Energy Utopia: Vancouver’s Neighbourhood Energy Strategy

by Molly M Steeves

B.A. (Hons.), University of Victoria, 2008

Project Submitted in Partial Fulfillment of the Requirements for the Degree of Master of Urban Studies

in the Urban Studies Program Faculty of Arts and Social Sciences

© Molly M Steeves SIMON FRASER UNIVERSITY Spring 2019

Copyright in this work rests with the author. Please ensure that any reproduction or re-use is done in accordance with the relevant national copyright legislation. Approval

Name: Molly Steeves

Degree: Master of Urban Studies

Title: Energy Utopia: Vancouver’s Neighbourhood Energy Strategy Examining Committee: Chair: Patrick J. Smith Professor Urban Studies and Political Science

Meg Holden Senior Supervisor Professor, Urban Studies and Geography

Anthony Perl Supervisor Professor, Urban Studies and Political Science Isabel Gordon External Examiner Director of Financial Services District of West Vancouver

Date Defended/Approved: January 23, 2019

ii Ethics Statement

iii Abstract

This study explores the barriers faced by the City of Vancouver in implementing its Neighbourhood Energy Strategy (2012). Through a case study of the Creative Energy Central Heat district energy system, I explore the challenges the City of Vancouver had in operationalizing this policy. The conceptual framework for this study utilizes the concepts of energy justice, remunicipalization and path dependency. These concepts facilitate an exploration of the intricacies and multiplicities of the challenges faced by the City of Vancouver, chiefly the provincial regulatory process with the British Columbia Utilities Commission (BCUC). With the assistance of the conceptual framework, I find that the BCUC’s stated mission of providing equal access to safe, economical and sustainable energy was in conflict with the City of Vancouver’s proposed agreement with Creative Energy. I also find that ownership was a significant factor in the challenges faced by the City, as Creative Energy’s private ownership subjected the agreement between the City of Vancouver and Creative Energy to the Provincial regulation. Finally, I find that resistance to new technology and methods challenged the agreement, as evidenced by statements provided by interveners in the regulatory process. These findings provide insights about the enactment of district energy policy for other municipalities seeking to enable GHG reductions through the provision for new district energy systems or through fuel switches of existing district energy systems.

Keywords: district energy; Vancouver; energy justice; remunicipalization; path dependency

iv Dedication

For Cecilia.

v Acknowledgements

Thank you to all my friends, family and colleagues for their support in the completion of this project. I would also like to thank everyone who participated in this study for their invaluable input and insight, Finally, thank you Meg for all of your oversight, patience and wisdom.

vi Table of Contents

Approval ...... ii Ethics Statement ...... iii Abstract ...... iv Dedication ...... v Acknowledgements ...... vi Table of Contents ...... vii List of Tables ...... ix List of Figures...... x List of Acronyms ...... xi

Chapter 1. Introduction ...... 1 1.1 The Why – Cities as Agents of Change ...... 1 1.2 The Research Question ...... 4 1.3 Case Study Context ...... 4 1.3.1 Provincial Context – British Columbia, Canada ...... 4 1.3.2 Regional Context – Metro Vancouver ...... 11 1.3.3 Municipal Context – the City of Vancouver ...... 12

Chapter 2. Conceptual Framework ...... 19 2.1 Energy Justice ...... 19 2.1.1 Distributional Justice ...... 21 2.1.2 Recognitional Justice ...... 22 2.1.3 Procedural Justice ...... 23 2.2 Remunicipalization ...... 24 2.3 Path Dependency ...... 27

Chapter 3. Research Design ...... 31 3.1 Interviews ...... 31 3.2 Archival Material ...... 34 3.3 Policy Documents...... 35 3.4 Media Coverage ...... 35 3.5 Analytical Efforts ...... 36

Chapter 4. A History of District Energy in Vancouver ...... 38 4.1 History of District Energy ...... 38 4.2 Central Heat ...... 39 4.3 South East False Creek ...... 41 4.4 Other District Energy Systems in Vancouver ...... 43 4.5 History of District Energy from a regulatory perspective at the City of Vancouver ...... 44

vii Chapter 5. District Energy Policy in Vancouver ...... 46

Chapter 6. Creative Energy and BCUC: The Challenges ...... 55

Chapter 7. Discussion ...... 69 7.1 Energy Justice ...... 69 7.2 Remunicipalization ...... 72 7.3 Path Dependence...... 74 7.4 The Use of A Conceptual Framework in this Case Study ...... 76

Chapter 8. Conclusions ...... 78 8.1 Topics for Further Discussion ...... 80 8.1.1 Zero Emissions Building Strategy ...... 81 8.1.2 Creative Energy Moving Forward ...... 83

References ...... 84

viii List of Tables

Table 1: Interviewee Relationship to District Energy and Neighbourhood Energy Strategy ...... 33 Table 2: Greenest City Action Plan – Target Reductions for NES (Neighbourhood Energy Systems or district energy systems) ...... 47 Table 3: Downtown Area Characteristics and Strategies ...... 50 Table 4: Cambie Corridor Characteristics and Strategies ...... 51 Table 5: Central Broadway Area Characteristics and Strategies ...... 51 Table 6: Energy Centre Guidelines ...... 52 Table 7: Energy Centre Strategic Priorities ...... 54 Table 8: Feasibility Key Tasks and Findings ...... 57 Table 9: Intervener and intervener interest...... 61

ix List of Figures

Figure 1: Greenest City Action Plan Carbon Reduction Targets adopted from the Vancouver Neighbourhood Energy Strategy and Energy Centre Guidelines...... 16 Figure 2: Historical Development of District Energy Networks, from genesis to the future...... 39 Figure 3: Neighbourhood Energy Priority Areas...... 49 Figure 4: Creative Energy Expansion Plan...... 59

x List of Acronyms

BCOAPO British Columbia Old Age Pensioners Association

BCUC British Columbia Utilities Commission

CoV City of Vancouver

CEC Commercial Energy Consumers Association of BC

CPNC Certificate of Public Convenience and Necessity

DES District Energy System

FAES FortisBC Alternative Energy Services Inc

FEI FortisBC Energy Inc.

GCAP Greenest City Action Plan

GHG Greenhouse Gas

IR Information Request

NEA Neighbourhood Energy Agreement

NES Neighbourhood Energy Strategy

NDP New Democratic Party

RFEI Request for Expressions of Interest

UDI Urban Development Institute

UNEP United Nations Environment Program

xi Chapter 1.

Introduction

1.1 The Why – Cities as Agents of Change

Globally, we are on the cusp of a climate crisis exacerbated by rapid urbanization and population growth. We are no longer able to turn a blind eye to the catastrophic impacts of this crisis – climate change, extreme weather events, poverty and social inequality are all undeniable and visible components of modern-day life.

Cities have a meaningful and leading role to play in combating the challenges associated with climate change. They are uniquely positioned at the correct scale to impact change. They also have jurisdiction over many of the systems, utilities and services that directly impact our environment. Hereby, it is essential to monitor and evaluate the work of cities in developing and implementing policy that endeavours to combat climate change. These evaluations will allow us to understand the challenges and achievements of municipalities in implementing various policies. A thorough understanding of the successes and challenges that cities face while working to enact sustainability policies will inform other jurisdictions, enabling them to learn from the successes of others and to work as a united front to combat global challenges.

My research investigates one strategic approach undertaken by the City of Vancouver to improve its sustainability performance and update existing infrastructure to be more socially, economically and environmentally sustainable. My research also examines the barriers faced by the City in undertaking this system overhaul.

Beginning in 2013, the United Nations Environment Program (UNEP), the chief program within the United Nations dealing with environmental concerns, began a study of low-carbon cities worldwide to identify how they utilized renewable energy to become more energy efficient and reduce greenhouse gas emissions1. This study was produced

1 UNEP, District Energy in Cities: Unlocking the Potential of Energy Efficiency and Renewable Energy. (2015). 11.

1 in collaboration and partnership with the Copenhagen Centre on Energy Efficiency, the International Council for Local Environmental Initiatives, and UN-Habitat.

In 2015, to summarize the outcomes of the research project, the UNEP released a report called District Energy in Cities: Unlocking the Potential of Energy Efficiency and Renewable Energy. This report states:

[a]ccelerating the uptake of energy efficiency and renewable energy in the global energy mix is the single biggest contribution to keep global temperature rise under 2 degrees Celsius… and to reap multiple benefits of an inclusive green economy. Cities account for more than 70 per cent of global energy use and for 40 to 50 per cent of greenhouse gas emissions worldwide.2

From this research, district energy systems were identified as one of the most effective methods for transitioning to a low cost, socially equitable, and low carbon energy supply. For the purposes of this study, district energy systems are defined as infrastructure platforms that allow heating and cooling infrastructure to be shared amongst many buildings, most suitably in high density areas3.

The UNEP report states:

District energy is not a new idea. But it has found new relevance in a world seeking practical solutions to the energy transition and climate change. It can simultaneously reduce emissions as well as boost the uptake on renewables4.

During the research period for the UNEP report, which took place from late 2013 to early 2015, 150 respondents from 65 cities were interviewed to determine a variety of perspectives on the successful implementation of district energy systems5. Of these 65 cities, 45 “champion” cities were selected. The selected cities had ambitious targets for

GHG or CO2 reduction and had also enacted policy regarding energy efficiency or renewable energy. These champion cities served as case studies for the report, which

2 UNEP, District Energy in Cities, 17. 3 City of Vancouver, Vancouver Neighbourhood Energy Strategy and Energy Centre Guidelines. (Vancouver, 2012). 4 District Energy. ‘District Energy in Cities’. http://districtenergyinitiative.org/images/resources/publications/DES_brochure_webversion.pdf (accessed on December 2, 2017). 5 UNEP, District Energy in Cities, 18.

2 sought to provide best practice examples in a variety of different policy contexts for other cities looking to employ district energy systems.

The City of Vancouver was one of these 45 champion cities, and participated in the research, workshops and interviews that led to the creation of the UNEP report. The City has also been involved in subsequent studies that have occurred after the publication of the original report. Vancouver’s inclusion as one of the 45 champion cities was predicated upon the success of the publicly owned South East False Creek Neighbourhood Energy Utility Demonstration Project and an established track record for ambitious “green” policy. Other contributing factors were a demonstrable desire to explore how best to utilize district energy systems as a mechanism of reducing GHG emissions and a desire to integrate energy planning into broader discussions about urban planning and design.

While the UNEP report set forth a global ambition to enable municipalities to implement district energy, the City of Vancouver also had a specific local context of innovation in sustainability and planning that contributed to Vancouver’s moves to become a model low carbon city. This context is explored more thoroughly in section 1.3.3.

As part of a broader strategy to lower greenhouse gas emissions, the City of Vancouver passed a Neighbourhood Energy System policy in 2012 to enable the fuel conversion of existing (legacy) district energy systems, to secure a customer base to allow for the expansion of legacy systems and to identify areas of sufficient or projected density to establish district energy systems. This policy depended upon a private utility to facilitate the fuel switch of one of the largest legacy systems and to implement the expansion of district energy systems into pre-identified expansion areas.

This thesis examines at the barriers faced by the City of Vancouver in implementing this Neighbourhood Energy System policy, specifically the regulatory challenges. The outcomes of this research will provide insight to other cities on the regulatory challenges that might be faced in partnering with a private utility to achieve GHG emissions targets.

3 1.2 The Research Question

The question that this research seeks to answer is: What barriers has the City of Vancouver faced in implementing its Neighbourhood Energy Strategy (2012)? This question aims to provide guidance on district energy policy development, ownership implications and regulatory challenges for municipalities developing or expanding district energy systems.

The research question will utilise a case study of a legacy district energy system owned by Creative Energy, a private utility. Creative Energy was born in 2014, through the purchase of Central Heat Distribution, a steam neighbourhood energy system that was established in the downtown core of Vancouver in the mid-1960s. The acquisition of Central Heat Distribution was supported by plans to expand the existing plant and undertake a fuel switch of the system to an alternative fuel such as biomass6 by the year 2020. As a private utility, The British Columbia Utilities Commission (BCUC) regulates Creative Energy. The BCUC is an independent agency of the British Columbia Government that regulates energy utilities to ensure that end users receive safe and equitable energy services.

The learnings from this study provide valuable lessons to other municipalities looking to develop district energy policy and enable fuel switches to low carbon fuel sources.

1.3 Case Study Context

1.3.1 Provincial Context – British Columbia, Canada

British Columbia is the westernmost province in Canada, with an approximate population of 4.6 million people7. The rest of Canada has long considered British Columbia a province that is progressive concerning environmental advocacy8. However, as the following section explores, this has not consistently been the case.

6 Creative Energy. ‘About Us’. http://creativeenergycanada.com/about-us/ (accessed June 16, 2017) 7 Statistics Canada, British Columbia Census Profile, 2016. 8 Dusyk, N., Berkhout, T., Burch, S. et al., Energy Efficiency (2009) 389.

4 British Columbia gets most of its power from electricity and natural gas. BC Hydro, a provincial crown corporation, is one of the largest electric utilities in Canada9. BC Hydro generates and distributes electricity, serving approximately 95% of British Columbia’s population. About 92% of energy production for BC Hydro comes from hydroelectric dams, considered to be a renewable source of energy10, with the remainder coming from thermal sources11. This represents one of the highest proportions of hydroelectric power in the world12.

The majority of this hydroelectric power is generated from infrastructure built in the 1960s and 1970s in the southeastern Columbia River basin and the northeastern Peace River basin, the construction of which led to considerable physical and social impacts in these areas13. In the mid 1970s, an additional dam, known as the Site C Dam, was proposed for the Peace region. British Columbia’s economy, since its founding as a Province, has been based on natural resources. In the 1970s, however, with a rise in environmentalism, came increasing conflict about the impacts of natural resource extraction and industry. These, in concert with questions about the growth and financial responsibility of provincial power utilities, forced action to reform British Columbia’s approach to energy utilities.

In 1980, the British Columbia Utilities Commission (BCUC) was formed to help regulate BC’s natural gas and electric utilities in the province. The BCUC is responsible

for ensuring that customers receive safe, reliable and non-discriminatory energy services at fair rates from the utilities it regulates, that shareholders of these utilities are afforded reasonable opportunities to get a fair return

9 BC Hydro. “BC Hydro and the British Columbia Utilities Commission”. https://www.bchydro.com/about/planning_regulatory.html. (Accessed Dec 20, 2017). 10 BC Hydro. “Generation type, rates & CO2 emissions”. https://www.bchydro.com/accounts- billing/rates-energy-use/electricity-rates/residential-rates/generation-rates-co2-comparison.html. (Accessed Dec 20, 2017). 11 Druce, Donald J. "Modelling the Transition from Cost-based to Bid-based Pricing in a Deregulated Electricity-market." Applied Energy 84, no. 12 (2007): 1211. 12 Kiani, Rowe, Wild, Pitt, Sopinka, and Pedersen. "Optimal Electricity System Planning in a Large Hydro Jurisdiction: Will British Columbia Soon Become a Major Importer of Electricity?" Energy Policy 54, no. C (2013): 311. 13 Dusyk, Nichole. "Downstream Effects of a Hybrid Forum: The Case of the Site C Hydroelectric Dam in British Columbia, Canada." Annals of the Association of American Geographers101, no. 4 (2011): 875.

5 on their invested capital, and that the competitive interests of B.C. businesses are not frustrated14.

The BCUC is a “quasi-judicial” entity, and thus its rulings are considered legally binding15. Energy that does not require a transmission system or distribution grid is not subject to regulation. Also, utilities can be exempted by the provincial minister responsible for the Commission or the Commission itself (with cabinet approval).16 Of particular note for this research is that utilities provided by a local government are exempt from regulation by the BCUC17.

As a result of the newly established BCUC, BC Hydro was required to apply for an energy project certificate for the proposed Site C Dam, which was submitted weeks after the Utilities Commission act was instituted18. In 1983, after a lengthy formal consultation process (116 days) which included testimony from BC Hydro staff, individuals from the affected communities, First Nations groups, municipalities and advocacy organizations, the BCUC recommended that “[t]he evidence does not demonstrate that construction must or should start immediately or that Site C is the only or best feasible source of supply”19. They suggested a re-evaluation of the process after one year, but in effect this caused the shelving of the project until 200720 – under a liberal government discussed below.

During the 1990s, the New Democratic Party (NDP) ruled for ten years on a platform that addressed labour and environmental interests21.By the turn of the

14 BC Hydro. “BC Hydro and the British Columbia Utilities Commission”. https://www.bchydro.com/about/planning_regulatory.html. (Accessed Dec 20, 2017). 15 BCUC. “Who We Are”. http://www.bcuc.com/about/who-we-are.html. (Accessed Dec 20, 2017). 16 BCUC. “Understanding Utility Regulation: A Participants’ Guide to the British Columbia Utilities Commission”. http://www.bcuc.com/Documents/Guidelines/Participant_Guide.pdf. (Accessed Dec 20, 2017). 17 Ostergaard, Peter, and Julie Gordon. The Regulation of District Energy Systems. Pacific Institute for Climate Solutions, University of Victoria, 2012, 6. 18 Dusyk, Downstream Effects of a Hybrid Forum: The Case of the Site C Hydroelectric Dam in British Columbia, Canada, 876. 19 Dusyk, Downstream Effects of a Hybrid Forum: The Case of the Site C Hydroelectric Dam in British Columbia, Canada, 877. 20 Ibid, 877. 21 Hoberg, George. The Export Question - Under What Conditions Should British Columbia Become a Major Exporter of Electricity? FutureGrid. Pacific Institute for Climate Solutions, University of Victoria, 2010 177.

6 millennium, the Province’s voters had grown resentful of government intervention in the market. Backed by a large contingent of the business community, Gordon Campbell’s Liberal Party swept into power.

Campbell’s first term was weak on climate change policy, demonstrated by opposition to the Canadian ratification of the Kyoto Protocol. However, a variety of factors – personal, political and public – shifted his governments attention to climate change for their second term22 which began in 2005. This policy change is demonstrated distinctly in the 2007 Throne Speech:

The science is clear. It leaves no room for procrastination. Global warming is real.

We will act to stem its growth and minimize the impacts already unleashed. The more timid our response is, the harsher the consequences will be.

If we fail to act aggressively and shoulder our responsibility, we know what our children can expect – shrinking glaciers and snow packs, drying lakes and streams, and changes in the ocean’s chemistry.

Our wildlife, plant life, and ocean life will all be hurt in ways we cannot know and dare not imagine.

We do know this – what each of us does matters. What everyone does matters.

Things we take for granted and that have taken millennia to evolve could be at risk and lost in the lifetimes of our children23.

The 2007 Throne Speech also announced a key policy initiative of Gordon Campbell’s second term - the Climate Action Plan. This plan had three central components: 1.) legislated greenhouse gas reduction targets (33% reduction by 2020 over 2007 levels), 2.) a revenue neutral carbon tax, 3.) a carbon neutral government enabled by carbon offsets.

22 Hoberg, The export question : Under what conditions should British Columbia become a major exporter of electricity? 179. 23 Campbell, Gordon. 2007 Throne Speech. Victoria: Feb. 13, 2007

7 The carbon tax was the first North American broad-based carbon tax24.. One of the primary distinguishing characteristics of this tax, and perhaps its most often praised characteristic, is that it was designed to be revenue neutral25. This means that all revenues generated from the tax were to be offset by personal and corporate tax cuts, in addition to credits for households that met low-income requirements26. The continued claim that the carbon tax remains revenue neutral has been challenged by some, with some claiming that the tax cuts either exceed or do not match the revenues generated by the tax27. However, the BC Government still considers this tax to be revenue neutral stating that “[t]he province is taxing what people want to reduce – carbon pollution – and using the revenue to reduce taxes on things British Columbians want to encourage: employment, investments and economic growth.28” The tax was designed to be raised each year from its initial $10/tonne of carbon emissions to a total of $30/tonne by the year 2012.

During Campbell’s second term, the Site C Dam project was re-opened, ostensibly to address a domestic need for energy and as an attractive low-carbon energy source. A five step development process was established to evaluate the viability of the project29. However, in 2010 the provincial government passed the Clean Energy Act which set forth 16 energy objectives and also permitted the province to exempt specific projects from review by the BCUC30. With this, the Site C Dam was exempt from

24 Peltier, R. "Oh Canada! B.C. Ratifies North America's First Carbon Tax." Power 152, no. 8 (2008): 70. 25 Lammam, Charles and Taylor Jackson. “ How BC’s formerly ‘revenue neutral’ carbon tax turned into another government cash grab”. FinancialPost.com. http://business.financialpost.com/opinion/how-b-c-s-formerly-revenue-neutral-carbon-tax-turned- into-another-government-cash-grab. (Accessed Dec 28, 2017). 26 Lee, Marc. “ Fair and Effective Carbon Pricing: Lessons From BC”. PolicyAlternatives.ca. https://www.policyalternatives.ca/sites/default/files/uploads/publications/BC%20Office/2011/02/C CPA-BC_Fair_Effective_Carbon_FULL_2.pdf (Accessed Dec 28, 2017). 27 Ibid. 28 British Columbia. “British Columbia’s Carbon Tax”. https://www2.gov.bc.ca/gov/content/environment/climate-change/planning-and-action/carbon-tax. (Accessed Dec 28, 2017). 29 Dusyk, Page 878. 30 Canadian Press, The. “B.C Introduces Clean Energy Act”. http://www.cbc.ca/news/canada/british-columbia/b-c-introduces-clean-energy-act-1.890452. (Accessed Dec 20, 2017).

8 the BCUC regulation, which also had the effect of significantly altering the requirements for public engagement31.

In 2011, Christy Clark took over leadership of the Liberal Party after Campbell resigned following an unpopular attempt at implementing a harmonized sales tax. In 2013, she ran for Premier and won on a platform that touted a plan towards a debt free B.C. A major component of her strategy towards this was to implement a robust strategy to capitalize upon B.C.’s liquefied natural gas (LNG) opportunity, challenging the Province’s ability to meet the targets outlined in Campbell’s Climate Action Plan32. She also promised to freeze the carbon tax, “despite legislated obligations in the Greenhouse Gas Reductions Targets Act (2008) to lower BC’s GHG emissions 33% below 2007 levels by 2020”33.

As demonstrated by the above paragraphs, the Provincial has had an inconsistent approach to sustainability and climate change policy. While Campbell can be said to have demonstrated a lack of commitment to sustainability in opposition to the Kyoto Accord and the facilitation of the re-opening of the Site-C dam, he was also in power when the Province was able to implement the first North American carbon tax. Following his resignation, Christy Clark led the Province to compromise its ability to meet the targets set forth in Campbell’s Climate Action Plan and campaigned on the promise to freeze the carbon tax, compromising the progress that had been made on these precedent setting initiatives.

Other Provincial context is important to understand within the context of this study. Currently, energy costs are quite low in British Columbia. Average residential energy rates are approximately 10.29 cents per kilowatt/hour34. To provide a few points of Canadian comparison, rates in Calgary are approximately 11.65 cents per kilowatt/hour and rates in Toronto are 14.31 cents per kilowatt/hour. Only Manitoba and Quebec have lower rates35 than British Columbia in the Canadian context. Given the low

31 Ibid. 32 Hoberg, Page 177. 33 Knowler, Jessica. British Columbia's Carbon Tax : Addressing Gender, Age, and Locational Impacts / by Jessica Knowler., 2017, 8. 34 BC Hydro. “ How Our Rates Compare” https://www.bchydro.com/news/conservation/2016/how- our-rates-compare.html. (Accessed July 15, 2017). 35 BC Hydro. “ How Our Rates Compare” https://www.bchydro.com/news/conservation/2016/how- our-rates-compare.html. (Accessed July 15, 2017).

9 price of energy in British Columbia, price has typically not encouraged consumer conservation in British Columbia36.

British Columbia is expecting population growth of 25% in concert with industrial growth over the next 30 years37. The Clean Energy Act requires that 93% of provincially generated power is produced from non-fossil-fuel sources38. However, anticipated growth challenges the province’s capabilities to provide an adequate supply of energy through so-called “clean” hydro sources. British Columbia is part of the Western Interconnect, a grid that includes Alberta, 14 states in the western United States and some of northern Mexico39. Current rates of growth – an expected rate of a 1.4% increase to demand – may necessitate the purchase of additional energy from external suppliers40, in all likelihood to be generated through the burning of fossil fuels.

Municipalities, regional districts and improvement districts in British Columbia are subject to the Local Government Act (LGA), which sets forth the framework for governance, and articulates requirements for planning and land use authority. Municipalities under the LGA develop Official Community Plans (OCPs), which are long- term planning documents that help to shape development over a 10-25 year timeframe. In 2008, British Columbia enacted Bill 27, which required that OCPs include targets for GHG reductions and include policies that outline methods to achieve these targets41. The City of Vancouver, for reasons described below, is exempt from the requirement to develop an Official Community Plan and has committed to GHG reduction targets in other policy documents explored below.

36 Li, Cheuk L. C.District Energy and Sustainable Neighbourhood Planning: A Study of the Burnaby Mountain District Energy System, Simon Fraser University, Burnaby, British Columbia, 2016, 5. 37 Kiani B., Rowe A., Wild P., Pitt L., Sopinka A., & Pedersen T., 311. 38 Kiani et al., 311. 39 Kiani et al., 311. 40 Kiani et al., 312 41 Stevens, Mark, and Maged Senbel. "Examining Municipal Response to a Provincial Climate Action Planning Mandate in British Columbia, Canada." Local Environment 17, no. 8 (2012): 838.

10 1.3.2 Regional Context – Metro Vancouver

Metro Vancouver is a federation of 21 municipalities, one Electoral Area and one Treaty First Nation. Metro Vancouver is responsible for planning for and providing core utility services, regional parks and affordable housing to members. Metro Vancouver has a Regional Growth Strategy, the authority of which is established by the Local Government Act42. The objective of the Regional Growth Strategy is to “promote human settlement that is socially, economically and environmentally healthy and makes efficient use of public facilities and services, land and other resources”43.

In 2002, Metro Vancouver identified sustainability as one of its primary objectives through the Sustainable Region Initiative (SRI). In 2008, Metro Vancouver’s board adopted a Sustainability Framework which serves as the foundation for all of Metro Vancouver’s plans, including the Regional Growth Strategy. The Regional Growth Strategy is a long-term policy document, which has a planning horizon to the year 2040. It identifies five key goals: create a compact urban area, support a sustainable economy, protect the environment and respond to climate change impacts, develop complete communities and promote sustainable transportation choices.

Metro Vancouver, like other urban regions in Canada, is experiencing a period of high growth. By the year 2040, Metro Vancouver is projected to have 3.4 million residents44. From 2015 through to 2016, Metro Vancouver had a population growth rate of 6.5% as compared with the national average of 5%45.

In 2007, Metro Vancouver (along with all of its member municipalities) signed the B.C. Climate Action Charter, which requires the measurement and reporting of GHG emissions and sets forth a goal of carbon neutrality. A BC Climate Action Toolkit was developed by the Green Communities Committee (comprised of representatives of the Province and the Union of British Columbia Municipalities) and the Fraser Basin Council. This Toolkit was developed to help signatories – 187 local governments along with the

42 Metro Vancouver, Regional Growth Strategy, Page 3. 43 Ibid. 44 Metro Vancouver. “ Regional Planning Services”. http://www.metrovancouver.org/services/regional-planning/Pages/default.aspx. (Accessed April 20, 2017). 45 Ibid.

11 Province and the Union of BC Municipalities46 - achieve their Climate Action Charter Commitments. This toolkit includes information on district energy systems including regulation and policy to support fuel switch and expansion of existing legacy systems.

In the Metro Vancouver region, there are several notable examples of successful district energy systems including SFU’s UniverCity in the City of Burnaby, the South East False Creek and River District in the City of Vancouver, Lower Lonsdale in North Vancouver, and Surrey Centre in the City of Surrey. It is important to note that all of these systems, with the exception of the South East False Creek System, operate on natural gas despite plans for fuel switch conversion.

1.3.3 Municipal Context – the City of Vancouver

Vancouver is located amongst mountains, ocean, and forest, all of which have been protected and celebrated as a core part of the city’s identity - for some time, the city was known locally as a 'setting in search of a city'47. This location has informed both the lifestyle and core values of Vancouverites, resulting in a high interest in sustainability and environmentalism - evidenced in part by the founding of Greenpeace in 196948 and founding Canada’s first Green Party49.

The City of Vancouver is a Charter City, which means it has not been bound by the Municipal Acts and is excluded from the Local Government Act including the requirement to develop an Official Community Plan. The Charter was granted by the Province in 1953 and as such is a provincial statute. With this, the City Council of Vancouver has the power to pass bylaws to regulate noise and land use, to buy and sell property, to collect taxes, to take on debt, and to give grants. The Charter can be amended by The City of Vancouver through the submission of private bills to the B.C. Legislature. The Charter also enables and facilitates “council and the director of policy

46 British Columbia. “Local Governments and Climate Action”. https://www2.gov.bc.ca/gov/content/environment/climate-change/local-governments. (Accessed on April 20, 2017). 47 Punter, John Vincent, and Canadian Electronic Library. The Vancouver Achievement : Urban Planning and Design / John Punter. DesLibris. Books Collection. Vancouver, B.C.: UBC Press, 2003, 4. 48 Punter, The Vancouver Achievement, 4. 49 Rosol, Marit. "Vancouver's "EcoDensity" Planning Initiative: A Struggle over Hegemony?" Urban Studies 50, no. 11 (2013), 2245.

12 very significant scope for policy innovation and direct response to local circumstance”50 Notably, this means that how the City of Vancouver operationalizes their municipal powers is quite different than other municipalities in British Columbia.

The City of Vancouver has a unique dynamic of innovation and advocacy that has influenced its political climate over the past forty years. Within the global context, Vancouver is recognized as a city with a 'high standard of design'. It is also known for its innovative approach to planning processes such as the Vancouver Urban Design Panel and the hybrid approach to planning through both a formal zoning approach and also a discretionary development control51. The Urban Design Panel was established in 1973 by Director of Planning Ray Spaxman – hired by the new TEAM (The Electors Action Movement) council to help bring about “a liveable city through new planning practice”52.

Vancouver, since its foundation, lacked a legally adopted citywide plan. The famous Bartholomew plan of 1928 was never adopted, nor was his 1948 update53. This became a central political issue in the 1990s54 when congestion, pollution and disparity amongst social classes became increasingly apparent. In 1992, Mayor Gordon Campbell initiated the process which resulted in CityPlan, adopted by council in 1995. Nearly 20,000 people were engaged throughout the creation of CityPlan55.

Since the 1970s Vancouver has, for the most part, prospered economically. This prosperity - in tandem with a spectacular natural setting, a reputation as a ‘global’ city, and an interest in sustainability - has enabled municipal approaches to planning that has “stopped freeway intrusions, promoted neighbourhood conservation, replaced redundant industrial lands with new high density residential areas and reclaimed the waterfront for public use56”. In short, the City of Vancouver has - for the most part - been able to enact policy that positions the public realm and urban fabric before conventional modes of urban development. In other words, the municipal planning approach has not been one

50 Punter, The Vancouver Achievement, 14. 51 Punter, The Vancouver Achievement, xv. 52 Macdonald, Elizabeth. "The Efficacy of Long-Range Physical Planning: The Case of Vancouver." Journal of Planning History7, no. 3 (2008): 185. 53 Punter, The Vancouver Achievement, 150. 54 Macdonald, The Efficacy of Long-Range Physical Planning, 184 55 City of Vancouver, CityPlan: Directions for Vancouver and City of Vancouver Response to GVRD Livable Region Strategic Plan. Vancouver: 1995. 56 Punter, The Vancouver Achievement, 3.

13 that shies away from contention in challenging urban development that does not benefit the city as a whole. This planning development and innovation has also been historically enabled through political structures – such as the 1936 reform of the municipal electoral system from a ward-based system to a city-wide based system57, which has also enabled municipal political parties to take aggressive stances on sustainability issues.

The City of Vancouver has also worked to position itself as a leader in sustainability and has an early track record of sustainable initiatives. In 1990, a “Clouds of Change” report issued by the City of Vancouver’s Task Force on Atmospheric Change represented one of the first municipal-scale approaches to global warming58. The City also launched an EcoDensity program under mayor Sam Sullivan, which sought to achieve sustainability and affordability through densification59.

Vision Vancouver, a centre left party, was founded in 2005 by former COPE (Coalition of Progressive Electors) members as a result of an internal party conflict over, in part, housing and campaign financing. During the 2005 election, Vision ran five councillors of a possible ten. Their Mayoral candidate, Jim Green, was defeated by the NPA’s Sam Sullivan.

By the 2008 election, Sam Sullivan was set to be replaced by a local businessman and councillor, Peter Ladner. In partial response to this, Vision Vancouver selected local ‘green’ businessman Gregor Robertson as their Mayoral candidate. Robertson won the election and has served consistently since then, with Vision- dominant City Councils.

Vision’s platform for the 2008 election focused on four central areas: homelessness and affordable housing, building strong and inclusive communities, the environment and sustainability, and the development of a thriving economy. The environmental platform proclaimed that “Gregor Robertson and the Vision Team will make Vancouver the greenest city in the world – the international leader among environmentally sustainable cities” – and positioned this in opposition to years of NPA in- action60. While the NPA under Sullivan had launched the EcoDensity initiative, many

57 Punter, The Vancouver Achievement, 13. 58 Affolderbach, and Schulz. "Positioning Vancouver through Urban Sustainability Strategies? The Greenest City 2020 Action Plan." Journal of Cleaner Production 164 (2017): 680. 59 Ibid. 60 Vision Vancouver 2008 Platform Document.

14 were critical of the plan for being “the greenwashing of a developer’s agenda” of densification61.

In 2011, Vancouver City Council adopted the Vancouver Greenest City Action Plan (GCAP), a strategy with extensive goals and objectives to become the greenest city in the world by 2020. The GCAP was part of the platform initiatives of a Vision Vancouver led council62 and was a response to efforts to achieve targets set forth in Vancouver 2020: A Bright Green Future Plan (developed in 2009) which situated its goals and targets within global best practice – and further emphasized ‘international standards’ rather than provincial or federal standards63.

Through its development, the Greenest City Action Plan was the result of the input of 60 City of Vancouver staff members, more than 120 organizations and thousands of citizens working over the course of two years to research best practices, set goals and establish targets64. While Greenest City ambitions focused on specific sustainability metrics, it also embodied a political and economic strategy to situate the City in a larger global context and to “boost [the] City’s economic competitiveness and to create the image of a desirable place”65.

The Plan set forth 10 goals and 15 measurable targets that serve as a roadmap to reduce the ecological footprint of the City by 33% by 2050, or 1,110,000 tonnes of

CO2/ year. The strategy also set forth the long-term vision for the city to reduce its dependence on fossil fuels. Significant to our case study, the Plan identified that buildings currently generate 55% of the City of Vancouver’s greenhouse gas emissions66.

Part One of the GCAP set forth goals for the years 2011 to 2014. With regards to Neighbourhood Energy Systems– also known as District Energy Systems - three key

61 Rosol, Marit. "Vancouver's "EcoDensity" Planning Initiative: A Struggle over Hegemony?" Urban Studies 50, no. 11 (2013)2239, 2246. 62 Scerri, Andy, and Meg Holden. "Ecological Modernization or Sustainable Development? Vancouver's Greenest City Action Plan: The City as 'manager' of Ecological Restructuring." Journal of Environmental Policy and Planning 16, no. 2 (2014): 269. 63 Ibid. 64 City of Vancouver, Greenest City: 2020 Action Plan, 4. 65 Affolderbach, Positioning Vancouver through Urban Sustainability Strategies? The Greenest City 2020 Action Plan, 678. 66 Ibid, 19.

15 goals were identified in Part One: to work with partners in the city to build new neighbourhood-scale renewable energy systems; to work with partners to convert large scale steam systems to renewable energy and, to develop a policy framework that clearly articulates when the City will or will not consider different renewable energy sources

As shown in the graph below [Figure 1], Neighbourhood Energy Systems are expected to account for 11% of the target reductions67. Neighbourhood Energy Systems are most efficient in dense urban areas68. Due to economies of scale, they make possible a range of energy sources that would not otherwise be financially feasible at the individual building scale.

Figure 1: Greenest City Action Plan Carbon Reduction Targets adopted from the Vancouver Neighbourhood Energy Strategy and Energy Centre Guidelines. Source: City of Vancouver. “Vancouver Neighbourhood Energy Strategy and Energy Centre Guidelines.” September 25, 2012. https://vancouver.ca/files/cov/neighbourhood-energy-strategy- and-energy-centre-guidelines-committee-report.pdf

In 2012, the City of Vancouver adopted the Strategic Approach to Neighbourhood Energy and the Energy Centre Guidelines. These policies clearly lay out the evaluation and approval processes for district energy projects, enable the conversion

67 Vancouver Neighbourhood Energy Strategy and Energy Centre Guidelines, 3. 68 Ibid, 4.

16 of existing energy systems and call for the development of new Neighbourhood Energy Systems. The City of Vancouver identified the single greatest opportunity to reduce GHGs in the conversion of fuel sources for existing steam neighbourhood energy utilities. The city’s emphasis on Neighbourhood Energy and the importance of integrating energy planning into broader urban planning discussions can be can be summarized in this quote by city manager Sadhu Johnson:

[y]ou have land-use folks saying let’s put the buildings here, and transport planners saying how do we get people moving around – and then almost as an afterthought, folks say, well, how do we provide energy to the neighbourhood? In Vancouver, we pioneered the integration of these various issues into our community building and urban planning.69

The City of Vancouver has had success with district energy systems, as mentioned in Section 1.1 and explored further in Chapter 4. One example of such success is the SEFC system, which was able to achieve a 60% CO2 emission reduction target through the use of sewage heat recovery. The system has grown 260% since 2010, with 4.2 million square feet of buildings now connected70.

Notably, Vancouver is home to the oldest and largest district energy system in British Columbia, the Central Heat Distribution Steam System - the subject of this case study. Given the history of district energy in the city, in addition to the success of systems such as the SEFC system, it can be said that Vancouver is a district energy leader in the region.

In 2015, the CoV released its Renewable City Strategy outlining its plan to transition to 100% renewable energy by 2050 and to reduce GHG emissions by at least 80% below 2007 levels by 2050. This ambition was also articulated in Part Two of the Greenest City Action Plan 2015-2020, and “followed a call for a nation-wide shift to renewable energy by more than 70 leading Canadian academics, and similar action by at least ten other world-class leading cities such as San Francisco, Sydney, Stockholm and Copenhagen”71. Three of the key strategies to achieve these goals were: reduce energy usage, increase the use of renewable energy and, increase the supply of

69 UNEP, Page 56. 70 City of Vancouver. “Neighbourhood Energy Strategy: Downtown Update”. http://council.vancouver.ca/20180221/documents/pspc3-presentation.pdf. (Accessed May 29, 2017). 71 City of Vancouver, Greenest City Action Plan Part 2, 9.

17 renewable energy. Of primary concern to our discussions here is the key goal of increasing the use of renewable energy – which further underlines the importance to the CoV of obtaining a critical mass in a neighbourhood energy system to ensure that the financial feasibility of a fuel switch was possible. The targets set forth in the Renewable City Strategy built upon the targets identified in Part One of the GCAP, contributing to a increasing climate change policy momentum.

This chapter introduces the research question and provides Provincial, Regional and Municipal content for approaches to sustainability, district energy systems, and energy regulation. This chapter demonstrates the rationale for investigating the Creative Energy case study as an example for other municipalities looking to develop or implement policies which would enable the fuel switch of legacy steam district energy systems. It also demonstrates that while there have been shifting priorities historically, there was a keen interest at the time of the implementation of the Neighbourhood Energy Strategy (2012) provincially, regionally and municipally to demonstrate sustainability leadership.

18 Chapter 2.

Conceptual Framework

This chapter outlines the conceptual framework of this study. The conceptual framework developed for this research project serves as a guide to help inform an understanding of the barriers that the City of Vancouver faced in implementing its Neighbourhood Energy Strategy. To establish my conceptual framework, I draw principally from three bodies of literature. The first body of literature that I use to guide this analysis is energy justice. This body of work facilitates a discussion of the mandate of the British Columbia Utilities Commission to protect the interests of the end user. Energy justice also enables an exploration of the manner in which conceptions of justice – embedded within the mandate of the BCUC – impacted the regulatory process for Creative Energy and the City of Vancouver. The second body of literature that I use to guide my investigation is that of remunicipalization, which facilitates a discussion about the potential impacts of ownership models of essential services and utilities. In this case, this has particular relevance on the impacts of ownership upon the regulatory process. Finally, the conceptual framework includes literature on path dependency which guides an exploration of the challenges that may have been experienced in implementing technological shifts with the Neighbourhood Energy Strategy for the utility, the City and the end user. Notably, this conceptual framework is used primarily as a means of exploring the complexity of this case study. The concepts that make up this conceptual framework do not prevail inherently within this case study, but rather serve as a means of understanding the process the City of Vancouver and Creative Energy went through with the BCUC.

2.1 Energy Justice

Energy justice is an inter-disciplinary research approach that is concerned with energy policy, energy production and systems, energy consumption, energy activism, energy security, the political economy of energy and climate change72.

72 Jenkins, Mccauley, Heffron, Stephan, and Rehner. "Energy Justice: A Conceptual Review." Energy Research & Social Science 11, no. C (2016), 175.

19 Energy justice is rooted in environmental justice, a movement that emerged in the 1970s as a response to the unequal distribution of the negative impacts of development and industry such as pollution or waste processing facilities. One of the concerns of environmental justice was the way in which these negative impacts were disproportionately located near marginalized or disenfranchised communities73.

In addition, environmental justice was concerned with the “whole system” of industry and development – not just the way we dispose of our garbage or industrial by- products but also the potential impacts of industrial projects on civil rights74. For some of the leaders of environmental justice at the time, “pollutants that inhibit[ed] human health also inhibit[ed] social progress”75. Environmental justice concerns itself with equity, wellbeing and justice as it relates to ecology and the environment.

To extrapolate, environmental justice seeks the

fair treatment and meaningful involvement of all people regardless of race, colour, national origin or income with respect to the development, implementation and enforcement of environmental laws, regulations and policies76.

As a general framework, projects that embody a sense of environmental justice can be seen to have five key characteristics, outlined below.

1. They incorporate the principle of the "right" of all individuals to be protected from environmental degradation. 2. They adopt a public health model of prevention (elimination of the threat before harm occurs) as the preferred strategy. 3. They shift the burden of proof to polluters/dischargers who do harm, discriminate, or who do not give equal protection to racial and ethnic minorities, and other "protected" classes. 4. They would allow disparate impact and statistical weight, as opposed to "intent," to infer discrimination.

73 Egan, Michael. "What Did Environmental Justice Look Like in 1970?" Environmental Justice 3, no. 2 (2010), 41. 74 Ibid. 75 Ibid. 76 Heffron, and Mccauley. "Achieving Sustainable Supply Chains through Energy Justice." Applied Energy 123, no. C (2014), 1.

20 5. They redress disproportionate impact through "targeted" action and resources.77

This list is included to highlight that one of the primary concerns of environmental justice is a concern for who is impacted by environmental degradation.

Central to environmental justice is the concept of justice. While the scope of this research paper prevents a comprehensive look at pieces of literature concerning conceptions of justice, we can define justice as a “combination of ensuring and recognizing the basic equal worth of all human beings together with a commitment to the distribution of good and bad things”78. Jenkins et al. invoke the Humean definition of justice as a device to settle conflicting claims on scarce resources and emphasizes that this applies to both the “distribution of benefits as well as burdens”79.

Energy justice carries with it this same understanding of justice – with the aim to “provide all individuals, across all areas, with safe, affordable and sustainable energy”80 and asks the question “how do we distribute the benefits and burdens of energy systems?81”. Notable in this definition is the conception of the public good – here defined as something that is indivisible, benefits the majority and cannot belong to any individual or group privately. This concept is central to the mandate of the BCUC, outlined later on, and – in theory – the development of urban planning that seeks to shape cities and policy that benefit the majority of its citizens.

The current widely accepted working definition of energy justice82 is that there are three central overlapping and interlinked tenets: distributional, recognitional and procedural.

2.1.1 Distributional Justice

Distributional justice concerns itself with the distribution of both the positive and negative outcomes of energy production and consumption. Jenkins et al. establish

77 Bullard, Robert D. "Environmental Justice in the 21st Century: Race Still Matters." Phylon (1960- ) 49, no. 3/4 (2001),154. 78 Heffron, and Mccauley, Achieving Sustainable Supply Chains through Energy Justice, 1. 79 Jenkins et al, Energy Justice: A Conceptual Review, 176. 80 Ibid. 81 Jenkins et al, Energy Justice: A Conceptual Review, 175. 82 Jenkins et al. McCauley et al.

21 evaluative and normative questions for distributional justice. The evaluative question is: where are the injustices? The normative question is: how should we solve them?83 When concerned with energy, distributional justice endeavours to ensure that all members of society – regardless of class, race, or income – have equal access to energy. For Heffron and McCauley, distributional justice is inherently spatial including not only the siting of projects but also access to energy services.

2.1.2 Recognitional Justice

Recognitional justice is concerned with which sections of society are ignored or misrepresented84 and disenfranchised from decision-making processes. This does not only manifest itself as non-recognition but also misrepresentation and disrespect of dissent, protest and processes that utilize a “top-down provision of information”85.

Heffron and McCauley use the example of evolving Scottish, Welsh and UK government policy on fuel poverty which only recently has come to recognize that specific segments of the population – such as elderly or infirm people – have higher than average energy consumption needs. This is in opposition to longstanding views that the energy poor/ were ‘inefficient’ users of energy who were simply in need of top down education about sustainable energy use. Social groups’ specific needs were marginalized, misrepresented and disrespected due to lack of understanding and lack of recognitional justice.

Today, policymakers in these regions seek to develop stronger understandings about the energy use of specific segments of the population that may have more intensive usage through conversations with those groups to build a more educated and nuanced understanding of their energy use and demands. This allows the policymakers to make informed decisions about segments of the population, without making assumptions about their energy demand and needs.

83 Ibid. 84 Ibid. 85 Jenkins et al. Energy Justice: A Conceptual Review, 177.

22 2.1.3 Procedural Justice

Procedural justice is concerned with how authentically engagement is used throughout decision-making processes or how a sense of community ownership in infrastructure projects is fostered86. Importantly, Jenkins et al identify three mechanisms of inclusion: mobilizing local knowledge, being transparent in the process, and better institutional representation. For Heffron and McCauley, transparency is an essential component of procedural justice – if the public is made fully aware of energy subsidies, their decision-making on what energy sources represent the best possible future is likely to be swayed. Often, this information is kept opaque and thus does not factor into the public’s perceptions of an energy source.

Energy justice is about the human or social aspects of energy. I will use this body of literature to provide a framework with which to examine how energy justice impacted the outcomes of the rulings between the BCUC and Creative Energy. I hypothesize that one of the significant barriers the city has faced has been the rulings of the BCUC, which have ruled against the City of Vancouver and Creative Energy as their agreement has been determined to not be in the public’s interest.

The Creative Energy case study can be examined through all three of the energy justice tenets. Distributionally speaking, the case for the Creative Energy Central Heat expansion lies within the argument that improved efficiency and sustainability performance serves the greater population. Even so, the BCUC’s primary distributional concern is concerning rates – even if this is short-term increase that will decrease in the long term, or in concert with improved sustainability measures. This paper will use concepts of distributional justice to explore the BCUC’s ruling.

The agreement reached between the City of Vancouver and Creative Energy may also be examined through the concepts of recognitional justice – especially regarding the consultation process of the creation of the Neighbourhood Energy Strategy policy and in the development of mandatory hook-up requirements by the City of Vancouver that benefited Creative Energy. This paper use concepts of recognitional justice to explore the BCUC process and the implementation of the Neighbourhood Energy Strategy.

86 Ibid.

23 Thirdly, the concept of procedural justice can help an understanding of our case regarding how the City of Vancouver and Creative Energy shared information about the relationship and agreement and made information transparently available about the arrangement.

2.2 Remunicipalization

Much of the literature regarding remunicipalization explores growing movements within South America and Europe that call for the de-corporatization and de-privatization of water utilities, arguing that water is an essential service and public good that a municipality should have control over. This process of bringing back utilities to public or municipal ownership is in contradiction to the neoliberal history of privatization of utilities87.

Wagner offers a definition of remunicipalization:

[r]emunicipalization refers to the process when functionally privatized (“outsourced”) functions and services are turned back (“insourced”) into municipal operation or materially (asset) privatized facilities are “bought” back and returned to public/municipal ownership, be it entirely or partially.88

An emerging segment of remunicipalization literature explores the expansion of the remunicipalization movement towards energy. One such piece explores the success of an energy remunicipalization campaign in Germany89.

After a wave of privatization in post-unification Germany in the 1990s, a popular movement recently grew calling for the government to remunicipalize energy utilities. This movement, known as the Energiewende, was precipitated by a national change in nuclear policy following the Fukushima disaster in 201190. This change in nuclear policy

87 Wagner, O., Berlo, K., Remunicipalisation and Foundation of Municipal Utilities in the German Energy Sector: Details about Newly Established Enterprises, J. sustain. dev. energy water environ. syst., 5(3), 397. 88 Wagner, O., Berlo, K., Remunicipalisation and Foundation of Municipal Utilities in the German Energy Sector: Details about Newly Established Enterprises, J. sustain. dev. energy water environ. syst., 5(3), 560. 89 Ibid, 560. 90 Moss, Timothy, Sören Becker, and Matthias Naumann. "Whose Energy Transition Is It, Anyway? Organisation and Ownership of the Energiewende in Villages, Cities and Regions." Local Environment 20, no. 12 (2015), 1549.

24 was enabled, in part, by an already enthusiastic national uptake in renewable energy91. The objective of the Energiewende was to transition from nuclear energy to renewable energy sources without adversely impacting the economy. The movement was identified as the “greatest political and economic challenge since post-war reconstruction”92.

The responses to this initiative have included a variety of configurations that re- imagine ownership and tighten local control. Ownership is one of the central considerations in these initiatives. However, ownership in these instances is not thought of in the simplistic binary of public versus private ownership. Instead, the German examples challenge conventional notions of ownership, as demonstrated by Moss et al.. These new projects consider political and financial ownership of projects in addition to “who identifies with them and why, who supports or opposes them, how inclusive they are and how they reflect or affect power relations in a locality or a region”93. Responses have included manifestations of energy cooperatives and ‘bio-energy villages’94.

In the German examples, after a course of local action, policymakers chose to bring the energy utility back under their purview enabling local authorities to further their energy transitions in highly diverse ways. One unifying feature of the methods, however, is the process of institutional change – which conjures notions of path dependency, further explored in the next section - from a highly relational perspective95.

Remunicipalization offers an opportunity to implement an energy policy at the local level throughout the whole value chain of energy supply96, independent from the private market to achieve successes in sustainability objectives or in meeting consumption or reduction targets. Further, bringing the energy utility back under municipal power enables a strong local government leadership and influence on energy markets. Germany wanted to show strong leadership in this area, and local governments

91 Grossi, Heim, and Waterson. "The Impact of the German Response to the Fukushima Earthquake." Energy Economics 66, no. C (2017), 450. 92 Moss et al, Whose Energy Transition Is It, Anyway? Organisation and Ownership of the Energiewende in Villages, Cities and Regions, 1548. 93 Ibid. 94 Ibid. 95 Ibid. 96 Berlo and Wagner, Page 399.

25 took advantage of this opportunity to do so, after the perceived slow action of privately owned energy utilities prior to the energiewende.

Central to the concept of remunicipalization is the idea that energy is a public good, and as such, it is an essential service that should be provided to everyone. Another body of work that explores the notion of energy as a public good is District heating as heterotopia: Tracing the social contract through domestic energy infrastructure in Pimlico, London, which provides a historical context for the installation of a centralized heating system for a housing project in Pimlico, which was the City of London’s first attempt at delivering neighbourhood heating. The system, rare in the UK unlike other European states that had more frequent instances of district energy systems, currently provides heating to over 3000 homes. Adding to its unique nature is the fact that it has survived the privatization of the housing project that it was initially built to serve.

This work explores this early experiment with the idea that heat was a public good and uses Foucault’s concept of heterotopia, “a type of space in which society gazes to understand what an alternate arrangement of living might look like” to examine how the public understanding of the Pimlico project has changed over time97 and the path dependent challenges of implementation of new systems, a concept further explored in the next section.

Today, outside of the Pimlico context, energy consumption has been decontextualized and is now understood less as a simple “municipal management of resources” and more as a “decontextualized energy system in which end users’ buildings, appliances, and behaviours all have a theoretical optimum energy performance.”98 What this means is that responsibility for energy use reductions has been offset, in part, from more substantial systemic reductions to smaller individual actions such as lowering the thermostat, putting on a sweater, or opening a window.

This body of literature provides a framework with which to examine the relationship of the City of Vancouver’s sustainable policy objectives with the objectives of the private sector and how the private ownership of Creative Energy influenced the

97 Johnson, Charlotte. "District Heating as Heterotopia: Tracing the Social Contract through Domestic Energy Infrastructure in Pimlico, London: Social Contract and Energy in Pimlico." Economic Anthropology 3, no. 1 (2016), 94. 98 Ibid, 95.

26 outcomes of the BCUC rulings. Chapter 1 also highlights how municipal control over a utility exempts it from regulation by the BCUC.

Remunicipalization inherently includes notions of energy justice, reaching beyond questions of “material ownership to include issues of local community control, distributional justice, environmental sustainability and justice and enhanced participation” notably, in matters of the public good.99. In this, remunicipalization concerns itself with the actors involved throughout the process the ways in which they are included meaningfully in the process and the ways in which the project benefits or challenges them.

2.3 Path Dependency

Path dependency is the manner in which “existing technologies and practices structure avenues of future development”100. Elizabeth Shove explores path dependency, which as a theory has its roots in economics, as a way of discussing the manner in which technologies persist in spite of the development of more efficient technologies or systems. Path dependency makes sense of the continued use of products or technologies based on historical preference or use. This holds true even if newer, more efficient products or practices are available, due to previous commitments or “paths”.

Shove and Berkhout utilize a classic example of the QWERTY keyboard in their writings about path dependency to illustrate the difficulty in dislodging well entrenched, although inefficient systems101. The QWERTY system was developed sometime between 1909 and 1924 and became the standard for typewriters102. However, in the 1930s August Dvorak and W.L. Dealy developed an alternate layout for the keyboard (the DSK or Dvorak Simplified Keyboard) that was said to increase efficiency. Many world records for speed typing have used the Dvorak keyboard and the Apple

99 Ibid, Page 1552 100 Shove, Elizabeth. Comfort, Cleanliness and Convenience : The Social Organization of Normality / Elizabeth Shove. New Technologies/new Cultures Series. 2003, 12. 101 Berkhout, Frans. "Technological Regimes, Path Dependency and the Environment." Global Environmental Change 12, no. 1 (2002), 4. 102 David, Paul. "Clio and the Economics of QWERTY." The American Economic Review 75, no. 2 (1985), 332.

27 corporation has claimed that the DSK lets you type “20-40% faster”103. Additionally, U.S Navy experiments had demonstrated that within ten days of retraining typists from the QWERTY system to the DSK, the typists had increased efficiency104.

Nonetheless, the QWERTY keyboard persisted – for keyboards had become part of a “large rather complex system of production that was technically interrelated”105. Shove writes, “alignment between actors, along with sunk costs of various form led, in this case, to a hardening of the “path” such that it has become increasingly difficult to break away from the QWERTY arrangement”106. In addition to the concerns around the cost of hardware conversions, there was resistance about the “software” i.e. the typists’ memory – which had been dispelled during the U.S. Navy experiments – but was percieved as a challenge nonetheless.

Within the context of energy, path dependency is often utilized to discuss the challenges of moving from well-established carbon intensive technologies and systems to those that employ renewable fuel sources107. In the context of environmental communication, path dependency is identified as one of the primary challenges in sustainable energy transitions. Shove explores the notion of “shocks” or the strategic utilization of preference as potential mechanisms to overcome the challenge of path dependency108. Unruh, discussed later, also explores the notion of shocks to escape what he terms “carbon lock-in” driven by path dependent processes.

A discussion of energy path dependency is complicated by politics and policy – it is not a purely market or consumer based phenomenon. From a political and policy level, path dependence can still be understood to be a process that is perpetuated by a dynamic of ‘increasing returns’ or “positive feedback processes”109 which both make the

103 Ibid. 104 Ibid. 105 Ibid, 334. 106 Ibid. 107 Ibid. 108 Ibid. 109 Pierson, Paul. "Increasing Returns, Path Dependence, and the Study of Politics." American Political Science Review 94, no. 2 (2000), 251.

28 social costs of switching from one system to another higher over time and emphasize timing and sequencing (the longer you are on the system, the harder it is to get off)110.

Politics also inherently functions as an institution, enacted through policy. Policies are intensive to produce and build consensus around, and thus it is difficult for them to be quickly responsive or adaptable. Policies are “extremely prominent constraining features of political life”111 , are “grounded in law and backed by the coercive powers of the state, [and] signal to actors what has to be done and what cannot be done, and they establish many of the rewards and penalties associated with particular activities”112. Policies carry with them an inherent predisposition to increasing returns – meaning that they are prone towards positive feedback loops. Further,

[p]olicies are costly to create and often generate learning effects, coordination effects, and adaptive expectations. Institutions and policies may encourage individuals and organizations to invest in specialized skills, deepen relationships with other individuals and organizations, and develop particular political and social identities113.

Unruh seeks to find a solution to these political and policy challenges and explores how industrial economies might shift from fossil-fuel based economies in the article Escaping carbon lock-in. For Unruh, “industrial based economies have become locked-into fossil fuel based energy and transportation systems through path dependent processes driven by technological and institutional increasing returns”114. He explores three policy level approaches that are progressively more aggressive to disrupt systems:

1. Let the system continue as status-quo, and focus on treating emissions (an “end of pipe solution”) 2. Partially modify the systems (continuity) 3. Replace the entire system (discontinuity)

For Unruh, policy change is inhibited by what he terms ‘techno-institutional lock- in’. In his discussion of institutional theory, “institutions create conditions for stability and

110 Ibid. 111 Pierson, 259. 112 Ibid. 113 Pierson, 259. 114 Unruh, Gregory C. "Escaping Carbon Lock-in." Energy Policy 30, no. 4 (2002): 317.

29 radical change that only occurs in the case of major crises or external shocks115”. This discussion of what enables a break from path dependency proves useful to our later discussions of the City of Vancouver’s challenges in implementing their NES strategy.

I intend to use path dependency as a way of exploring resistance that the NES may have received from builders and developers as part of the intervener process of the BCUC proceedings, and to explore some of the regulatory challenges that the City of Vancouver faced in their implementation of the Neighbourhood Energy Strategy.

This chapter outlines the conceptual framework that informed the interpretation of the Creative Energy Central Heat Case study to inform an analysis of the barriers that the City of Vancouver faced in implementing the Neighbourhood Energy Strategy. While the concepts outlined in this conceptual framework chapter do not explicitly prevail within the case study, the concepts were nonetheless helpful in analyzing the variety of factors that challenges the City of Vancouver in their Neighbourhood Energy Strategy roll-out.

115 Unruh, Escaping Carbon Lock-in, 320.

30 Chapter 3.

Research Design

This chapter outlines the research methodology of this study. The research took the form of a mixed-method case study which was explored through qualitative semi- structured open-ended interviews, a close reading of text, media, policy documents, and analysis of archival material.

Gaber and Gaber provide a rationalization of mixed-method research design by asserting that “single method research strategies run the risk of missing significant data sets that can cripple a planning investigation”116. The research design incorporated a variety of sources to ensure that the research findings were balanced and did not carry forth the bias of a sole source. This is in opposition to a single method case study, which would utilize a single research method. As Yin points out,

a strong advantage of the case study method in the first place is the ability to deal with contextual conditions… it allows you to start an investigation without knowing precisely the boundaries of the case and even to discover telling insights into the ways that decisions are made – because initially contextual conditions may turn out to be a key part of the decision-making process and therefore later become part of the “case”117.

3.1 Interviews

Four qualitative interviews formed an invaluable segment of the research of this project, allowing for a rich understanding of the policy development approach, the BCUC rulings and the barriers the City of Vancouver faced in implementing the Neighbourhood Energy Strategy. The interviews provided four distinct viewpoints that supplemented media coverage, policy documents, academic text and archival documents that were systematically reviewed (this methodology is presented below).

116 Gaber, John, and Gaber, Sharon L. "Utilizing Mixed-Method Research Designs in Planning: The Case of 14th Street, New York City." Journal of Planning Education and Research 17, no. 2 (1997), 95. 117 Yin, Page 237-8.

31 The sampling methodology for the interviews sought to reach four distinct perspectives on district energy systems. These perspectives included policymakers, those that champion district energy systems as a means to achieving sustainability objectives, developers, and those that navigated district energy implementation from the utility side. The four participants were selected based on initial research and document review. The sampling was a non-probability purposive sample and remained open to snowballing. The transcripts of the interviews were later analyzed using NVivo software.

The four interviewees were interviewed between June 2017 – January 2018. In two instances, the interviews took place at the subject’s offices. A third interview took place in a local coffee shop. The fourth interview took place over the phone. Two of the interviews took approximately one hour. Two interviews were condensed to half an hour due to the interviewee’s schedule. Even with the variance in time, in all four instances, the questions in the interview guide were addressed. All the interviews were recorded and transcribed soon after the interview took place so as not to lose the detail or nuance of the interview.

All interviewees were asked if they would like to remain anonymous. Three participants agreed to be named in the study and provided their written consent verifying this agreement. The fourth participant asked to remain anonymous.

The interviewees were provided with the option to receive a copy of the questions that would guide the semi-structured interviews in advance of the interview. All participants elected to receive the questions in advance. The interviews were conversational and semi-structured. The list of questions prepared sought to determine a participant’s involvement in district energy, their potential biases and sought to remain open to any additional information they may want to share with the interviewer. However, the interviews were flexible to allow modification and response based on the answers provided. Due to the nature of semi-structured interviews, “an important part of the research may involve the discovery of different dimensions, aspects, nuances or concepts … that were not evident at the start of the project”118. For this research project, each of the interviewees brought to light nuances to the research question that were not present or available through other research methods.

The questions that structured the conversation guide were as follows:

118 Babbie and Benaquisto, 113.

32 1. What is your involvement with district energy systems in Vancouver, British Columbia? 2. What do you see as the strengths of the NES? 3. What do you see as the weaknesses of the NES? 4. What are the key barriers to implementing the NES? 5. How has the timeline for the implementation of the NES changed? 6. Is there anything else you would like to share? 7. Are there any documents that may be relevant to my study or that you would like to share with me?

All interviewees were contacted through email. The table below (Table 1) outlines the interviewees, their title, their relationship to district energy and their relationship to the Neighbourhood Energy Strategy.

Table 1: Interviewee Relationship to District Energy and Neighbourhood Energy Strategy Name of Title Relationship to District Relationship to the Interviewee Energy Neighbourhood Energy Strategy Chris Baber Manger, Manager of the City of Wrote and developed the 2012 Neighbourhood Vancouver’s Neighbourhood Energy Strategy Energy Neighbourhood Energy Program and Policy Stacey Bernier N/A Former President and Was President and CEO of CEO of Creative Energy Creative Energy during the time when they were before the BCUC Gerard Principal, Advisor and development Reshape served as advisor and MacDonald Reshape services for Creative champion for Creative Energy Strategies Energy Fuel Switch Fuel Switch and undertook comprehensive study of the Central Heat fuel switch project Developer Unnamed Developer who works with Development Perspective Development District Energy Systems Company

Chris Baber manages this City’s Engineering Department’s Neighbourhood Energy Program, which is a cross-departmental initiative with the Sustainability and Planning Departments. Chris Baber was initially hired as the Project Manager for the South East False Creek system in 2006 and since then has been responsible for developing the City’s Neighbourhood Energy Strategy and overseeing its

33 implementation. Chris Baber has worked closely with Creative Energy in developing a feasibility study for the fuel switch of the downtown core system. BCUC rulings on franchise agreements developed in support of the Neighbourhood Energy Strategy – explored further in Chapter 6 – have forced the re-examination and re-evaluation of the Neighbourhood Energy Strategy.

Stacey Bernier was the former President and CEO of Creative Energy. In 1999, Stacey started his own renewable company called Lincoln Energy, which focused on geothermal/geo-exchange projects. Lincoln Energy developed a reputation for initiating and carrying out a portfolio of unique projects including sea water and lake water geo- exchange projects. Two of the projects undertaken at this time won awards with Fortis BC. Stacey was then asked to join CORIX and head their Sustainability Division. During this time Stacey worked on projects at SFU, UBC, and in Seattle, Portland and Toronto. In 2014, Stacey was approached to join Creative Energy and run the transition around the purchase of Central Heat. Stacey left Creative Energy in October 2016.

Gerard MacDonald is a professional engineer with a Masters in Clean Energy Engineering and Principal at Reshape Strategies, a clean energy and infrastructure consultancy. Reshape Strategies has been working with Creative Energy and the City of Vancouver on developing a feasibility study for the Central Heat downtown fuel switch project. Prior to working with Reshape, Gerard worked as Community Energy Manager with Fraser Health Authority. Gerard is passionate about examining the potential conflicts and opportunities for concert between neighbourhood scale and building scale green energy policies.

The Unnamed Developer has considerable experience working with development in the priority areas as outlined in the Neighbourhood Energy Strategy.

3.2 Archival Material

Archival material was accessed to provide a history of the Central Heat District Energy in Vancouver, the general approach to District Energy systems in Vancouver, and to try and develop an understanding of the initial motivations and incentives of the City of Vancouver in encouraging the development of the Central Heat District Energy System.

34 Three Council Minutes Records were accessed on microfiche from the year 1965 through to 1966 (November 2, 1965 and February 1, February 15, 1966). These microfiche records were captured through screen captures which were then emailed to the researcher to provide a copy for later reference, if needed. This method of transferring the microfiche images is standard at the City of Vancouver archives.

One non-digitized physical document was accessed and photographed at the City of Vancouver archive. This document was the proposal from Phillips, Barratt and Partners Consulting Engineers to the City of Vancouver for the Central Heat system from 1965. While reading the document, a Councillor’s summary notes were discovered, tucked into the proposal. These were also photographed and analyzed.

3.3 Policy Documents

Three main policy documents were analyzed throughout this research, as well as Council reports and presentations made in support of these policies. The primary objective of the analysis was to clearly understand the relationship between the City of Vancouver’s sustainability and greenhouse gas target reduction targets and district energy. These include the policy in question, the Neighbourhood Energy Strategy as well as the two key citywide strategies of the Greenest City Action Plan and the Renewable City Strategy.

Analytical efforts focused on determining the background and context for the policy proposal, the details of the specific strategic action recommended in the policy, and what the proposed next steps for the policy implementation are. These documents were not coded with NVivo, instead a close reading of text was used to extract information new and pertinent to the research question.

3.4 Media Coverage

As this is a topic that has been receiving some amount of attention in the media, media coverage was tracked dating back to 2012, when the Neighbourhood Energy Strategy was released.

Media clippings were uploaded and analyzed using NVivo software. Approximately ten articles were analyzed, including all media published in reputable

35 national or local newspapers relating to this topic. Although uploaded to NVivo, the articles were not coded. Instead a close reading of text uncovered detail and nuance relevant to the research question.

3.5 Analytical Efforts

My analytical efforts were modeled, in part, on the analytical procedure utilized by Charling Li in her work “District Energy and Sustainable Neighbourhood Planning: A study of the Burnaby Mountain District Energy System119”. This work has considerable relevance for my thesis topic and utilizes a similar research methodology. Interview data and documents were analyzed using a conceptual framework. Interview transcriptions were uploaded into NVivo and coded based on the established conceptual framework. The interviews were analyzed for themes, patterns or conflicts and word frequency.

A literature review was conducted at the onset for journal articles and academic sources. Journals and academic articles were downloaded as PDFs and imported into NVivo. Text was open coded and then focus coding was based on emergent themes and/or patterns. A text search query was modified into a node, which was further analyzed as a word tree to help illuminate the context of any emergent patterns.

Policy, although considered documentation, required a slightly different research approach than other documentation. Relevant policy and council or committee reports were downloaded and a close reading of text uncovered new and relevant information. A temporal analysis was included as it was important to uncover and examine how policy has changed over time to provide context to current policy and approaches. Close attention was paid to implementation strategies and targets set by existing policy, utilized as a gateway to assessing the efficacy of actions taken by the City thus far. Archival materials were also counted as documentation.

News coverage and articles were reviewed during the course of the research project. It was especially important to consider the bias of these sources of data.

119 Li, Cheuk L. C., District Energy and Sustainable Neighbourhood Planning: A Study of the Burnaby Mountain District Energy System, Simon Fraser University, Burnaby, British Columbia, 2016, 26.

36 This case study is inductive, in that general principles will be developed from specific observations120. The case study is idiographic, in that the research seeks to provide a complete understanding of a specific case. The examination and interpretation of data is mixed-method in that I use “multiple methods and sources of data in the study of the same phenomenon121”.

This research strategy references existing academic literature to provide context for key conceptual principles. Policy, press and archive material provided a historical and situational context. Semi-structured conversational interviews gave a rich and experienced understanding of key factors and dynamics that have either aided or impeded the implementation of the Neighbourhood Energy Strategy. Significantly, the intent of the case study is to triangulate different sources of data (multiple sources of evidence) and “provide convergence upon the truth about some social phenomenon across methods122”.

Once I was no longer able identify any new patterns within my data sources, I concluded my analysis. This analysis provided me with the tools to answer my research question What have been the barriers to implementing the City of Vancouver’s Neighbourhood Energy Strategy (2012)?

120 Babbie & Benaquisto, 23. 121 Gaber, John, and Gaber, Sharon L., 98. 122 Ibid., 98.

37 Chapter 4.

A History of District Energy in Vancouver

4.1 History of District Energy

District energy systems have been traced back to Roman times, where hot water was used to heat buildings and public baths123. However, district energy systems as we know them today were established in the United States in the late nineteenth century. During the 1930s, the systems gained popularity in the Soviet bloc and in Western Europe. During this time, “states adopted different technologies and rationales to provide heat as a standard of living for citizens that reflected national priorities and resources”124. In the middle of the century, throughout the Soviet states the combination of central planning and urbanization saw the rapid widespread use of district energy systems. Internationally, especially in Europe, the uptake on district energy systems was slower. Today, however, it is a common and widespread form of municipal infrastructure125.

The following diagram, Figure 2, outlines the historical development of district energy networks from their genesis to the future. The columns each represent a generation of technology associated with a particular period of time during which that generation of technology prevailed. The rows represent certain components of the systems and help to clarify the composition of the four different generations in terms of technology. Generally speaking, this figure demonstrates a shift from fossil fuel intensive systems based on convenience, towards systems that are primarily motivated by sustainability and efficiency.

While there are similarities between generations in terms of heat carrier, pipes and buildings, there are fundamental shifts in the heat production source and the primary motivation in society. As an example, the chief distinction between first generation and second generation systems is that there was a shift from comfort and reduced risk as a primary motivating factor towards fuel savings and reduced cost associated with the fuel.

123 Biomass Energy and Resource Centre. “District Heating” https://www.biomasscenter.org/what- we-do/our-expertise/district-heating. (Accessed May4, 2017). 124 Ibid. 125 Ibid.

38 In third generation systems, biomass and waste or fossil fuel boilers were the means of heat production and a primary concern was with the security of the heat production fuel supply.

As we move towards fourth generation systems, heat production is moving predominantly towards low temperature heat recycling and renewable sources and this concern for the sustainability of the heat production is identified as the primary motivation in society. Many existing district energy systems are currently in the third generation of best available technology. However, many new systems fall within the fourth generation category and this trend is also reflected in the motivation to encourage and enable fuel switches to renewable fuel sources with existing systems.

Figure 2: Historical Development of District Energy Networks, from genesis to the future. Source: Data from Lund (2014)

4.2 Central Heat

The City of Vancouver has a long history with Neighbourhood Energy Systems. In the 1960s, a District Energy system was set up in downtown Vancouver as Central Heat Distribution. The proposal from the consulting engineers of the initial Central Heat

39 system to the City of Vancouver is helpful in articulating the case that was used to rationalize the implementation of the City’s first District Energy System. This rationale is outlined below.

The system was steam-based and powered by natural gas, which was seen to provide a more efficient and economic source of heat than the oil powered individual building burners that were being used widely at the time. Interestingly, the reduction of air pollution was articulated as a key factor in the case for the implementation of this system. The proposal states, “[o]ne of the most important advantages to the citizens of Vancouver would be a sharp reduction in the amount of pollutants that are presently flowing into the city’s atmosphere.126”

Safety was another key factor identified in the argument for the development of the Central Heat system. The steam that moved through the system would be moved under low pressure, and its use would remove one of the key sources of fires at that time and would thus lower insurance rates. This would also impact cost, which was another advantage that was articulated in the proposal to the city.

At this time, the proposal entailed that the system would be built on Lot 8 on the north side of Hastings Street, east of Thurlow, with the main steam line located in the CPR tunnel that runs directly under the City. It was initially proposed that the distribution system would consist of three main trunk lines including:

• A trunk line that would follow the CPR right-of-way below Hastings and Pender Streets extending to Richards to the east and eventually to Main Street. • A second trunk system in the CPR tunnel which would serve the Downtown of Vancouver including the Hudson’s Bay store and the Hotel Georgia. • A third trunk line which would seek to serve the West End, an area at the time which was recently densified with apartment development.

The Central Heat System was eventually approved and built on Beatty Street, and has continuously operated since its inception. Currently it serves 210 buildings in the downtown peninsula127. Customers of this system include BC Place, St. Paul’s Hospital, and Queen Elizabeth Theatre. Approximately 17% of the energy sales of this system are to government clients.

126 Reshape, A Low Carbon Legacy for Downtown Vancouver, i. 127 Ibid.

40 This system was purchased by Creative Energy in 2014 and serves as the basis for the Creative Energy case study.

4.3 South East False Creek

Another notable system within the Vancouver context is the South East False Creek utility. Developed initially as a demonstration project to show the viability of low carbon district energy systems, the South East False Creek neighbourhood energy utility project utilizes waste heat from a sewer pump station co-located in the district energy system128. While the City had familiarity with district energy, it had not yet seen a successful renewable energy powered system. The SEFC system was also North America’s first waste heat recovery system.

The project began in 2005, when a consultant was hired to provide a feasibility study for a district energy system that would meet the social, economic and environmental objectives of the community. Five different scenarios were explored to determine which technology would be most appropriate. Two of these options were carried forward for further analysis and public engagement: biomass and waste heat recovery. Biomass was determined to have lower supply costs and the largest GHG reductions. However, the City of Vancouver determined that they would not be able to overcome the public perception of negative impacts of biomass and also identified that the time required to go through the permitting process through Metro Vancouver was a risk. Thus, it was determined that the SEFC would operate through sewer heat recovery, backed up with natural gas boilers.

While the demonstrative nature of the project was said to be for the exhibition of the viability of low carbon district energy systems, there was also the desire to have a project through which the City could showcase its approach to sustainability for the 2010 Olympics. As Stock points out:

[t]he assurance of a district energy solution for the False Creek area may arguably be the announcement by the International Olympic Committee that Vancouver was the successful bidder for the 2010 Winter Olympics. From that point forward, decision making throughout the Metro Vancouver region set about identifying showcase projects that would reinforce Vancouver’s image of a sustainable city. An obvious location for such a

128 UNEP, 13.

41 showcase was the proposed site of the athletes’ Olympic Village on the south shore of False Creek in Vancouver129.

While the project was a sustainability showcase project for the Olympics, the South East False Creek Utility’s importance as a local renewable energy project demonstration project should not be understated. The success of this project was important to empower and instill confidence in future low carbon district energy projects in the region. The importance of demonstration projects is acknowledged by the UNEP:

[l]ocal governments are supporting demonstration projects to illustrate the feasibility and commercial viability of modern district energy systems and showcase socio-economic benefits to citizens, private building owners, developers and investors; pilot new policies for uptake by the city council or national government; and build local and institutional capacity and confidence.130

The South East False Creek NEU is fully owned by the City of Vancouver and is thus exempt from regulation by the BCUC. An uncommon model for the City of Vancouver, the city decided to develop the system for two main reasons:

• The system was built to support the Olympic Village, and as such there was a very tight development timeline in advance of the Olympics. There was the perception that there was not the proper time to secure a private utility and get the necessary approvals for the systems in time. • There was also an impetus at the city to develop a demonstration project to prove the viability of renewable energy district energy projects.

In addition to these motivating factors, the City was also able to secure sizeable grants and low-cost financing in support of the project131. The time from initial feasibility study to operation was an accelerated five years, due to the time constraints associated with the Olympic Village development.

Today, this system serves approximately 7,000 residential units, with approximately 70% of the heating energy obtained from waste heat recovery (raw

129 Stock, Kevin. Risk Communication in Public Consultations for Locally Unwanted Land Uses : A Study of the Public Consultation for the South East False Creek Neighbourhood Energy Facility / by Kevin Stock., 2010, 35. 130 UNEP, 68. 131 Ibid, 89.

42 wastewater)132. Key successes of the South East False Creek System include achieving a 60% CO2 emission reduction target, with sewage heat recovery. The system has also grown by a rate of 260% since its inception in 2010, and now has over 4.2 million feet of buildings now connected133. It is important to note that buildings within the SEFC boundary were required by municipal by-law to hook into the district energy system to help ensure that they system had sufficient load. The project also incorporated a didactic component, with public art that responds visually to real-time energy use and publicly accessible panels about the project and its emission reduction successes.

The SEFC district energy system has been instrumental in proving the viability of such projects and has served as an exemplary project, providing a successful model for other district energy systems built by private developers elsewhere in the city. Even so, the particulars of the SEFC project financing were extraordinary, as mentioned above. The SEFC model provided an excellent example of a successful operation, but builders and developers still had some anxieties about their execution and implementation.

Due to the public ownership model of SEFC, there is complete transparency about the connection costs and energy tariffs of the project. In 2006 Council approved a set of principles for the rate-setting of SEFC. In 2009, Council requested that City Staff report back on an annual basis on the SEFC rates, and to conduct a more comprehensive rate review every five years. In 2010, an independent Neighbourhood Energy Expert Panel was established to advise both staff and council on rate adjustments. With the aforementioned process, proposed and approved rate changes are available for review in publicly accessible Council Minutes.

4.4 Other District Energy Systems in Vancouver

Vancouver also has a large legacy district energy system at both the British Columbia Children and Women’s Hospital and the Vancouver General Hospital. Fuel switches for both of these systems have been planned and are imagined to be sources of energy for future development. These district energy systems would be privately run, which is a response from the City to the perceived risks of the potential impact to the City’s credit rating and the potential impact on their ability to borrow capital for other

132 UNEP, 25. 133 Neighbourhood Energy Strategy: Downtown Update, April 14, 2015.

43 municipal projects134. Upfront costs with district energy represent a significant challenge for municipalities that have competing pressures for spending. Private ownership can seem like a straightforward method to get projects funded and built. Lee extrapolates:

[t]he City seeking a private operator relates to risk around customer uptake and concerns about total amount of borrowing being taken on by the City (and impact to the City’s credit rating and capacity to borrow for other capital work)135.

Notably, private ownership subjects the project to regulation by the BCUC.

Private district energy systems are also planned in the River District (East Fraser Lands). This 700,000 m2 primarily residential development is located on former industrial use lands along the Fraser River. The system provides power for the development as well as City owned social housing in close proximity to the development. While currently fueled by gas boilers, once a sufficient threshold is reached the plan is to connect the system to a regional waste-to-energy facility located in Burnaby.

District Energy has also been identified as a priority for other areas of the city through the Neighbourhood Energy Strategy, outlined further in Chapter 5.

4.5 History of District Energy from a regulatory perspective at the City of Vancouver

As previously mentioned, the City of Vancouver’s first district energy system was implemented in the 1960s. Council minutes available through the City of Vancouver archives indicate that at the time, in February 1966, the Vancouver Charter had no power to authorize the installation of steam lines in the City streets even though they had power to permit the installation of electrical works, cables, gas pipes and pipe lines. The City could either push for the appropriate amendments to the Vancouver Charter or push for the enactment of a special legislation by the Provincial Legislature ratifying the agreement between the City of Vancouver and Central heat.

Subsequent Council minutes, dated February 15, 1966, indicate that one of the directors of Central Heat reached out to the Attorney-General about the issue. The recommendation of the Attorney-General was that “instead of developing a special Act to

134 Lee, 18. 135 Ibid.

44 ratify the agreement between the City and the Company, an enabling section could be inserted into the Charter Amendments notwithstanding that there had been no previous advertising on the matter”136. Council approved that the Corporation Counsel take action to obtain enabling legislation. This demonstrates a strategic maneuvering on the behalf of both the City of Vancouver and Central Heat to enable their project which was championed to be beneficial from an end-user cost perspective and also for a reduction in pollution. With this concern for the end-cost user and pollution impacts, it can be said that Central Heat was established with conceptions of the public good whereby a consideration for the positive indivisible impacts of the project were primary motivating factors. This political maneuvering was continuous, to use Unruh’s terminology, in that it sought to modify selected components or processes of the system, but also maintained the overall system architecture.

Since that time, policy approaches to district energy at the City of Vancouver have largely sought to been enabling, however intricate. As outlined in Section 1.3.3., the City has taken an ambitious stance towards sustainability policy actions and district energy has formed part of their strategic approach to lowering greenhouse gas emissions.

Enabling tools that the City of Vancouver can employ to ensure the success of district energy systems are: utility regulatory and contractual tools, such as those used to control utility access to the City of Vancouver streets and infrastructure; cost competitive measures such as adjustments to property tax policy for utilities, access to grants and capital funding; and connection policy tools such as zoning policy or service area bylaws137. These, of course, would be subject to council approval. Some of these have been enacted by the City of Vancouver, such as zoning policy or service area bylaws as we will discuss in the following chapter.

The following chapter discusses, in more depth, current approaches to district energy policy at the City of Vancouver.

136 Regular Council Minutes, February 15, 1966. 137 Neighbourhood Energy Strategy, Downtown Update, April 14, 2015.

45 Chapter 5.

District Energy Policy in Vancouver

The following chapter provides a summary of the recent history of district energy policy within the City of Vancouver leading up to the development and implementation of the Neighbourhood Energy Strategy. To begin, it outlines the impetus for neighbourhood scale strategies within the City of Vancouver. Next is an outline of the City of Vancouver’s approach to neighbourhood energy policy, including detail on each of the target areas identified within the Strategic Approach to Neighbourhood Energy. Following is a discussion of the rationale for the Energy Centre Guidelines and the manner in which they were intended to be implemented. In closing, the strategic priorities and their associated timeline are presented. This chapter helps to demonstrate how the City of Vancouver conceptualized their strategy and approach to district energy systems.

In 2011, the City of Vancouver adopted the Vancouver Greenest City Action Plan, seeking to reduce its ecological footprint per person by 33% by 2020, or 1,110,000 tonnes of CO2 per year. Within the plan, district energy systems are expected to account for 11% of the overall reduction of CO2 (120,000 tonnes). This reduction will happen in two ways: primarily, through the conversion of existing heat systems to fuels with lower emissions and also by building new district energy systems, which would have lower emissions than conventional building approaches. It is important to point out that the first approach represents an overall reduction, whereas the second approach considers a scenario of growth in emissions overall. The following table (Table 2) outlines the two main strategies to achieving the 120,000 tonnes of CO2 reduction through district energy systems. Table 1 demonstrates that the largest opportunity for CO2 reduction is in the conversion of existing steam heat systems, such as Central Heat Distribution, to low carbon energy sources.

46 Table 2: Greenest City Action Plan – Target Reductions for NES (Neighbourhood Energy Systems or district energy systems) Focus Area Examples GCAP Reduction Target (tonnes CO2/ year avoided) Conversion of existing steam Central Heat Distribution, 95,000 heat systems to low carbon Children and Women’s and VGH energy sources Hospital Steam System Establish and Expand new NES South East False Creek, River 25,000 District Energy, North East False Creek Total 120,000

Currently, energy used by buildings generates 55% of Vancouver’s GHGs. The Greenest City Action Plan identifies priority areas for economically viable and high impact projects for GHG reduction. Large-scale sustainable energy systems for high density, mixed-use neighbourhoods are among the top priority action areas. To help enable these types of projects, city staff were directed to develop a policy framework to evaluate development proposals for new neighbourhood energy projects. Not only would these help with GHG reductions, they would also provide opportunities for additional GCAP goals related to green jobs and green buildings. The result of this work was the Strategic Approach to Neighbourhood Energy and the Energy Centre Guidelines, described below.

The Strategic Approach to Neighbourhood Energy was adopted by Council in 2012. The document outlined the areas in the city that have the most significant potential for carbon reduction. The NES also included a Sustainable Large Development Site Rezoning Policy which required that any rezoning application for a site larger than 2 acres must complete a low carbon energy study considering neighbourhood-scale energy opportunities or site-oriented energy supply options for smaller sites.

Concurrently, Council adopted the Energy Centre Guidelines, which lay out the evaluation and approval processes for district energy projects, requires some new major developments to connect to district energy systems, enable the conversion of existing district energy systems to new fuel sources and encourages the development of new district energy systems.

To inform the development of these two policies, an engagement process was undertaken. The City of Vancouver engaged utility providers, developers, landowners, customers, governments, institutions and NGOs to discuss the objectives, opportunities

47 and barriers for district energy systems in Vancouver. The feedback from this process indicated strong support for district energy amongst the key stakeholders, but also revealed concerns about increased cost and ownership of district energy systems, and the potential conflict between the City of Vancouver’s district energy policy and other land use policies138.

One of the key benefits of district energy systems that make them an attractive mechanism for GHG reduction at the municipal scale is that they provide economies of scale for renewable energy resources that are not financially viable at the building scale139.

Neighbourhood Energy is considered viable in areas of the city where the capital and operating costs of the system can be recovered through customer rates that are competitive with traditional forms of heating (i.e. electricity and gas). While NES generally benefit from the ability to utilize low operating cost energy sources such as sewage heat, these systems are capital intensive and generally require a large and densely developed customer base of buildings to achieve necessary economies of scale and to minimize the cost of the energy distribution infrastructure to the end users. Large scale and dense new development areas and locations already served by an existing steam system are good candidates for low carbon NES opportunities.140

Much of the City of Vancouver does not meet the minimum density to provide a viable load for cost efficient district energy141 as it is comprised of predominantly single family residential or other low-density development. Thus, the Neighbourhood Energy Strategy identified three areas for potential district energy development: downtown, central Broadway, and the Cambie corridor. The three target areas were identified through an analysis that evaluated the service area of existing heat systems and new Neighbourhood Energy Systems, existing and projected densities and land uses, large- scale rezoning projects and areas with potential to transfer to district energy systems.

The Neighbourhood Energy Strategy provides a flexible approach to each of these areas tailored to their unique attributes. These areas of potential are outlined below in Figure 3.

138 City of Vancouver, Vancouver Neighbourhood Energy Strategy and Energy Centre Guidelines. 139 Ibid, 2. 140 Ibid, 4. 141 Lee, 17.

48

Figure 3: Neighbourhood Energy Priority Areas. Source: Data taken from City of Vancouver. “Vancouver Neighbourhood Energy Strategy and Energy Centre Guidelines.” September 25, 2012.

The differences between the three target areas was articulated in a September 25, 2012 report to Council:

• Existing systems have different types of ownership (private, institutional and City), different mandates (public sector facilities versus private sector buildings) and regulation (e.g. utilities that are not municipally-owned are regulated by the BC Utilities Commission, municipally-owned systems are regulated by municipal Councils) • Some target areas are not served by existing systems, thus requiring variances in connection policy • The business case for development of new systems varies with density, scale, types of land uses and pace of development142

142 Vancouver Neighbourhood Energy Strategy and Energy Centre Guidelines, City of Vancouver. (Sept 25, 2012), 7.

49 In light of these differences, a unique approach would be required for each of the target areas. The tables (Table 3, 4, 5) below identify the characteristics of the target areas, the potential for new systems, the energy demand context and strategies that would be employed within each of the areas to help meet their specific demands.

Table 3: Downtown Area Characteristics and Strategies AREA CHARACTERISTICS Existing System Central Heat Distribution Ltd currently serves more than 200 buildings (largest GHG emission reduction opportunity in the City at greater than 70,000 tonnes of CO2 per year) New Systems: Southeast False Creek (established) Northeast False Creek (implementation underway) Energy Demand Context: Significant development activity underway and/or anticipated in False Creek Flats, West End, Granville Loops area, Central Business District, Northeast False Creek and Southeast False Creek Many existing gas heated buildings are potentially serviceable with NES, including a high proportion of West End and Downtown Eastside buildings. STRATEGIES Energy Supply Enable the conversion of Central Heat Distribution Ltd to low carbon energy source: Require significant expansions to be low carbon via regulatory and contractual tools (eg. Northeast False Creek) Create supportive policy for low carbon conversion (e.g. Energy Centre Guidelines) Utilize rezoning policy to require low carbon heat for new buildings. Investigate complimentary low carbon options. Connection Policy Continue use of service area bylaw to secure connection of new developments in Southeast False Creek. Continue to use Northeast False Creek rezoning policy to secure connections of new development, and establish a new service area bylaw. Develop and implement connection policy for those areas with NES potential. Source: Contents reproduced from City of Vancouver. “Vancouver Neighbourhood Energy Strategy and Energy Centre Guidelines.” September 25, 2012.

50 Table 4: Cambie Corridor Characteristics and Strategies AREA CHARACTERISTICS Existing Children’s and Women’s system heat system (GHG emission reduction opportunity is System greater than 10,000 tonnes CO2 per year. New Southeast False Creek (established) at north end of area. Systems: Energy Large development sites located at Oakridge, Pearson Hospital, Little Mountain. Demand Corridor-wide redevelopment underway. Context: Rezoning connection policy already in place. STRATEGIES Energy Convert Children’s and Women’s and Vancouver General Hospital steam systems to a Supply low carbon energy source; Require as a condition of the Children’s and Women’s Hospital Acute Care Centre Rezoning. Create supportive policy for low carbon conversion (e.g. the “Energy Centre Guidelines”) Evaluate business case of establishing new NES at large development sites. Explore a competitive process and utilize regulatory and contractual tools to establish new NES. Connection Clarify connection policy for rezoning Policy Source: Contents reproduced from City of Vancouver. “Vancouver Neighbourhood Energy Strategy and Energy Centre Guidelines.” September 25, 2012.

Table 5: Central Broadway Area Characteristics and Strategies AREA CHARACTERISTICS Existing Vancouver General Hospital steam heat system (GHG emissions reduction opportunity System is greater than 15,000 tonnes CO2 per year). New Southeast False Creek (established) adjacent to area Systems: Energy Broadway land use planning exercise will define future development. Demand Many existing gas heated buildings potentially serviceable with Neighbourhood Energy Context: STRATEGIES Energy Pending low carbon conversion, expand the Vancouver General Hospital steam Supply systems to a low carbon energy source: Create supportive policy for low carbon conversion Expand system to adjacent areas of the Broadway area via regulatory and contractual tools Future rapid transit infrastructure work may present opportunities to expand Southeast False Creek or Vancouver General Hospital systems or to establish new systems to serve existing and anticipated corridor development. Strategy will follow Broadway land use planning exercise. Connection To be defined following Broadway land use planning exercise. Policy Source: Contents reproduced from City of Vancouver. “Vancouver Neighbourhood Energy Strategy and Energy Centre Guidelines.” September 25, 2012.

51 These tables depict a nuanced and highly specified approach for each of the target areas that considered existing infrastructure and future strategies to reduce emissions. Importantly, these tables also identify the GHG emission reduction opportunity (demonstrated in the existing system row). Clearly articulated in Table 3 above, the Central Heat conversion was a prominent feature of the Neighbourhood Energy Strategies approach to the Downtown Area, which had the greatest carbon reduction potential of any area in the City at greater than 70,000 tonnes of CO2 per year.

The Energy Centre Guidelines were developed in concert with the Neighbourhood Energy Strategy. Within these documents both Energy Centres and Neighbourhood Energy Systems refer to district energy systems. The Guidelines were developed to be utilized when new district energy systems are proposed, when significant change or renovation is proposed at existing district energy systems, or when low carbon energy technology is being utilized for industrial use.

The Energy Centre Guidelines serve to set standards, guide approval and evaluation of energy centres and clarify the responsibilities of the City of Vancouver, other levels of government and other regulatory bodies. The Guidelines were developed with the assistance of stakeholder workshops that included NGOs, government agencies, academia, utility providers, and residents of neighbourhoods currently serviced by Neighbourhood Energy Systems. The public interest was kept in mind in terms of air quality, neighbourhood fit, fuel sources and public engagement.

The Energy Centre Guidelines address 5 key areas and are summarized in table 6 below:

Table 6: Energy Centre Guidelines Rationale for Guideline Implementation Tools 1.) Climate Protection: Energy Centres must optimize GHG reductions and achieve reductions of at least 50% compared to business as usual. Lead Authority: City of Vancouver NES are needed to achieve City To be implemented through Energy Centre zoning and carbon reduction targets, and development permitting process, and operating agreements. experience demonstrates that significant GHG emission reductions are achievable. Stakeholders in general support the use of low carbon energy sources to displace fossil fuels.

52 Rationale for Guideline Implementation Tools 2.) Air Quality: Energy Centre proposals must demonstrate that the impacts of the facility on ambient air quality will not compromise Provincial and Regional air quality objectives and must meet or exceed all applicable air quality regulations. Lead Authority: Metro Vancouver (with supporting action by the City of Vancouver). Clean air is essential for public Metro Vancouver regulates the emissions from boilers. The health, is a City goal, and is a high Metro Vancouver District Director of Air Quality Management priority for stakeholders. Metro also has the discretionary authority to require emissions Vancouver regulates air quality, and modelling and monitoring. The City will require discretionary the City can support this by requiring components of Metro Vancouver regulation (modelling and appropriate technical analysis and monitoring) through rezoning and development permit transparency in the evaluation of processes and operating agreements. projects. 3.) Neighbourhood Fit: Energy Centres must demonstrate architectural, urban design, and operational characteristics that ensure that the facility integrates with the surrounding neighbourhood and addresses impacts such as traffic, noise and/ or odour. Lead Authority: City of Vancouver. Energy centres must effectively To be implemented through Energy Centre zoning and integrate into neighbourhoods, and development permitting process, and operating agreements. address stakeholder concerns regarding potential impacts on local liveability. 4.) Sustainability of Fuel Sources: Optimize the use of available waste-heat resources to provide low- carbon energy, and demonstrate sustainable sourcing and supply of all proposed renewable fuels. Lead Authority: City of Vancouver. Waste heat is in general the preferred To be implemented through Energy Centre zoning and low-carbon energy source of development permitting process, and operating agreements. stakeholders. If wood fuel is to be used ensure that it is clean and from waste sources to ensure that it supports objectives of protecting natural environments and waste reduction 5.) Community Engagement: Proponents of new Neighbourhood Energy Centres must demonstrate robust consultation has taken place with the local community and stakeholders when planning energy facilities, and use the project to build energy awareness in the community. Lead Authority: City of Vancouver. Public input is required for the Early discussions with City staff are required, to align public planning of new energy centres, and consultation activities around siting, design, and operations, the consultation process must be recognizing that rezoning and development permits will have robust and transparent. This, along enhanced consultation requirements. with access to information regarding ongoing energy centre operations will help build community support. Source: Contents reproduced from City of Vancouver. “Vancouver Neighbourhood Energy Strategy and Energy Centre Guidelines.” September 25, 2012.

In consideration of the implementation of this plan, “near-term” actions were proposed within the Energy Centre Guidelines identified within Table 7 below. This table demonstrates the intended timing of the Downtown Steam System conversion.

53 Table 7: Energy Centre Strategic Priorities PROJECT TIMING ACTIVITY Downtown Steam System Q4, 2015 Complete feasibility study for conversion of the Downtown steam system Q1, 2016 Pending outcome of feasibility study, negotiate contracts to secure conversion Northeast False Creek Q2, 2015 -Creative Energy to submit application to BCUC to establish system -Staff to present connection bylaw to Council South Downtown Q2, 2015 Creative Energy and City to negotiate Franchise Agreement to establish NES West End and DTES Q2, 2016 Complete feasibility studies and planning for new systems Source: Data taken from City of Vancouver. “Vancouver Neighbourhood Energy Strategy and Energy Centre Guidelines.” September 25, 2012.

As demonstrated above, the City of Vancouver had developed a nuanced and thorough district energy policy in the Neighbourhood Energy Strategy and Energy Centre Guidelines. These two policies sought to take advantage of a significant opportunity to reduce GHG reductions, most notably in the Downtown Area. Clearly articulated in Table 3 is the importance of the Central Heat fuel switch, and how prominently it was featured within the City of Vancouver’s plans to reduce emissions.

Important to our case study, these policies also articulated the intended public engagement process and relationship with the City required by proponents of district energy systems. They also articulated implementation strategies for Target Areas which called for the exploration of methods to facilitate the conversion of Central Heat Distribution Limited to a low carbon source.

54 Chapter 6.

Creative Energy and BCUC: The Challenges

The following chapter outlines the relationship developed between the City of Vancouver and Creative Energy intended to help achieve the GHG reductions targeted by the City within the Greenest City Action Plan and the Neighbourhood Energy Strategy. This chapter also explores the provincial regulatory process that was required as a result of the private ownership of Creative Energy and the way in which the relationship between the corporation and the City of Vancouver was formulated.

In early 2013, working towards the goals set out in Part One of the Greenest City Action Plan and in the Neighbourhood Energy Strategy, the City of Vancouver released a request for expressions of interest (RFEI) for Neighbourhood Energy Concepts for Downtown Vancouver to identify a proponent who would be able “to investigate, finance, design, build and operate low carbon district energy utility services for downtown Vancouver143.”

The successful proponent was to have considerable experience in conducting feasibility studies for district energy systems, developing and maintaining successful relationships with the building community, in addition to developing and operating district energy systems. Notably, the successful proponent would also have “[p]rior successful experience satisfying the regulatory requirements for registration and approval as a public utility; and [m]anagement of complex public engagement processes for establishment of energy systems and siting and/or development of energy production facilities.144”

By June 7th, 2013, Ian Gillespie of Westbank Projects– one of the City of Vancouver’s largest developers – was in exclusive negotiations to buy Central Heat Distribution145. Speaking about the purchase of the utility, Gillespie articulated that he

143 City of Vancouver. “Request for Expressions of Interest: Neighbourhood Energy Concepts for Downtown Vancouver” http://bids.vancouver.ca/bidopp/EOI/documents/PS20121461-RFEOI.pdf. (Accessed April 4, 2017). 144 Ibid, 3. 145 Lee, J. (2014, Feb 25, 2014).

55 perceived energy to be one of the critical components of a city, and also that he was looking to reimagine how that service might be delivered by a private utility:

What are cities made up of? Cities are made up of the built environment, they’re made up of transportation, they’re made up of energy, and they’re made up of the social environment. If those are the legs of the stool, how do we get ourselves more involved in every piece of that stool? Now we’re the provider of heating to Vancouver, what can we do to remake that system?

By June 20 an agreement had been signed between the City of Vancouver and Creative Energy, and on June 27 the city confirmed that Creative Energy had been chosen as the preferred proponent for the downtown low carbon district energy system146.

As part of the initial Memorandum of Understanding (MOU) between the City of Vancouver and Creative Energy, a feasibility study was conducted for the fuel switch of the Central Heat Legacy system. One of the key findings of this feasibility study was that the fuel switch project would require a new steam plant, which was proposed to be located on City-owned land in the False Creek Flats147. This building, nicknamed the “Green House”, went through a preliminary design phase with local architects Henriquez Partners and the Bjarke Ingels Group. Through this analysis, the site depicted in Figure 4 was determined to be one of the only possible sites due to its size and location. The original steam plant would be connected to the new steam plant and would provide peaking and back-up energy, and continue to act as the distribution centre for the existing downtown network148. The concept also included a rooftop farm and didactic interpretive centre.

The following table (Table 8) summarizes the outcomes of the feasibility study: the column on the left outlines the key tasks in the study, and the column on the right outlines the key findings associated with each of the articulated tasks. The outcomes of the feasibility study were reported in a report prepared for the City of Vancouver and Creative Energy.

146 Lee, Jeff. “City will require new downtown buildings to hook into district energy plant”.http://www.vancouversun.com/technology/City+will+require+downtown+buildings+hook+dis trict+energy+plant/10972244/story.html. (Accessed April 4, 2017). 147 Ibid. 148 Ibid.

56 Table 8: Feasibility Key Tasks and Findings Key Task Finding Identification of possible sites for the project. A site was identified – a City-owned site in the False Creek Flats. More information on this site is included below An expression of interest from potential equipment A full forecasting of potential technology costs was vendors to establish representative technology provided. In additional operational costs were costs and performance. forecast, alongside projected performance data.

An expression of interest from potential suppliers Local sources of clean urban wood waste include of clean urban wood waste (biomass). local park and forest management; demolition and land clearing activities; wood processing and manufacturing businesses; and the transportation sector. Until recently, about 50% of local urban wood waste still went to landfill149.

Additional research on the long-term availability, This research was compiled. Clean Urban Wood cost and greenhouse gas neutrality of clean urban Waste is considered neutral under all provincial, wood waste. national and international carbon accounting protocols150. A full chapter in the report deals with this subject. A preliminary site concept to inform analysis of Henriquez and Bjarke Ingels were retained to building costs, aesthetic treatment of plant, fuel develop a concept design. Floor plans and delivery options and other feasibility renderings were developed for consideration. considerations.

An air quality screening study, evaluating air A full air quality screening assessment was quality impacts of biomass incineration. prepared. Key findings include that the fuel switch plan will exceed requirements under current and proposed future scenarios151. In-depth stakeholder interviews. Stakeholder interviews with government, current customers, potential customers and others (including architects, consulting engineers and non-profit foundations) were conducted throughout the process. Notably, these interviews determined the ability and willingness of existing clients to pay a premium for low carbon rates. Detailed financial and policy analysis, including At the time uncertainties included the potential possible risks, uncertainties, optimizations, and relocation of St. Pauls Hospital, a major client of enabling strategies. Central Heat, the Provincial valuation of thermal distribution infrastructure, Notable to our research the BCUC decisions, city connection policies and the actual timing of development were also listed as uncertainties.

149 Reshape, A Low Carbon Legacy for Downtown Vancouver, iii. 150 Ibid, xiv. 151 Ibid, 125.

57 Assessment of project alternative and This comprises a whole section in the report and comparators152. analyses potential alternative fuel switches and comparator projects. Source: Reshape Infrastructure Strategies. “A Low Carbon Legacy for Downtown Vancouver: Final Feasibility for the Creative Energy Fuel Switch”. March 17, 2017.

The following illustration (Figure 4) depicts the concept for the Base Fuel Switch Concept. The yellow area indicates the existing downtown core system reach, with hatched yellow areas representing future expansion areas. The green indicates the Green House potential location and also highlights the connection to the existing steam plant.

152 Reshape, A Low Carbon Legacy for Downtown Vancouver, i.

58

Figure 4: Creative Energy Expansion Plan. Source: Reshape Infrastructure Strategies. “A Low Carbon Legacy for Downtown Vancouver: Final Feasibility for the Creative Energy Fuel Switch”. March 17, 2017.

This proposal would be fuelled by 32% natural gas and 68% biomass. In this particular instance, and within the City of Vancouver generally, biomass is considered to be “local sources of clean urban wood waste including local park and forest management; demolition and land clearing activities; wood processing and manufacture

59 businesses, and the transportation sector”153. Not mentioned in the proposal is why the City of Vancouver considered this time to be more opportune to combat public opinion regarding biomass, when it was identified as a chief obstacle to the Southeast False Creek district energy system.

By March 2014, the sale of Creative Energy to Gillespie was finalized154 and in April 2015, Creative Energy applied to the BCUC for a Certificate of Public Convenience and Necessity (CPCN) to construct and operate a new Neighbourhood Energy System for NEFC and Chinatown in addition to requesting a Neighbourhood Energy Agreement (NEA) between the City of Vancouver and Creative Energy. Contingent upon the approval of the NEA, the City of Vancouver had recommended a Neighbourhood Energy Bylaw to council which would make it mandatory for new buildings and rezonings to hook into the central energy system, thus restricting the heat sources available to new buildings within these areas.

The regulatory process by the BCUC begins with the issuance of the CPNC which establishes that the utility will provide safe, reliable and non-discriminatory energy services. Following this, the utility and the BCUC work to determine a rate.

Persons or organizations that want to become involved in a BCUC review process can apply to be an intervener. Persons requesting intervener status must demonstrate to the satisfaction of the Commission that they are directly or significantly affected by the Commission’s decision. Alternately, they can prove that they have experience, information, or expertise relevant to a matter before the Commission that would aid decision-making155.

The following interveners registered in the proceeding (Table 9):

153 Ibid. 154 Ibid. 155BCUC. ‘Rules of Practice and Procedure’. http://www.bcuc.com/Documents/ParticipantInfo/G_1_16_BCUC_Rules_of_Practice_and_Proced ure.pdf. (Accessed December 20, 2017).

60 Table 9: Intervener and intervener interest. Intervener Interest (Public or Client Group) City of Vancouver (CoV) City of Vancouver Commercial Energy Consumers Association Of British Commercial energy consumers Columbia (CEC) British Columbia Old Age Pensioners’ Organization, Active Private consumers Support Against Poverty, Disability Alliance BC, Counsel Of Senior Citizens’ Organizations Of BC and The Tenant Resource and Advisory Centre (BCOAPO) FortisBC Alternative Energy Services Inc. (FAES) Energy utility Hollyburn Properties Limited Land owner LandlordBC Land owners FortisBC Energy Inc. (FEI) Energy utility Urban Development Institute (UDI) Non-profit association of development industry professionals Corix Utilities Inc. Energy utility Onni Hastings Holdings Corp. and the Onni Group (Onni) Land owner and developer GeoExchange BC Provincial industry association dedicated to the education, promotion and responsible design and installation of geoexhange energy systems Energy Canvas Ltd.156 Renewable energy consultant Source: Reshape Infrastructure Strategies. “A Low Carbon Legacy for Downtown Vancouver: Final Feasibility for the Creative Energy Fuel Switch”. March 17, 2017.

The regulatory process involved multiple stages and included a procedural conference, two sets of intervener and Commission information requests (IRs) to Creative Energy, one set of Panel IRs to Creative Energy, intervener evidence, one set of IRs on intervener evidence, rebuttal evidence filed by Creative Energy, an oral hearing held on September 14, 2015 through September 16, 2015, and finally, inclusive and written final arguments.

Because the application was for both the CPCN and the NEA, the BCUC separately considered the issues. With regards to the CPCN, some interveners thought that there were more feasible alternatives to the project such as individual in-building steam systems and the use of renewable natural gas (biomethane) to fuel gas boilers.

Several interveners (UDI, FAES, CEC) took issue with the lack of public engagement that Creative Energy conducted on the matter. This is not an insignificant point as the BCUC looks to engagement processes to help determine whether or not the

156 BCUC, Order C-12-15.

61 Project is in public interest. While the City of Vancouver did engage on the project by creating a hypothetical case study on an atypical neighbourhood and then consolidated the concerns of stakeholders by creating a list of performance measures and objectives which included cost, GHG emissions, the impact of emissions on health, regional visibility, upstream environment, local liveability, local economy and energy resilience, Creative Energy did not undertake a separate engagement process. In this case, the BCUC used the outcomes of the City of Vancouver’s process to help inform their decision.

From an energy justice perspective, the City of Vancouver sought to address distributional and procedural justice. However, Creative Energy chose to ignore BCUC engagement guidelines for the CPNC process and instead rely on the engagement done by the City of Vancouver which has an obligation to consult and has stated it as one of their fundamental civic goals. Through our understanding of procedural justice outlined within the conceptual framework, we can see how Creative Energy fell short in utilizing authentic engagement through-out decision making processes to help foster a sense of community ownership in this infrastructure plan.

FAES also took issue with the project risk assessment stating that:

the two-page risk analysis provided by Creative Energy is plainly inadequate, and does not meet the requirements of the 2015 CPCN Guidelines. Most glaringly, Creative [Energy] fails even to mention, let alone to evaluate, the single biggest risk associated with the NES – the risk associated with the complete lack of information regarding the Energy Supply Phase 2 technology, on which the business case for the NES and the entire Project is completely dependent.157

This excerpt alludes to an important component of the application and subsequent decision. Creative Energy asked for the project to be considered in two phases: a first phase which would see the system to continue to run off of natural gas and a second phase (the aforementioned Energy Supply Phase 2) which would see the fuel switch. The challenge with this approach for several of the interveners was that the application relied on the conceptions of public good inherent in the Energy Supply Phase 2, but was unable to provide detail on the implementation of this phase. Instead, Creative Energy stated that they would apply for a second CPCN for the Energy Supply

157 BCUC, Order C-12-15.

62 Phase 2. For FAES, this notion of public good promised with the later phase could not be used as an argument for the first phase without fully understanding the feasibility and implementation strategies of the second phase.

After the consideration of the interveners arguments, through Order C-12-15, the BCUC granted the CPCN for the NEFC area, but excluded Chinatown, and did not approve the NEA stating that “[t]he Commission has reviewed the Application and has determined that it is in the public interest to grant approval of this CPCN Application and finds that it is not necessary for the public convenience and does not properly conserve the public interest to approve the NEA.” Importantly, within this ruling the BCUC separated the CPCN and NEA, identifying one (the CPCN for the NEFC area) as serving the public good, but the NEA not in the public interest.

Of over 100 pages outlining the oral hearing, one major theme emerged as the reason for the rejection of the NEA: that an approval of this agreement would look as though the BCUC was supporting the mandatory bylaw that the City had proposed. This was the fundamental point of contention over the NEA application.

With regards to the mandatory bylaw, the ruling stated:

[t]he Panel has concerns about directly or indirectly approving the CoV’s Neighbourhood Energy Bylaw (NE Bylaw). These concerns are two-fold: that the CoV purports not to activate its NE Bylaw unless the (ii) Commission approves the NEA; and that the language of the NEA, while not authorizing mandatory connection, makes reference to the NE Bylaw… The Panel makes the following comments:

a. While there is no specific clause in the NEA that provides for mandatory connection, there is language in the NEA that may leave the impression that the Commission is, indirectly, approving the NE Bylaw, which will mandate connection…

b. The Panel is concerned that enactment of the NE Bylaw is conditional upon Commission approval of the NEA. In our view, this could raise a public perception that the Commission has reviewed and approved the NE Bylaw… The Panel would prefer that the CoV enact bylaws and policies that are not linked to approvals by the BCUC; otherwise, confusion arises, and the public may perceive that the BCUC approves the CoV’s mandatory connection158.

158 BCUC

63 Regarding the ruling, Todd Smith, director of Infrastructure for BCUC stated, “it is a fairly novel, new type of agreement between a public utility and a municipality.159”. This statement hints at the hesitance that the BCUC had to endorse NEA as a novel type of agreement, which might look as though they were approving the NE Bylaw.

In response to this ruling, Creative Energy filed a new application seeking approval of an amended NEFC and Chinatown Neighbourhood Energy Agreement and also applied, for information purposes only, a Bylaw Enactment Agreement (BEA).

In response to this, by Order G-29-16, the BCUC established a procedural conference for the review of the new application. Interveners for this procedural conference included the City of Vancouver, FortisBC Energy Inc, Fortis BC Alternative Energy Services Inc., the Commercial Energy Consumers Association of British Columbia, the British Columbia Old Age Pensioners’ Organization, Active Support Against Poverty, Disability Alliance BC, Counsel Of Senior Citizens’ Organizations Of BC (BCOAPO) and The Tenant Resource and Advisory Centre, the BC Sustainable Energy Association, and the Sierra Club of BC. While Creative Energy tried to argue that the issues brought up by interveners in the previous ruling should not be re-considered, the BCUC rejected this rationale. While each of these interveners had separate interests and perspectives relating to the Creative Energy application, they can generally be categorized into two camps: those that supported the application through an understanding of the inherent public good present in the emissions reductions and achievement of Greenest City Action Plan goals, and those that found the proposal counter to the public good due to the requirement for mandatory hook-up or potential for higher rates.

By March 18 of 2016, the interveners had provided their final arguments and by March 29, Creative Energy had provided their rebuttal. They stated:

[n]eighbourhood energy systems (NES) are in the public interest and are consistent with global trends to achieve sustainable communities, but can be derailed by regulatory hurdles, especially hurdles driven by those with vested, commercial interests in the status quo…This is the time for this

159 Lee, Jeff. The Steam Age Returns to Vancouver. http://www.vancouversun.com/technology/Steam+returns+Vancouver/11009247/story.html. (Accessed June 4, 2017).

64 Panel to bring the regulatory review of this Project to a close. And it is time for the Project to be implemented.

This statement can be interpreted through several components of the conceptual framework developed for this study. Through an understanding of energy justice, Creative Energy position that the regulatory process can derail projects that serve both public interest and sustainability objectives indicates that Creative Energy did not feel that the BCUC’s procedural process is serving the public interest. Creative Energy’s statement insinuates that the regulatory process was being driven by those with commercial interests in the status quo. Further, with an understanding of path dependency, we can see that Creative Energy saw resistance to new technology inherent for the interveners who had commercial interests in business as usual even though there may have been benefits for the public good in terms of GHG emission reductions once the project in its entirety was implemented.

After several rounds of back and forth the commission re-affirmed their ruling - that the applied for franchise was not in the interest of the end consumer. They stated:

[w]ith regard to the NE Bylaw, the Panel finds that moving the mandatory connection provisions from the Prior NEA into the BEA is more a matter of change in form rather than substance. Hence, we consider the applied-for franchise to be constituted by the rights, privileges and concessions set out in the combined set of documents: the Amended NEA, the BEA and the NE Bylaw. Consistent with the Prior Decision, the Panel does not find the applied-for franchise to be acceptable in its current form in that it implies Commission approval of the provisions contained in the NE Bylaw as well as those provisions contained in the Amended NEA.

For the BCUC, the changes from the initial NEA to the BEA were tokenistic, and failed to properly address the procedural outcomes of the first intervener process. From a recognitional and procedural justice perspective, this lack of recognition or meaningful integration of public and intervener commentary challenged the BCUC’s approval of the BEA. However, this procedural element was not the most significant challenge to the approval. Again, this statement makes clear that the primary point of contention for the BCUC was the mandatory connection provisions and the implied support of this requirement through an approval of the BEA. The BCUC found this to not be in the interest of the public because it had monopolistic connotations.

65 UDI, one of the interveners in the initial ruling, stated that the proposed agreement served to create a monopoly for Creative Energy. Both Creative Energy and the City reject claims that they were creating a monopoly, stating that there needs to be a critical mass to ensure the efficacy and efficiency of the systems. The BCUC, in Order C-12-15, acknowledged this by saying:

[t]he Panel is fully aware that the granting of a CPCN for this Project in a situation where the CoV imposes mandatory connection requirements on its developers has the effect of establishing a monopoly in the franchise area. However, the Panel exercises its discretion to approve a CPCN for this project because it finds the Project to be in the public interest, in large part because of the demonstrated need for the project, which has arisen because the CoV has determined a need for a DES, the Project is supported by CEA policy by supporting electricity conservation, and there are several developers ready, willing, and able to move forward with their developments. In the Panel’s view, the fact that the zoning has been subject to a public process and that development is proceeding in accordance to those zoning requirements is sufficient prima facia evidence to support a conclusion of the Project justification160.

It is important to unpack this statement, as it is densely packed with notions of procedural justice. To begin, there is an acknowledgement that the agreement as proposed would have monopolistic implications within the franchise area. As demonstrated throughout this chapter this is a central concern of the BCUC and many of the interveners. However, the CPCN is found to be within the public interest and thus is deserving of approval as it upholds the BCUC mandate. The BCUC states that this was able to be determined, in large part, because of the engagement that the City of Vancouver did with stakeholders namely with developers who were willing to participate. Further, the public process required by the City of Vancouver in zoning helps to substantiate the public interest in this component of the agreement. With this statement, it is clear how important public engagement and procedural justice is to the BCUC’s understanding of the rationale and benefit of the project.

Both the City of Vancouver and Creative Energy have since expressed their disappointment, with Gillespie even going so far as to say that the BCUC is on “the

160 BCUC Order C-12-15

66 wrong side of history” with this ruling161. For Gillespie, the BCUC’s ruling is demonstrative of an entrenched path dependent way of thinking - “[w]hat this is telling me is that the old economy is going to dig in and fight. And guess what? We’re going to have 10,000 of these little quarrels across the country over the next 20 years as we make this transition to a low-carbon energy environment”162. Gillespie sees his initiative as one that provides the ‘greater good’ for the city as a whole, and the BCUC’s regulation as hindering a project that will ultimately help the City of Vancouver achieve its carbon reduction targets.

To consider this through a framework of energy justice, Gillespie sees this project as addressing a need to provide Vancouverites with safe, affordable and sustainable energy and thus fulfilling a distributional justice approach. Even so, while the procedural components of the regulatory process allow interveners, authentic engagement was not conducted by Creative Energy as they did not conduct their own engagement through the CPNC Guidelines, drawing into question a commitment to being transparent in the process and fostering a sense of community ownership in the project. This sense of ownership is critical to a true sense of procedural justice. This also indicates a failure of recognitional justice, in that large sections of the community that would be impacted by these projects were ignored and under-represented.

While district energy represents a unique and valuable opportunity to reduce greenhouse gas emissions at the municipal scale, regulatory challenges triggered through ownership represent a significant barrier for the City of Vancouver. Both Stacey Bernier and Chris Baber identify that they are not aware, after considerable exposure and research, of a single successful district energy fuel switch that did not have municipal involvement in securing a customer base. This is something identified within the UNEP report, which sought to provide best practice from their extensive research for cities that are looking to transition towards low-carbon district energy systems.

161 Lee, Jeff. “Unbowed by Utilities Commission’s Third Rejection, Creative Energy plans to dig in”. http://vancouversun.com/news/local-news/unbowed-by-utilities-commissions-third-rejection- creative-energy-plans-to-dig-in . (Accessed, Jan 7, 2017). 162 Ibid.

67 Across the 45 champion cities, local governments were ranked as the “most important” actor in catalyzing investment in district energy systems, playing a central role in addressing the associated risks and costs163.

This chapter explores the regulatory process that the City and Creative Energy were subject to in this agreement. We can see that the BCUC took issue with several components of the agreement, and interveners took issue with the mandated connection and risk management approach by Creative Energy and the City of Vancouver.

This chapter also demonstrates how intricate and complex the BCUC ruling process can be. The complexities of this process has the potential to represent a significant challenge for the broader public to become involved or engaged in the process. These rulings represent one of the most significant challenges to the successful implementation of the Neighbourhood Energy Strategy.

163 UNEP, 13.

68 Chapter 7.

Discussion

As stated at the outset, literature related to energy justice, remunicipalization and path dependency were hypothesized to be a useful framework through which to analyze the case study. The following chapter explores the findings of the research through the lens of these three central tenets of the conceptual framework.

7.1 Energy Justice

As previously established, one of the central barriers to the implementation of the Neighbourhood Energy Strategy was the regulatory process and rulings of the BCUC against the mandatory connection, which would guarantee the loads required to make the fuel switch financially viable. Their ruling stated:

these (mandatory connection) provisions (would) effectively grant Creative Energy a monopoly on the provision of heat and hot water in NEFC and for new buildings and significant renovations in Chinatown164.

Further, the ruling stated:

The commission is deliberate in its choices to typically not grant a franchise that has inherent rights, privileges or concessions that:

• Provide for exclusivity of supply; and/or • Require mandatory connections; and/or • Require mandatory end use; and/ or • Grant exclusive provision of end use.

The Panel reaffirms this fundamental principle – to regulate only where required and to not impede on competitive markets unless there is an inability of competitive forces to operate with greater efficiency and effectiveness than a sole service provider. Accordingly, to grant a franchise

164 Creative Energy Vancouver Platforms Inc. Application for Reconsideration and Variance of Order G-88-16 – Final Order with Reasons, Page 19 as quoted in letter from Fortis BC to Sean Pander, Green Building Manager of the City of Vancouver, October 5, 2016.

69 that confers the greatest degree of monopolistic powers would require a compelling reason to demonstrate that it is in the public interest to do so.

As demonstrated by the above excerpts, central to the rationale of the ruling was the idea that the NEA was designed to confer ‘the greatest degree of monopolistic powers’ and that there was no compelling reason for BCUC to conclude that this was in the ‘public interest’. The BCUC’s mission statement is to ensure that “ratepayers receive safe, reliable and non-discriminatory energy services at fair rates from the utilities it regulates”165. This mission carries with it an implicit concern for the equal just treatment of the ratepayer. Intrinsic in this mission are the central concerns of energy justice: to “provide all individuals, across all areas, with safe, affordable, and sustainable energy”166.

In addition to the mission statement, the Commission is guided by a Vision Statement and five central Values. The Vision Statement articulates that the BCUC shall be a “trusted and respected regulator that contributes to the well-being and long-term interests of British Columbians”167. This Statement makes even more explicit the manner in which energy justice – particularly distributional energy justice - is part of the objectives of the BCUC. In Chapter 2, we lay out a definition of energy justice and its three central tenets, capturing that energy justice has the aim of “providing all individuals, across all areas, with safe, affordable and sustainable energy168” This parallels with the stated Vision of the BCUC. Further, the BCUC states as their Vision that their objective is to protect the well-being of British Columbians as a whole, and ensure that all individuals have equal access to energy. This concern for the distributional components of the utilities subject to their rulings is not the only way in which the BCUC reflects the concerns of energy justice.

As previously mentioned, the BCUC has five central values. The first value is accessibility with a commitment to “facilitate fair, transparent and inclusive processes that encourage well-represented input from relevant stakeholders who possess the information required to present their views effectively”169. This value reflects values

165 BCUC. “Who We Are”. http://www.bcuc.com/about/who-we-are.html. (Accessed Dec 20, 2017). 166 Ibid. 167 Ibid. 168 Jenkins et al., 176. 169 Ibid.

70 embedded within the procedural justice element of energy justice. As outlined in Chapter 2, procedural justice is concerned with mechanisms of inclusion such as mobilizing local knowledge, better institutional representation or most notable to the BCUC’s first value, transparency in their process. The BCUC is committed, as one of their core values, to transparency in their process.

As demonstrated in the previous chapter, there were considerable elements of the process which can be understood through a procedural lens and that the engagement process undertaken by the City of Vancouver was one of the ways in which the CPNC was understood by the BCUC to be in the public interest.

The second core value of the BCUC is integrity or to “lead in a straight forward and consistent manner, by making objective and well-reasoned decisions and by treating stakeholders with dignity and respect170”. This echoes the concerns of recognitional justice which concerns itself with the fair representation in decision making processes. The BCUC commits within this value to treating stakeholders with dignity and respect, and while they do not commit to including all sections of society within stakeholder discussions, they do commit to the respectful and dignified treatment of all stakeholders in their procedural and recognitional processes.

The above section demonstrates the BCUC’s Mission and Values have embedded components of energy justice through a concern for just treatment of ratepayers, inclusive processes and the dignified treatment of stakeholders. Chapter 6 in this study also demonstrates how an understanding of procedural justice helps to illuminate how notions of public interest were found for the CPNC and not the NEA. The sections of the BCUC’s ruling also include concerns that echo the concerns of energy justice: namely a concern for the best interest of the end user.

For the City of Vancouver and Creative Energy, the proposed relationship that would enable the fuel switch of the Central Heat required a mandatory hook-up. This would provide the loads needed to make the system financially viable and optimally efficient. For the City of Vancouver, this fuel switch was a critical and strategic move to achieve carbon reduction targets outlined in the Greenest City Action Plan. The City of Vancouver’s objective with the Greenest City Action Plan is to ensure future livability and economic vitality for its citizens. The relationship between Central Heat and the City of

170 Ibid.

71 Vancouver required that initially higher customer rates and upfront capital investment be made to provide improved future performance in line with the goals of the Greenest City Action Plan. In this, they require a different perspective on energy justice than that of the BCUC.

For the BCUC, they are concerned primarily with providing just and equitable access to energy from a financial perspective. For Central Heat and the City of Vancouver, long-term energy justice for the City meant that some would have to carry a more substantial financial cost. However, the three separate components of energy justice as outlined within the conceptual framework of this study help to demonstrate that while the understandings of the understanding of distributional components by the key players of the project were different, there were shared understandings of recognitional and procedural justice by the City of Vancouver and the BCUC and this helped to enable the approval of the CPNC.

7.2 Remunicipalization

Also articulated in previous chapters, the Central Heat system was subject to regulation by the BCUC because of its private ownership. Ownership thus became one of the challenges facing the City in the implementation of the Neighbourhood Energy Strategy. As Central Heat is privately owned, the Franchise Agreement was subject to regulation by the BCUC, which ultimately rejected the NEA proposal due to its monopolistic nature. This was not a challenge that was faced in the successful SEFC system, as the City owned it. Remunicipalization, concerned primarily with ownership of utilities, helps us to analyze how issues surrounding ownership complicated the ambitions of the City of Vancouver and Creative Energy in their Franchise Agreement proposal.

In the June 16, 2016 ruling by the BCUC, the Commercial Energy Consumers Association of British Columbia (CEC) was one of the interveners. Other intervenors included the City of Vancouver, Fortis BC Energy Inc., Fortis BC Alternative Energy Services Inc, the British Columbia Old Age Pensioners’ Organization et. al, the BC Sustainable Energy Association and the Sierra Club of BC.

One of the procedural arguments put forth by the CEC emphasized the issue of ownership, stating:

72 The CEC is also concerned with risk to developers in the absence of clear codes and guidelines between the developers and the utility in light of the ownership of the utility by a development company that competes with other developers.

Not only was the private ownership at issue here, it was also that the ownership was so closely tied to one of the largest developers in the city of Vancouver (Westbank). Prior to the new campaign financing rules that went into place in October, 2017, Westbank was one of the largest corporate donors to Vision Vancouver – the political party of the Vancouver mayor from 2008-2018, and the party of the council majority at the time of the application.

In the final BCUC ruling on the matter, dated September 26, 2016 after Creative Energy asked the BCUC to reconsider previous rulings, the panel acknowledged the City’s policy objectives and how the ruling might impact its ability to implement the policy to meet these objectives171. The panel identified two ways in which the City could achieve its policy objectives:

• To own and operate the district energy system and exempt it from regulation by the BCUC under the Utilities Commission Act; or • To enact a Bylaw entirely independently from the NEA, requiring developers to connect to the City’s preferred energy system. Within this, the BCUC points out how a different ownership model would exempt Creative Energy from their ruling and mitigate one of the primary challenges that the City of Vancouver had in implementing their Neighbourhood Energy Strategy.

Within the context of remunicipalization, re-establishing ownership of utilities are framed primarily within the context of energy as a public good and as such private entities should not have ownership, nor stand to profit. However, Berlo and Wagner’s 2017 exploration of the wave of remunicipalization of 72 German energy utilities also identifies remunicipalization as an opportunity to implement energy policy without dependence on the private market. In their research, remunicipalization allowed independence and autonomy from the private market and also ensured policy success in terms of sustainability objectives or in meeting targets. It is important to note, that remunicipalization as a movement has traction in Europe and South America, where the

171 BCUC. “BCUC Releases Decision on Creative Energy Application in Vancouver” http://www.bcuc.com/Documents/NewsRelease/09-26-2016-BCUC-NewsRelease- CreativeEnergy.pdf (Accessed March 4, 2017).

73 public perception around utility and the public good are considerably different from that of the North American market.

In the case of the City of Vancouver, their policy objectives in the Neighbourhood Energy Strategy and Greenest City Action Plan were compromised by the rulings of the BCUC which were triggered, in part, due to ownership. The City of Vancouver, by putting themselves in a position where they required a private entity to enable the achievement of stated policy objectives – in this case, GHG emissions reduction –compromised their ability to take strong, innovative governmental leadership.

While the City of Vancouver had taken ownership of the SEFC NES, to expedite the process with the pressures of the 2010 Olympic Games and the desire to provide a demonstration project of low carbon district energy systems, they are hesitant to take on this model again. Specific conditions such as low-cost financing and sizeable grants, which made ownership more palatable in the SEFC case, are not foregone conclusions. Also, risk associated with borrowing capital to finance such a project, the potential impact on credit rating and the implications on the City’s ability to borrow capital for other municipal investments (during a time of competing pressures such as affordability), make municipal ownership of a utility such as Central Heat politically unpalatable.

Additionally, there is a significant opportunity for capitalistic growth in this new market segment by private sector partners. The City of Vancouver has explicitly stated that it expects partnerships with the private sector are essential to the completion and realization of the Greenest City Action Plan goals172.

The concept of remunicipalization provided a pathway to explore how ownership provided challenges to the City of Vancouver in enacting their Neighbourhood Energy System by subjecting their agreement with Creative Energy to BCUC regulation. Significantly, the BCUC panel identified ownership as one of the potential ways in with the City of Vancouver could achieve their policy objectives.

7.3 Path Dependence

A hypothesis of this research was that notions of path dependency – or the manner in which technologies persist in spite of the development of more efficient

172 City of Vancouver, Greenest City Action Plan, 3.

74 technologies or systems due to habits and infrastructures already in place – would be present in resistance about the uptake of district energy from builders and developers and in some of the resistance that the Neighbourhood Energy Strategy received.

In an interview with a developer who had considerable experience working with district energy systems, cost, the uncertainty of process and shifting policy development were mentioned as concerns of the development community. When asked about how the development community had responded to the Neighbourhood Energy Strategy, the participant revealed that while the development community had familiarity with district energy systems, other factors such as being required to pay for both conventional mechanical systems and build for future connection, the uncertainty of the BCUC regulatory process and the shifting targets of the City of Vancouver’s policies (and the potential cost implications of these) were concerns. Through these, we can see from the development community that there was resistance to the uptake of this technology at play in that the uncertainty of new policy and technology, which factored into decision making about district energy.

Additionally, as stated in Chapter 6, Ian Gillespie perceived that there were components of path dependency in the BCUC ruling – stating that their ruling represented a status quo approach to energy infrastructure and that there were going to be many such disagreements on the road to a low carbon future. From Ian Gillespie’s perspective, the BCUC did not have a complete understanding of the financial and policy requirements to make a low carbon system, or a fuel switch of a legacy steam system, viable. In this, Ian Gillespie utilized components of path dependency language in his public reactions to the rulings in order to situate the BCUC on the “wrong side of history” – that of entrenched and perhaps outdated approaches.

Similarly, in the Creative Energy statement mentioned on Page 75, resistance to new technology was perceived to be inherent for interveners who had commercial interests in business as usual even though there may have been benefits for the public good in terms of GHG emission reductions once the project in its entirety was implemented.

In these examples an understanding of path dependency, and the ways in which organizations can resist technological change even with proven benefit, helps us to understand some of the challenges that the City of Vancouver faced in implementing

75 their Neighbourhood Energy Strategy both from a regulatory and operationalization perspective.

7.4 The Use of A Conceptual Framework in this Case Study

This case study utilizes a conceptual framework as a means of exploring the challenges faced by the City of Vancouver in the implementation of the Neighbourhood Energy Strategy. This policy, which would enable the City of Vancouver to achieve their Greenest City Action Plan GHG reduction goals, depended upon partnership between the City and the private market. As such, the agreement between Creative Energy and the City of Vancouver was subject to regulation by the provincial regulatory body, the BCUC. Through an understanding of the history of district energy in Vancouver, an understanding of district energy policy in Vancouver, and the proposed relationship between Creative Energy and the City of Vancouver we can see that one of the primary challenges that the City of Vancouver faced was the regulatory process with the BCUC.

Each of the concepts included in the conceptual framework help to develop a stronger understanding of the intricacies of the regulatory process. Energy justice – concerned with recognitional, procedural and distributional justice – enabled a closer inspection of the ways in which notions of justice, fair and meaningful consultation and notions of the public interest were interwoven through the regulatory process, key decision documents and intervener statements. Remunicipalization, a concept which calls for the de-privatization of energy utilities based on the rationale that they are an essential service and public good that should be provided by a municipality or government, enabled a discussion of the ways in which ownership impacted the implementation of the Neighbourhood Energy Strategy. Literature surrounding path dependence within the context of movement from carbon intensive systems to renewable systems, brought insight to the intervener objections and developer hesitance that supported the maintenance of the status quo way of doing things.

Embedded within each of these concepts is a notion of the public good, or that which has value that is beneficial to the public and is not divisible. Energy justice concerns itself with the benefits of energy projects, how they are distributed and how the public and other key stakeholders are involved in the procedures to establish and regulate utilities. Remunicipalization considers utilities essential services that benefit the public good, and as such, should be provided by the government as opposed to private

76 entity. Finally, path dependency examines how existing technology can be met with resistance even when more efficient systems exist. This can be due to uncertainty and habit, even when the newer technology may be of greater benefit to the public (in this case, reduced GHG emissions).

77 Chapter 8.

Conclusions

The question that this thesis sought to answer was: what barriers did the City of Vancouver face in the implementation of the Neighbourhood Energy Strategy (2012)? In this thesis, I have laid out the principal barriers faced by the City of Vancouver – namely, the regulatory challenges of the BCUC. I use a conceptual framework drawing upon literature relating to energy justice, remunicipalization and path dependence to explore the challenges faced by the City of Vancouver in efforts to understand the challenges that City of Vancouver faced. In this examination, we create an understanding of the ways in which other municipalities might learn from the challenges that the City of Vancouver faced. The following text summarizes the challenges faced by the City.

One of the primary challenges that the City faced in implementing the Neighbourhood Energy Strategy was regulatory challenges from the BCUC. The BCUC, in its very mandate, states that its primary concern is to ensure the equitable access to energy for all British Columbians. The BCUC found that the proposed agreement between the City of Vancouver and Creative Energy was not in the best interest of the consumer due to proposed mandatory connection requirements through a bylaw to be enacted by the City of Vancouver (the operationalization of this bylaw was contingent upon approval of other aspects of the partnership by the BCUC). Concepts of energy justice, embedded within the mandate of the BCUC, can be seen embedded within the ruling of the BCUC. While the agreement between the City of Vancouver and Creative Energy may have enabled a more long-term delivery of energy justice (through improved sustainability performance), the BCUC was concerned primarily with rates and monopolistic components of the agreement. The concern for procedural and recognitional justice embedded within energy justice helped to inform an examination of the intervener process with the BCUC rulings and the way in which engagement done by the City of Vancouver, and neglected by Creative Energy, informed the decisions by the BCUC. Thus, an understanding of energy justice informed our analysis of the procedural undertakings that proved to be one of the most significant challenges by the City of Vancouver in the implementation of the Neighbourhood Energy Strategy.

78 This study also used emerging bodies of literature relating to remunicipalization to explore how ownership of the Central Heat system contributed to the challenges that the City faced in implementing their strategy. The Neighbourhood Energy Strategy depended on the participation of a private utility to expand existing systems, facilitate the fuel switch of the largest existing legacy system and develop new systems in areas of high urban density. This dependence on a private utility subjected the strategy to regulation. Thus, it can be said that ownership was one of the barriers faced by the City of Vancouver in implementing the Neighbourhood Energy Strategy. While the primary literatures surrounding remunicipalization are situated within different cultural conceptions of energy and ownership, the concept provided a framework to understand how ownership factored into the challenges presented by the City of Vancouver in its plans. Remunicipalization provided a concept to explore how ownership challenged the City of Vancouver in enacting a Neighbourhood Energy System by subjecting their agreement with Creative Energy to BCUC regulation. This has particular relevance to our case as the BCUC panel identified ownership as one of the potential ways in which the City of Vancouver could achieve its policy objectives.

Our exploration of literature about the German energiewende enabled us to consider how remunicipalization empowers local responses to sustainability along the entire value chain of energy supply. We can see from this exploration that the City of Vancouver was disempowered from innovative approaches outlined in the NES because of the relationship with Creative Energy. Thus, the ability to impact the entire value chain was compromised, and in addition, the city’s ability to show leadership in exploring unconventional models to enable technical requirements of a fuel switch was compromised. This concept allowed us to explore the nuance of ownership, leadership and innovation throughout the entire supply chain.

Finally, the concept of path dependency provided a nuanced understanding of how systems become entrenched because it is easier to remain upon the path of least resistance rather than re-write or re-structure systems. In this case, we saw path dependency in the hesitation of some developers to take up district energy. Path dependence was perceived to be a factor by Ian Gillespie in the rulings of the BCUC, and the claim that the BCUC was conforming to outmoded technologies and approaches to energy was part of his public rebuttal to the rulings. Similarly, Creative Energy understood there to be path dependence on the part of some of the interveners as they

79 had commercial interests in the maintenance of the status quo. This concept can also offer insight into how policy and political systems become path dependent as an institution that thrives on increasing returns. The City of Vancouver developed an ambitious GHG reduction goal in the Greenest City Action Plan and developed the Neighbourhood Energy Strategy to help them achieve this reduction. This policy required partnership with a private entity, and as such became subject to regulation. The regulatory process challenged innovation and did not allow the policy to enable technological shift by providing the required base loads to make a fuel switch financially feasible. While this understanding is complicated by understandings of the public good, outlined above, it can be said that the City of Vancouver attempted to enact policy through continuity, to use Unruh’s terms, they were ultimately unsuccessful and were forced to recalibrate. Literature around path dependency informed an understanding of the ways in which established technologies and the actors that benefitted from these technologies challenged innovative approached to GHG reduction by the City of Vancouver and Creative Energy.

For the City of Vancouver, many challenges were faced in implementing the Neighbourhood Energy System Policy and this has forced a recalibration of the policy approach to neighbourhood energy systems. However, the city’s over-overarching ambition to deliver on the objectives of the Greenest City Action plan remain unchanged. Through this research, I explore the challenges that the city faced through the concepts of energy justice, remunicipalization and path dependency and provide learnings for other municipalities looking to partner with the private sector in the implementation of low carbon or renewable energy district energy systems.

8.1 Topics for Further Discussion

This thesis explored the barriers faced by the City of Vancouver in the implementation of the Neighbourhood Energy System of 2012. As outlined in the preceding chapters, both the City and Creative Energy were forced to rethink their strategies towards district energy as a result of the BCUC rulings. The following chapter seeks to capture some of the revised thinking on this issue as a collection of topics for further discussion and research. The intent of this thesis was to provide insight about the challenges faced by the City of Vancouver for other municipalities who are implementing district energy policy. The items contained in this chapter are topics for further research

80 that could also be valuable opportunities for learning for district energy policy implementation in the future.

8.1.1 Zero Emissions Building Strategy

In 2016, the City of Vancouver approved a Zero Emissions Building Plan that targets a reduction in emissions from new buildings of 90% from 2007 levels by the year 2025. The plan also sets a target of achieving zero emissions for all new buildings by 2030, including phased GHG emissions reductions and thermal energy demand targets. This policy provides updates to the rezoning bylaw by the end of 2016 and to the Vancouver Building Bylaw by the year 2020.

The Plan incentivizes uptake by developers through a variety of mechanisms including creative financing options that move the incremental capital cost of zero emissions to the strata corporation (Energy Efficiency Strata Loan for Condos with City Loan Loss Guarantee), reduced City charges and taxes, expedited permitting, public benefit negotiations, parking requirement relaxations, design prizes (cash), exemptions for form and development and increases in buildable area.

Greenhouse Gas Intensity (GHGI), Thermal Energy Demand Intensity (TEDI) and Energy Use Intensity (EUI) will be the three metrics to evaluate all buildings going through rezoning, with an incremental step down in these metrics year by year until 2030 until net zero GHGI is achieved.

For low and high rise multiple unit buildings, there will be requirements to meet a passive-house level heating demand by the year 2025. Unit layouts will be impacted by these requirements, for examples the amount of fenestration and thickness of walls, which may impact saleable area. Requirements will almost certainly impact number of windows, slab edge exposure, and balconies – with all of these features requiring careful consideration. In addition, whole building air leakage testing will be required. For office buildings, there will be a shift towards more heat pump technology for heat and hot water, moving away from natural gas and heat recover in ventilation systems.

Almost immediately after the policy was passed, a concern about the potential conflicts between the Zero Emissions Building Plan and the Neighbourhood Energy Strategy arose. Would building scale approaches threaten the viability of district scale options?

81 A Policy Report dated July 5, 2016 recommended that “staff report back with …any synergistic updates to neighbourhood energy requirements”. As a first path, in areas where neighbourhood energy connections are not available, the “reduction focused” strategy will focus on reductions in space heating and fresh air heating demand through building envelope performance and “highly efficient ‘passive’ heat recovery ventilation” leveraging research and advancements made by the Passive House movement173. As a second path:

new buildings connecting to a Neighbourhood Energy System will also be required to reduce demand for space heating energy but the emphasis for these buildings will be on providing renewable heat energy for heating, ventilation air, and hot water174.

In this plan, difficult-to-retrofit large occupied buildings, and new buildings built within dense urban settings would hook into Neighbourhood Energy Systems, but would have a requirement for improved building envelopes and ventilation systems. At the same time, because the Neighbourhood Energy System would reduce GHG emissions, the efficiency improvements required would be more modest than reductions requirements for buildings that are not able to hook into Neighbourhood Energy Systems.

The Zero Emissions Building Strategy approaches the decarbonisation of the City at the building scale, while the Neighbourhood Energy Strategy sought to reduce emissions and move towards decarbonisation at the district scale. Some perceived that these two approaches conflicted with each other, as incentivizing building scale approaches may, in some instances, compromise the necessary loads for district scale approaches. This perception, and the lack of initial clarity about how potential conflicts might be addressed, were seen to compromise the Neighbourhood Energy Strategy.

Some, such as Gerard MacDonald, believe that there are opportunities for building scale and district scale strategies to work in concert:

[d]istrict energy can tap low-carbon energy sources not available, appropriate or adequate at individual development sites. District energy can lower the cost of greenhouse gas reduction through economies of scale and integration of different building types. Lower costs are essential

173 City of Vancouver, Zero Emissions Building Plan, 7. 174 Ibid.

82 to gaining public acceptance of deep greenhouse gas reduction. Compared to building-scale energy systems, district energy exhibits less technology lock-in and more flexibility to adopt to new low-carbon technologies and ratchet down emissions over time. And district energy provides greater opportunities for cross-sectoral synergies to combat climate change – enhanced resource recover; “peak shaving” and thermal storage to optimize the electric grid; and integrated production of thermal energy, electricity and transportation fuels175.

What is clear that Zero Emission Building approaches are picking up traction as strategies are being adopted in other Canadian cities, such as Toronto. With this, there is an opportunity to education and provide clarity about the opportunities for both district and building scale approaches. This important issue requires more careful research and conversation.

8.1.2 Creative Energy Moving Forward

The setbacks outlined throughout this document have forced a recalibration on behalf of both the City of Vancouver and Creative Energy. Early in 2018, Creative Energy collaborated with InstarAGF Asset Management to form a partnership to expand the downtown system. With this Creative Energy has put forth an application to the BCUC to redevelop the original Central Heat Beatty Street facility, moving half of the capacity to a new plant within BC Place Stadium176. In this proposal, pipelines will carry the energy back to original plant for distribution. The project is slated to begin construction in late 2018. Creative Energy has also made plans to redevelop the Beatty location, adding 18 storeys of office and commercial space above the original plant, with an expected completion in 2020.

Creative Energy, for the most part, seems undeterred by BCUC’s regulatory challenges. The company has set its sights beyond Vancouver, and currently has $400 million in district energy projects in Vancouver, Toronto and elsewhere.

175 Macdonald, G., The promise and pitfalls of new green building policies: Can district energy thrive?., 21. 176 Nelson, Jacqueline. “ InstarAGF infrastructure fund to invest Vancouver energy system”. Accessed February 18, 2018. https://www.theglobeandmail.com/report-on- business/streetwise/instaragf-infrastructure-fund-to-invest-in-vancouver-energy- system/article37951376/

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