ENERGY EFFICIENCY
ACCELERATOR
DISTRICT ENERGY
District energy systems are among the most efficient ways to distribute electricity as well as heating and
cooling (thermal) services, providing efficiency gains up to 80-90% relative to conventional separate generation
of electricity and heat. By 2050, modern DES (District Heating and Cooling with Combined Heat and Power)
could avoid over 35 GT of CO2 emissions at low cost, and deliver 58% of CO2 emission reductions required to
keep the global rise in temperature to 2-3°C, while producing significant environmental and economic benefits.
DES enable the use of
1)energy that is typically lost (reducing primary demand by 30-45%),
2)energy sources that are not viable at the scale of the single building,
3)a variety of local fuel sources, including waste streams and renewables.
DES systems are fuel and technology agnostic and also enable the greater integration and balancing of variable
renewables. District energy is an opportunity for all countries, and particularly for those that have coal-based
electricity production, and those that could harness important economic gains from fuel switches to locally
available renewable energy sources. Harnessing economies of scale, DES lower the cost of moving buildings to
higher efficiency. As a form of decentralised energy, it allows the matching of energy output with specific load
demands, which defers or avoids additional investment in central generation and distribution infrastructure;
and use of different locally available energy, reducing vulnerability to external events. In places where electricity
infrastructure is being built, DES can increase access to modern energy services and achieve greater system
reliability. Other benefits include local economic development through job creation.
MARKET BARRIERS
DES are not new, and cost effective technologies are available today. Still, there are long-standing barriers to greater
deployment of DES:
•lack of awareness about benefits and
savings;
•lack of appropriate recognition of benefits
by some green building certification
programs (e.g. LEED), which favor
building-scale energy solutions;
•the lack of an agreed methodology to
•lack of integrated infrastructure and
land-use planning to match supply and
demand, ensure a large, densely developed
customer base to ensure viable project
economics, mitigate load uncertainty
(ensure future connections) and to minimize cost to end-user (anchor loads);
•grid access and interconnection
regulations;
•high upfront capital cost;
•lack of knowledge/capacity in structuring
projects to attract the investments;
•and a lack of access to patient capital.
recognise energy saving and environmental benefits;
However, cities and countries worldwide have successfully developed targeted policies that address the above market barriers;
enhance long-term cost competitiveness; harness the private sector’s financing and delivery capability; and have succeeded in
scaling up district energy systems, and fostering significant industry growth.
MARKET SECTORS
DES involve city governments, commercial, institutional and residential building owners, as well as engagement by the private sector.
While DES generally benefit from the ability to utilize low operating
cost energy sources, these systems require high initial investments
to pay for capital construction costs, as with all major infrastructure
investments. These costs can be managed under a utility ownership
model which allows for upfront capital costs to be amortized over the
long term and recovered through customer rates that are competitive
with traditional forms of heating (i.e. electricity and natural gas).
But a variety of economic models and business partnerships exist
that provide viable structures to establish and manage district
systems. Which model is best depends on objectives and preconditions. In public –led models, the government owns the bulk of new
district energy infrastructure, but the technical design, construction
and possibly even the operation is often contracted out to private
firms. Co-operatives are increasingly popular often in the case of
smaller scale projects, (up to 3,000 customers), and the plant may
or may not be owned and operated by the energy users.
In order to engage the private sector, projects need to capture at
least 200-500 housing units, have sufficient density and/or a mix of
uses and loads. If there is an anchor load nearby then this threshold
can change. Public (government, education, healthcare buildings)
and commercial (corporate and investor-owned real estate) building
sectors can kick-start district energy delivery models that engage the
private sector, as they provide anchor load, and require less coordination than the residential single family and multi-family house sector.
From a review of successful cases, five DES “development types” are
apparent:
1)New systems for new development projects, both greenfield
and brownfield projects;
2)New systems in the existing built environment;
3)Upgrading and expanding existing institutional or multi-user
district energy systems;
4)Upgrading and expanding existing single-user institutional
systems to encompass surrounding development;
5)Establishing single-user institutional systems.
EFFECTIVE DES POLICIES:
FROM RESOURCE AND INFRASTRUCTURE PLANNING TO LAND-USE POLICIES
Energy Mapping and Infrastructure Planning is the starting point to
assess district energy opportunities, establish economic and technical
viability, develop tailored policies and business models, and inform
an overarching district energy strategy. Energy and resource mapping
can also be used to build public awareness and engage the stakeholder necessary for effective project implementation.
Policies that help create a market for DES include: benchmarking and
disclosure requirements of building energy performance; incentives
for energy efficient renovation and new construction; measures
and standards that provide incentives for the electricity produced
in district energy systems (e.g. CHP) with clear, consistent rules for
connecting to the grid; priority dispatch; licensing exemptions for
small scale generators; and policies that open energy markets to
decentralized generators and internalize the public benefits of DES
(FIT, net-metering, heat incentives).
KEY STAKEHOLDERS
The District Energy Accelerator will engage city/country partners to develop an integrated policy and investment roadmap for deployment of
district energy systems (DES) in multiple jurisdictions and initiate city partnerships or ‘twinnings.’ These partnerships and city twinnings will
allow city governments to share their policies and experiences and assist each other in policy planning and DES strategy development;
and engage in a collaborative process with public and private sector stakeholders. The following are representative stakeholders that should
be involved in the planning and implementation process:
NATIONAL/STATE
GOVERNMENT:
CITY GOVERNMENT:
BUSINESS:
END-USERS:
FINANCE
INSTITUTIONS:
EXPERTS:
• Energy and
environment
ministries,
• financial and fiscal
departments,
• utility commissions,
• grid operators.
• Elected officials,
• planners and regulators,
• building code officials,
• energy or facility
managers,
• municipal utilities,
• environmental services,
• city networks that can
facilitate city twinning.
• Utilities and
• Real estate
• governments,
• building owner
associations,
• hotel and retail
chains.
• World Bank,
• regional development
banks,
• GEF,
• finance institutions,
• pension funds.
• International and
local NGOs,
• industry groups,
• national and local
experts
subsidiaries,
• energy service and
energy management
companies,
• engineering firms and
technology providers,
• local supply-chain
companies.
A recent renaissance of DES has led cities and utilities to deploy systems with the support of organizations such as EBRD, GEF, IEA, UNDP, UNEP,
and environmental NGOs and think tanks, as well as green building councils and industry associations like IDEA and Euroheat & Power. UNEP
is developing a handbook with ICLEI and UN Habitat on DES policies at the city level. International finance institutions such as the World Bank,
IFC, EBRD, and regional/national development banks have gained experience with DES policy development and project implementation. Private
financial institutions are providing project finance for the deployment of DES projects. There is a significant opportunity for DES scale up.
COMMITMENTS
Using the public-private collaboration model of the Energy Efficiency Accelerator platform, this Accelerator could facilitate the following
commitments: [xx] cities will develop DES strategies, based on energy resource mapping, to roll out systems supplying [xx%] percent of their
energy, and reduce [xx] tons of GHG emissions. NGOs and IGOs will provide policy tools, resources and expert assistance. Financial institutions
will deliver [xx] amount of funding for policy roadmap development, implementation, project execution and performance tracking. Utility and
energy service companies will commit to help deliver [xx] number of DES. Global and local businesses will offer energy audits and mapping to
enable [10-15] cities to assess their DES potential. Other commitments comprise the quantification of the goal, baseline and impacts as well as
the reporting of actions and progress.
The key near-term milestone is securing a commitment from [10-15] city governments, supported by their
national governments, [3-5] utilities / technology companies, and [3-5] finance institutions to
participate in the DES Accelerator, and engage in city/country partnerships. The process
and lessons learned can be captured in the Solutions Gateway created by ICLEI and
UN-Habitat to build knowledge and share replication potential on a wider scale.
City governments are an effective player, as they have regulatory
authority over public procurement and land use, and often own or
have stakes in local energy utilities. Through land-use policies, city
governments can set: guidelines for urban development plans to
consider district energy; service area bylaws that designate areas for
district energy service providers; public and private rights-of-way
and easements for district energy infrastructure installations; provide
access to land, infrastructure, and waste streams; district energy
connection mandates and compatibility requirements; development
cost charges; and zoning to encourage high density and mixed use.
Such land-use-related policies help aggregate, provide or guaran-
tee minimum anchor loads for developments, and provide investor
security and alleviate financial risks (customer retention/risk). City
governments can also help by setting green building policies that
allow developers to achieve requirements cost-effectively through
connecting to DES; and by outlining local development strategies and
climate action plans, harnessing DES potential for wide community
development.
© Islington Council
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ENERGY EFFICIENCY
ACCELERATOR
DISTRICT ENERGY
NEXT STEPS
An ad hoc working group will be formed to complete detailed
planning. It will also facilitate the suggested process for the DES
Accelerator and help recruit city, state and regional officials and
national governments that wish to participate. Discussions are
co-led by Danfoss and ongoing with leading private sector actors
to join the initiative. This accelerator is initiated by UNEP in collaboration with ICLEI – Local Governments for Sustainability and
UN-Habitat under the framework of Sustainable Energy for All.
Communication material produced by UNEP
as a contribution to SE4ALL.
The Global Energy Efficiency Accelerator Platform is a partnership comprised of a large
number of institutions, businesses and governments which include among others:
Accenture, Asian Development Bank, European Bank for Reconstruction and Development,
Inter-American Development Bank, ICLEI (Local Governments for Sustainability), International
Copper Association, International Energy Agency, Johnson Controls, Philips, UNDP, UNEP,
UN Foundation, World Business Council for Sustainable Development, World Bank (ESMAP),
World Resources Institute.
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www.se4all.org/energyefficiencyplatform/