Ask the Expert – Philippe Hudon

Since 2004, Philippe Hudon has worked in the field of building mechanics services, technologies, and approaches to energy efficiency. He made a name for himself through a long and diversified experience in design, installation, and research and development before founding Akonovia, an engineering consulting firm specializing in energy transition and decarbonization. In this issue of Ask the Expert, he gives an overview of the sustainable transition in Quebec and the importance of investing in sustainable buildings now.

Can you tell us a bit about your path and your current position?

I have always been passionate about energy efficiency since I was at school. At college, my professors participated in conferences on sustainable buildings, and I found inspiration in their presentations. This passion led me to pursue a bachelor’s degree in engineering, followed by a master’s degree in energy efficiency and renewable energies, with a specialization in geothermal energy. As soon as I entered the job market, I had the chance to work in two complementary fields: energy simulation and expertise in geothermal systems.

10 years ago, I founded Akonovia, a firm specializing in energy efficiency and decarbonization projects across Canada. With a team of over 90 collaborators, we support our clients’ energy transition by offering them innovative and sustainable solutions. This professional venture was a natural extension of my passion for energy efficiency, nourished during my studies and reinforced by my experiences in energy simulation and expertise in geothermal systems. Akonovia is a key player in energy efficiency today, with a clear mission: to support the energy transition and carbon neutrality.

Your mission is to decarbonize the built environment. What’s the situation like in Quebec, in regard to your mission – i.e. legislation, building codes, investments?

In Quebec, we are fortunate to benefit from a largely decarbonized electricity network, with 90 percent of electricity produced by hydroelectricity, and a good part of the rest coming from wind power. This places our province in an enviable position in terms of energy-related carbon footprint.

However, this energy abundance, coupled with relatively low costs, has sometimes pushed us not to fully exploit this precious resource. Furthermore, regulations are not adapted to this new reality. Today, energy balances are increasingly tight, and it is becoming imperative to better manage this valuable resource. We must pay particular attention to power management during winter peak periods, as well as kilowatt-hour consumption throughout the year. Quebec is at a crossroads: we have an exceptional base with our carbon-free network, but the availability of this energy is limited. This pushes us to think about strategies that optimize its use, while seizing opportunities to increase our energy resilience and continue to decarbonize other sectors.

During CAGBC’s Accelerating to Zero Summit in Montréal last fall, you said that in three years we went from abundance to a tighter state of affairs. Can you elaborate on that?

Five or six years ago, we lived in a situation of energy abundance. At that time, Quebec had such a large energy surplus that it was difficult to know what to use it for. We sought to attract industries and businesses to use this surplus, seeing this as an economic opportunity.

However, in just two years, this paradigm has completely changed. We have gone from an energy surplus to a situation where balance sheets are tight, or even in deficit in terms of power available in the network. This rapid transition has created a shock, because it is disrupting our reflexes and our management processes, but it is not yet well mastered by decision-makers.

Having lived in a context of energy abundance for such a long time, our thinking has been influenced by our energy consumption habits. Going from such an abundance to a shortage requires a period of adaptation, both in terms of decision-making processes and resource usage. Today, this awareness must accelerate to allow us to rethink our priorities and adopt strategies better adapted to this new reality.

In this context of scarcer resources, do you think it is possible to do more with less? What does perspective change require (or imply)?

We are at the dawn of the energy transition, even though we have been working on energy efficiency and sustainable buildings for years. Today, decarbonization is unavoidable, and the lack of energy we notice accentuates the need to review our thought process and our ways of doing things. This pushes us to seize new opportunities in energy efficiency, an area in which the market is evolving extremely quickly.

I see that the sector is divided into two types of players: those who have a long-term vision and who adapt to growing pressures—whether linked to environmental policies or rising energy costs—and those struggling to keep up. For example, a client recently told me that in a building built only three years ago, the strategies are already obsolete. This illustrates how rapidly energy performance requirements are advancing.

In a recent study carried out in collaboration with the FTQ, entitled Generation 1.5, we highlighted the significant financial risks for real estate investors and developers who do not engage in sustainable building projects. This investment should not be seen solely through the prism of return on investment, but as an essential measure to limit long-term financial risks, particularly on cash flow.

To respond to these challenges, it is crucial to change our paradigms and consider energy efficiency not only as an economic lever, but also as a necessity to ensure the sustainability and competitiveness of businesses in the face of environmental and economic challenges. This will result in an increase in the value of the real estate portfolio.

How serious is the risk of not investing in greener buildings? How can asset management improve this?

The Generation 1.5 study published in collaboration with the FTQ and other partners, including Hydro-Québec, Énergir, Devimco, as well as experts such as Vertima and BJC, aimed to analyze the financial risks associated with sustainable (green) buildings compared to traditional ones (brown), highlighting the long-term impacts on the valuation of real estate assets.

We often only perceive the initial additional cost of a sustainable building without taking into account the economic and environmental benefits that it can generate in the long term. Our goal was to identify risks associated with inaction, such as rising energy costs; the increase in the price of carbon; fluctuations in insurance premiums; the rental price; and the impact of emerging regulations, such as accounting standards on GHG emissions.

Financial institutions and real estate investors are increasingly adopting ESG policies and seeking to reduce their carbon footprint. This directly influences their investment strategy, favouring green buildings. Conversely, brown buildings are exposed to multiple risks, such as their location in areas vulnerable to climatic disasters (floods, hurricanes) or their unreadiness to comply with new climate and energy regulations.

Two scenarios were simulated in the study:

• 1. A sustainable (green) building: although it requires a higher initial investment, its resilience to climate and financial risks allows it to generate a higher return over 10 years, with a potential valuation up to 30 percent higher than a traditional building’s.
• 2. A traditional building (brown): its initial cost is lower, the risks that materialize (rising energy costs, equipment upgrades, regulatory compliance) result in a 15 percent decrease in its value over a decade.

A key point is also the premature obsolescence of equipment in traditional buildings. For example, equipment installed less than 10 years ago could become unsuitable for new climate or regulatory requirements, requiring costly investments. These reinvestments could almost wipe out any accumulated financial returns.

So, the real question is not whether investing in a sustainable building is risky, but to understand that not doing so exposes you to major financial risks. The coming financial, climatic and regulatory storms make this investment strategic, both to secure the value of assets and to meet the growing expectations of investors and institutions.