Sustainable Cities and Infrastructure –––––––––––––––––––––––––––––––––––––––––––– Low Carbon

Sustainable Cities and Infrastructure ––––––––––––––––––––––––––––––––––––––––––––Low Carbon Manufacturing, Technology

Innovation and the Quality Standard of Industry

André SchneiderVice President, GIB Foundation

Chairman, World ClimateVice President, EPFL

Global Infrastructure Basel

Global Infrastructure Basel Foundation(©)www.globalinfrastructurebasel.com 2

Global Infrastructure Basel Foundation is the globally leading organization dedicated to scale up the financing of sustainable infrastructure development. The independent, not for profit organisation is funded by diverse sources, ‐ ‐among them the Swiss Government and the City of Basel in the framework of their promotion policy for market based sustainable development around the world.

Based in Basel, Switzerland, GIB Foundation aspires to make accessible the added value of (environmental, societal and economic) sustainability of selected, high value infrastructure projects to contractors, clients and investors. For that purpose it develops and applies specific methods of project design, finance and rating as well as capacity development.

Introduction


What is the relationship between sustainable infrastructure, low carbon manufacturing, technology innovation and quality standards of industry ?

It is all about sustainable lifestyles !

Sustainable Lifestyles


Is it possible to improve human health and life quality while at the same time reducing current levels of energy, transport and resource use?

Social innovation and significant changes in consumption patterns and lifestyles will be vital to achieve long-term economic prosperity for all within the bio-capacity of our planet.

Knowledge on sustainable lifestyles is scattered as are sustainability projects and initiatives.

There is an immense need for advancement through bringing together current knowledge, experience and relevant stakeholders in a dialogue process to articulate and clarify the challenges that society faces in achieving the goal of sustainable lifestyles.

How do we support sustainable lifestyles ?


1. Sustainable consumption (integrating the hidden cost into our consumption)

2. Sustainable infrastructure (energy, mobility, water, and other utilities)

3. Sustainable housing (a new approach to housing development)

Sustainable Consumption––––––––––––––––––––––––––––––

Sustainable Consumption


Sustainable Consumption


Planned Obsolence


Food Waste


Sustainable Infrastructure––––––––––––––––––––––––––––––

Why is Sustainable Infrastructure so Important?

12 Global Infrastructure Basel Foundation(©)www.globalinfrastructurebasel.com

Confronting the challenges of climate change mitigation and adaptation, resource scarcity and energy security will require massive investment in the fundamental reconfiguration of the infrastructure that supports modern society.

By 2050, nothing will function as it does today. This challenge presents huge opportunities both for investors, general contractors and for projects owner.



Daniel Wiener

should there be another word after solution



10 Themes for Sustainable Infrastructure


The following ten themes clearly affect the performance of sustainable infrastructure projects and their governance:

AccountabilityTransparencyCustomer FocusResults OrientationPoverty ResponsivenessPower-Balanced PartnershipsShared IncentivesSound Financing MechanismsProactive Risk ManagementResource Protection

Sustainable Housing––––––––––––––––––––––––––––––


Situation

• Around 40% of the CO2 emissions are coming from housing.

• Energy efficient buildings and measures to improve energy efficiency for buildings are technically and financially feasible and can be based on existing and available technology as well as proven design concepts.

• In many cases the necessary capital, to fund such measures to extend energy efficiency, is missing and not easily available.

• In order to move beyond demonstration and scale up to mainstream implementation, we need to create• new policy frameworks to find new sources of financing (like grid reductions

or peak reductions);• public private partnerships that allow the financing of such measures based

on the cost reduction and performance contracts.


A Case

• Housing Complex, Larger City in Northern Germany• CAPEX: 45.100.000 € (205.000€ in average per unit for 220 building units)• OPEX for Energy: 370.260 € / year (1.683€ per unit for 220 building units)• Increase in CAPEX from applying EE measures: 6.600.000 €• Decrease in OPEX from applying EE measures (energy efficiency and energy selling to the grid) :

382.000 € / year • Financing of increase in CAPEX for applying EE measures: 4% interest on long-term loan• Payback Period based on the full use of the decrease of OPEX for interest and payback: 30 years

• In conclusion:• The future users of these houses will spend the reduced energy costs of 1.740 € per year for a

period of time (30 years) on paying back the investment for the EE measures (or a total of 52.200 €), before they profit fully of the cost reduction of 1.740 € per year.

• The owner will have a much more energy efficient building with no further investment but pay the full energy costs as without EE measures for 30 years.

• The financier will get the required return on their investment of 4%.


Barriers

• LOW ENERGY PRICES: Causing a very long payback period.

• CAPEX: Higher upfront capital cost while savings come in at a later time.

• MISALIGNMENT: Misaligned financial incentives between landlord/owner (investor of the energy saving and reduction measures) and tenants (receiver of cost savings). (not in the case of owner occupation)

• TECHNOLOGY RISK: Perceived risks of energy efficiency measures and positive energy buildings are high (new to the market).

• INSTABILITY: Instability of energy prices over the long investment horizon although prices in general have been increasing over time.

• PERFORMANCE RISK: Owners or tenants cannot be certain on energy performance in the long run.


Opportunities for Implementation

• LOW ENERGY PRICES: Realistic or not, tax on externalities, targeted subsidies, and/or laws stimulating energy efficiency measures.

• FINANCING: If low energy prices are addressed, financial tools that provide money to pay for such energy efficiency investments, where a shared energy cost reduction provide interest payment.

• CROSS FINANCING: Find ways to use such solutions to reduce grid extensions and peak performance and use this as new sources of financing.

• SOLUTIONS: Find the right solutions that addresses the type of buildings, economic context, capabilities of the project owner, the climatic context, and the opportunity for long term renewable energy systems.

• PERFORMANCE ASSURANCE: Solution providers need to guarantee the energy savings generated to allow for a steady cost savings flow.

• PROJECT DESIGN, SET-UP AND MANAGEMENT: Institutional set-up, where an agency or operator seek the best solutions, best providers of technology and of finance, develop economic model with definition of roles.

• BEST PRACTICE: Solutions Directory; Financing Directory; Solutions and Financing Community; Document successful projects.

Conclusions––––––––––––––––––––––––––––––


Conclusions

• We need to go from low carbon to sustainable development.

• Low carbon manufacturing and production has to integrate concepts of sustainability and cover the hidden sustainability costs and must address over consumption.

• Low carbon manufacturing and production has to provide solutions for sustainable infrastructure and housing.

• We need to approaches to financing of sustainable infrastructure and financing looking at• Rethinking infrastructure and housing planning;• Financing through institutional investors providing long term fixed income

financing;• Financing integrating all elements like cost of grids and cost of. peak energy

need.


Conclusions

• We need technology innovation to reduce energy use, to create smart mini grids and to develop new consumption models.

• We need industry quality standards to define frame conditions for • sustainable consumption;• sustainable infrastructure; and• sustainable housing;to assure quality, common levels and protection for investments.

• We need to develop sustainable life styles.


Thank you for your attention!

Contactwww.globalinfrastructurebasel.com

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Sustainable Cities and Infrastructure –––––––––––––––––––––––––––––––––––––––––––– Low Carbon