The POWER Interview: Vicinity CEO Discusses District Energy
The rise of distributed, or decentralized, power generation has been supported by district energy, the generation from facilities and associated distribution networks supplying steam or hot water, chilled water, and electricity for heating and cooling to millions of square feet of building space across the U.S. and around the globe. District energy is among several focus areas for POWER’s Distributed Energy Conference, which this year is scheduled for Oct. 19-21 in Chicago, Illinois.
Among the newest district energy providers—at least in name—is Vicinity Energy, a company recently launched by Antin Infrastructure Partners after Antin’s purchase of Veolia North America’s district energy assets in the U.S. Vicinity, headquartered in Boston, Massachusetts, immediately became North America’s largest provider of district energy. The company is supplying energy and related services across 13 networks in 10 major cities, including large networks in Boston; Philadelphia, Pennsylvania; Baltimore, Maryland; and Kansas City, Missouri. Vicinity today has more than 400 MW of combined heat and power (CHP) electricity production, providing service to more than 200 million square feet of building space.
Bill DiCroce, president and CEO of Vicinity Energy, recently talked with POWER about how sectors such as life science and biomedicine are embracing district energy technology due to its resiliency and reliability. District energy is supplying heating, cooling, humidification, and power for equipment sterilization, and DiCroce noted how commercial property owners can transfer their energy risks while recapturing valuable amenity space such as parking and rooftops in their buildings—all without onsite combustion.
DiCroce noted that “property owners, developers, and major institutions alike are increasingly gravitating toward this established technology, recognizing it as a green, cost-competitive and super-reliable energy option. Cities also recognize the important role we play in reducing the carbon footprint of their environs.” DiCroce touted Vicinity’s effort to be a greener alternative to conventional heating, cooling, and electricity service, and highlighted how the company’s leadership team has more than 50 years in the district energy business.
POWER: What is your background in district energy?
DiCroce: “I ran Veolia’s North American activities. Veolia is the world’s largest environmental services company, working with industries including water, energy, and waste [management]. We look at a company’s strategy, where they are, where they’ve been, where they’re going.”
POWER: What precipitated the deal with Antin?
DiCroce: “If you looked at [Veolia’s] water, waste, energy business, and if you looked at our district energy, they all involved infrastructure that requires funding, and we were looking at that as we were out there looking at other ways to grow the business. The ability to build our platform was restricted a bit, which impacted our ability to expand. We knew it was time to check the market on interest from infrastructure funds.
“What it means for us was, we [now] have an owner with good financial backing, with good cost-to-capital [ratio], and the ability to grow in this space. This allows us to expand our networks, put new infrastructure in new neighborhoods, in new parts of cities. I was able to bring all the energy talent over from Veolia. Now we’ve got a management team solely focused on energy, to provide great customer service.”
POWER: Where do you see growth potential in district energy?
DiCroce: “Military bases, campuses, hospital, medical complexes … all of those have district energy at the core. So we really serve urban environments and campuses. In a typical urban environment, the big hospitals, commercial real estate, high rises, government buildings and campuses … when you look at the skylines, most of those buildings are served by us.”
“In our three biggest districts, Philadelphia, Boston, and Baltimore … we have more about 100 million square feet in Philadelphia [including the University of Pennsylvania], about 50 million in Boston, and just under 50 million in Baltimore. And then we have smaller CHP [combined heat and power] installations as part of other systems. CHP and microgrids—we design, own, and operate [those systems].”
POWER: How does your group promote itself to customers?
DiCroce: “Say you have a big petrochemical plant, or a facility in a big urban district. One of our systems is the cleanest way to burn methane on the grid. Because we’re the most efficient, if you look at the bid stack in the PJM or MISO, we’re down at the lower left [least expensive resource]. Because we have this big thermal off-take, low gas prices wind up being a benefit for our customers. The people we heat and cool, it’s a better price for them.
“We have central plants, and piping to distribute, so you don’t have to have a boiler plant in your building, you don’t have to have a chiller plant in your building. You don’t have cooling towers on the roof. A boiler plant might be in the parking garage, but we just pipe heat into the building, and they can use that space in the garage that the boiler would have occupied.”
POWER: How could governments promote district energy?
DiCroce: “In a world of absolutely heightened focus on carbon reduction, you look at three sectors: the power generation sector, transportation sector, and buildings, the heating and cooling of buildings. In power generation, the amount of wind and solar has dramatically increased, and incentives have helped. District energy plants are on the thermal side, and we should be better incentivizing CHP, and we should be incentivizing alternative fuels.”
POWER: Do your systems have a preferred fuel type?
DiCroce: “If you look at a district, in that winter peak, we’re burning natural gas, and 1% or 2% oil. If we had a better symmetry, would could start looking at biofuels, at hydrogen. Waste oil, if we could get that price point down, could also be utilized. But the incentives [from government] haven’t been there, they’ve all been on the renewable side. The district energy business really needs to advocate on the incentives side. We don’t care what fuel we use, we’re indifferent to that, but if the price point [for a fuel] is five times higher than natural gas, it’s hard for customers to say ‘I’m going to pay five times more for that’.”
—Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine).