Decades-Old Technology Offers a Greener Way to Cool Buildings

The efficiency and low power requirements of the system in Heerlen, developed by Mijnwater BV, means it consumes 65% less energy than traditional heating and cooling, according to the company. Such networks, known as district cooling—or heating—systems, are on the rise as towns and cities look for ways to cut emissions. They point the way to solving one of climate change’s biggest challenges: As Earth warms and summer temperatures break records, demand rises for air conditioning, boosting energy consumption and the climate-warming emissions that come with it. Demand for power to cool homes and businesses is likely to more than double by 2050 and account for about 13% of the world’s electricity consumption, according to BloombergNEF. It’s a dangerous feedback loop that threatens to accelerate global warming. “As human beings, we can’t keep installing air conditioning systems that aren’t efficient for this demand,” says Olivier Racle, director of district heating and cooling for the French utility Engie SA.

What makes district cooling more efficient is centralizing the source of the chill. Instead of using individual air conditioners, it draws cold water from a single place and pumps it to different buildings. Mines aren’t the only source: The systems can also take water from lakes or rivers where the water temperature is naturally cooler than the air.

It makes most sense in cities, where people and businesses are packed together. Some systems have been around for more than a century. Consolidated Edison Inc. operates the biggest U.S. steam system, with heating and cooling for 1,650 customers across Manhattan. It’s easy to see how things can be improved. Projects and networks that come to rely on power from wind and solar will have no carbon footprint at all.

Now the technology is getting fresh impetus from policymakers seeking to slash the contribution buildings make to greenhouse gas emissions. There’s a lot of room to grow: District cooling projects account for less than 3% of the air conditioning market in Europe, according to estimates from cooling and heating consultant Devcco.

At Mijnwater, the European Investment Bank is supporting a plan to spend as much as €150 million ($166 million) to extend the Heerlen system. And Engie, which runs an immense district cooling network in Paris, plans to spend about €3.7 billion on the cooling and heating technology worldwide over the next five years. The EIB signed off on a €260 million loan to help Engie finance a redevelopment of a system in Paris. About half the company’s expansion will come in North America, where it has a 35-year project to expand and operate Ottawa’s district heating and cooling system.

Not every system needs a source of conveniently cool water on hand. The United Arab Emirates, one of the largest recent adopters, is too hot to rely on ambient water. Instead, projects use refrigeration plants to cool water. Engie has a 40% stake in the Abu Dhabi-based National Central Cooling Co., known as Tabreed, which it bought in 2017 for $775 million. Earlier this year, Tabreed signed a 30-year agreement to build a district cooling system for the new capital of the Indian state of Andhra Pradesh.

District heating and cooling systems can be expensive and complicated to start because they involve miles of pipes. But the savings on energy and emissions can be significant. Even with the use of conventional power generation to lower the water temperature, the citywide scale of district cooling allows the system to use half as much electricity as conventional air conditioners. For heating systems, waste heat from industrial plants or from renewable power can be used. That’s a good option, says Meredith Annex, an analyst at BNEF, “if you’re having trouble with the power grid already and you’re looking to have a reliable source of cooling.”

While players such as Engie can back projects with their own balance sheets, financing remains a hurdle to wider adoption. Projects take years to build before customers enjoy any benefit, so a developer must find someone to shoulder upfront costs. There are also few regulations encouraging more efficient cooling networks, which limits banks’ appetites to make loans. “The banks aren’t willing to take the risk on an uncertain revenue,” says Lambert Teuwen, senior banker at the EIB.

Then there’s public awareness. In places where governments or municipalities aren’t mandating the development of district cooling or heating systems, companies need to get a large number of consumers to agree to switch off conventional cooling and heating if a large-scale project is to make financial sense. “There are always money people around saying, ‘Look, the money is there, what we need is feasible, realistic projects that are of a certain size,’ ” says Birger Lauersen, an official at the Danish District Heating Association. “It is a good idea, but selling good ideas can be difficult.”

©2019 Bloomberg L.P.