OTTAWA - Federal grants to improve the energy efficiency of existing buildings across Canada worked reasonably well for homeowners but were largely a waste of money for businesses, a new study suggests.

The so-called ecoENERGY program that the Conservative government introduced in 2007 prompted about half a million homeowners to insulate walls and attics, buy better furnaces and plug air leaks — most of it work that otherwise would not have been done.

But the majority of businesses that received grants under the program would have done the retrofits anyway, without the incentive of federal cash.

Those findings are from a draft evaluation of the $864-million, four-year ecoENERGY program, obtained by The Canadian Press under the Access to Information Act.

The grants, administered by Natural Resources, end next March although new applicants for the wildly popular homeowners' subsidies were abruptly cut off last March 31 as costs soared far beyond the initial program budget.

The internal evaluation of ecoENERGY, dated Sept. 15, examined the so-called "free rider" problem; that is, how many recipients of grants would have carried out the energy-efficiency improvements even without the incentive of taxpayer-funded subsidies?

Analyses of parallel home-retrofit programs in two U.S. states found "free rider" rates of between 26 per cent and 45 per cent. In other words, grants were wasted on this group, who would have carried out the energy-conservation work anyway.

The Canadian program, officially called ecoENERGY Retrofit — Homes, had an acceptable 25 per cent "free rider" level, based on a survey of homeowners.

Ten U.S. grant programs for businesses that paralleled the Canadian business versions had "free ridership" levels that were typically under 50 per cent. The Natural Resources evaluation, on the other hand, found almost 75 per cent of the Canadian business recipients would have carried out the retrofits anyway, with no government dollars.

The divergent results between homeowners and businesses were repeated when "spillover" rates were analyzed; that is, how much extra retrofit work was carried out that was not subsidized but was undertaken in connection with — and presumably inspired by — the grant-induced retrofits?

About 15 per cent of homeowners did extra work, all on their own dime, while for business it was as low as eight per cent.

"Free-ridership was not adequately considered when the ecoENERGY financial incentive programs were identifying targets attributable to the program," the evaluation concludes. The programs "may not be as cost-effective as they could be."

Ottawa initially earmarked $160 million in 2007 for the home-retrofit program, which provides up to $5,000 to homeowners who paid for an initial energy audit, carried out recommended improvements, and were audited again to ensure the work was satisfactory.

The Conservatives' 2009 federal budget, as part of the Economic Action Plan to deal with the global meltdown, dramatically expanded the homeowner program by more than $300 million. Response was so overwhelming that another $80 million was added in this year's budget — and new applications were cut off as of March 31 this year. The total budget for the four years ending March 3, 2011, is $745 million.

The business element of the ecoENERGY program was much smaller, and with a more modest takeup. The three business parts of the program together were budgeted at $119 million over four years, and as of March 31 this year — with one more year to run — about $71 million had been allocated.

The senior official in charge of the Natural Resources program says all of the ecoENERGY initiatives are being reviewed to determine whether they'll be renewed next year.

"That review is underway and no decisions have been taken for the period beyond March 31, 2011," Carol Buckley said in an interview.

Buckley said the homeowner program was clearly a success, and is expected to reach about five per cent of Canada's housing stock, helping to reduce Canada's greenhouse-gas emissions while giving the economy a boost.

The evaluation was useful in determining how the programs could be better designed in future, especially the elements directed at businesses, she added.

The report said working closely with individual provinces improved the impact of ecoENERGY. The homeowners retrofit program, for example, was well integrated with provinces but the business elements were not. Only New Brunswick agreed to partner with the business parts of the program.

Buckley said the business elements were intended to reach firms not normally assisted by energy-efficiency programs, and that any future renewals of the program would take into account the problems cited by the evaluation.

"I'd set the bar higher in terms of what the minimum investment needed to be," said Buckley. "And maybe provide them with more capacity support in terms of identifying the opportunities and making business cases. ...

"And maybe not providing financial incentives."