Energy

Toronto, Canada

Toronto’s Atmospheric Fund makes sustainability affordable

Summary

The Toronto Atmospheric Fund (TAF) is making the impossible possible by funding sustainable projects that often cannot be financed through traditional sources. Its successes include Canada’s first municipal combined heat, power, and cooling system (trigeneration); its largest solar power plant; an energy efficiency financing program that targets new condominium construction; and a pilot test of outdoor LED white lighting. Since its inception TAF has reduced CO2 emissions by 500,000 tons and created a funding model that is a world leader.

What is it?

TAF finances Toronto-based initiatives that combat global climate change and improve air quality through a self-sustaining revolving fund. TAF’s mission is to pioneer solutions that accelerate reductions in local greenhouse gas emission. It provides grants, makes loans, undertakes special projects, and creates partnerships with all sectors of the community, city departments and agencies to facilitate action on climate change.

Assessing Grants

TAF funding allows innovative projects that traditional financial sources may find difficult to finance, to be implemented. It focuses on three main areas:

• Renewable energy;
• Energy conservation and efficiency; and
• Reducing the fossil fuel content of energy sources.

Projects are assesses according on their potential to:

• Incubate innovative solutions and address opportunities that are especially being over-looked by other agencies. About a third of the grants fund City of Toronto projects that cannot be included in the City’s annual budget or that may carry a higher level of risk than usual. Projects by public institutions and non-profit organizations in the community ac-count for the rest of the grants; and
• Provide strategic information, direction, education, and community partnerships that will lead to emissions reductions in the future.

TAF funding

TAF was originally endowed with $23 million ($CAD), US$19 million, or two-thirds of which came from energy savings from a citywide street light retrofit. The endowment is valued today at $28 million ($CAD). TAF’s assets generate approximately $1.5 million in revenue annually for grants and special projects. Up to $8 million in financing from TAF’s assets is also available for mandate-related loans. Total project funding since inception has been about $30 million.

The City expects the financing side of TAF’s program to grow rapidly as it finds partners in the financial sector who are willing to leverage loan guarantees and other financial products that TAF is currently developing.

Results

TAF’s project financing has saved the City upwards of $20 million —over $2.7 million annu-ally—in cumulative energy and maintenance costs. Key successes include:

• Canada’s first municipal trigeneration system (see below)
• Conversion of the City’s traffic signals to LED lamps (in progress)
• Canada’s largest grid connected solar PV system
• Conversion of City vehicles to hybrids
• Development of a heat-watch warning system to prepare the city for extreme summer heat waves
• A performance based residential energy efficiency retrofit incentive program
• North America’s first urban wind turbine
• Development of a large university’s energy and climate action plan
• Policy development supporting the Province of Ontario’s ambitious phase out of coal power generation.
• Green loan program for new condominium construction with Toronto’s largest de-veloper, Tridel
• Startup of Toronto’s first car sharing company, AutoShare
• Energy efficiency retrofit of artists’ housing and work spaces, with Artscape.
• Establishment of The Clean Air Partnership, an educational organization that mobi-lizes public and political support for emissions reductions
• An integrated inventory of the City’s own corporate and citywide greenhouse gas and air contaminant emissions
• A strategic plan for district energy development in Toronto with the Canadian Urban Institute
• Development of mandate related financial products to accelerate emission reductions in buildings

TAF funding has also delivered other benefits including: cleaner air; hundreds of jobs in the construction trades; safer and more energy-efficient street and lane lighting; energy efficiency upgrades to 100 City-owned buildings; "Greening" of schools across the City; energy efficiency green-ups of over 12,000 homes, and; demonstrations of new clean technologies such as solar PV cells, solar thermal, geothermal, LED lighting, hybrid electric cars and electric bicycles.

TAF has achieved results through a combination of grants, financing, and building partnerships. For example, on March 7, 2007, the switch flipped on Canada’s first municipal trigeneration system at the City’s Exhibition Place - Toronto’s premier venue for exhibits, trade shows, and large events, attracting over 4 million visitors annually.

Case study - Exhibition Place Trigenerational system

Summary	TAF has helped to finance the establishment of a trigenera-tional system that combines electricity generation, heat produc-tion, and cooling produced by one highly efficient system ser-vicing three large buildings. This will also help to phase out provincial coal-fired generation.
TAF Funding grant	TAF provided $80,000 in 2002 for a feasibility study and sub-sequently loaned $1 million in project financing. TAF also fa-cilitated a partnership with the Federation of Canadian Munici-palities, which then provided funding.
Energy Efficiencies	Once fully operational the system will meet 30% of the venues’ energy needs and save $30 million in energy costs over time.
CO2 reductions annually	7,400 tons annually.

Next steps

TAF’s Board of Directors - appointed by City Council will implement a new vision over the next four years, including:

• Seeking projects with greater impact
• Enhancing TAF’s revolving fund mechanism by utilizing all of its assets to finance mandate related projects—most of the funds have been invested in traditional equities and bonds to date;
• Expand the TAF model to the Greater Toronto Area, which has a population of 4.6 mil-lion and offers significant market opportunities for new technology development.

TAF is also expected to finance the Mayor’s upcoming Toronto Climate Action Plan to be announce in the first half of 2007.

Under current consideration by TAF’s Board is the establishment of a Green Loan Credit Enhancement Facility, which would create an initial pool of $10 million in capital for pro-ject financing, secured by $2 million of TAF’s assets to guarantee the pool.

Application

Some key lessons that can be applied to large cities from TAF’s experience, and other municipal revolving funds, are:

1. Municipal agencies that are dedicated to climate mitigation, especially if they are given an asset base and are relatively independent like TAF, can focus leadership, develop inte-grated strategies, and multiply resources for climate mitigation in a way that is often chal-lenging to accomplish in a large bureaucracy;
2. Energy efficiency investments create revenue streams that can both service capital financing for projects as well as provide income for incubating new projects;
3. The greater proportion of savings that can be recycled into new projects, the greater the acceleration of emissions reductions and the more rapid the expansion of capital available for climate mitigation over time;
4. Revolving funds operate best at a relative distance from the political sphere in order to be able to make strategic decisions and maintain their capital base in difficult budget times;
5. Quantification and measurement of savings over time are absolutely essential to main-taining political support for the added value that revolving funds bring to municipal cli-mate mitigation projects;
6. Incubation funding to “get the ball rolling” and project financing to scale up pilots are strategies that go hand in hand and should be integrated in municipal climate action poli-cies.