WHEN A HOME-GROWN IDEA GOES GLOBAL
RMI is showing the world how working with hundreds of buildings at once has sustainability impacts greater than the sum of their parts
By David Labrador, Senior Writer/Editor at Rocky Mountain Institute.
Rocky Mountain Institute wants to coordinate your entire neighborhood to save you money, and save the climate. For years we built or renovated single buildings — like New York’s iconic Empire State Building — to show how energy efficiency improvements can save energy and costs. But then we widened our focus to whole districts of buildings, and discovered new ways to harness advances in clean energy to create an entirely new business model that allows for sustainability benefits that go far beyond economies of scale. This is the story of how that work unfolded and spread to radically low-carbon districts in China, India, and around the globe.
RMI first switched to working with an entire district in 2014, when we helped Arizona State University’s 1,550-acre campus work toward climate neutrality and save money doing it. The key to achieving such success profitably is that “It doesn’t have to be in one fell swoop,” says Victor Olgyay, a principal with RMI’s Buildings Program. “If you incrementally improve buildings when pieces of equipment are failing and it’s cost-effective to replace them, you can get to deep energy savings, very low energy, even zero energy, over time.” That concept, which underlies RMI’s Zero Over Time Initiative, is helping make existing buildings and districts cleaner and more profitable.
Next, RMI’s Buildings Program found itself creating a new zero-energy district from the ground up. The site is Hazelwood Green, a proposed 180-acre, 6-million-square-foot, mixed-use development on a former industrial site in Pittsburgh. A net-zero energy building or district offsets its annual energy consumption with on-site renewable energy production. The RMI team began with a technical analysis, using whole-building energy modeling and district-level modeling of the electricity systems, including renewable energy, and of the heating and cooling systems.
BUSINESS MODEL BREAKTHROUGH
The breakthrough came when the team did an economic analysis to find the most cost-effectivemway to get to net zero energy. “At that point, a lot of people thought that, even if net zero energy was achievable technically, it would be difficult to pay for,” says Matt Jungclaus, a manager in RMI’s Buildings Program. But the team found that planning an entire district presented a unique opportunity to make net zero energy profitable for everyone, including tenants. RMI’s buildings team invented a business model using an integrated energy services provider (IESP) to act as a multipurpose developer, financier, operator, and administrator of the district’s energy systems.
“In its most basic form, an IESP can be thought of as an on-site utility that covers on-site renewable electricity generation,” says Jungclaus. “But it’s also responsible for energy efficiency, district-wide heating and cooling, maintaining all those systems, and billing the customers.” The large up-front investments by the IESP are repaid over time on utility bills, generating a steady return that gives the IESP excellent credit for financing because of the utility-customer relationship. Because the IESP finances all those systems, the cost of construction for developers is lowered, all while keeping costs for tenants and for the district as a whole below business-as-usual costs.
The RMI team designed the IESP business model at the same time as they designed Hazelwood Green, and in one sense they got lucky: location. “Pennsylvania is a deregulated electricity market, so the IESP can be set up to be a retail electricity supplier, which cleared the way,” says Jungclaus. “The United States has so many different regulatory landscapes that one solution won’t necessarily work everywhere else,” There are equally daunting challenges with the electricity- regulation landscape in China and India.
RMI published An Integrative Business Model for Net-Zero Energy Districts in August 2016. Now district developments using the IESP business model are under development in Denver, with the 250-acre National Western Center campus, which is based on RMI’s Hazelwood Green work, and in Texas, where the Whisper Valley residential project is doing something very similar. But RMI is already thinking bigger. “We’re not doing what we did back at ASU and we’re not doing what we did at Hazelwood Green. We continue to evolve for bigger impact,” says Olgyay. “We’re starting to integrate more things into the idea of what makes a net zero city.”
“We continue to evolve for bigger impact. We’re starting to integrate more things into the idea of what makes a net zero city.”
“We’re not just saying ‘we want a green district.’ We’re defining everything — water, mobility, green infrastructure, energy storage, resiliency — in the clearest form,” says Jungclaus. “We’re already seeing that this structure has the potential to make a difference around the world, and a lot of those projects’ concepts have really outpaced the development of this one district in Pittsburgh.”
SETTING THE PACE FOR GREEN CITIES IN CHINA
In China, RMI is working closely on a 330-square-kilometer near-zero carbon district centered around Meishan Island (Meishan means “plum hill” in English) in the large port city of Ningbo, just south of Shanghai. The Ningbo project is one of 50 near-zero carbon pilot candidates that China’s central government set in motion with its 13th Five-Year Plan. Net zero carbon is a closely related metric to net zero energy. RMI’s China team traveled to about a dozen cities to find the perfect near-zero carbon district partner in Ningbo, which was both effective and willing to work closely with a foreign NGO. RMI benefits from a good relationship with the central government’s National Development and Reform Commission (NDRC), which plays a significant role in creating the five-year plans. That “allows a really close relationship with local government on different levels,” explains Yihan Hao, a manager with RMI’s Buildings Program in China. “It allows us to have access to closed-door meetings, which is unusual for an international NGO.” In the end, says Hao, “They took us seriously.”
RMI assisted with a thorough survey and technical and economic analysis and an ambitious design that makes Ningbo’s one of the most advanced of the 50 pilot candidates. The design has the potential to reduce carbon emissions in the district to less than one ton per person by 2030. For reference, emissions in the United States were 16.5 tons per person in 2014. Also by 2030, the design will allow for the district’s gross domestic product to quadruple and population to triple, while saving $3.4 billion on energy compared to business as usual.
But Ningbo also had to contend with regulations governing the connection with the local electric grid. The Ningbo district generates power from wind turbines, and the development ran into difficulties with State Grid, the national electricity grid operator that supplies its own power to Ningbo, as to every city in China, under business as usual. State Grid was initially reluctant to distribute growing amounts of Ningbo’s wind power. But the concept RMI developed in Pittsburgh also applied on the coast of China. “When we proposed the solution of an integrated energy service provider business model, they finally smiled and started taking photos of our projects,” says Hao. State Grid and the local government jointly operate the IESP. “So now State Grid has asked the local design institute and energy planners to follow our targets and they have started the construction of a smart control center for the zone,” says Hao.
RMI’s next step in China will be upgrading the near-zero carbon district concept. This will include not just carbon emissions reductions but waste control and pollution mitigation, with the goal of getting them all to zero. RMI is exploring this concept with other jurisdictions in China that are less built up than Ningbo. “We are proposing a new concept very much based on learnings from the Palava project [see below],” says Hao. “In less-developed areas, they not only want carbon emissions to be low, they also want it to be sustainable and livable and green.”
A GREEN CITY RISES IN INDIA
Since February 2018, RMI has been collaborating on the design of a net-zero energy, 4,500-acre city on the outskirts of Mumbai, India, that will house 2 million and employ 500,000 when it is fully built out. The city, Palava, is being built by the Lodha Group, India’s largest real estate developer. Phase 1 was largely completed before RMI joined, and had 16,500 housing units occupied as of March 2019. RMI is collaborating on the design of Phase 2, which will add 80,000 units, and Phase 3, which will be bigger still.
Palava has the potential to reduce annual CO₂ emissions by 290,000 tons. Much of its energy, for both buildings and electric vehicles, will come from rooftop solar, which will cover practically all rooftop space. But deep efficiency is really the key to making Palava net zero energy. Overall, the buildings will use 60 percent of the energy of an average building in India. Almost all water in the city will be treated and reused to reduce water intensity and energy costs. And mobility, which is the single largest energy draw in the Mumbai suburb, will be transformed.
Lodha is a developer that means to be a leader, especially in sustainability. “Mumbai has some real challenges with traffic, with air pollution, and with water pollution, and this is a solution to that. They are responding to the challenges of India,” says Seth Coan, an RMI manager with the Buildings Program. “They’re evolving constantly, picking up on what we give them and not only running but sprinting with it. It’s been exciting to see how they’re integrating our recommendations into their business practices and into this actual city,” says Coan. Olgyay says, “By making a good business case for them to pursue zero-carbon development, we think Lodha will inf luence developments throughout India.”
Coan says that, “They saw us as a partner because we weren’t working on one element of the smart city, we were, like them, looking at the whole system holistically.” One of the most striking things about Palava is how deeply holistic design can cut carbon produced through mobility. “We’re starting to understand how good design of these projects can reduce mobility needs, and that’s especially true of Palava,” Olgyay says.
Grid-Interactive Efficient Buildings
By Cara Carmichael
Buildings can work with the power grid, not against it, and so become the linchpin to decarbonize the electricity sector: responsive and dynamic assets that support solar and wind generation sources, rather than one-way, standalone users of energy. As responsive assets, buildings can communicate with the power grid and ramp their energy use up or down depending on the cost or the carbon intensity of the grid electricity at any given time. This will reduce operating costs for building owners and help utilities integrate more renewable power into the electricity system, resulting in resilient buildings, communities, and regions. Grid-interactive efficient buildings (GEBs) also make electrification (e.g., heating buildings with electricity) not only possible but also potentially profitable. GEBs have four key attributes: energy efficiency, on-site solar, energy storage, and load flexibility. They can reduce energy use by 40 percent, while reducing peak demand by up to 85 percent. This would enable building owners and occupiers to reduce their energy bills by at least 60 percent. GEBs can be implemented profitably today using existing technologies. Building owners should first focus on energy efficiency and on-site solar. Next, improve load flexibility by means of advanced control systems that can shift energy use (e.g., staging electric vehicle charging to reduce peak demand). Then owners should consider on-site energy storage, which is cost-effective in many locations today and becoming more so across the United States. Grid-interactive efficient buildings are most profitable in all-electric buildings, utility territories with demand charges or time-of-use rates, and buildings with a high baseline energy use.
“They’re picking up on what we give them and not only running but sprinting with it. It’s been exciting to see how they’re integrating our recommendation into their business practices and into this actual city.”
Mobility was projected to consume 64 percent of the total energy footprint of Palava, and the new design has the potential to reduce that by 90 percent, in part by colocating employers and residences. “By reducing commuting distance, you have the largest impact,” explains Coan. The design also encourages people to walk, bike, and use shared and electric transport. Olgyay says, “That’s a huge thing, it turns out. It’s design: it’s essentially free. You’re not paying for a lot of infrastructure.” Palava’s design was developed with the help of the RMI team working with the Indian government on that country’s mobility transformation, which could save India as much as 1 billion tons of CO₂ emissions by 2030.
But just as in the United States, electricity regulations were a challenge in Palava. “They’re grappling with the regulatory environment around renewables. Fitting into the current regulatory framework for solar is challenging,” says Coan. Selling excess electricity back to the grid was the main obstacle. It is possible under current regulations, but only a portion of electricity delivered is compensated and that is only paid on an annual basis. This complicated the business case by reducing much of the revenue that on-site solar can produce. This interface of electricity-producing districts with the electric grid is a challenge everywhere.
HOW GREEN DISTRICTS CAN SAVE THE WORLD
As RMI helps develop net-zero districts around the world, our ambitions are growing for not just what they can be, but for what they can do. “What we’ve really started to think about is the grid integration of districts with the utility,” says Olgyay. Jungclaus explains that, “These districts, given the amount of load they have, could collaborate with utilities and with grid operators to drive benefits for both the district and the greater grid, and those two entities could share the revenue or the costs savings.”
Olgyay says that, “The RMI Buildings practice and Electricity practice are starting to have a lot of overlap, because buildings can be distributed energy resources, especially when they’re generating electricity, or when they’re able to consume and store excess electricity from the grid.” RMI is on the cutting edge of optimizing buildings to provide these benefits to the grid, a concept called grid-integrated efficient buildings, or GEBs (see “Grid-Interactive Efficient Buildings”).
But while individual GEBs can do a lot to help level out demand for grid electricity, lowering the peak demand that drives so much spending and carbon-emissions by utilities, “You can do even more than that when you’ve got a whole district, because when you’ve got aggregation of hundreds of buildings they can help balance out some of the issues on the electrical grid,” says Olgyay. A large, controllable power source like a fleet of hundreds of GEBs can provide essential services to an electric grid that previously only a billion-dollar power plant could provide. “We can actually have buildings integrated with the grid in such a way that they can do black start [recovering from grid outages] and voltage regulation and all kinds of cool things. That actually allows for the utility to avoid capital costs by having buildings provide some of those services,” Olgyay says.
“This represents an opportunity for the building owners to have a source of income and a source of energy arbitrage, but the policies and so forth are
not in place to make that happen right now,” says Olgyay. “Regulations have to catch up. We have to make it easier for building and district owners and developers to invest in this sort of thing and to profit from it. There is a block, as indicated in Palava, as indicated in Ningbo, that we need to address,” Olgyay says. “Unlocking the relationship between building owners, developers, utilities, and to some extent, policymakers, is going to potentially get many more buildings renovated and much more green energy on the grid.”
Everywhere in the world, whether in Pittsburgh, Ningbo, or Palava, getting building- and district-based renewable energy integrated into and compensated by the electrical grid is the frontier where deep progress on climate and energy can be made. “It’s technically not that difficult, it’s
just difficult in terms of the business model,” says Olgyay. And RMI is continuing to scout the cutting edge of what is possible. Jungclaus says, “What I think the future has in store is more of a focus on these districts integrating with the greater grid around them. To see successes happening in
Ningbo and Palava, or even in other districts across the United States that are moving at a quick pace, I think it’s incredibly promising.”