More cities offering loans to cover upfront cost of heat pumps, solar

Mike Campbell didn't pay a penny upfront when his new air-source heat pumps were installed this spring to replace his old oil boiler. The Charlottetown homeowner got a zero-interest loan that he'll pay back over 10years.

In the meantime, he's saying goodbye to heating-oil bills that sometimes topped $1,000 a month savings that can cover his loan payments.

Campbell got the loan through a government-funded program called Switch Charlottetown, run by a groupcalledProperty Assessed Clean Energy (PACE) Atlantic, a community interest corporation, on behalf of the local municipality.

Similar programs have been popping up across Canada and the U.S. to help tackle some of the barriers that stop people from making green upgrades to their homes, from swapping gas and oil heating for heat pumps to adding insulation or solar panels.

"This is just a no-brainer, really it's going to end up saving me thousands a year," he said.

If he moves, Campbell even has the option to leave the loan attached to his home, and for the next owner to keep paying it back.

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As a bonus, PACE Atlantic also provides lots of services to make things easier for homeowners, from helping them navigate incentives like the Canada Greener Homes Grant to recommending contractors.

"It can be very confusing when you're looking at the website and, you know, applying [figuring out] which programs you want, what rebates come with them," Campbell said.

He turned to PACE Atlantic for help.

"They just took me step-by-step," he recalls.

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How green loan programs work

Originally, green loan programs were called Property Assessed Clean Energy (PACE)programs,but many now have different names. Those in Alberta are called the Clean Energy Incentive Program (CEIP), and Saskatoon and Toronto call theirs Home Energy Loan Programs (HELP).

These kinds of programs allow property owners to borrow money to cover energy-efficiency and renewable-energy upgrades to the property and pay it back over time as a surcharge on their property tax bills.

In many cases, the program pays the entire upfront cost directly to the contractor.

The loan is secured as a tax lien attached to the property and not the owner. That means it doesn't affect the credit of the property owner, and the loan can be transferred to the next owner if the property is sold.

So, homeowners can make upgrades without worrying whether they'll move before they get a return on their investment.

That's also what distinguishes municipal programs from the federal Greener Homes Loan program, which also offers zero-interest loans.

Typically, the interest rate for municipal loan programs is also zero or low, and the repayment time frame is long.

For example, for Switch Charlottetown, the interest rate is zero per cent and paid back over 10 years for heat pumps and 15 years for solar panels (which they say makes the average monthly payments $82 and $110 respectively, compared to average monthly energy savings of $110 and $130). For Edmonton's program, the interest rate is currently 3.5 per cent and repaid over 20 years or the lifetime of the eligible upgrades, whichever is shorter (for example, it's listed as 16 years for an air-source heat pump.)

Some programs also offer additional bells and whistles, such as lists of approved contractors, for example, or step-by-step guidance through the whole process, as PACE Atlantic does..

Julian Boyle, president of PACE Atlantic, saidthat so far, the participating municipalities in PACE Atlantic's loan programshave seen zero default or delinquency in payments from homeowners, and the average payback for homeowners' investmentis less than 5.5 years.

While the programs are generally run municipally, some, such as Switch Charlottetown and Switch Stratford, have federal funding through the Federation of Canadian Municipalities.

Loans could help municipalities reach green goals

For many Canadian towns and cities, fossil fuels burned to provide heat and hot water to buildings are a huge source of greenhouse gas emissions. For example, they account for 58 per cent of Toronto's and 55 per cent of Vancouver's emissions.

Jessica McIlroy, senior analyst for the buildings team at the Pembina Institute, a clean energy think-tank, noted that 80 per cent of existing buildings will still be around in 2050, the year that Canada has committed to net-zero emissions.

That means retrofitting is a big part of reaching governments' decarbonization goals.

Saskatoon, which has had a property-assessed loan program since 2021, has specifically said it wants more homeowners and businesses to install solar panels to support its net-zero plan.

Announcing anew program in Guelph, Ont., this month, Bryan Ho-Yan, the city's manager of corporate energy and climate change, said the goal is to "help the community reduce emissions in an affordable way."

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Canadian cities currently offering loans

Not all provinces have legislation allowing for programs like this, but they're currently running in provinces that do.

• Alberta has 11, including Edmonton and Calgary.
• Ontario allows them.Toronto has had one since 2014, Ottawa since 2021, andGuelph launched its zero-interest loan program just this month.
• Saskatchewan allows them, and Saskatoon has had a program since 2021.
• PACE Atlantic runs two programs inP.E.I and two inNova Scotia, and plans to launch programs in three more Nova Scotia communities later this year. A dozen Nova Scotia communities also offer loans throughThe Clean Foundation's Clean Energy Financing program.
• B.C. has some programs, despite the fact that it has not yet passed legislation officially enabling them.
• Yukon has a territorialprogram that's open to both participating municipalities and rural homeowners outside municipalities.

Most get 'fully subscribed'

How popular have these programs been? Very, McIlroy says, adding"they're almost all getting fully subscribed."

Toronto says its program won't take any new applications until fall 2023 "due to overwhelming demand." Saskatoon's program has been full since February 2023, and its website says wait-list applications will be notified if additional funding becomes available.

PACE Atlanticrunsthe two Switch programs in P.E.I. and two others in Nova Scotia. Boylesays as of the beginning of August, more than 980 retrofit projects have beencompleted and 120 others are underway since the programs launched two years ago.

He added that 30 per cent of participants are doing multiple retrofit projects, and many are spreading the word to neighbours.

That's what happened to Campbell. He heard about the Switch program from a friend who used the funding to install solar panels, and talked to another friend who had a heat pump installed in his new house five or six years ago.

"He just swears by it. So they're happy with it, and I'm pretty sure I'm going to be happy too."

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The impact on contractors

The programs arehelpingget more contractors interested in green retrofits.

Boyle says when the P.E.I. programs launched two years ago, only four or five contractors would come to information sessions, and that has ballooned to 20 or 30.There are now more than 80 contractors involved in the program.

"Because they know it's good for their business," he said.

Andy Dunn, owner and operator of Dunn Electric, which installed Campbell's heat pump, said he gets a lot of customers through Switch Charlottetown.

And because the municipality fronts the upfront cost, contractors are "you know, guaranteed to get paid," Dunn said. "And that's always a bonus."

Boyle estimates that almost 400 jobs have been created from PACE Atlantic's programs, halfof them locally.

The 'scale that we need to get to'

Boyle says each of the participating homes in PACE Atlantic's programs are cutting greenhouse gas emissions by an average of 45 per cent or 5.72 tonnes a year.

He estimatesthat the 1,100 participantsrepresentabout two to five per cent of local homes peryear in those communities: "And this is kind of the scale that we need to get to, to head towardsnet-zero."

But because many of the programs rely on federal funding and are so popular, they have a limited capacity andhave to pause when they run out of money.

McIlroyalso points outthat while these programs are popular with homeowners, they don't reach everyone for example, they tend to leave out renters, landlords and larger apartment buildings.

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She added those with lower incomes may need programs that don't require payback over time. Some provinces and municipalities, such as P.E.I., Nova Scotia and GuelphinOntario are offering free heat pumps or large heat pump grants for low-income homeowners alongside loan programs.

Programs are also needed that can provide help quickly, McIlroy added "because when your furnace kicks out you're not going to wait months for paperwork to get filed."

"We need flexibility for who's getting support and how, and we need to make sure that everyone has an appropriate home."