharge fixtures with lamp wattage of 1000, 400 and 250 respectively. It has been determined that adequate lighting can be obtained for the main halls with much lower wattage lamps. It is proposed that all the lighting fixtures be retrofitted or replaced with new lower wattage lamps and ballasts. The fluorescent fixtures would also be retrofitted with the latest T8 lamps/electronic ballasts. Exhibition Place staff propose to engineer, tender and manage this project

Project Costs and Savings

The estimated cost associated with this energy retrofit is $800,000 and total annual savings of approximately $150,000 are anticipated, with a payback period of 5.4 years.

The interdepartmental team established to review ERP applications has reviewed the funding application and recommends approval since this project meets the financial criteria and guidelines as set out in the report entitled “A Framework for Establishing an Energy Retrofit Program and Financing Strategy” as adopted by the Budget Advisory Committee at its meeting on April 8, 2004, as amended by the Policy and Finance Committee at its meeting in April 13, 2004 and adopted by Council at its meeting of April 19 to 24, 2004.

Controls

Spending Variance reports:

June 2005: For example in a report to the Policy and Finance Committee:^{it072.pdf p13}

Energy Retrofit Program (ERP) - As at the end of June 30, 2005, the Energy Retrofit Program projects spent a total of $0.284 million or 2.5 percent of their 2005 Approved cash flow of $11.345 million. Projected expenditures to year-end is estimated at $6.565 million or 57.9 percent.

The following projects contributed to the delayed spending performance during the first six-month period:

• Arenas Energy Retrofit Program (CPR150) - The concept report (feasibility study) has just been completed and approved and implementation of energy retrofit measures will start in the beginning of October 2005 with no more than $2.500 million expected to be spent this year on the Arenas project.
• Exhibition Place ERP Tri-Gen (CEX201) - Although the equipment and the labour work of this project have been tendered, the 2005 spending projection to year-end is expected to be only $2.200 million due to waiting for NRCan grant (Federal grant program for Energy Retrofit Program) approval before proceeding with construction.

December 2005: Another report to the Policies and Finance Committee:^{it034.pdf p13}

Energy Retrofit Program (ERP) actual expenditures during the twelve months ended December 31, 2005 totalled $5.038 million or 44.8% of the 2005 Approved Capital Budget of $11.248 million. The following projects were the principal causes of the under-expenditure:

• Arenas Energy Retrofit Program had no expenditures incurred during 2005. The concept report (feasibility study) has been completed and approved and implementation of energy retrofit measures started in the fall. Of the $3.880 million 2005 approved cash flow; $2.700 million was spent by year-end on the Arenas’ project.
• Exhibition Place ERP Tri-Gen - This project was delayed due to time required to complete the various stages of a specialized project of this nature and the need to obtain grant approvals prior to construction. As a result, only $1.400 million of the $4.400 million of 2005 approved cash flow was spent by year-end.
• The Firehall Energy Retrofit project is now under construction and is scheduled to be completed in 2006. There was some delay in getting the project started due to a delay in receiving grants from the Federal government with $1.3 million of the 2005 approved cash flow of $2.0 million will be carried forward into 2006.
• The Exhibition Place Energy Retrofit Buildings project is now under construction and should be completed in 2006. Some delays were caused by uncertainty about the status of certain Exhibition Place buildings. As a result year-end expenditures totalled only $0.215 million, and unspent funds of $0.650 million are being carried forward into 2006

June 2006: A report to the Policy and Finance Committee:^{it101.pdf p10}

As at June 30, 2006, the Energy Retrofit Program expenditures were $2.972 million or 18.7 percent of its 2006 Approved Capital Budget. All projects are under construction. The year-end spending rate is projected at 87.9 percent due to an unanticipated delay in implementation of energy retrofit initiatives at Exhibition Place, Arenas and Fire Stations.

September 2006: A report to the Budget Committee:^{backgroundfile-781.pdf p11}

Energy Retrofit Program – As at September 30, 2006 the Energy Retrofit Program expenditures were $6.007 million or 37.8% of the 2006 approved cash flow. All projects are under construction and the spending rate at the year-end is projected at 91.1%. Under expenditures are due to an anticipated delay in implementation of energy retrofit initiatives at Exhibition Place, Arenas and Fire Stations.

Reports to the Administrative committee, such as April 2005 ^it003.pdf

There is a standard energy services agreement published on the Toronto website which may indicate standard controls.

The Analyst Briefing Notes for the 2006-2015 Energy Retrofit Program collects much material including the request for the additional $15M requested.^{2006capanalystnotes_enrgretro.pdf}

The Analyst Briefing Notes for the 2007-2016 Energy Retrofit Program has more information, including recommended funding for Pools and Community Centres.^{an_capergretro.pdf} This reports indicates that previously approved projects will be completed in 2007. Thus the total of $15.661M indicates that all but $661,000 dollars of the original $20M have been spent.

Analyst Briefing Notes for Parks Forestry and Recreation for the 2007 Budget contain indications that Hydro rebates were substantially responsible for recent power savings.^an_oppfr.pdf

Evaluation

In a report entitled Energy Retrofit Program Status and Request for Additional Funding from the Deputy City Manager and Chief Financial Officer:^{it001a.pdf pp3 and 7}

Prior to the announcement of the Energy Retrofit Program, energy efficiency projects had difficulty in competing for the City’s limited capital funding. The Energy Retrofit Program has allowed planned energy retrofits to move forward.

and

Conclusions:

The Energy Retrofit Program has been very successful and has allowed $20 million of energy retrofit projects to proceed. In order to undertake additional energy retrofits and to continue and support the City’s energy management plan, additional funds in the amount of $15 million should be earmarked for the Energy Retrofit Program in 2006.

In a 2006 letter to the Ontario Legislature^{it025.pdf p5}, Mayor Miller claims that Better Building Partnership work has resulted in 51 Megawatt reduction and savings of carbon dioxide reductions in 500 buildings.

In a staff report to the Roundtable on the Environment^{it025.pdf p26}, an attachment was provided (Attachment 2 page 37) claiming that for the Arenas Retrofit 10,200,000 had been spent, .614 megawatts had been saved annually, $1,350,000 had been saved per year, and that the future holds the same ("See column 2"). The same staff report was forwarded to the Policy and Finance Committee.^{it013.pdf p38}

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See Working Notes for this paper.

Content last modified on September 28, 2010, at 07:51 PM EST