DISTRICT ENERGY IN CITIES A GLOBAL INITIATIVE TO UNLOCK THE POTENTIAL OF ENERGY EFFICIENCY AND RENEWABLE ENERGY. UNEP in collab oration w ith

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1 DISTRICT ENERGY IN CITIES A GLOBAL INITIATIVE TO UNLOCK THE POTENTIAL OF ENERGY EFFICIENCY AND RENEWABLE ENERGY UNEP in collab oration w ith

2 WHY IS DISTRICT ENERGY IMPORTANT? 60% of the global energy consumption in buildings, largely met by fossil fuels

3 ENABLE USE OF WASTE HEAT AND LARGE SCALE RENEWABLE SOURCES Connecting sources which cannot be used on an individual building level Can achieve 30-50% reductions in primary energy consumption for cooling

4 Levelized Cost of Cooling US Dollars/MWh (2013) D I S TRICT DISTRICT ENERGY IS COST EFFECTIVE Absorption Chillers Free Cooling Electric Chillers Network Commercial Chiller Cost Domestic Air Conditioning Cost Commercial/Domestic Electricity consumption *These costs are explained in the UNEP publication District Energy in Cities: Unlocking the Potential of Energy Efficiency and Renewble Energy

5 Levelized Cost of Heating US Dollars/MWh (2013) D I S TRICT DISTRICT ENERGY IS COST EFFECTIVE *These costs are explained in the UNEP publication District Energy in Cities: Unlocking the Potential of Energy Efficiency and Renewble Energy

6 MULTIPLE BENEFITS TO ACHIEVE DIVERSE POLICY OBJECTIVES Oslo, Norway's, employment benefits from DES are estimated at 1,375 full-time jobs. Green economy and resilience HCFC emissions Reduced CO2 emissions Paris reduced refrigerant emissions from cooling by 90% Balancing RE power Multiple Benefits Cities develop DES to achieve a variety of objectives Local, free and RE Sources GIFT City could lower electricity consumption for cooling by 65-80% Energy efficiency and access Reduced blackouts/ grid stress Lower cost of cooling Cyberjaya lowered cooling costs by 39% through district cooling

7 WHAT IS DISTRICT ENERGY?

8 LAUNCH OF DISTRICT ENERGY IN CITIES INITIATIVE AT CLIMATE SUMMIT Double Global Rate of Improvement of Energy Efficiency by 2030

9 THE SUSTAINABLE ENERGY FOR ALL INITIATIVE

10 A GLOBAL PARTNERSHIP TO SCALE-UP MODERN DISTRICT ENERGY SYSTEMS

11 OBJECTIVES OF THE INITIATIVE TAP THE POOL OF EXPERTISE ACROSS ITS PARTNERS TO: Increase awareness Promote and strengthen local - national policies Create an environment that attracts investment

12 MILESTONES OF THE DES INITIATIVE Sep 2014: Initiative Launch at NY Climate Summit Feb 2015: EU Conference on Heating and Cooling Apr 2015: Asia-Pacific launch in Seoul. Rajkot signing. Training on Initiative at ICLEI World Congress May 2015: 2 nd Partner Coordination Call. Governance structure adopted. May 2014: 1 st Partner Coordination Call Dec 2014: Presented Initiative at Dubai Cooling Conference Jan 2015: Secretariat established Feb 2015: Achim Steiner launches District Energy in Cities Report 30 Apr 2015: Europe & Central Asia Launch. IFC/UNEP workshop. IFC collaboration. Belgrade, Banja Luca, Croatia, Kosovo sign-up May-June 2015: 2 nd UNEP visits to Banja Luca and Belgrade Jun 2015: City of Rajkot visit to Climespace Jun 2015: Bonn Climate Talks, TEM meeting

13 MILESTONES OF THE DES INITIATIVE Jun 2015: Presented Initiative at meeting of the Nordic Countries on EU Heating and Cooling Strategy June 2015: 1 st Annual Partner Meeting in Vienna and adoption of DES Initiative s work plan Aug 2015: DES Initiative presented at the 4 th Annual Asia-Pacific Conference Dec 2015: French and Chinese Translations of DES Publication released June 2015: Milan case study and partnership Jun 2015: Meeting of French partners to the DES Initiative Jun 2015: Initiative side-event at EU Sustainable Energy Week Sep 2015: Bogota Climate Summit joint event between DES Initiative and SE4All Building Efficiency Accelerator Oct 2015: Paris case study released

14 A TECHNICAL GUIDE TO DISTRICT ENERGY In launching this report we want to draw the attention of the world s decision makers, mayors and leaders at the community level to the importance of district energy systems. - Achim Steiner, UN Environment Programme Executive Director. Launch of the District Energy in Cities Report - Paris, 25 February 2015

15 DEVELOPING THE INITIATIVE S APPROACH Best Practice Guidance developed with 45 champion cities (150 Interviews) Technology Options and Benefits City policies Business models National policies INITIATIVE S APPROACH FOR ACCELERATING DES

16 THE INITIATIVE S 10-STEPS TO DEVELOPING MODERN DES

17 INITIATIVE ACTIVITIES LIGHT TOUCH DEEP DIVE Four initial pilot countries selected for light touch and deep dive China India Serbia Colombia OUTREACH Regional and global replication and support, including: Latin America Eastern Europe Asia

18 Expertise sought from other members of Technical Task Force D I S TRICT LIGHT TOUCH CITY ACTIVITIES AIMS PROCESS Political buy-in identify one deep dive pilot city per pilot country create a pipeline of cities in each pilot country that will commit to developing DES, providing a critical mass for market transformation. Select 5 cities per pilot country DES Rapid Assessment in each city National DES workshop Long-term support STATUS 16 light-touch cities are being selected across the four pilot countries for using existing funding. Deployable project teams including UNEP, ICLEI, Danfoss and Empower to carry out some assessments

19 AIMS PROCESS DEEP DIVE CITY ACTIVITIES Demonstrate DES and establish DES city-wide plans, policies and investments, including one project to tender per pilot city. Test and regionally tailor tools, trainings, methodologies and best practices. Establish coordination framework Training and capacity building Deep assessment DES Plan and policies developed Support one DES project to tender STATUS One deep-dive city per pilot country will be selected from light touch activities DES Initiative preparing trainings, tools and methodologies with partner support Deployable project teams being planned with more expertise sought from Technical Task Force

20 AIMS GLOBAL AND REGIONAL OUTREACH ACTIVITIES Collect and disseminate best practice and project results to recruit new learning cities Ensure signed-up learning cities are sufficiently supported to develop DES. AWARENESS RAISING VIRTUAL PLATFORM DIRECT SUPPORT COP21 and COP22, global and regional forums, webinars and events. Regional workshops to attract new cities Publications on best practice and case studies Online virtual platform to provide training and support Training materials, tools, methodologies, best practice Communication link between learning cities and mentor partners Committed cities receive fundraising and matchmaking sessions with mentor cities and private sector partners

21 I N C I TI E S CASE STUDIES

22 BEST PRACTICE IN TOKYO: LOCAL PLANNING REQUIREMENTS District energy incorporated into Tokyo s planning system City requires large developments to assess connection to DH and DC and consult with district energy suppliers. If an economic barrier exists to connect a new large building the city will seek to overcome this barrier

23 BEST PRACTICE IN SINGAPORE: CONSUMER PROTECTION High opportunity district cooling zone identified District Cooling Act mandates connection which ensures business model is sustainable Tariff regulations ensure consumers protected from high prices Future financial gain shared with customers

24 PARIS: 90 YEARS OF CONCESSION Consumption of coal in the centre of Paris a significant problem (air pollution, deliveries and fire risk). Operates concessions for many utilities 1927: Private concession developed for district heating. 1949: City of Paris becomes 33% shareholder in CPCU Today district heating is nearly 50% renewable and supplies equivalent of 500,000 households including 100% of hospitals, 50% of social housings, and 50% of public buildings.

25 D I STRICT I N C I TI E S PARIS: QUICK FACTS Paris owns the network which is 475km long 4GW (thermal) production facilities producing steam for the network. Nearly 50% renewable 3 Waste-to-energy plants avoid the emission of 800,000 tco 2 per year, these are not owned by CPCU. The city is also using its significant geothermal reserves for district heating 2 CHP plants and several heat only boilers also provide heat and are owned by CPCU Production: 5.5 TWh of heat and 1 TWh of electricity per year

26 PARIS CONCESSION MODEL 1927: CPCU, a private company, starts developing district heating under a concession contract. 1949: City of Paris purchases 33% making CPCU a public-private joint venture. 1991: ELYO (later Cofely) becomes majority shareholder. Today: CPCU is 33% owned by City of Paris, 64% by the private sector (Cofely) and 2% is traded publicly. Dividend to city from CPCU per year: 2 million euros Annual fee paid to city for concession per year: 7 million euros Calculated benefits to city each year: 19.5 million euros

27 PARIS OWNERSHIP STRUCTURE AND CONTROL City of Paris owns the network Production facilities mostly owned by CPCU except 3 waste-to-energy plants CPCU does all maintenance, investment and customer interactions. 4 of 10 directors on CPCU s Board of Directors nominated by City of Paris. Concession contract specifies maximum heat tariff indexed by percentage of renewable energy sources used to encourage renewables. City of Paris can control the production mix of heat and target higher renewable shares.

28 SPLIT ASSET CONCESSION MODEL WITH D I S TRICT PUBLIC/PRIVATE CONCESSIONAIRE Regulator (Paris) Gas, Biomass, Waste etc. Waste-to-energy plants are owned by regional agency. 1 TWh per year CHP and Waste-toenergy Concession Agreement 7 million euro per year DH Network (owned by city, operated by CPCU) CPCU (public/private) 5.5 TWh per year Return on Investment 2 million euro dividend to City 19.5 million euros calculated benefit to city per year 100% Hospitals 50% Social Housing 50% of public buildings 33% City of Paris 64% Cofely

29 PARIS: LOCAL GOVERNMENT IMPACT PLANNER AND REGULATOR Urban Development Zones Will develop mandatory connection once more than 50% renewable (2015) Strategy and targets: 60% renewable by FACILITATOR OF FINANCE Enables cheap loans for CPCU Direct loans. Sometimes pays for extending the network inside the new zone Pools investment with other municipalities PROVIDER AND CONSUMER Anchor loads (public buildings, hospitals, social housing). Network runs through parts of the metro system Direct ownership of network in the city. Sets maximum heat tariffs and sets a special low tariff for social housing COORDINATOR AND ADVOCATE Urban Development Zones will develop mandatory connection once more than 50% renewable (2015) Strategy and targets: 60% renewable by 2020.

30 BENEFIT OF PRIVATE SECTOR City of Paris reduces risk associated with generation and distribution of heat. Able to use expertise of international district heating company. Separation from City allows CPCU to be self-financing and more efficient. Large private sector investments historically helped finance development Benefits/payments to city

31 ANSHAN, CHINA: THE PROBLEM 42 different district heating companies, some networks owned by the city and some are privately owned. High pollution levels with current system: fined US$1.3 million in 2013 by Liaoning province for high levels of PM10, SO2 and CO2. Some networks have overheating and underheating. Lack of hot water connections means networks are underutilised. Source

32 ANSHAN, CHINA: INVESTING IN WASTE HEAT Million RMB <2.5 years payback / / / / MW available surplus heat (1 st phase) Yearly energy saving Coal savings C02 emission savings Yearly savings 830,000 MWh 173,000 tons 290,000 tons 103 million RMB (15 million euros) Source Investment million RMB (30 35 million euros)

33 ANSHAN, CHINA: PRIVATE SECTOR Local government worked with Danfoss and COWI to design more sustainable and integrated heating solutions for the city. Danfoss supplied heat exchangers for waste heat connection to steel plant The new transmission line will be owned and operated by a joint venture that is 60% city owned and 40% private. The construction will be sub-contracted to individual contractors. All existing district heat companies will remain, purchasing heat from the central transmission company.

34 ANSHAN S LOCAL GOVERNMENT PLANNER AND REGULATOR Developed with the help of private sector a new strategy for district heat development in city. City s focus on pollution reduction is key driver in transforming system. FACILITATOR OF FINANCE Directly financing majority of improvements in the city including connection of waste heat and a transmission line. Large city investment has leveraged private investment in transmission line. PROVIDER AND CONSUMER Utilising municipally owned district heat companies as an investment vehicle for upgrading networks. Setting waste heat tariff from steel plant to pay off investment in connection. COORDINATOR AND ADVOCATE Cities role will be in coordinating multiple district heat companies. Advocating system to other cities in the region.

35 BENEFITS OF PRIVATE SECTOR Danfoss bring international expertise in district heating development enabling Anshan to use less coal and thus pollute less. Investment provided from private sector in transmission line reduces risk to city and allows funds to be used elsewhere.

36 YEREVAN, ARMENIA STATUS OF DHN No domestic fossil fuel resources, import natural gas, DH supply up until 1990s Today: individual heat solutions: wood, kerosene, electricity, gas boilers District heating on existing network 60% > expensive domestic gas-fired boilers Low-reliability, poor maintenance, heat losses, low collection rates

37 YEREVAN PILOT PROJECT Cogeneration on DHN could deliver 14.6 AMD/kWh of heat compared to boiler houses on DHN delivering 22.7 AMD/kWh if electricity is used ArmRusCogeneration CJSC, restore network, build CHP Yerevan minority shareholder Government Decision guaranteeing purchase at favorable price of electricity produced by new cogeneration units of the district heating project.

38 YEREVAN JOINT VENTURE MODEL CHP FiT CHP on DHN could deliver 28 euros /kwh of heat compared to DH connected boiler 40 euros/kwh ArmRusCogeneration City and private sector ArmRusCogeneration CJSC (Yerevan minority stakeholder) Transfer of publicly owned network to joint venture 10,000 residents reconnected. Save 50.2GWh of energy and 10,200 tco2eq

39 YEREVAN, THE ROLE OF LOCAL GOVERNMENTS PLANNER AND REGULATOR Worked with national government to apply 1. multi-part heat tariff < alternative 2. preferential electricity feed-in tariff (internalizing benefit of heat in the electricity price) < marginal price FACILITATOR OF FINANCE Free use of municipally owned DH infrastructure to enable PPP demonstration project. Leveraged more than 9 million USD of FDIs for restoration of district heating system PROVIDER AND CONSUMER Utilising municipally owned district heat companies as an investment vehicle for upgrading networks. Setting waste heat tariff from steel plant to pay off investment in connection. COORDINATOR AND ADVOCATE Cities role will be in coordinating multiple district heat companies. Advocating system to other cities in the region.

40 THANK YOU! For more information on the Global District Energy in Cities Initiative and to become a partner, please visit the website or contact: Mrs. Djaheezah Subratty, Head of Policy Unit, Energy, Climate, and Technology Branch, UNEP Djaheezah.Subratty@unep.org Ms. Lily Riahi, Advisor on Sustainable Energy in Cities, Energy, Climate, and Technology Branch, UNEP lily.riahi@unep.org unep.org/energy/des