Affordable solutions for greener cities: introducing the “virtual” district energy system

Affordable solutions for greener cities: introducing the “virtual” district energy system

The drawback to energy efficiency policy is that it can be unclear how the real estate and construction industry might benefit from the changes – they fear (sometimes with justification) that green buildings cost more.  Fortunately, we have developed strategy for solving that problem.  We’d like to introduce a ground-breaking policy tool can be used by any city to accelerate the shift to ultra low carbon buildings at no cost

Almost every local government has set climate goals and it follows that they should be eager to accelerate the adoption of the in-building energy utility approach because it dramatically accelerates progress in achieving their climate goals at absolutely no taxpayer cost.

Here is where it starts getting really interesting because every municipality has access to an existing bylaw that, with some very minor tweaking, could compel the developers of every new building over 50,000 sq. ft. to participate in the setup of the in-building energy utility. That bylaw is a District Energy System (DES) bylaw.

The DES bylaw requires all new, large buildings in a specified area to hook up to a central energy system via underground pipes that run from the central plant to the buildings.  However, if the term “system” was interpreted slightly more broadly the argument could be made that if the buildings were connected “fiscally” instead of “physically” that connection would constitute a “system” and therefore should be applicable.  While this re-interpretation has not been definitively tested under the law, legal experts suggest that this interpretation or some minor variation of it should hold up.  If the DES Bylaw could be applied to a financially connected district energy system, it would have a profound impact on our societal GHG efforts, and therefore should merit marshaling the best legal minds to create the appropriate legal wording.

Assuming they can, municipalities could use the DES bylaw to require every new building over 50,000 within their municipal boundaries to be connected together through the financial operation of in-building energy utilities in each building that achieve an ultra-low carbon emission standard.

As positive as this would be, it still has one important drawback and that is that the DES bylaw currently only applies to new buildings.  However, just as the original DES bylaw was developed by creative minds we would hope that a similar burst of innovative thinking would permit the DES bylaw (or some similar new bylaw) to be applied to existing buildings as well.

This works really well for existing buildings. While it is still possible to set up an in-building energy utility that fully covers all energy retrofit costs in exchange for the right to recoup those costs by charging the tenants a utility energy rate, the carbon emission reductions would likely be about lower (50% reduction instead of 80% reduction). This is because it costs more to install certain technologies in an existing building. Nonetheless, because existing buildings account for 98% of all large buildings (as compared with 2% for new buildings), the inclusion of existing buildings in the DES bylaw would result in a monumental increase in GHG savings, as every single existing and new building could be required to participate.

While a mandatory DES bylaw may sound to some like a heavy-handed government approach, it is important to remember that under this system no party will incur any extra costs and everyone will be invited to become owners in the energy utility and generate a good financial return. With this solution, everyone is a winner.

David Van Seters, Helen Goodland and Nick Farina are the co-founders of eStream Energy Partners, an in-building energy utility company that is seeking to partner with developers and municipalities to facilitate this groundbreaking new way to achieve dramatic carbon emission reductions in large buildings.

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