Report Release:An Integrative Business Model for Net Zero Energy Districts

Wow, great report.   Full of promising data on building a whole new economy that will sustain for many centuries.

Report Release: An Integrative Business Model for Net Zero Energy Districts

Fort Collins, Colorado

Net zero energy (NZE) buildings—those that are responsible for the production of as much (or more) clean energy as they use annually—have been gaining momentum around the world. And now, there are even net zero energy districts being contemplated, like Fort Collins’s Fort ZED, Arizona State University, and UC Davis’s West Village. However, there still remains an industry-wide perception that net zero energy is too expensive, or comes at a much higher incremental cost over business as usual.

Master developers of NZE districts face the challenge of driving exceptional energy performance without deterring prospective parcel developers or incurring exorbitant development costs themselves. Prospective parcel developers may fear that stringent performance requirements will require higher upfront capital costs or that achieving ultra-low energy buildings will not be cost-effective in the long run, compared to business as usual. Prospective tenants of NZE developments may fear that additional construction costs will get passed through to them in the form of higher rents, or that the ongoing cost of procuring renewable energy may be higher than conventional energy bill
s.
But in our newly released Insight Brief, An Integrative Business Model for Net Zero Energy Districts, RMI presents an innovative business model for developing net zero energy or ultra-low energy districts and details how pursuing net zero energy is not a cost, but rather a significant value driver.

Our innovative business model develops net zero energy districts in a way that is attractive to the district developer, parcel developer, and tenants; creates a profitable business for an integrated energy services provider; and benefits the local electric grid and neighboring community. It was developed specifically for a 180-acre development in a midsize U.S. city.

Making Net Zero Energy Financially Attractive 

Net zero energy is achieved in four steps: (1) Identify on-site renewable energy capacity and thus set the district’s energy “budget;” (2) use superefficient district geothermal heating and cooling; (3) set design standards to drive load up to 75 percent below code; and (4) iterate between steps 1 and 3, optimizing based on the net present value of the life-cycle cost until net zero energy is achieved. These four steps must be done in a way that makes the project financially attractive to developers, tenants, and investors.



Three things must occur to make net zero energy financially attractive to parcel developers: (1) on-site solar photovoltaics should be owned and developed by a third-party; (2) the capital cost of heating and cooling equipment should be moved out of buildings and into a district heating/cooling system; and (3) there should be on-bill financing for the incremental cost of energy efficiency. This puts first costs at or below the cost of a business-as-usual (BAU) building. On top of that, high-performance buildings typically yield higher sale prices or rents. 
To make net zero energy financially attractive to tenants, the BAU tenant energy bill must be replaced by a net zero energy bill that includes three components: (1) an electricity bill that includes the third-party-owned PV costs; (2) district heating and cooling costs; and (3) on-bill repayment of the energy efficiency financing. The sum of these three components is lower than BAU, and the tenant inhabits a healthier and more comfortable building.
Net zero energy business models are financially attractive to investors because the large capital investments in solar PV, district heating and cooling, and energy efficiency are repaid over time on utility bills, generating a steady return that benefits from enhanced credit because of the utility-customer relationship.


The elements of this business plan can be broken into discrete components consisting of services and value streams. Some of these components are interdependent, while others stand alone....