In 2010, Vancouver created the South East False Creek Neighbourhood Energy Utility (SEFC NEU),xxxv which represents the “wholly public” business model. It manages a district heating network largely based on renewable sources. The network is currently fuelled by waste heat from an expanded sewer pump station located within the NEU Energy Centre, but is designed to integrate future sources of renewable energy sources and waste heat. There were three main reasons that led the city to choose the “wholly public” business model. As the project had to be launched before the 2010 Winter Olympics, the development schedule was insufficient to secure a private utility and the related approvals. The public-led project was also an opportunity to demonstrate the commercial viability of modern district heating, as at the time of the initial project the private sector had not shown interest in or capacity to develop low-carbon district energy systems (a condition that has since changed). Additionally, the city had strong access to low-cost loans and was successful in securing grants.
When the system became operational in 2010, the municipality controlled 17% of the initial system load (25% of the floor area), but it was able to pass a service-area bylaw to guarantee connection of the additional loads. The network is publicly owned, which allows for transparent connection costs and energy tariffs, enabling the city to provide information on tariff cost and savings comparisons to building owners (e.g. savings from not having on-site boilers). This helped to build confidence and encouraged new connections from residents and private developers. The total cost of the project (CAD$32 million, i.e. US$31 million) was fully covered through utility customer rates and the utility was entirely financed by city-raised debt; however, the debt was structured as if the project was financed by 60% debt and 40% equity to demonstrate commercial viability to the private sector and give the city the option to divest in the future without impacts on customer tariffs. The SEFC system has grown its customer base by 260% since 2010. The SEFC’s district heating network, conceived as a demonstration project, motivated the private development of an additional network, as well as plans for two legacy steam-heat systems’ conversion from natural gas to renewable sources. Today, most of the new district energy investment in Vancouver is coming from the private sector, typically via a franchise agreement with the city to secure low carbon outcomes.
Reasons for success
Vancouver was able to adopt the “wholly public” model thanks to its strong access to low-cost finance and its ability to secure grants, which enabled it to implement the project without initial private investment and gave it the opportunity to carry out an innovative demonstration project that could be later replicated by private developers. The impending 2010 Winter Olympics also assured broader municipal backing for the project and its “wholly public” approach as the best way to guarantee successful delivery.
C40 Good Practice Guides
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All references can be found in the full guide.