SESAC Site Delft

The following information has been gathered as part of the CONCERTO Premium policy research.

Benefits of CONCERTO:

Key benefits:

SESAC project supported the realization of the major local climate goals.

By implementing the CONCERTO project, the city was able to realize a substantial part of Delft climate targets. Within the Delft project designers used specific insulation values and may choose further measures to reach their targets. Biggest successes: All goals were reached (refurbishments and new eco-buildings), a district heating company has been set up and serves as a model to others all despite economically difficult times.

The SESAC project served as test study for better building standards. This influenced local policy in so far that CONCERTO made it possible to show Delft and others that certain practices are feasible and do work.

The City of Delft has developed a unique District Heating PPP, with an innovative ownership structure, giving the City and the Social Housing Company equal votes to the private part, regarding end-user prices, grid extension and environmental investments, even though the private partners contributed with a vast majority of the financing./

Harnaschpolder and Poptahof applied new cost-cutting and incentive based structures when contracting private property developers. In Harnaschpolder the City and the Private Developers entered a new type of cost-cutting and performance based building process, and in Poptahof did the City and its Social Housing Company apply an innovative PPP cross-financing model, enabling partial reallocation of funds from sales of new private apartments to refurbish social housings with caped rents in the same area.

Skill development:

In the sesac communites Grenoble, Delft and Växjö, realized trainings on the environmental management system ecoBUDGET.

Barriers encountered:

Legal barriers:

The planned ESCO concept to finance refurbishment measures to Social Housing area, which would have been the major strategy in this project, failed. The tenant’s total lease (apartment and energy) was not to increased more than stipulated and the ESCO should successively be reimbursed as a percent of the collective energy savings for all the tenants.

Further complication was the system of caped rent and subsidies for tenants with weak income, which only covered the lease for the apartment, not the tenants energy bills. As a solution, the entire concept had to be revaluated, and the outcome was a new innovative PPP and cross-financing model. This new model enabled a partial reallocation of funds from sales of new private dwellings to the refurbishment of social housing apartments with caped rents in the same area. It also enabled the establishment of an innovative district heating PPP between the Social Housing Company and the energy utility Eneco.

Administrative barriers:

Delft adopted “Update Delft Climate Plan 2008-2012”. Due to document the vision of Delft had been defined and objective and targets changed. The city defined the vision to be CO2 neutral but they did not define the data for that. It gave problems with national subsidy schemes. Another problem was that City of Delft was not allowed to formulate stronger rules on energy performance then the national ones.

Technical barriers:

The City of Delft normally uses so called EPC, Energy Performance Coefficients when contracting developers and building contractors. The EPC system utilizes a combination of building, system and fuel/energy related factors to classify a project. Even if this system can reach overall objectives, it has historically been difficult for the city to push through any specific additional demands for energy efficient buildings and supply of renewable energy (S.6, p.6). As a result, the SESAC work package 4 in combinations with other technical work packages, contributed to the realization of an innovative procurement and contracting model. The contracting model is holding back parts of the developers and building companies payment until they could prove they carried out the specific work and achieving the high energy efficiency required by the city.

Economic barriers:

• The economic crisis affected plans in the Harnaschpolder area – the municipality had bought land at high cost and depended on selling it off to developers. Due to the economic crisis, developers did not want to build, thus endangering the CONCERTO targets and the financial planning of the municipality. As a result, finally 95% of houses could be built and the land value was not dropped, but higher density allowed. However, the final PPP solution proved that a city and its social housing companies actually can control and secure the provision of affordable and environmentally friendly energy to its citizens, without taking on the massive investments of building and owning the heating grid themselves.
• Short term thinking of government due to very short legislative periods (2 years) : fund supporting energy efficiency refurbishment at national level used to exist, but has been cut. The lead time for realization of district heating grids is very long, and that that any project like this will need substantial up front financing to handle the long period of negative cash-flow.

Social barriers:

When setting up the heating supply company, it was difficult to get all the stakeholders at the right moment. Furthermore, it was difficult to have several partners with own agenda and goals: Housing association (wanted to refurbish, main task was general refurbishment, not EE), energy agency, municipality (had EE-targets due to climate plan).

Even though partners knew each other outside SESAC, they did not trust each other – this was only vocalized at the very end of the project. Over the course of the SESACproject, trust improved through lots of talking and effort needed. It took several years until finally the heating supply company succeeded.

Success factors identified:

Technical Success Factors:The construction companies were contractually obliged to implement all renovation works on a test dwelling before putting them in place on a larger scale in the entire building. The quality of renovation works was checked by using blower door tests and by infrared thermographs, during which the test dwelling is heated up.

Institutional success factors: “Polder Model”: The district heating company was a public-private partnership between two municipalities, three housing corporations and the Energy Utility Eneco. This partnership is still quite unique in the Netherlands but can be seen as a typical result of the Dutch way of solving organizational challenges. In a long negotiating process every stakeholder could have expressed their concerns and, as a consequence, may have taken a share in the organizational solution. Built-in checks and balances guaranteed that during the operational phase every stakeholder could have checked the fulfillment of their goals. This was what the Dutch call the “polder-model”.

Economic success factors:

Harnaschpolder and Poptahof applied new cost-cutting and incentive based structures when contracting private property developers. In Harnaschpolder the City and the Private Developers entered a new type of cost-cutting and performance based building process, and in Poptahof did the City and its Social Housing Company apply an innovative PPP cross-financing model, enabling partial reallocation of funds from sales of new private apartments to refurbish social housings with caped rents in the same area.

Business models used:

A new public private partnership (PPP) district heating company was established in Delft, producing, distributing and supplying an equivalent of nearly 20,000 homes with heat and hot water. It is one of the major projects within the DELFT climate plan.

In Delft an ESCO has been established to build and operate the new district heating network (there was no district heating before). The district heating company (Warmtebedrijf Eneco Delft BV) was created after a call for tenders to find the main private investor. This included the municipalities of Delft and Midden Delfland as well as the four largest housing associations in Delft, thus guaranteeing the connection of a sufficient number of buildings. Under these conditions, the district heating company could be economically feasible. Even if the private investor was the main shareholder (97%), the definition of so called “priority shares” was the key area to ensure that the ESCO fulfilled the sustainable development criteria. In fact, all important decisions related to the extension of the district heating, major investments and sustainability issues had to be taken jointly by the three “priority” shareholders.

An ESCO/ contracting-model had been investigated for the housing association and municipality in order to finance energy efficiency retrofitting in Poptahoff. This would have depended on raising rents in order to recoup costs. However, this was not allowed under Dutch law, as rental levels are regulated. No ESCO has been used –however, housing associations are now increasing the rent, since it is now allowed . The original thoughts on the ESCO were rejected due to many legal constraints. These constrains had to do with specific parts of tenant-protection regulation that saw to it that tenants are not charged by a third party for measures that are part of the real estate and should therefore be in the rent.

Legacy – follow-on projects:

In the SESAC communities (Växjö, Delft and Grenoble), stakeholder meetings were organized and involved actors of the local service sector (e.g. builders, architects, housing companies, etc.). During these meetings, it was discussed how the results reached in the demonstration activities could be used in the day-to-day work of these stakeholders. In this way, it was tried to create a spill-over from the demonstration activities and to motivate companies to replicate construction techniques developed within the sesac project (e.g. wooden constructions, passive houses).

Legacy - Policy Developments:

The new local climate action plan that was defined for the coming for years was drawn indirectly on experiences gained from CONCERTO. A lot has been learned, in particular on district heating companies and better building standards.