3. The City would make available LIC financing available to homeowners (see Section 2.3.4.2 – LIC By-law)

2.3.3.2 Findings

With the assumptions established for the R-DEER Business Case, the analysis demonstrated the feasibility of the CEP home retrofit strategy.

Key findings are summarized below. Additional detail is provided in Appendix E – Full Business Case.

MSC Profitability

The MSC would operate at breakeven by the end of Year 3, rising to an average of approximately $6M to $8M per year through to 2041. The total potential retained earnings by 2041 would exceed $123M (net of low-income refunds) and would continue to rise as the LIC payments from later retrofits flow in. This assumes no diversification of business lines, subsidy programs or dividend payments to the City. The retained earnings could be potentially assigned to pay dividends to the City, or be allocated to other social goals, or both. The MSC Board would establish the acceptable level of profit (or loss) consistent with its social mission. The PWT recommends that the Entity addresses program accessibility during final program design and the potential to leverage retained earnings to meet the needs of low-income residents and/or seniors on fixed incomes.

Lender Perspective

The need for loans from the private sector is driven by retrofit orders, i.e., the success of the MSC. The MSC would have net borrowing requirements of about $7.5M by the end of year 1, rising to $15M in year 2, to $25M in year 3, and $32.5M by year 4. Year 4 is when the MSC achieves its targeted retrofit delivery rate. Maximum net borrowing increases at about $35M for the following few years. For the Lenders these represent low-risk loans with acceptable returns.

The annual increase declines over time due to the accumulated effect of the incoming LIC payments. The maximum net borrowing requirement for the MSC is approximately $498M in year 2041 and falls to zero by 2062.

Homeowner Perspective

Utility annual savings will outpace homeowner’s payments under both the low-case and high-case utility price scenarios. This is in addition to immediate comfort benefits and potential increase in property value. The average cost of the retrofit is approximately $25,000 to $30,000.

Residential sector emissions and source energy

The program will achieve the R-DEER energy goal and exceed the R-DEER emissions goal while placing the community on the path to achieving its CEP goals and contributing to Canada’s commitment to the Paris Climate Agreement targets.

Program savings versus costs

Annual utility cost savings for all R-DEER customers will surpass the total annual retrofit payments for these customers within 10-15 years of the first retrofit. Individual customers will see savings and payments balance out almost immediately after the retrofit.

2.3.3.3 Stress Testing

The R-DEER Business Model proposes to transform the energy retrofit market by offering standardized retrofits at high volume to the community. As such, there are no market equivalents to inform two key assumptions: 1) market penetration and 2) support subsidies for low-income homeowners. Consequently, the PWT and other stakeholders asked the PWT to stress test these two assumptions. The financial business case remains viable with 25% less market penetration.