04 Apr 2017

Build right to save energy and money: Unlocking the potential of district energy in urban development

District cooling is not a new concept — in fact, it’s been around for over 120 years and quietly cools cities like Dubai, Singapore and Paris — but it’s gaining traction as the world searches for proven technologies to ensure cities are developed sustainably. In the fast-growing “development corridors” of Malaysia, investors are pushing for innovative policies that can unlock district cooling’s full potential in a country with accelerating demand for air conditioning.

​A technology that reduces energy use, expenses and the need for refrigerant chemicals, district energy is finally getting its place in the sun.

Fast-growing emerging economies, whose expanding, increasingly middle-class populations need new housing, and whose burgeoning industries need new operating centres, are looking for ways to build brand-new townships that will lock in efficient, sustainable energy and resource-use patterns.

They’re in a unique position to capture the full benefits of district cooling, but it’s a one-off opportunity because its foundations are laid underground so it has to be considered at the planning stage.

“Without district cooling, new developments and industry will run almost 100 per cent on grid electricity and will miss out on opportunities for using high efficiency waste heat and renewables for cooling,” said Maimunah Jaffar, the Head of Planning and Compliance at the Iskandar Regional Development Authority(IRDA), the organization responsible for one of Malaysia’s “development corridors”, Iskandar, in the southern state of Johor.

Development corridors are large, connected areas set aside for new developments that accommodate and develop the country’s growing economy and population.

Investors: Regulatory policies needed to unlock district energy’s potential

The IRDA is looking at using district energy to cool a newly-planned township with a data centre hub at its heart, and private investors are acting as a catalyst, pushing for government policies that will help further unlock the district cooling market.

The investors want a regulatory framework partly because the cost structure and infrastructure needed to provide district cooling are different from those of conventional air conditioning.

Guidelines setting out cost- and benefit-sharing structures could be part of the answer, helping avoid future issues, such as pricing problems and perverse incentives, as experienced in other parts of the world with large-scale district cooling.

“Unlocking our potential for district cooling will require longstanding market barriers to be removed and replaced with a supportive policy framework promoting cost-effective and low-carbon operation,” said Datuk Ismail Ibrahim, Chief Executive of the Iskandar Regional Development Authority.

High opportunity costs of conventional energy and high stakes for the planet

The opportunity costs of overlooking district cooling for Iskandar’s planned 740-acre Kulai Sedenak project would be high. Without intervention and planning support, the new township would develop using stand-alone chillers, and miss out on a projected 35 per cent saving on carbon emissions, 50 per cent saving on refrigerants and up to 40 per cent saving on primary energy consumption.

It would also miss out on the opportunity to be a pioneer. New planning guidelines developed at the level of the Iskandar region could be scaled up nationally, potentially having a huge influence on real estate developers and industry. These could also influence municipalities in Malaysia and around the world to design smart cities that incorporate low-carbon district cooling.

The stakes for meeting Malaysia’s pledged contribution to the Paris Agreement on Climate Change – a 45 per cent reduction in greenhouse emissions by 2030 and a 32 million-tonne cut in carbon emissions by 2020 – are also high.

Despite this, in Malaysia, as elsewhere, district cooling is not always considered by building developers, or is written off as too expensive, even though existing projects in the country could save between 10 per cent and 35 per cent on cooling costs. This cost efficiency is achieved through dramatic reductions in electricity consumption of up to 50 per cent.

District Energy in Cities Initiative and Iskandar region to work on guidelines

It’s not for want of support.

“Malaysia actively promotes renewable energy and energy efficiency to mitigate climate change, which involves putting in place the policy, regulatory, financial and facilitating frameworks,” said Paul Wong, Under Secretary of the Green Technology Policy Division in Malaysia’s Ministry of Energy, Green Technology and Water (KeTTHA).

“District cooling, being an energy efficient technology and practice, is strongly supported by the Malaysian Government,” he said.

At the request of IRDA, the UN Environment-led District Energy in Cities Initiative is providing expertise to identify local guidelines, policies and regulations to unlock the sector and attract investment for district cooling in this and other large-scale developments in Malaysia.

Last week, the Initiative brought together relevant actors from Malaysia and around the world – among them, district energy providers, champion cities, regulators and law firms – with the intention of building momentum for action to transform this nascent market into a success story for Malaysia.

“We will use the insight and expert recommendations from this workshop to support Iskandar as it strengthens the investment environment for district cooling,” said UN Environment’s Chief of Energy and Climate Branch Mark Radka.  

“A first step will be to work with the authorities to develop planning guidelines based on national and international best practice,” he said. 

In fact, Malaysia already has a number of district cooling plants of various sizes, the largest of which cools buildings in CyberJaya, a young town with a science park at its heart that aspires to be the Silicon Valley of Malaysia.

ENGIE, which owns 49 per cent of this particular plant and is a partner of the Initiative, was part of this multi-stakeholder group providing comments and insights on the Malaysian district cooling market.

“Our goal is to bring clean energy and energy efficient solutions like district cooling and heating networks to meet the needs of smart cities in the Asian region. Our district cooling system that supports CyberJaya demonstrates innovative green technology as a model for a sustainable and green township,” said Pierre Cheyron, the CEO of ENGIE Services Asia-Pacific.

It may not be the most exciting or visually-arresting energy- and emissions- saving technology in existence, but with a growing and increasingly urban world population that will need to be housed and clothed, many in new townships in emerging economies, district energy provides an essential contribution to just, sustainable development.

Given that cities account for 70 per cent of global greenhouse gas emissions worldwide and buildings are one of the main sources of urban emissions, district energy may finally be getting its long-awaited recognition.

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