Climate, cost and capacity pose fuel-switching challenges for building owners looking to curb greenhouse gas (GHG) emissions in line with Canada’s target for a 40 to 45 per cent reduction below 2005 levels by 2030. Industry panellists contemplating the electrification of mechanical systems during a recent Canada Green Building Council (CAGBC) conference in Toronto acknowledged that the leap to net zero comes with varying degrees of difficulty from region to region across the country.

For example, British Columbia’s lower mainland enjoys the twin advantages of a clean electricity grid and milder winter temperatures that generally don’t compromise the effectiveness of air-source heat pumps. Elsewhere, the arrival of new technologies and ongoing replacement of fossil-fuel-fired power generation with renewable sources are expected to ease the transition to low-carbon heating and domestic hot water systems, but that’s occurring on a patchwork of timelines.

A carbon price on pace to reach $170 per tonne by 2030 and the potential for other regulatory and investment-related imperatives are now reshaping conventional cost-benefit analyses. Yet, even as the commercial real estate industry is urged to readjust priorities from incremental improvements with quick paybacks to big-ticket, deep retrofits, energy efficiency continues to be a preferred gateway to decarbonization for many companies pursuing emissions reduction targets.

“One of the goals along with heating electrification is to reduce the amount of heat we need. It seems like now we’re talking about carbon, carbon, carbon, carbon, but energy efficiency is still very much the first thing that we focus on,” affirmed Ariel Feldman, director of sustainability with Choice Properties. “You still need to take all those steps first because, from the owner’s perspective, electrification is not necessarily going to pay back. You might spend more money up front and you might spend more money on the operations side. That’s not a very good business case to start from.”

That said, he maintains business cases should no longer be anchored in the supposition that a boiler has a 30-year life cycle. Speaking at the REMI Show earlier this month, Jeff Ranson, director of energy, environment and advocacy with the Building Owners and Managers Association (BOMA) of Greater Toronto, hammered home the same message.

“If you’re comparing the cost of zero carbon with your current operating costs, that’s a false equivalency because your current building operations may not be possible in the future. Business as usual may not exist, and probably won’t exist,” Ranson submitted. “We’re not typically factoring in changes to the asset value whether or not your building is aligned with carbon targets. We’re not factoring carbon pricing. We’re not factoring in policy risk.”

“The sticks are coming,” Steve Kemp, a principal with RDH Building Science, warned CAGBC conference attendees.

Incentives and obstacles for electric heat pumps

In British Columbia, there’s now one such stick intertwined with a carrot. Since the release of the provincial budget on February 23, 2022, the provincial sales tax (PST) on gas-fired heating and cooling systems has jumped from 7 per cent to 12 per cent, while heat pumps are now exempt from PST.

“To qualify, it must be a heat pump for air-conditioning and heating, where your heat pump is your primary heating and cooling system,” said Pushpinder Rana, senior director, commercial products and industry relations, with Mitsubishi Canada’s HVAC division. “Those are huge trigger points, and we are seeing similar movements across Quebec.”

Kemp outlined some of the obstacles to adoption. Notably, some air-source heat pumps employing variable refrigerant flow (VRF) technology function well down to temperatures of minus 30⁰ Celsius, but, predominantly, hydronic systems “go kaput” at about minus 15⁰ C, necessitating backup boilers in areas where the temperature falls below that threshold. Because heat pumps circulate lower-temperature water — at about 49⁰ C versus 82⁰ C with boiler systems — a switchover will likely also entail replacement of space heating equipment.

“Whether it’s a fan coil, baseboard convector or radiant panels, at these lower temperatures, you need a bigger physical thing to deliver the same amount of heat to that space,” Kemp advised. “We may be gutting every baseboard convector, every fan coil in the building.”

Retrofitters are installing larger convectors and fan coils, multiple-row fan coils or fan-assisted baseboard convectors. However, reinforcing Feldman’s argument for prioritizing energy efficiency, Kemp also cited an example of a major retrofit where his firm derived sufficient savings from building envelope improvements to cancel out such required investments.

“There, we basically cut the heating demand by 75 per cent and theoretically could have kept the same mechanical system,” he noted. “Sometimes you can get lucky.”

In the future, hybrid hydronic-VRF heat pump systems are expected to improve cold-weather performance and mitigate uncertainty around pending phase-downs of some hydrofluorocarbon (HFC) refrigerants. Rana sketched out a range of existing and emerging VRF heat pump and heat recovery products he predicts will increasingly capture market share, including hyper-heating technology for cold-temperature performance and a water-source format.

“There is a huge gap between what a heat pump or heat recovery solution provider can offer to the market and the understanding and the knowledge the market has,” he asserted. “We have training for consulting engineers. We have training for contractors. The objective is to educate the market.”

Alternatively, geo-thermal systems promise consistent output everywhere the required wells can be accommodated.

“If you’ve got space on your site for geothermal, you can do it across the country and we’re seeing really good paybacks even on a 15-year assessment,” reported Cara Sloat, senior engineer with the mechanical and electrical engineering firm, Hammerschlag and Joffe. “It’s worth looking at that technology even if you’ve previously been worried that you can’t afford it. Some of the big banks are financing that now also, so that can take it off your project’s books and get it somewhere where it’s easier to deal with.”

Mapping out strategies to 2030 and 2050

She suggests the timing is right to convert to a heat pump in any building with a cooling system approaching the end of its life cycle, but also highlighted potential for capital planners to stretch the expenditure over a longer period.

“There are a variety now of quite good heat-only heat pumps on the market so you can get something that is optimized for heating only that would do your domestic hot water plant and directly replace a boiler,” Sloat said. “So maybe you do half the plant now and you think about phasing. That is available.”

Meanwhile, a portfolio primarily consisting of open-air retail and industrial warehouse buildings has given Choice Properties more flexibility for a phased approach to its 2050 net zero target. Feldman projects rooftop HVAC units will need to be replaced at least twice in that period and, for now, that means dual-fuel gas and electric systems in some cases. It’s an approach he aims to minimize given the extra costs of two systems, but it’s a necessary contingency to address concerns about pass-through utility costs to tenants and capacity of the electrical grid. The latter can be a particular vulnerability when landlords have little ability to control tenants’ energy use.

“That was a limiting factor at one of our sites where we decided, even though we would have ideally liked to go all-electric, we’re doing dual-fuel for now while the grid is improved,” Feldman recounted. “We’re hoping with the next iteration in 15 years, we’ll go all-electric at that point. We have a little bit more leeway than you have on a multi-unit residential building or an office where you’re replacing a boiler that lasts 30 years.”

“We find that trying to retrofit heat pumps into existing buildings with limited space for additional transformers is very challenging,” Sloat concurred. “Doing a study on a high-rise building, we saw we were adding maybe 3 megawatts to back it up with an electric boiler, which is the same as a whole new building.”

Regardless of complications, with a the carbon price now at $50 per tonne, Kemp calculates electric heat pumps are already more cost-efficient than natural gas systems in British Columbia, Manitoba and Quebec. That pool should expand rapidly as the price takes its ordained trajectory to $170/tonne over the next eight years, and on up to possibly as high as $300/tonne by 2050.

By 2030, Kemp foresees Saskatchewan and Nunavut will be the only areas of Canada where fuel-switching may not be a money-saving proposition. Feldman concludes it’s best to get proactively ahead of that curve.

“British Columbia, Manitoba, Quebec, where the grids are clean and the electricity is relatively inexpensive, that’s where you want to focus at the start. Start with the ones that are a bit easier and then build your experience,” he urged. “As the technology improves and the supply chain improves and costs start to come down relative to the existing technologies, you will get to a point where it starts to look better and better in other provinces as well.”

Barbara Carss is editor-in-chief of Canadian Property Management.