The cost (and necessity) of fuel-switching

Architect Sheena Sharp parses the bold policy changes needed to meet UN emission reduction goals in the buildings sector.

Our current Prime Minister is our COVID Prime Minister. The next Prime Minister will be our climate change prime minister. They will be the PM that meets the UN climate targets—or doesn’t. What should we be looking for in the party platforms, particularly with regards to existing buildings—which represent the biggest carbon emission problem, and the hardest one to solve?

Over the past several years, Toronto 2030 District has embarked on a project to map the costs of getting buildings to zero operating emissions. The project uses a section of downtown Toronto comprising 300 million square feet of floor space as a testbed. This district includes most of the building types in Canada, albeit in different proportions to the country as a whole. Our group of 47 private and public sector partners looks at this issue from the point of view of the options and costs to individual building owners: we don’t think it’s an option to say “it’s too expensive,” but rather, we have embraced the goal of showing how we can pay for it.

What are the climate impacts of individual building decisions, if scaled up to the entire building stock? This is where politicians have power and responsibility, so an election is a critical time to address this issue.

Buildings are the biggest asset most people and companies have. The service life of a building envelope averages 30 to 70 years. Mechanical system service life averages 15 to 30 years. Practically, building elements are not incrementally upgraded. You don’t add 2” of insulation this year, then another 2” next year. You make changes at the end of service life.

What this means is that the buildings we are designing now will exist in 2050—probably as we designed them. Think about the last building you designed. Is it ready for zero emissions in 30 years? Between now and 2050, existing buildings will experience one equipment replacement. Think about your last retrofit. Will it measure up?

The only thing we know for sure is that we cannot achieve the UN climate targets while burning fossil-fuel-based natural gas as a primary heating source for buildings. We know that between now and 2050, we will need to fuel switch. Likely, we also will need to make buildings more energy-efficient to reduce costs. But which fuel do we switch to? And do we do efficiency upgrades first, or fuel switching?

There are over six million existing residential and commercial buildings in Canada that use natural gas, and that therefore directly emit significant quantities of greenhouse gases. If we were to renovate all of them between now and 2050, that would amount to renovating 215,000 buildings per year.

An opportunity for supercharging our efforts is the deeper integration of energy and building policy. Energy policy tends not to examine the range of changes that could be made to buildings, as energy becomes more costly. The design industry, on the other hand, has been trying to solve the problem building-by-building, but without an understanding of the impact on our energy systems.

If the two systems worked together to find a balance between the costs of building energy-efficiently and the costs of systemic fuel switching, the overall costs could be reduced. Governments are the only ones with the authority to bring all the players together to build in the best possible way moving forward. In fact, it took government coordination to install the gas system in the first place. It will take government action to get us out of it.

Buildings emit GHGs by using electricity made from fossil fuels, as well as through the direct burning of fossil fuels in buildings. Between now and 2050, the electric system will have to decarbonize, resulting in clean energy use for electricity in buildings. This is largely under provincial jurisdiction, and each province has wildly different electricity source mixes—but what this means is that we should not avoid electrification in jurisdictions that have dirty grids. Instead, we should include the additional loads in the plans to clean those grids.

Federal involvement in cleaning the grid happens through carbon pricing, cash transfers for efficiency measures, and enabling provincial cross-border energy flow. Indigenous relations are largely a federal responsibility, and cross-border energy flow has often been proposed as passing through unceded territory, or territory where treaties have not been honoured, resulting in increasingly strong resistance. The federal government will be a key player in addressing these issues through both a logistics and reconciliation lens.

To understand the other half of the problem—eliminating emissions from the 6,000,000 commercial and residential natural gas customers in Canada—the District 2030 partners and researchers devised a thought experiment, using the principles of project management to schedule the transition and gauge feasibility. (For the project costs to building owners see What Will it Take to Decarbonize Building Operations?).

There are four competing strategies for the transition: Blue/Green Hydrogen, Electrification/Clean grid, Electrification + Renewable Natural Gas, and Efficiency First. Each has different aspects that will help or hinder it being deployed to reduce building operating emissions by 50% in 2032 and 100% in 2050, the current UN targets.

A Blue Hydrogen Strategy

Blue Hydrogen is the marketing name for hydrogen made with natural gas. The hydrogen and carbon in natural gas (methane) are split, the carbon is stored underground, and the hydrogen is sent by pipeline to be burned for heat at the building level. The 2030 District analysed the capital investment and operating costs of the various options, and Blue Hydrogen came out as the least expensive option for fuel switching.

Under the Liberals, the federal government is already investing in further development of the technology. However, there are two main issues with blue hydrogen. First, not all carbon from natural gas can be captured in the process: estimates range from 70% to 95%. We used 90% for our exercise, giving the benefit of the doubt to industry. Because of this problem, in order to be emissions-free, we would eventually have to switch to the more expensive Green Hydrogen (made with water and electricity) sometime in the future.

The second issue is that though it has successful pilot projects, Blue Hydrogen does not exist. While we have a lot of natural gas in Canada, we don’t currently make hydrogen with carbon capture and storage at this scale.

Hydrogen is a smaller molecule than natural gas. In a hydrogen-based fuel system, parts of the natural gas infrastructure could be reused, but all of the main distribution lines, as well as some of the local distribution lines, would have to be re-built. In Toronto, about a third of the local distribution would have to be replaced: meaning a lot of ripped-up roads.

Our natural gas infrastructure was not installed through a process of individual owner decisions. The provincial governments installed the system neighbourhood by neighbourhood. In Ontario, this system is still being expanded today. Switching to hydrogen will require a similar process.

While we know how to manufacture the required boilers and furnaces for a hydrogen-based system, and may be able to make dual-fuel equipment, we don’t currently do it. There is no supply chain, no standards, no available safety monitors, design codes or regulations.

There are also concerns about our capacity to safely store CO2, and about the social acceptability of building or re-building pipelines. These amount to non-trivial project risks.

To meet the UN targets, a project schedule might look something like this: We allow two years to develop policy, consensus and regulations, which would be incredibly fast. We would then need to complete the following tasks: Build the generation capacity, re-build local infrastructure as required, manufacture heating equipment, and start switching over customers. Finally, we would need to replace the Blue Hydrogen with Green Hydrogen.

Because we would have to first build the supply system, the available time to convert would be a few years, and we would have to do so at an initial pace of 950,000 building plant renovations per year, followed by a more reasonable pace of 150,000 per year.



An Electrification Strategy

Electricity has a different issue than hydrogen: it has existing infrastructure, generation, codes, design standards and supply chains. But does it have the capacity to serve all of the heating needs of current natural gas customers?

When designing buildings, we do not size boilers or furnaces based on the total heat we will need in a year. Rather, we size them based on the maximum heat we will need to produce on the coldest day of the year. Similarly, when we are adding to the electricity supply system capacity, it’s the peak demand that matters, not the total load. Since electricity, unlike gas, cannot be stored, we need to size the generation system for the coldest day. The development of economical grid-scale storage is hotly pursued, and there are many pilot projects, but it is not widely deployed.

What will happen to the peak loads if we convert to heating electrically? We based our scenario on converting all buildings to cold climate air-source heat pump technology, which although the most expensive system, gives us the lowest peak demands. In our test bed of downtown Toronto, the peak would switch from summer to winter, and increase by 100%. The electric system, as it stands right now in Ontario and most provinces, has additional peak capacity. We could start electrifying gas customers right away, and ramp up clean electricity generation at the same time.

Although electricity is sold by the kilowatt, the majority of the cost is in building the plants and distribution system. The marginal cost to produce additional clean kilowatts from existing plants is very little. It’s very likely that an all-electric system will generate additional revenue to offset upgrade costs, unlike with hydrogen.

What would a project schedule look like?

Again, we’ve assumed two years for consensus, policy and regulation. Fuel-switching in buildings could start immediately, as would building increased system capacity: we would not have to convert systems neighbourhood-by-neighbourhood like with gas. The pace of conversion up to 2032 would have to average 393,000 buildings per year, followed by 150,000 per year up to 2050. Not all of the provinces have clean electricity generation, so at some point, the coal and natural gas plants would have to be closed and replaced with clean electricity sources.

The Hybrid Gas/Electric Strategy

This solution combines the benefits of the first two fuels, and takes advantage of the fact that “standard” heat pumps, which operate to about -10 C, are much less expensive than cold climate heat pumps. The idea is to electrify heating with the standard pumps, and use the existing gas system for the peaks.

Natural gas is the common name for methane extracted from the ground. Renewable natural gas (RNG) is also methane, but made from bio-based processes, such as capturing methane emissions from organic waste, landfills, and wastewater treatment. It is molecularly identical to natural gas, so infrastructure would not have to be rebuilt.

The downside of RNG is that we only have the feed stock to make about 15% of the methane that we currently use. This problem goes away if we are only using it for peaking, as peaking loads will require only about 5% of what we currently use. Furthermore, the operating costs would be high: RNG would likely cost the same as electricity. We would need to add a carbon price on top, to ensure that RNG was only used in peak periods.

The biggest project risk is that RNG would be a very flexible fuel, and the building sector will be competing with heavy industry for access to it, so operating costs could be high. Currently, natural gas use by industry is greater than its use by commercial and residential buildings. This would be a huge project risk. Another project risk is that if the conversion deadlines are not met, we would be forced to continue to use fossil-fuel based natural gas, and would therefore miss the UN targets.

This would have the lowest building-level capital costs, and low stranded assets. After policy is in place, it could start right away.

The Efficiency First Strategy

The premise of this solution is that we continue to use natural gas, but meet our targets by reducing emissions through energy efficiency measures. When we have gone as low as we can, we fuel switch at a lower level, thus reducing stranded assets in the energy system.

This strategy reduces gas use with more efficient mechanical equipment, by using controls to reduce unneeded heating, and by reducing the amount of heat lost through building envelopes. But how much efficiency is enough before you fuel switch? The City of Toronto has just released a study looking at this question. By their calculations, a 60% reduction is possible through deep energy retrofits, with energy efficiency similar to a net zero energy renovation.

Again, if this solution was proposed, we could allot two years for consensus, policy and regulations, and start renovations for gas customer immediately. However, we would need to complete deep energy retrofits to 100% of the building stock, or 706,000 buildings per year. The alternative fuel systems would have much more time to ramp up—potentially 17 years—before we would have to complete equipment replacements in 100% of the building stock.

This strategy is potentially quite expensive. If the first and second phases of renovations were accelerated to be completed in 8 ½ years, an estimate based on a City of Toronto report is that an additional $17-billion per year would be needed in spending on renovations—in Toronto alone.

The equipment required in the second phase of renovations would be smaller in size, offering a marginal advantage to building owners.

Use of Architectural Expertise

Meeting the UN’s emissions targets in the buildings sector will require both the right policy and the right regulations. A big part of an architect’s work is to meet regulations, and it is disheartening when the regulations are ineffective or overly complex.

A problem particularly galling to architects is that the federal government has been undermining the architectural profession in what should be a collective effort to improve the energy performance of buildings. As all architects know, we are trained to lead teams and meet energy goals in buildings—even if clients often aim just to achieve building code minimum. The methods and science are familiar to us. Architects are licensed and, in many provinces, carry mandatory insurance. But instead of using the existing licensing system, the federal government has set up a new parallel system of para-professionals—Green Energy Advisors. These Advisors have minimal training, add costs to the process, and add a layer of bureaucracy—just at the point that we need to move faster.

Further, the current energy compliance methodology (entailing the use of reference buildings versus modeled performance) favours natural gas, and all subsidies are based on this methodology. A compliance model based on Energy Use Intensity (EUI) would be harder to game, and more transparent to building owners. This would ensure that the regulations actually deliver on the policy. Moving to EUI requires data that our federal government does not currently provide—yet we know that it is available, as the American government provides it.


The price of your vote should be that the party will meet the UN targets of 50% CO2 reductions by 2030, and 100% by 2050. At this point, only the Greens are proposing this, with the Liberals and the NDP close behind, and the Conservatives at about half of where they need to be. While compromise is beneficial in human relationships, we cannot negotiate with physics. We need to comply with the UN targets, or we will fail, with catastrophic results for humanity.

But it is not sufficient to just have targets: each country has to actually meet those targets. We need politicians who are willing to say, out loud, that we are going to phase out fossil fuel-derived natural gas completely at the building level.

The Gantt charts show that we do not have time to develop new technologies. We must use the solutions that are proven to work right now. We cannot afford to miss deadlines by a wide margin. We need real teeth to ensure that promises are met. Politicians should say what fuel or combination of fuels they support.

We should be looking for stronger policy that includes:

  • A carbon tax of $340 or more;
  • A commitment to develop agreements for one or more clean fuels, in no more than two years;
  • A commitment to set performance-based building renovation targets, likely at the net-zero/Passive House level;
  • A commitment to streamline compliance using existing professional licensing system and to provide the right data to support low-energy design.

It seems that we have a lot of work to do, and we need government leadership and authority to do it. Make noise, and vote wisely.