Net Zero Energy Districts Can be Cost-Neutral Compared to Traditional, Lower Performing Developments, Finds RMI

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Report offers new business model for high-performance, low-carbon net zero energy districts

Net zero energy (NZE) developments can deliver a lower life-cycle cost compared to business-as-usual and can be structured to have equivalent first costs to developers—all while creating a community that is more livable, healthy, comfortable, resilient, and environmentally sustainable, according to a new Rocky Mountain Institute (RMI) report.

An Integrated Business Model for Net Zero Energy Districts helps overcome the common industry assumption that achieving NZE comes at a higher upfront cost. Developers may fear higher capital costs, while prospective tenants of NZE developments may expect that additional construction costs will be passed through to them. According to RMI, executing NZE at the district scale represents a prime opportunity because NZE districts have specific advantages that individual buildings do not, helping overcome any such (real or perceived) concerns.

The report reveals “quadruple bottom-line benefits” for parcel developers, investors, tenants, and the community when net zero energy is accomplished at the district scale in four steps:

  • Identify on-site renewable energy capacity and thus set the district’s energy “budget”
  • Use efficient centralized systems, such as district geothermal heating and cooling
  • Set design standards to drive down load significantly (up to 75 percent below code)
  • Iterate between steps 1 and 3 to optimize based on the net present value of the life-cycle cost until net zero energy is achieved

This approach was first modeled specifically for the developer of a proposed 180-acre, 6-million square foot, mixed-use NZE development located on a former industrial site in a midsize U.S. city. The location has relatively low electricity rates and inexpensive natural gas. The team assumed no net metering of rooftop solar generation presenting a worst-case scenario for cost-competitive NZE.

But, by establishing third-party development and ownership of on-site solar photovoltaics, moving the capital cost of heating and cooling equipment out of individual buildings and into a district heating/cooling system, and providing on-bill financing for the incremental cost of energy efficiency, NZE can be cost neutral even in these conditions. NZE also becomes financially attractive to tenants because a net zero energy bill is on par with or lower than a conventional utility bill.

District-scale developments have a unique opportunity to put in place a dedicated integrated energy services provider (IESP), which serves as an on-site utility with an expanded role. Such an entity would manage multiple energy-related operations and act as a multipurpose developer, financier, operator, and administrator of energy systems, as well as a regulator of building performance requirements.

“With a whole system viewpoint, district-scale developments are uniquely positioned to be a major driver of the next generation of high-performance buildings, and provide an opportunity for a more intelligent connection to an evolving grid while opening the market for financially attractive green infrastructure investments,” said Iain Campbell, Managing Director of RMI’s Buildings Program.

Download the report at rmi.org/pdf_NZE_Districts_Brief

About Rocky Mountain Institute
Rocky Mountain Institute (RMI)—an independent nonprofit founded in 1982—transforms global energy use to create a clean, prosperous, and secure low-carbon future. It engages businesses, communities, institutions, and entrepreneurs to accelerate the adoption of market-based solutions that cost-effectively shift from fossil fuels to efficiency and renewables. In 2014, RMI merged with Carbon War Room (CWR), whose business-led market interventions advance a low-carbon economy. The combined organization has offices in Basalt and Boulder, Colorado; New York City; Washington, D.C.; and Beijing.

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Nicole Arnone
Rocky Mountain Institute
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