Heating and Cooling – the Opportunity
Heating and cooling is vital to human existence. We don’t need these systems for comfort only. They are often a question of survival: regulating temperatures in extreme weather conditions and keeping our vaccines, medicines and food viable for long periods.
But we face a problem. In Europe and globally, half the energy consumed is for heating and cooling, mostly for buildings and industry. Almost all this demand is met by fossil fuels. In 2015, renewable energy accounted for only 10.3% of heating.
This means we can’t accomplish the energy transition and be on the path for 1.5 degrees to avoid the most catastrophic impacts of climate change, unless we act now to change how we heat and cool our buildings. And that’s nothing short of a revolution – one that is urgently needed, given the ticking clock the latest IPCC report has stated. In planning and infrastructure terms, 2050 is the day after tomorrow and everything must change, so we cannot go fast enough.
But the biggest opportunities for change often come by tackling the biggest problems. This is where our work, focused on district energy, comes in.
One Giant Leap: District Energy
District Energy. It’s pipes and water and when done properly, it’s an elegant solution to bring local energy resources to our buildings – to heat and cool as few as a dozen in a district or an entire city. Modern district energy systems connect renewables, waste heat, thermal storage, power and thermal grids and heat pumps.
These hidden technologies are a big deal for climate change mitigation goals – modern district energy can reduce primary energy consumption for heating and cooling by up to 50%.
Many countries in Europe are already on the fast track to achieve their climate targets, just by implementing modern district energy technologies. District energy knocked 20% off CO2 emissions in Denmark. Germany is using district heating systems to expand solar thermal systems collector field area by 800,000 m2 by 2020 (IKZ, 2017).
Cities are harnessing modern district energy to meet their energy efficiency, zero energy building and renewable energy objectives. Paris historically used district energy to reduce coal consumption and today is expanding and modernizing the network to connect social housing, improve energy efficiency and increase the renewables share, powering 50% of the network with renewable and recovered energy. From now and into the future, district energy will play an important role in carbon reduction commitments, helping Paris meet its 25% reduction commitment by 2020.
Imagine the energy and carbon emissions we could save if we accelerate the transfer and replication of these experiences in cities and countries worldwide.
That is why at UN Environment, we launched the District Energy in Cities Initiative, to take exactly these kinds of successes and spreading them elsewhere.
Fast-Tracking Cities and Bringing Impact to Scale
When you consider that the average connection to district energy is 12% in Europe and under 7% globally, we can see big potential for growth.
The Initiative is taking advantage of this potential.
Launched in 2014, the District Energy in Cities Initiative started with a few interested cities and committed partners like Danfoss, ENGIE, and the European Bank of Reconstruction and Development. Within four years, we have tripled our partners, while increasing the number of pilot cities committed to implement district energy six-fold with the accompanying amount of investment and carbon emissions reductions.
And more is coming.
When we started our work in countries like India and Chile, for example, district energy was not on the political agenda.
Today India has included district energy under its National Cooling Action Plan to phase down hydro-fluorocarbon (HFC) refrigerants. We are working with the city of Thane/Mumbai, among several others in India, to determine a tendering strategy for two district cooling projects, along with a 20-year city wide plan of district cooling action plan.
Looking to scale, we are designing a national programme together with Energy Efficiency Services Limited, the largest publicly-owned ESCO in India, including a US$200 million revolving fund to leverage investments in district cooling worth US$2.8 billion.
Chile, meanwhile, is prioritizes district heating under its 2018 Presidential Plan and its National Air Quality Plan. Ten Chilean cities have prepared district energy project assessments and the Ministry of Energy recently created a specialized district energy unit dedicated to support this project pipeline to investment, employing Initiative tools and methodologies.
We achieve such scale by understanding that demonstration projects shift markets, creating a replicable approach. The Initiative works with cities until we get to a tipping point that can drive national policy change. Then we set up a national delivery unit to support roll-out nationwide.
Public-Private Partnerships to Accelerate Investment
The majority of new district energy investment involves the private sector. That is because district energy is good for planet and pocket, like many energy efficiency investments.
On average, district energy projects make returns from 12 to 20%, break-even in 2 to 8 years, providing steady annual revenues over the long term.
But to really take advantage, we need to address upstream barriers and make it easier for the private sector to invest.
The Initiative's model encourages investment by partnering early in market development to prepare financially sound projects. In Banja Luka, this approach unlocked US$22 million in project finance to upgrade the city’s 35-year old network.
The Initiative worked alongside the European Bank for Reconstruction and Development (EBRD) from the outset to ensure that plans and assessments conform to finance providers’ requirements. The Initiative also worked with the CTCN, private sector, local stakeholders, and the city authority to build consensus and trust on planned interventions.
Engaging relevant and diverse stakeholders from the beginning proved vital in turning uncertainty on the district heating network’s future into an agreed financing plan and new business model and leading the project to market with a US$9.8 million investment loan from the EBRD.
The retrofits increased the share of renewables by 75%, slashed CO2 emissions by 91%, improved air quality, and saved US$1 million a year in reduced fuel use. The utility has gone from a negative balance sheet to making US$1.5 million in annual revenues.
As you can imagine, the utility is happy, the city is happy, and so are the taxpayers.
To sum up, acting on heating and cooling through modern district energy can take an enormous bite out of climate change, bring other benefits across sustainable development, and support healthy and green bottom lines – but it can only be done through partnership.
Europe's capacity to lead the energy transition through innovation and leadership is vast and the call to accelerate the energy efficiency revolution is clear – we hope you join us in this urgent mission.
* District Energy in Cities Initiative, a global network of 46 partners accomplishing energy efficiency projects in 36 cities across 14 countries, housed in UN Environment, Paris office.
For further information please contact:
Communications Officer, Energy & Climate Branch, United Nations Environment Programme