Getting in Hot Water: A Lesson in Climate Subsidy Programs

My hot water tank blew out just before Christmas. I had no idea, just went down to the crawlspace to get some wrapping paper and found the floor flooded around the old tank. We’d been expecting this for a while, having never had to change the tank since we moved in seven years earlier.

Contemplating my replacement tank I got excited about the prospect of a subsidy (and a better overall flow of hot water). Good timing, I thought. My buddies in the BC government have set up just a program to make sure I go the energy efficient route. Here’s the pitch:

Choose to take advantage of B.C.’s new home energy efficiency incentives. Choose to better insulate your home. Choose low energy appliances, heating and lighting options. Save on power bills. Save on heating and cooling costs. Save on sales tax. Save hundreds to thousands of dollars.

Alas, it was not meant to be. In order to access any federal or provincial subsidies you need to arrange for a full energy audit of your home. You pay part of the cost of doing so, about $150 at the outset and another $150 when the work has been completed. You then can get subsidies on equipment that meets certain standards but they have to be submitted by the auditor before you get your cheque (or cheques, plural, as the federal version of this program does effectively the same thing).

Trouble is, I needed a hot water heater within days, because the other one was leaking. I had no time for an energy audit, and quite frankly my home is in pretty good shape for energy efficiency. The maximum subsidy I would have been able to get was less than the cost of the inspector, so in any event it was not worth doing.

Oddly, the largest subsidies are for natural gas burning water heaters, which are supposedly more efficient on some measure of energy efficiency. But burning natural gas creates carbon dioxide, and this program was brought in ostensibly to get homes to reduce their carbon footprint. The subsidy for electrical hot water heaters (the eco-choice since 90% of BC’s electricity is hydroelectric) is only half as much, at $130. And then at both Rona and Home Depot I found not a single option that actually meets the standard anyway.

So I ended up buying the maximum twelve-year electric hot water heater (they sell them based on expected life). I did the best I could for the planet, but the government was no help in swaying my decision into something more efficient or climate friendly.

Perhaps this program would work if I was retrofitting an old house with new windows, appliances and all that. But for routine upgrades, it is not worth the paperwork.

So here’s an idea. Why not work with Rona and Home Depot to pressure them to meet new efficiency standards for the products they sell. Then send every household a “cheque” for $5,000 (about three times the maximum from the federal home reno tax credit) redeemable for puchase of selected equipment at those stores. Wouldn’t that be a whole lot easier?


  • I am not convinced that electric heaters are “the eco-choice since 90% of BC’s electricity is hydroelectric.” At the margin, BC’s electricity is generated by burning natural gas. It is more efficient to burn gas to heat water directly than to burn gas, turn the heat into electricity, and then turn the electricity back into heat to heat water.

    If the choice were between burning gas and using hydroelectricity in BC, an important consideration is that hydroelectricity not consumed in BC is exported to displace gas-fired or coal-fired power in other jurisdictions. While burning more gas in BC increases the province’s carbon emissions, it reduces carbon emissions elsewhere (quite possibly by a larger amount).

    From an environmental perspective, it probably makes sense to provide more generous subsidies for gas heaters than electric heaters in BC.

  • Todays statcan release is entitled Households and the Environment. It seems pretty watered down to me.

  • I think I read (this was some time ago so I apologize for any inaccuracies) that the purpose of this program is to increase the efficiency of homes and reduce the overall energy consumption (particularly electricity during peak demand) rather than to solely subsidize retrofits.

    Although I haven’t done a cost-benefit analysis, I would think that the greatest impact of this program, and the most efficient use of tax dollars, would be to improve the energy efficiency of older homes. Sure the government could provide $5,000 to new homes to make energy saving retrofits, but wouldn’t that $5,000 go further in a home that was constructed in 1960 rather than a home that was constructed in 2008? I’m not sure when your home was built, but since you stated that your home was already energy efficient, giving you $5,000 for home retrofits would probably have a lower overall impact on your energy consumption than $5,000 in an older home.

    As this is a form written by/for economists, so why not do a cost-benefit analysis of the program to see where the greatest impact will be – providing rebates to new, already quite efficient, homes or to older, more likely to be less efficient, homes? I am all for subsidies, but as we are in tight times, I hope you are not recommending that the government waste more tax dollars than it already is/does.

    (also, I believe that you can still receive funding for ’emergency’ retrofits, such as yours, if you get an audit within 3-4 days of installing the replacement)

  • shabadaba, thanks for that clarification. In my original conception I was thinking that such a subsidy would apply only to homes built before 1980 or so, but neglected to put that in the post.

    Erin, I don’t get your logic cuz I am not marginal! You are saying it is better to burn natural gas and generate carbon dioxide at my home then have 10% of my electricity generated from burning natural gas (which will inevitably be generated more efficiently than in my home). Are you really saying that natural gas is 92-93% more efficient than electricity when it comes to hot water heaters?

  • The issue is not BC Hydro’s current generation mix, but how it would respond to a change in electricity consumption.

    If British Columbians consume less electricity by heating water with gas, BC Hydro will respond by burning less gas at its thermal stations rather than by producing less hydroelectricity at its existing dams.

    If British Columbians consume more electricity by heating water with it, BC Hydro will be unable to generate anymore hydroelectricity from its dams (at least in the medium term) and have to instead burn more natural gas at its thermal stations.

    The tradeoff is not gas versus hydro, but using gas for direct heat versus using gas for electricity. Even if the tradeoff is gas versus hydro within BC, every unit of hydro consumed in BC detracts from the province’s hydro exports and forces other jurisdictions to burn more fossil fuels for electricity.

  • Every jurisdiction is going to have to figure this out for themselves, I think. In the case of BC, the dams are a huge opportunity, as clean alternative power generated at other times (wind, solar, tidal, etc) can be stored as water in the dams (rather than in batteries).

    So one end of the solution is alternative power generation that is not reliant on releasing carbon dioxide. The other is energy efficiency, and the ability of households to greatly reduce their electricity consumption through better windows, insulation, etc.

    I still think the claim that it is better to convert houses to natural gas water heaters would be a big mistake (one that we are currently subsidizing). In addition to releasing carbon dioxide, they are also releasing hydrogen, which could be captured (at a thermal plant, say, where it would also make more sense to implement some future carbon sequestration) and used as fuel elsewhere.

    But let’s be clear: I bought a new electric hot water heater that replaced my old electric hot water heater for a net gain in efficiency. If I instead replaced it with a natural gas burning heater, it would only be a net gain in efficiency if that small unit was more efficient than the equivalent amount of electricity generated from a thermal plant.

    And even then only if you assume that I am the marginal consumer, and all my current electricity is generated by those thermal plants. I contend that my allocation should be in proportion to the overall structure of electricity generation in the province.

  • Canada’s natural gas supplies are finite, and dwindling (principally due to massive exports to the US). If I were in BC, I’d bet on renewables, rather than fossils.

    Base load electricity generation is often supplemented by burning natural gas during peak load hours. I don’t know how BC Hydro does it, but I expect that if you had a timer that provided electricity to your heater at off-peak times, you wouldn’t be contributing to any fossil burning.

    Of course, public policy should be structured so as to give an incentive to do this (rate structure, and smart metering), and not rely on voluntary efforts, which generally provide little impact.

  • In an ultimate long-term sense, we need to generate electricity in ways that do not emit carbon. When we reach that point, it will make ecological sense to use electricity instead of gas as a heat source. However, as long as we rely on fossil fuels for a significant amount of electricity, it makes sense to burn gas directly for heat and use electricity for other needs.

    I believe that it will take far longer to have every carbon-emitting power plant replaced with renewables or equipped with carbon-capture technology than most water heaters last. Until we get close to the promised land of carbon-free electricity, it generally makes ecological sense to convert from electric heat to gas heat.

    I take your point that BC itself may be close to carbon-free electricity, but if we are concerned about global carbon emissions, we cannot overlook the relationship between BC’s electricity consumption, BC’s electricity exports and electricity generation in importing jurisdictions.

    By the way, I am debating the merits of subsidizing gas heaters, not criticizing your personal decision. Kudos for upgrading to a new heater more efficient than your previous one.

  • Good point, Dave. You may be correct that by using an electric heater only at off-peak times, a British Columbian could avoid prompting more thermal electricity generation in the province. If so, that British Columbian would be consuming hydro electricity that would otherwise be exported and displace thermal generation in other jurisdictions.

  • Some of the most effective energy efficiency programs provide subsidies at point-of-sale. So the consumer only sees the sticker price and the subsidy is paid directly to retailers.

    The best is hopefully to regulate. But a gradual transformation from point-of-sale subsidies to point-of-sale standards is the suggested route.

    The revamped Eco-Energy program made the program much worse. You are right in identifying that it is a program targeted towards complete housing retrofits and not products at the time of their replacement. If you’re electric I would think BC Hydro’s programs would be a bit more innovative.

    In any case, you can do an insulation wrap around your hot water tank and save some money. A bit more pricy is solar hot water.

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