President's Message 4th Quarter 2015

By Robert Thornton posted 06-16-2017 20:34


From District Energy Magazine, Fourth Quarter, 2015

Juan Ontiveros

District energy is a proven environmental strategy for cities. From the days when Thomas Edison first developed district energy in New York City, centralizing the production of heat in a more highly controlled urban facility has enabled displacement of hundreds or even thousands of individual boilers and furnaces in a city. That same environmental strategy is being deployed today in megacities like Beijing and Seoul where massive investment in district energy is under way, specifically aimed at improving air quality, increasing sustainability and promoting the health of citizens.

Early on, cities that adopted district energy realized that a primary societal benefit was the dramatic reduction of fine particulates being emitted by coal furnaces across the city. A side benefit was the reduced risk of major fire conflagration achieved by cutting the number of combustion sources. Today, district energy innovators are integrating renewable technologies and low-carbon options to cut urban greenhouse gas emissions. A central plant can leverage economies of scale to deploy cleaner, more efficient technologies not economically viable on a building-by-building basis - like waste-to-energy, surplus industrial heat, biomass and even renewable cooling. Taken one step further, centralizing the integrated production of electricity and thermal energy to supply a community microgrid can optimize efficient use of local resources, cut emissions, strengthen grid resiliency and reduce energy waste.

In August I was invited to Seoul for a district heating/combined heat and power summit sponsored by Korea District Heating Corp. (KDHC). I commend KDHC President Kim Sung Hei for his leadership in convening the signing of a memorandum of understanding among Korea, China, Mongolia, the European Union and the United States to facilitate greater collaboration and knowledge sharing on district energy and CHP. District energy systems in Korea utilize waste-to-energy and CHP and are actively integrating biomass and renewable resources. Although founded just 30 years ago, KDHC today has annual revenue greater than $3 billion, underpinned by significant annual growth. A key focus is on reducing the energy intensity of its customers and doing more with less. For example, IDEA member Flow Control Industries participated to help KDHC understand how the company's balancing valves can improve customer efficiency through maximizing differential temperature performance.

In late September, on the same day that Chinese President Xi Jinping was meeting with President Obama to announce plans for carbon trading in China, IDEA hosted a delegation from the Beijing District Heating Group (BDHG) at Harvard University for a briefing and plant tour. The president of BDHG, Liu Shui Yang, gave an overview of the massive scale of district heating in and around Beijing, arguably the largest system on the planet, and explained the company's recent efforts to improve production and distribution efficiency while reducing customer energy intensity. Expanding CHP, shifting from coal to natural gas and integrating distributed heat sources are all part of the strategy. BDHG has plans, characterized as "blue sky, green energy and smart heating," to invest $100 billion yuan (around $15.7 billion) in district energy networks over the next 15 years. Part of the plan involves construction of major thermal feeder loops, nearly 150 km (92.3 miles) in length, so that production and emissions are located outside the Beijing air bubble.

In controlled, more centrally planned economies like China's, investment in district energy by federal, regional and local governments is fundamentally easier because the economic model values and integrates all of its benefits to society. Higher efficiency stimulates lower net cost to consumers and producers alike. Air quality improvements translate to fewer premature deaths and reduce overall health care costs by decreasing respiratory and pulmonary disease, and those costs are all internalized in the economic model. As a result, central planners properly value all the advantages of district energy/CHP. One of the challenges in a capitalist economy like the U.S. is that some of the benefits of district energy/ CHP systems accrue to society in general, yet the investment costs must be covered by direct consumers. Monetizing the value of cleaner air, greater grid resiliency and reduced greenhouse gas emissions needs to be incorporated into policies and regulations.

The U.S. Environmental Protection Agency's Clean Power Plan (CPP) represents an important and timely policy to potentially leverage greater investment in district energy/CHP. As discussed during a recent EPA/IDEA webinar, the proposed federal rule will set state targets for carbon dioxide emissions reductions from electricity generating units (EGUs) and enable states to design and implement their own compliance strategies. Since district energy/CHP is ubiquitous in all 50 states, it will be important for IDEA members to engage with and educate their respective state policy makers. IDEA has worked collaboratively with EPA for at least 15 years, and both parties have benefitted from an ongoing dialogue. EPA recognizes the scale and economic advantages of district energy/CHP and has been receptive to credible policy input from IDEA. For instance, the new August 2015 version of the CPP now credits 100 percent of thermal output, whereas the original draft only credited 75 percent of thermal output from EGUs for emissions displacement. The comment period will close 60 days after the revised rule is published in the Federal Register (which had not occurred as of the date of this writing). IDEA plans to submit comments on the model rule and federal plan and will offer guidance to our members for state efforts. It will be critical that we all mobilize to educate state-level policy leaders.

IDEA has published a "Smart Tools" white paper with case studies showing how district energy/CHP can be a valuable compliance tool. These can serve to educate policy makers on real-world local examples. As demonstrated by Veolia's Kendall Station Green Steam project, recovering useful heat for district energy can deliver multiple economic and environmental benefits to a city. Instead of overheating the Charles River, surplus heat is now recovered and delivered through a new pipeline to customer buildings in Boston. Utilizing thermal energy improves the heat rate for the electricity generating station and elevates its dispatch standing with the New England ISO. Reusing heat from generation displaces downstream emissions representing about 6 percent of the total emissions for the Boston/Cambridge economy - a significant step forward to compliance. But let's all understand that IDEA and our members will need to actively engage in the coming effort to fully leverage the potential of the CPP for our industry.

The imperative for education and advocacy traverses local, state, federal and even global platforms. Last September, IDEA was invited to the United Nations Climate Summit to participate in the launch of the U.N. Environment Programme (UNEP) District Energy in Cities Initiative. Since then, we have worked to support the UNEP initiative through outreach and engagement. For example, at the recent IDEA Annual Conference and Trade Show, the city of Boston agreed to join as a "champion city" and more than two dozen IDEA member organizations signed on to join as UNEP partners. IDEA member Empower has been very engaged in support of UNEP district cooling efforts and hosted UNEP at our conference in Dubai. Fast-forward one year, and today the 2015 U.N. General Assembly has released 17 sustainable development goals (SDG), a number of which relate to energy:

  • Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation
  • Ensure access to affordable, reliable, sustainable and modern energy for all
  • Make cities and human settlements inclusive, safe, resilient and sustainable
  • Take urgent action to combat climate change and its impacts

While the SDGs do not explicitly prescribe district energy or CHP, U.N. leaders clearly understand our sector and appreciate the climate mitigation advantages of efficient district energy.

Like many people, I was transfixed by the American visit of Pope Francis, especially his address to Congress, where he commended actions to cut pollution and to urge cooperation across national boundaries to "protect our common home." Therefore, it falls to us, the actors in the industry, to identify opportunities and work collaboratively, both with government and other nongovernment agencies to mobilize business leaders to invest in district energy. With China's commitment to enact carbon trading, along with firm carbon targets by more than 70 countries, it feels like substantial momentum is building as we approach COP21, the 2015 U.N. Climate Change Conference, in Paris. Over 1,000 mayors will be gathering at Paris City Hall to call for local action, and we need to be ready to assist those cities seeking more guidance on district energy as a solution.

This will not be a straight line forward, and it will involve engagement with many parties, like EPA, the Department of Energy, International Energy Agency, UNEP, C40 Cities Climate Leadership Group, Urban Sustainability Directors Network and the U.S. Green Building Council (USGBC). IDEA has launched a new initiative with a USGBC task group to update the treatment of district energy in the LEED rating system. We will continue engagement in ongoing development activities in cities like Pittsburgh, Washington, D.C., and others across North America while we continue support of the UNEP District Energy in Cities Initiative. It's clear that district energy has once again emerged as an important environmental strategy for cities, and our industry must step forward not only to support, but to lead.

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