DELAY THE ELIMINATION OF INCENTIVES FOR HIGH EFFICIENCY NATURAL GAS EQUIPMENT IN B.C. (2023)
Issue
As part of its CleanBC Roadmap to 2030, the provincial government is currently planning to phase out demand-side incentives for installing high-efficiency gas furnaces, heaters, and boilers as part of their plan to shift to incentivizing heat pumps, building envelope improvements, and other efforts.
Similar to the 2022 BC Chamber of Commerce policy entitled “ Pause the Implementation of the Provincial Sales Tax on Fossil Fuel Combustion Systems and Heat Pumps Initiative”, this policy is concerned with a specific policy measure which may have unintended consequences that could ultimately undermine our efforts at carbon emission reductions, and negatively impact the HVAC sector which has oriented itself, its training and its supply chains to serve the current market. While the goal of reducing greenhouse gas emissions and promoting energy efficiency is laudable, this specific policy change moves too fast and should thus be delayed.
Background
Currently, various incentives are offered to homeowners and businesses to replace less-efficient natural gas equipment with more efficient models, through utility-funded incentive programs.
For example, currently the provincial government offers, through FortisBC utility-funded incentives, rebates of between $200 and $1,000 for upgrading an older, inefficient water heater to a natural gas ENERGY STAR® model, with the greatest rebate offered for the most efficient models. Similarly, for furnaces upgrades rebates of between $800 and $1,000 are offered for installing high-efficiency natural gas furnaces, and rebates are offered in the amount of $1000 for upgrading boilers and $1500 for a “combi” boiler combining heat and hot water.
This current policy of providing incentives has been successful in promoting energy efficiency and reducing greenhouse gas emissions by incentivizing the adoption of more efficient and less polluting technologies.
Most standard natural gas storage tank water heaters currently in homes today have a Uniform Energy Factor (UEF) of about 0.50 to 0.60, while new models have a minimum UEF of 0.67. In comparison however, condensing tankless models offer UEFs as high as 0.97.
While not as efficient as an electric heat pump, clearly there is significantly increased efficiency achieved in moving a consumer or business from a less-efficient standard model to a high-efficiency natural gas model. It is this efficiency gain we risk undermining if we eliminate the existing rebate programs.
Potentially Undermining Emissions Reductions
The government has outlined a new policy direction in its CleanBC Roadmap to 2030 which includes phasing out incentives for conventional natural gas equipment including residential and commercial furnaces, boilers, tank and tankless water heaters and fireplaces.
This new policy of phasing out these incentives could have unintended consequences. In particular, it risks disincentivizing people from making incremental changes to their heating systems.
A full heat pump system can cost upwards of three or even four times as much as a gas furnace, making the transition from an older, inefficient system to a heat pump system prohibitively expensive for many homeowners and businesses, particularly those with older buildings or limited budgets. In addition, given a consumer’s energy use patterns and needs, operating an electric heat pump may as cost as much or more on a month-to-month basis, further impacting the cost-benefit considerations of some consumers.
In comparison, transitioning from an older furnace or water heater to a high-efficiency natural gas model can be much less expensive, allowing for greater adoption. Without the current incentives, instead of upgrading to a higher-efficiency gas furnace or boiler, consumers and businesses may be more likely to stick with their older, less efficient systems, which could ultimately result in greater emissions and energy waste.
Industry and Market Readiness
In response to the current, long-standing incentive program, many HVAC businesses have spent considerable time, labour and expense developing the talent, expertise and capacity to actually provide and install the high-efficiency appliances under the existing incentive program. The speed with which this phase-out has been developed and announced, and the very limited consultation period with the industry on this issue specifically, risks negatively impacting these businesses.
The installation of heat pumps requires a very skilled and experienced journeyperson plumber, gas fitter, or refrigeration technician. The existing roster of qualified tradespeople will not be adequate to meet demand, as this sector struggles with the same labour challenges experienced across the economy. Additional upskilling efforts must exist in all areas of the province to ensure the skilled labour needed to adequately serve business and residents.
In addition, for a heat pump to even be eligible for rebates the product must be installed by a Home Performance Contractor Network (HPCN) member. The HPCN is a list of ‘certified’ contractors which have completed an application and training process. This process adds a further layer of time, cost and complexity to ensuring industry capacity to serve the new heat pump incentive regime. The HPCN application process involves securing two customer references and one supplier reference, supplying various business, registration and insurance documents, and then completing additional training through courses which can total up to 32 hours of training time. For HVAC companies with staff working on more than one job site at a time, they must ensure enough installers and supervisors complete this training to meet minimum requirements of the program.
Finally, insurance companies in B.C. must also be part of this transition. In the Atlantic provinces, some homeowners have been surprised to learn that their insurer required a backup source of heat when transitioning to a heat pump system , negating some of the environmental benefits and creating barriers and confusion for consumers. The reason insurers may be hesitant to insure is because of the variability in performance between heat pumps. While some (most expensive) options can consistently operate to -40C, many other heat pumps do not meet these performance standards. As the temperatures drop, so too does the operating capacity of the units. This causes risk of pipes freezing in the home and leading to water damage. Delaying this transition will ensure this aspect has been fulsomely considered and accounted for in B.C.
A More Gradual Phase-Out
Instead of prioritizing this phase-out as a “near term” action as is currently the plan in the Roadmap to 2030, we recommend delaying this phase-out to allow for a more gradual transition and to enable the sector more time to prepare for and build the required capacity and supply chains, and to allow more consumers and businesses the opportunity to make the still-valuable efficiency improvements supported with the current incentive program.
However, delaying the phase-out of these existing incentives need not come at the expense of creating new incentive programs as noted in the Roadmap to 2030 as both can and should exist concurrently and be adequately funded and supported.
In summary, while the goal of moving to 100% efficient systems is laudable, the government's plan to phase out incentives for installing higher-efficiency gas furnaces, heaters, and boilers risks disincentivizing people from making incremental changes and could ultimately result in greater emissions and energy waste, and risk negative impacts to the HVAC industry which is a vital partner in our retrofit and efficiency goals. Instead, the planned elimination of the existing incentives should be stopped, and they should be allowed to continue in concert with additional efficiency programs and initiatives.
THE CHAMBER RECOMMENDS
That the provincial government:
- Delay the planned elimination of the current incentives for installation of high-efficiency natural gas equipment by homeowners and businesses.
- Ensure adequate funding and administrative support to allow both the current incentives and rebates to continue and new efficiency initiatives to be introduced as part of the Roadmap to 2030
- Ensure the industry and business associations have adequate time for considered fulsome participation as part of any future consultations on government policy changes.
- Work with the industry to develop any needed additional upskilling or training supports to ensure industry capacity for heat pump installation, and streamline, where possible, the ‘certification’ process for trained contractors to then be eligible to participate in the rebate program.