Extended executive summary
Renewable energy for new future-proof solutions
Every hour and a half, amount of solar energy that reaches the Earth exceeds annual consumption of energy of the entire planet. With increased urbanization worldwide, providing energy to residential and commercial facilities. With array of available and proven technologies, we can take the cities to the future together. Future less dependent on fossil fuels and more in harmony with the environment.
Due to rapid expansion of photovoltaic technology, mentioning solar energy immediately triggers ideas about conversion of solar into electric energy. However, in northern hemisphere, households spend between two thirds and three quarters of energy to solve their heating, cooling and hot domestic water needs. Using and storing heat from the summer to heat in the winter is the solution to major energy need of every space used for living and working. In combination with energy efficient building or energy efficient retrofitting – we can make sure that people are comfortably warm in winter and comfortably cool in summer, with the same solar energy our planet has been receiving throughout the year.
Through this approach, we are confident to reduce energy consumption by at least 30% and up to 80% in least energy efficient areas that we have surveyed. Imagine the positive impact on the environment! Moreover, it can be done without financial or comfort drawbacks for the end users.
To start transforming cities, we need examples.
Showcases that the approach is working on wide enough scale to make it a regional and hopefully global trend.
The idea is to start small, yet large enough to prove scalability of the project. For that purpose we choose to team up with forward thinking municipalities and propose cooperation through public private partnership. Part of the world notorious for its energy inefficiency is Eastern Europe. It is a fertile soil for implementation of such concepts due to decade’s long underinvestment and under maintenance of heating systems, as well as increased urbanization and growing life standard that generates demand for more cooling.
More concretely, the idea is to show the difference in capital of Serbia, Belgrade as starting point for the regional transformation.
Heat pumps and good thermal insulation
Modern heat pumps combined with appropriate open well sources or probes operate at efficiencies often exceeding 400%. That means that for every kWh of energy spent to operate, heat pumps generate 4-5 times as much energy for heating or cooling. This level of efficiency allows operator of energy systems to work profitably independently of changes of the energy prices for inputs and for the end users.
Operating at lower temperatures for heating, sometimes as low as 35C, operation requires less energy than traditional heating systems that work at 70 or 90C in Eastern Europe and even higher temperatures in some parts of the USA.
Low temperature heating is feasible only on buildings that meet certain energy efficiency standards which correspond with energy consumption of 60kWh per m2 for heating or better.
This type of building performance is obtained with proper Rockwool or similar insulation, double or triple glazed windows and recuperated ventilation systems. Only synchronised approach to both insulation and energy efficiency heating/cooling systems can give desired, future proof results.
Source – Stambeno Belgrade (Public partner)
Good size, good fit
Serbia is a country of 7.5 million people, on the way to becoming a European Union member since 2014. In this transition period, it still has many advantages of an emerging market yet a certainty of transition into an EU-type market economy. In particular this means that the country is obliged to start implementing all energy efficiency and renewable energy policies in line with appropriate EU strategies (EU2020). The EU has set some of globally most ambitious goals when it comes to energy efficiency and renewable energy, for example by 2020 member states should have 20% of energy coming from renewable sources and improve energy efficiency by 20%. EU2050 strategy is taking the game further into the field of energy efficiency and renewables. The part of the challenge for Serbia lies in the fact that it is not yet an EU member meaning that funds available to EU member states and various subsidies are not available to Serbia.
Challenges create stronger businesses. If the proposed business model for public private partnership can work independently of subsidies, grants and government aid – it is only then the case for truly (financially) sustainable concept that can generate returns on investment without fear of deteriorating fiscal policies towards renewable energy as they turn more mainstream.
For several years Serbian lawmakers have been working closely with experts from the World Bank to prepare legislation supporting investments in renewable energy and energy efficiency. Public private partnerships, in turn, became a natural channel for project development since part of socialist legacy is state/municipal ownership of infrastructure, district heating systems, energy production and distribution networks and facility management for collective housing in many cities.
Making city of the future – future-proof
Capital of Serbia, city of Belgrade is home to some 1.7 million people. It is the single largest market on the stretch from Vienna, Austria to Athens, Greece. Several times it has reaffirmed its position as city of the future in Eastern Europe. Just few hours by air from all major European cities, a gateway between the West and the East it is an ideally accessible showroom for what can be done worldwide. Heavily urbanized it carries architectural and energy inefficient legacy of socialist ear when abundance of energy was not questioned until last few decades. It is only last 15 years that topics of energy efficiency and just last three years that the renewable energy is being used more and more in residential and commercial spaces. With all the charms of its position, growing development and bright future – when it comes to energy it is known in which direction the city will go.
Favourability of Belgrade also lies in its mixed architecture – it combines evolutionary urban development of centuries old city with planned urbanization strictly enforced during socialist, post WWII ear. It means that lessons learned in Belgrade through PPP can be implemented in broader number of cities in both Eastern and Western hemispheres.
In 1966 city has formed a Housing Agency in charge of facility management of maintaining buildings, facades and providing services to collective housing buildings. Today the public partner of the proposed project has working relations with about 19,000 residential buildings or some 37% of entire residential market in the City. Not only that the company has decade’s long relations with homeowners’ associations but also a valuable track record of repairs, problems and issues various buildings have developed over time. Most importantly, they keep detailed track record of best paying clients and buildings – for almost half a century. Since they are service to the citizens, they never could make profits or capital accumulation necessary to address the capital intensive challenges of deteriorating housing market.
The PPP concept kicks in to provide fresh capital, on long term basis (15-30 years) for capital intensive investment in thermal insulation and introduction of renewable energy sources for heating and where possible cooling and hot domestic water. The roles in PPP are clearly divided:
- Private partner provides capital and execution know-how which guarantees long term operational excellence
- Public partner makes sure the market outreach is done extensively enough and that payment collection rates are 100% from the citizens during project lifetime.
What are the numbers?
From the total of 19,000 buildings that can be targeted some 860 buildings are considered the most interesting in first outreach. These 860 buildings cover 1,060,000 square meters of heated residential space in just over 22,800 apartments. To thermally insulate and introduce renewable energy as power source for heating and where possible cooling, combined debt/equity investment of €125 million is needed. This level of investment yields €12.7m of annual revenues against maximum of €4.4m of operational costs. Due to applied technologies, operational revenues are always growing several times faster than the input energy costs. It is expectation of project developers that stepping into the market at times of low energy prices will yield even better returns as energy prices increase and grow at the pace of inflation.