Richmond, B.C., and Corix partner on City Centre district energy program

The city of Richmond, B.C., has created a novel public-private partnership with Corix Utilities to develop district energy services for its downtown core. Peter Russell, MCIP RPP, Senior Manager, Sustainability and District Energy, City of Richmond, B.C.

Photo Peter Russell.

City Centre, Richmond, B.C.

ocated on Lulu Island in the Fraser Richmond (fig. 2), is being transformed 1.9 million sq ft of space in eight customer River estuary, the city of Richmond is from a low-density, predominantly com- buildings from two temporary energy cen- part of the Metro Vancouver area in mercial precinct into a series of high- ters, both equipped with natural gas-fired Lthe lower mainland of British Colum- density, mixed-used neighborhoods that boilers totaling 11 MW (37.5 MMBtu/hr) of bia. This coastal city of nearly 220,000 will have an estimated 50,000-80,000 hot water heating capacity. Future plans residents was a key venue during the residents at buildout by 2040. for the system call for construction of a 2010 Winter Olympic Games, site of the Today, providing space and domes- larger permanent energy plant that will long-track speed skating events. In re- tic hot water heating in City Centre is the extract low-carbon heat from a sewer force cent decades, Richmond has experienced new Oval Village District Energy Utility. main, reducing system greenhouse gas rapid growth and today continues its Located adjacent to the Richmond Olym- emissions by up to 80 percent. transition from suburban community to pic Oval – now an indoor multisport arena As it develops the Oval Village sys- a regional town center with international – this district energy system has been in tem, Richmond has been leading the way clout. In the process, its downtown core is commercial operation since 2014 and con- in creating a novel model for a public-pri- undergoing a major redevelopment: City nected its first customer in April 2015. The vate partnership that will see the provi- Centre (fig. 1), the fastest-growing part of first phase of the project currently serves sion of district energy services throughout

FIGURE 1. City of Richmond, B.C., and its neighborhoods, including City Centre. FIGURE 2. The city of Richmond, B.C., and the Greater Vancouver area.

Knight St Bridge

Arthur Oak St Laing Bridge Bridge N Vancouver Mitchell Island International Airport Airport Connector Bridge BRIDGEPORT SEA ISLAND Moray Bridgeport Rd Channel Bridge No. 7 Rd

Dinsmore Cambie Rd Bridge EAST No. 2 Rd WEST CAMBIE Bridge

CAMBIE Highway 91 Boundary Rd HAMILTON CITY CENTRE Shell Rd EAST RICHMOND Westminster Hwy

THOMPSON 8 No. 8 Rd Granville Ave No. 5 Rd No. 2 Rd

Blundell Rd SEAFAIR FRASER LANDS

BLUNDELL Highway 99 No. 4 Rd Francis Rd No. 3 Rd Garden City Rd ve A Williams Rd SHELLMONT No. 6 Rd

No. 1 Rd BROADMOOR

Railway Arm Fraser River Steveston Hwy STEVESTON South Shell Rd Gilbert Rd GILMORE George Massey Tunnel

SOUTH ARM ISLANDS

Source: City of Richmond, B.C. Source: City of Richmond, B.C.

© 2018 International District Energy Association. ALL RIGHTS RESERVED. District Energy / Second Quarter 2018 7 FIGURE 3. Aerial rendering of the Oval Village District Energy Utility service area. ment for new buildings undergoing rezon- ing. District energy-ready buildings must be designed to utilize energy from the district system when a neighborhood util- ity is available. Connection to the future utility is secured with a legal agreement prior to the rezoning adoption. Further down the development approvals, this commitment is also registered on the land title. Since implementing this practice in 2009, the city has secured over 8,000 district energy-ready residential units to date in the City Center area, ensuring the Source: City of Richmond, B.C. necessary demand for energy services needed to support a low-risk investment environment. City Centre. The model leverages private- district energy in its City Centre. Rich- sector design, financing, construction and mond’s City Centre Area Plan was rapidly operations expertise while ownership of being implemented; the 2,500-acre area, SINCE IMPLEMENTING A “DISTRICT ENERGY- the utility is retained via the city’s energy largely defined by low-density commer- READY” REQUIREMENT, THE CITY HAS company. The utility is regulated by Rich- cial uses, was transforming into several SECURED OVER 8,000 DISTRICT ENERGY- mond City Council, which defines rates high-density mixed-use neighborhoods. READY RESIDENTIAL UNITS. and service areas. The approach stands out The city envisioned that district energy as an efficient model for delivering district services would be developed in a phased energy services in Canada – a model catch- program, with smaller nodes emerging in To date, most of these buildings are ing the interest of other cities. different areas but eventually connected still in the design or approval stages. Some to form a City Centre-scaled system with have already been constructed as district THE BACKGROUND STORY multiple energy plants. energy-ready but without a district energy When the city of Richmond devel- An early opportunity emerged to get connection. These buildings are built using oped its Community Energy & Emissions district energy planning work going. As hot water hydronic heating systems with Plan in 2012, it was estimated that Rich- a host city for the 2010 Winter Olympic a developer-installed boiler plant instead mond residents, businesses and insti- Games, Richmond committed to building of an energy transfer station. Given the tutions spent CA$440 million ($354.5 a speed skating oval venue. To raise a por- pace of development and the varied loca- million) on energy in 2010. Those dollars tion of the funds to build the venue, the tions of where redevelopment is occur- were largely directed to major energy city disposed of a number of consolidat- ring throughout City Centre, the city had utilities and multinational oil companies. ed sites in 2006, while retaining a major to make strategic choices regarding where At the time, the city already understood waterfront parcel in the center on which and when it would service new buildings. through the 2012 launch of its Alexan- to construct the Olympic Oval; significant The Oval Village was the first such area, dra District Energy Utility in Richmond’s residual funds raised from the disposition but other areas with potential for servic- West Cambie area (adjacent to City Centre) were used to replenish and further grow ing exist throughout City Centre. The city that district energy was an effective tool the city’s land inventory. The land disposi- expects that over time and with Richmond for reducing community greenhouse gas tion also created the opportunity for the council endorsement, those buildings emissions. District energy could also raise city to approach the waterfront parcel de- could eventually be connected once the new non-tax-base revenues while creating veloper to work together to assess the via- distribution network is more established in local jobs. Each new building connected to bility of district energy to service buildings those areas. district energy in Richmond represented on that site. The result of the city’s direct (and represents) a new significant reten- engagement with the developer eventu- ESTABLISHING A NEW ENERGY COMPANY tion of energy spending in the community, ally led to the parties signing a memoran- Given the investment potential of effectively “localizing” energy generation. dum of understanding to work together. the developer’s waterfront site alone and Of those cities and universities seizing This site and eventually surrounding sites given the multiple rezonings under way the opportunity in British Columbia, some would become the service area for the in the immediate surrounding area, the began investing directly using their own Oval Village District Energy Utility (fig. 3). city realized a new approach to financ- resources while others sought to engage Around the same time, seeing the ing a district energy project would be re- the private sector. long-term potential of district energy quired. Rather than become encumbered The city saw the opportunity to “get across City Centre, the city also began in- with debt, the city sought a private-sector ahead” of redevelopment by planning for cluding a “district energy-ready” require- partner in 2010 to design, build, finance

8 District Energy / Second Quarter 2018 © 2018 International District Energy Association. ALL RIGHTS RESERVED. and operate the Oval Village District En- cluded infrastructure, business and finan- come to a final agreement that could be ergy Utility, choosing Corix Utilities. Then cial planning, and, second, development executed. Critical terms of the agreement in 2013, the city established Lulu Island and execution of a long-term concession included Energy Co. (LIEC) as a wholly owned mu- agreement. ··capital investment structure (debt/ nicipal corporation to work directly with Given the MOU the city held with equity) with a defined debt rate and its private-sector district energy partner. the developer who purchased the water- return on equity for Corix; For context, under the British Co- front site, the due diligence phase started ··capital, capital expenditure and lumbia Community Charter, local gov- with initially understanding development operating plan review and approval ernments have broad powers to provide timing for the waterfront site alone and processes; services to their citizens that “council developing an appropriate infrastructure ··customer service standards; considers necessary or desirable, and may plan and financial model. The developer’s ··a process whereby LIEC had the right do this directly or through another public plan was to develop the site strategical- to complete a service-level review; authority or another person or organiza- ly over an approximately 15-to-20-year ··expectations on service levels to be tion” (Section 8.2); local governments also timeline. The Corix MOU also set specific measured using clear performance have the “authority to regulate, prohibit expectations to use local renewable ener- metrics; and impose requirements under the Com- gy resources, which would be assessed as ··competitive and transparent procure- munity Charter in relation to a municipal part of the due diligence process. In the ment processes for design and con- service” (Section 8(3)a). Another regional meantime, however, more district energy- struction; local government in British Columbia, the ready buildings in the surrounding area ··service areas defined by a development city of North Vancouver, incorporated the were finalizing development approvals, plan in the agreement (as amended Lonsdale Energy Co. to operate its district and the regional government had plans over time); and energy system in a similar way. to replace a major sanitary force main ··Richmond bylaws and development that ran through the service area. Further permit process developments as the WORKING WITH A PRIVATE-SECTOR analysis undertaken by Corix revealed tools to support customer connections. PARTNER that the district energy system buildout The 30-year concession agreement The city of Richmond had selected timeline could be significantly shortened was executed in October 2014 whereby Corix Utilities as its district energy partner if these buildings were serviced and that LIEC would own the infrastructure, and through a rigorous procurement process. sewer heat was a viable energy source for Corix would design, build, finance and Corix is a privately held corporation, prin- the utility. These two opportunities sup- operate the system. At the same time, cipally owned by the British Columbia In- ported a positive business case allowing Richmond City Council enacted the Oval vestment Management Corp., with offices both parties to move to the next stage of Village District Energy Utility through the in Vancouver, B.C., and Wauwatosa, Wis. the process. adoption of a service area bylaw that re- Both parties would enter into an MOU to Hammering out a concession agree- quires mandatory connections to the dis- define roles and responsibilities in 2011, ment of this magnitude was a new venture trict energy utility and defines customer a process for working together and a com- for LIEC and city staff. The process began rates. As regulator, Richmond City Council pensation commitment to Corix should an with identifying the material terms of an approved this approach with clear direc- agreement not be reached. The process agreement. Using the terms as a basis for tion that utility rates must be competitive for working together included two distinct a broader legal document, both LIEC and with business-as-usual customer rates, de- stages: first, a due diligence phase that in- Corix worked together for over a year to fined as conventional electric and/or natu- ral gas utility rates for the same level of service for the lifecycle of the equipment.

THE AGREEMENT WAS EXECUTED IN 2014 WHEREBY LIEC WOULD OWN THE INFRA- STRUCTURE, AND CORIX WOULD DESIGN, BUILD, FINANCE AND OPERATE THE SYSTEM.

Broadly, in British Columbia, rate reviews can be carried out by the city council under the province’s Commu- Courtesy city of Richmond, B.C. nity Charter; a similar approach is under consideration in Nova Scotia on the east The Richmond Olympic Oval, site of 2010 Winter Olympic Games speed skating, is now a 1 multisport arena containing a 20,000-sq-ft fitness training facility, two skating rinks, six coast. Some municipally owned district hardwood sport courts, a track, climbing wall, cafe and other amenities. energy operations in B.C. have also creat-

© 2018 International District Energy Association. ALL RIGHTS RESERVED. District Energy / Second Quarter 2018 9 FIGURE 4. The 2 River Green residential development on Richmond’s Fraser River, estimated for and performance stakes are higher than completion in 2020, will be among the customers of the Oval Village District Energy Utility. for a privately owned utility; citizens have higher expectations related to transparen- cy and prompt response to their concerns, which, in turn, influences the city council’s expectations of staff. These expectations have led staff to focus on customer service excellence and innovation. In this context and after LIEC assessed Corix’s ability to successfully deploy district energy ser- vices in the Oval Village (a program that included an interim energy center; distri- Source: City of Richmond, B.C. bution piping; capital planning and project management processes; and, finally, man- aging customer and developer concerns), LIEC had the confidence to begin consider- ing how buildings in other subareas of City Centre could be serviced by district energy through the public-private partnership model the company had established.

TODAY BOTH PARTIES ARE COMPLETING DUE DILIGENCE WORK TO DETERMINE HOW BEST TO SERVICE THE WHOLE OF CITY CENTRE.

Photo Andrea Sirois. Efforts to understand the potential This vinyl mural, Underwater by Andrea Sirois, wraps around the 53-ft shipping container that for expansion began in 2016 in the area houses one of the Oval Village system interim plants. immediately surrounding the Oval Village. Using development projections in the larger Oval Village area, LIEC worked with ed an additional and separate dedicated to provide thermal energy services prior Corix to complete an expansion test to body to oversee the rate review process, to the commissioning of new buildings, assess infrastructure and business strate- but city councils in these cases still ap- thus avoiding the unnecessary deploy- gies for extending the distribution net- prove rates.2 Otherwise, private compa- ment of capital. As demand for services work and adding generation capacity. The nies wishing to establish district energy grows, capital costs will be offset by ad- work showed positive results. Develop- utilities in the province are required to ditional revenues generating a positive ment was also proceeding rapidly in the seek the approval of the B.C. Utilities rate of return. All costs are fully recovered northern part of Richmond, which led Commission. Meanwhile, in Ontario, the through user fees applied to serviced LIEC staff to consider how this area could Municipal Act gives local governments properties. (See example customer prop- be serviced. City Centre North is currently the authority to create bylaws respect- erty in figure 4.) planned to include a broader mix of land ing climate change and energy (excluding Using this approach since its incep- uses such as apartments, hotels and large electricity), heating and cooling.3 tion in 2012, LIEC now is responsible for multiuse entertainment complexes. For the operation of two service areas – the this reason, LIEC considered that provid- EXPLORING EXPANSION OPPORTUNITIES Alexandra District Energy Utility and Oval ing cooling services in addition to heating For context, LIEC and the city always Village District Energy Utility – using four services in this area would be viable. envisioned that a City Centre-scaled dis- energy plants, two of which are tempo- With these opportunities and the in- trict energy system would be viable but rary, to provide energy to over 3.5 million troduction of new private district energy considered that growth of the system sq ft of residential, commercial and insti- service providers in the Greater Vancou- would occur through a phased construc- tutional space. This has eliminated an es- ver area, LIEC decided to test the market tion program. Bit by bit, service area nodes timated 2,300 tonnes of greenhouse gas through a new provider procurement could be connected to form a City Centre- emissions in the community to date. process. Corix was once again selected scaled district energy system serviced by For a new energy utility like the Lulu in 2017 as the lead proponent based on multiple energy plants. LIEC’s approach is Island Energy Co. that is wholly owned its experience and approach; today both to ensure infrastructure is phased in time by a local government, the accountability parties are busy completing the impor-

10 District Energy / Second Quarter 2018 © 2018 International District Energy Association. ALL RIGHTS RESERVED. tant due diligence work to determine how your partner, and invest in building tation and, most importantly, securing a best to service the whole of City Centre. your local council’s confidence in staff private-sector partner to design, build, and the new venture. Consistent finance and operate the district energy BUSINESS MATTERS messaging, highlighting the benefits utility. Today, supplied with thermal en- The Lulu Island Energy Co. is a wholly and addressing community concerns ergy from the city’s wholly owned Lulu owned corporation as approved by the and customer complaints as a priority Island Energy Co., district energy custom- B.C. Office of the Inspector of Municipali- are a must in this context. ers benefit from Richmond City Council’s ties. As an administrative matter and with ··Rate-competitiveness with business mandate to provide customer service ex- a strong company in place, the Alexandra as usual is a great starting place. It cellence and competitive rates using low- District Energy Utility, initiated by the city’s pushes innovation and strategic carbon energy systems. engineering department, was transferred phasing of infrastructure and deploy- in full to LIEC in 2017. ment of capital. Matching business-as- With respect to local economics, usual costs also reduces public fears Peter Russell is the senior LIEC calculated that the buildout of dis- of future utility costs. manager, Sustainability and trict energy in City Centre could provide ··Every phase of infrastructure devel- District Energy, for the city an estimated 630 design and construc- opment has to stand on its own. of Richmond, B.C.; his team tion jobs by 2040. An estimated 10 oper- “Self-sufficient” business cases and focuses on community, ating jobs will turn into full-time posi- construction programs are a must, corporate and district en- tions over the duration of the project. given the potential for shifting council ergy programs and environ- Currently, local artists are involved during priorities and housing market fluctua- mental protection. He is a trained environ- the design to incorporate public art into tions. For many local governments in mental engineer, an award-winning the energy plant buildings’ exteriors. Fur- Canada, energy utilities are not a core Registered Professional Planner with the thermore, 25 percent of the contractors service area; district energy, however, Canadian Institute of Planners and an have headquarters in Richmond, and dis- builds on local government utility man- experienced sustainability manager, having trict energy jobs provide a strong incen- agement expertise (e.g., water and worked with the cities of Vancouver and tive for them to continue anchoring their sanitary utilities). Surrey, B.C., prior to Richmond. Russell also businesses in the city. ··Establish a level playing field for worked with cities across western Canada private developers. If developers all as a consulting planner for 10 years, devel- LESSONS LEARNED have the same costs related to district oping sustainability, land-use and energy Through this initiative, Richmond and energy in their pro forma and disclo- plans. He holds a Bachelor of Applied Sci- LIEC created a replicable model using dis- sure requirements, they will have less ence degree in environmental engineering trict energy to create a low-carbon com- concern about the competition in from the University of Windsor and a Mas- munity, at a lower cost. Lessons learned to marketing their developments. ter of Science degree in community and date in Richmond include the following: The city of Richmond benefited from regional planning from the University of ··Seize those early opportunities to a unique starting point: a city center area British Columbia. He can be contacted at catalyze action; you don’t need all the ripe for redevelopment. Richmond’s City [email protected]. answers to get started. Trust that your Centre Area Plan most recently updated knowledge will grow and your thinking in 2009 included a far-reaching commu- End notes will shift to address concerns or chal- nity consultation to produce a vision for a 1 Ken Church, Natural Resources Canada on behalf of Canadian District Energy Working Group – Market lenges. In Richmond’s case, the oppor- higher-density, mixed-use, transit-orient- Development Subcommittee, Encouraging District tunity was partnering with private ed City Centre area. Introducing district Energy Growth through Municipal Policies and developers that either had experience energy services in this area simply made Programs – A Discussion Paper on Possible Growth Strategies (draft), October 2017. operating geoexchange systems, as in sense, but this followed extensive busi- 2 Ibid. the case of the Alexandra District En- ness case analysis, stakeholder consul- 3 Ibid. ergy Utility (see cover story in this issue and article in Second Quarter 2014 District Energy), or had a major land holding, as in Oval Village. FOR MORE INFORMATION, PLEASE VISIT: ··Spread the risk; partners offer value ··CITY OF RICHMOND, B.C. – www.richmond.ca beyond their resources and expertise. ··LULU ISLAND ENERGY CO. – www.luluislandenergy.ca, for current service areas In addition to the risks that can be man- and rates, future plans, and resources for customers including educational aged by your partner, the city found that videos and a Kids’ Corner it can also manage risks using municipal ··ENERGYSAVE RICHMOND – www.energy.richmond.ca, for energy efficiency regulatory powers identified in this ar- programs for existing and new buildings ticle (i.e., rezoning, building permits). ··CORIX UTILITIES – www.corix.com/corix-companies/corix-utilities ··Take the time to build confidence in

© 2018 International District Energy Association. ALL RIGHTS RESERVED. District Energy / Second Quarter 2018 11