On a pleasant Summer’s day on Tuesday, August 17 2004, exactly one year after a devastating blackout had shut down the economy of Central Canada and the Eastern United States, a minor miracle occurred on Toronto’s waterfront. At approximately 11 a.m., a group of dignitaries, engineers and a smattering of celebrities – including Hollywood actor/environmental activist Alec Baldwin – packed into the Steam Whistle Brewery to witness the symbolic activation of Enwave’s deep lake water cooling system (DLWC) by deputy mayor Sandra Bussin.
Today, DLWC provides cooling to more than 180 buildings in downtown Toronto through an extensive network of pipes and heat transfer facilities controlled by Enwave Energy Corporation[1]. DLWC is now celebrated internationally and widely touted as “Toronto’s Green Calling Card” for its ongoing contribution to helping the City meet its goal of reducing greenhouse gas emissions by 65 per cent by 2030. But back in 2004, the DLWC concept was still unproven.
In his speech, Alec Baldwin referred to DLWC as “a miracle.” While there is no doubt that DLWC is an example of truly innovative engineering, the real miracle, more than 20 years in the making, was that the project’s many champions had been able to overcome numerous obstacles to bring the vision of consulting mechanical engineer Robert Tamblyn to fruition.
This is a short version of a complex story that began with Tamblyn’s “crazy idea” in 1981. The idea gained traction and credibility a decade later thanks to two years of intensive research and engagement expertly managed by the Canadian Urban Institute (CUI).
DLWC was eventually transformed into a highly prized infrastructure asset by Enwave Energy Corporation (assets that combined both the original heating capabilities with the innovative cooling technology). But this evolution was only possible because of a brave decision by Toronto City Council in late 1999 to partially privatize its district energy utility, the Toronto District Heating Corporation (TDHC). Transforming TDHC into a private corporation opened the door to investment (after considerable due diligence) by the Ontario Municipal Retirement System (OMERS) as a majority shareholder, ushering in a period of growth and expansion for Enwave and DLWC.
Acknowledging the project’s transformation from a risky environmental play to a blue-chip infrastructure investment, Brookfield Asset Management subsequently purchased the shares of OMERS and the City. With the backing of Brookfield, Enwave continued to expand DLWC and grow the Enwave brand in other jurisdictions, including the U.S.
In February 2021, Brookfield sold the Canadian assets of Enwave to a group of institutional investors led by the Ontario Teachers’ Pension Fund for $2.8B – a chain of events that all began with Tamblyn’s brainwave.
What is Deep Lake Water Cooling?
Simply put, Enwave’s DLWC system uses very cold water from the depths of Lake Ontario to cool buildings in downtown Toronto. Using three large pipes extending 5km into the lake, the frigid water flows to the Island Filtration Plant, where it is treated. This is a joint project between Enwave and Toronto Water, in which Enwave relies on Toronto Water and their potable water system. From the Island Filtration Plant, the water is piped to the John Street Pumping Station on the lakefront. However, before continuing to the City’s drinking water system, the water first moves through a heat transfer process that cools water in Enwave’s closed loop system without interfering with the potable water. Enwave’s system then circulates the water through more than 180 downtown buildings to provide air conditioning. The process is then repeated. Only the temperature of the lake water is harnessed, rather than the water itself, which means that the system does not pollute the lake with a plume of waste heat.[2]
DLWC cools everything from office buildings to data centres to hospitals and condos, avoiding the use of what were viewed at the time as ozone-polluting chillers, saving prodigious amounts of electricity while also reducing GHG emissions[3]. Today, DLWC is responsible for displacing 4,000 tCO2e per year, which is equivalent to greater than 85% of electricity required by traditional systems.[4]
The system has since expanded, but even in 2004, the act of connecting 20 downtown buildings to DLWC reduced city-wide GHG emissions by 3%, a figure that would increase to 25% just a year later as more buildings were added to the district energy network.
The first properties to benefit from what Enwave CEO Dennis Fotinos at the time called the “energy of the future” (in addition to the Steam Whistle Brewery) included the Royal Bank Plaza, the Air Canada Centre (now known as the Scotiabank Arena) and the six buildings comprising TD Centre. “DLWC reduces electricity use by 75 per cent,” Fotinos said in 2004. “DLWC will also eliminate 40,000 tonnes of carbon dioxide annually (the primary GHG emitted through human activities).” His forecasts have proved remarkably accurate.
Early days and a ‘tipping point’ that allowed the project to move forward
DLWC was envisioned by engineer Robert Tamblyn in 1981. Initially dubbed ‘Freecool,’ the concept was first studied by Tamblyn’s firm in a 1982 report commissioned by Canada Mortgage and Housing Corporation (CMHC).[5] A follow up report in 1984 for the province and federal government confirmed the original positive findings but the significant capital cost and uncertainties regarding environmental approvals saw the idea shelved.
With the support of TDHC, the ‘Freecool’ concept was revived in 1990 by the recently established Canadian Urban Institute (CUI). CUI’s first president, Richard Gilbert, was well versed in the benefits of Freecool. Not coincidentally, prior to taking the reins at CUI, Gilbert had been a Metro Toronto councillor and, as Metro’s representative on the Board of the Toronto District Heating Corporation (the forerunner to Enwave), its president. Announcing CUI’s commitment to the project, he identified three reasons why he believed the time was right to take another look at Freecool.
The first was that downtown Toronto in general and the commercial office sector in particular was experiencing rapid growth. Gilbert foresaw increasing demand for chilled water to provide air conditioning for these buildings, adding to unwanted emissions[6].
Second, he was concerned that growing demand for the electricity necessary to run hundreds of individual office building chillers would place unacceptable pressures on Ontario Hydro to expand its capacity to generate more electricity at a time when pressure was mounting to reduce the province’s reliance on coal-fired electricity generation.
Third, Gilbert was aware that the federal government was planning to introduce tough new regulations which would require landlords to replace hundreds of HVAC chillers with updated equipment designed to mitigate the impact of CFCs on the Earth’s ozone layer. Gilbert saw the introduction of DLWC as a way to help landlords – including many public sector organizations – avoid many millions in capital outlays while also helping the City meets its environmental goals.[7]
In early 1991, CUI launched a lengthy, comprehensive enquiry process that invested more than $750,000 on eight technical and nine other research studies to answer tough questions from corporate and environmental skeptics[8]. The Deep Lake Water Cooling Investigation Group, managed by Gillian Mason, employee number two at CUI, held 24 breakfast meetings, scheduled every two weeks for more than two years[9]. According to Mason it was “a truly diverse group, representing every constituency, from “corporate types wearing business suits to activists who turned up clad in Birkenstocks,” Mason recalls with a smile. One of the decisions made early on was to replace the evocative term ‘Freecool’ with the more marketable ‘Deep Lake Water Cooling.’
Skillfully managing the different priorities of federal, provincial and municipal funders as well as contentious points of view held by members of the working group, CUI organized a conference in mid-1991 to review the findings of the technical studies.[10]
Several important building blocks fell into place as a result of the commitment of the stakeholders involved with CUI’s DLWC investigation group. One participant likened the process to ‘shuttle diplomacy,’ an approach that worked in part because people were encouraged to keep their ‘eye on the prize’ rather than allowing ideological positions to get in the way of progress.
A particularly contentious example was whether DLWC should be classified as a ‘megaproject,’ a term synonymous at the time with expensive failure. Facing this challenge head on, following debates on the topic at the June conference, CUI brought in Energy Probe, an outspoken environmental NGO known for its opposition to so-called ‘megaprojects.’ After lengthy debate and careful consideration, the organization agreed that DLWC should not be “tarred with the same brush as Hibernia or the Darlington B” by being characterized as a megaproject[11]. While DLWC may have shared some characteristics with ‘megaprojects’ such as its large capital cost, Energy Probe concluded that moving forward with DLWC “was less undesirable than the status quo,” an admission that proved to be critically important to gaining and maintaining political support.
Another tangible step forward that would eventually shave millions off capital cost estimates came from Metro’s Works Commissioner, Robert Ferguson, who endorsed the notion of integrating DLWC with the City’s potable water facilities. His City counterpart, Nick Vardin, also signed on to the idea after checking with Toronto Public Health.
The CUI’s final report in February 1993[12] confirmed that, while the DLWC concept had great potential, obstacles remained. CUI’s comprehensive engagement process had succeeded in establishing credibility and getting everyone ‘comfortable’ with the concept – including people who had started off in opposition. But the hefty estimated price tag, uncertainties over financing, governance and environmental approvals saw momentum for DLWC retreat to the inner sanctums of Metro Hall and Toronto District Heating Corporation.
The project nevertheless continued to have external champions long after the DLWC Investigation Group issued its final report. Although many of the report’s recommendations for further action were eventually implemented in various forms, the idea for a formal ‘Cooling Strategies Board’ never materialized.
Informal advocates included representatives from BOMA (Building Owners Management Association), who were, for the most part, keen to achieve the dramatic cost savings for commercial landlords identified in CUI’s reports, although there were disagreements about whether the decision to “hook up to DLWC” should be mandatory or voluntary.[13] “Giving up control of one’s asset to a utility – which is what connecting to DLWC in effect represented –
was anathema to building managers,” recalls an individual involved in backroom discussions. “Those guys took a lot of persuading. The good reputation enjoyed by TDHC in providing heating to downtown buildings probably made the difference.”
Individuals from provincial ministries, federal departments and investors with ‘deep pockets’ such as pension funds, which were starting to explore the merits of investing in infrastructure, also continued to signal their support.
Navigating from NGO to Private Corporation
From late 1991 to the late-1990s the culture of decision-making affecting the DLWC project gradually evolved from that of a municipal not-for-profit to a form of management and governance that would ultimately allow it to meet success in corporate boardrooms. There were many moving parts.
In the early 1990s, the City of Toronto and Metro Toronto were still operating independently of each other (amalgamation would only take place in 1998). Even though Metro and its six constituent municipalities enjoyed a sometimes rocky relationship, the professionals in charge of municipal systems serving downtown Toronto remained focused on the multiple benefits of DLWC that had been identified through CUI’s investigatory process[14]. With support from Metro and City councillors, TDHC established a working group to advance the project.[15] Although the TDHC Board approved preliminary engineering plans as early as 1992, continuing concerns about financing and uncertainties over how to achieve environmental approvals proved to be a stumbling block.
The problem of how to raise funds was that, as an NGO, TDHC was prohibited from making equity investments or undertaking long-term borrowing. Metro and TDHC’s representatives would continue to search for the most appropriate way to deal with this roadblock for several more years. The preferred option – to transform TDHC into a private corporation, which had been discussed during CUI’s investigations – eventually won out.
Meanwhile, behind the scenes, Dale Richmond, who as Metro’s CAO had been supportive of DLWC from the outset, left Metro in 1993 to take on the role of President & CEO of OMERS, the pension fund that would ultimately take a major stake in the project through its newly established subsidiary, Borealis Infrastructure Ltd.
In 1996, DLWC received a boost when the Toronto Atmospheric Fund, an agency created in 1991 with a mandate to advance the City’s environmental goals, invested $150,000 in additional studies designed to reignite momentum for the project.
The report produced for TAF by Allen Kani Associates endorsed many of the potential benefits of proceeding with DLWC originally identified by CUI but also offered new ideas. The TAF report confirmed that commercial building landlords could expect to save more than $20M in hydro costs annually after connecting to DLWC. The project would also cut GHG emissions by more than 200K tonnes annually, the equivalent of 3% of all emissions generated in Toronto. As more buildings connected to the system, the TAF report estimated that the percentage of emission reductions would increase to between 20 and 25% of all city emissions. Another important benefit identified by TAF was that sourcing its drinking water from the deepest parts of Lake Ontario would save the City between $26 and $28M – the cost of installing a carbon filtration system to deal with foul-smelling algae affecting the taste of the City’s drinking water.[16]
The TAF report also identified an opportunity to divert food and waste to digesters to create methane instead of sending food and waste to landfills, providing a power source for generators to run absorption chillers, which would in turn create the cold air required for air conditioning.
Building on the positive findings of the TAF report, TDHC invested $20M from its reserves to install an absorption chiller facility in the garage of the recently completed Convention Centre and construct a 10’ diameter pipe from Lake Ontario via the John Street Pumping Station to the building.
A year later, the City launched an environmental assessment of DLWC, a process successfully completed in 1998. Anticipating that the project was approaching a critical point in its evolution, the federal Department of Natural Resources provided a loan of one million dollars (half of which was forgiven) to allow TDHC to begin advanced engineering, and the Federation of Canadian Municipalities (FCM) provided a capital works loan of $10M from the Green Municipal Fund (since repaid by Enwave).[17]
Meanwhile, as TDHC and Metro continued to debate the practicalities of how to move ahead with DLWC, two actions by Mike Harris’ provincial government in 1997 and 1998 were to have significant impacts on the project.
The first, announced in 1997, was the amalgamation of Metro and the six local municipalities into one large entity – known as the “megacity” or the new City of Toronto. This took effect on January 1, 1998. The new council initially had 58 elected representatives (including the mayor).
The second was the province’s announcement in 1998 that the number of seats on the newly amalgamated council would in future be reduced from 58 to 45. Although this would only take effect in 2000, Dennis Fotinos, who, as a member of the City’s Works and Utilities committee is credited with kickstarting the drive to transform TDHC into a private corporation, decided not to run for re-election. He left politics later that year, taking an executive position with TDHC.
Growing in confidence that DLWC could actually happen, Toronto Council removed another potential obstacle to cementing agreements with major landlords as customers for DLWC. As the province’s largest ‘local electricity distributor’ (LED), Toronto Hydro was earning millions by supplying electricity to hundreds of buildings in downtown, which were still using conventional heating and cooling technology. Signing agreements in support of DLWC, which was explicitly designed to reduce electricity consumption (and therefore revenue to the utility), would have violated the utility’s fiduciary duty. Within months of learning of this conflict, in December 1998, Toronto City Council passed a motion directing Toronto Hydro to support DLWC, releasing TDHC from that constraint.[18]
Officials from the City and TDHC also had to work closely with provincial regulators to persuade them that the DLWC should be exempt from the fees normally charged to industry for harvesting water from the lake, a move that kept the potential business case for DLWC in the black.
In 1999, Toronto City Council finally decided to move ahead with the partial privatization of TDHC. As of January 1, 2000, the organization was to be known as Enwave Energy Corporation. Enwave promptly issued four ‘capital calls’ to raise $68M. The City retained 43% of shares, and OMERS purchased the remaining 57%. Freed from the constraints imposed by its former NGO status, Enwave then announced that it was moving ahead with an historic investment in DLWC of $120M.
Parallel to these decisions by the City of Toronto, the newly created subsidiary of OMERS, Borealis Infrastructure Management, driven by the vision of CEO Michael Nobrega, had been carrying out extensive due diligence on DLWC, which resulted in the OMERS Board approving the investment in DLWC[19].
Flush with this newfound source of capital, Enwave moved into high gear. The Spanish company ACCIONA won the contract to oversee construction of the project. Work began in 2002.[20] As the project neared completion, Enwave and the City of Toronto entered into an Energy Transfer Agreement that “allowed Enwave to share the City’s water utility infrastructure, giving the company access to cold water from the lake before entering the City’s distribution system as drinking water.”[21]
The DLWC system became operational in 2004, completing a sequence of events that have no parallel in the annals of sustainable infrastructure investing.
Enwave grows DLWC and establishes value for its investors
Prior to and following the successful launch of the DLWC district energy system in August 2004[22], Enwave aggressively pursued opportunities to add new customers. By 2007, the company had finalized the connection north to Queen’s Park.[23] No fewer than three cabinet ministers – Laurel Broten (Environment), Dwight Duncan (Energy) and David Caplan (Infrastructure) – attended the press conference, an indication of the high value ‘green credentials’ associated with the project. Also in 2007, Enwave added the downtown Hudson Bay store and Tridel’s Element, the first condo to be connected[24]. There are now more than 180 buildings on the system.
Enwave not only grew the DLWC project in downtown Toronto but built its reputation beyond Toronto’s borders as an effective owner and operator of district energy systems involving both heating and cooling assets. In 2012, Brookfield Asset Management purchased the shares of OMERS and the City of Toronto, allowing Enwave to continue expanding its reach, including investments and acquisitions in the U.S.
In 2019, Enwave announced a $100M expansion in downtown Toronto, which benefited from a federal grant of $10M from the Department of Environment and Climate Change’s ‘Low Carbon Economy Challenge.’ The focus of the expansion is ‘The Well,’ a mixed-use development with 3M square feet of retail, office and residential space west of Spadina Avenue. Demonstrating its capacity for innovation, Enwave partnered with developers Allied Properties REIT and RioCan REIT to finance the design and installation of a massive thermal storage facility that holds 2M gallons of water from the DLWC system.
According to a release issued by the partners, “As a thermal ‘battery,’ the ingenious system can store energy at night during off-peak times, easing strain on the electricity grid and reducing costs. The system is efficient, resilient, and, with greater capacity, can now supply low-carbon heating and cooling to an additional 17 million square feet of space.[25]”
The City of Toronto and Enwave continue to advance plans for expansion, and in early 2020 launched a new environmental assessment to “study the effects of expanding the capacity of the system to meet the city’s growing demand for cooling.”
In February 2021, having overseen the continued growth and expansion of Enwave, Brookfield sold its shares related to the Canadian assets to institutional investors, a group led by the Ontario Teachers’ Pension Plan, for $2.8B.
Glenn Miller, FCIP, RPP is a senior associate with CUI who previously ran the education and research programs of the Institute. Gillian Mason, MPA, RPP, MCIP is an independent consultant. Gillian was CUI’s ‘employee #2,’ responsible for managing the DLWC Investigation Group, whose findings served as the ‘tipping point’ for the project.
October 5, 2021
[1] https://www.enwave.com/case-studies/enwave-and-toronto-water-tap-into-innovative-energy-source/ Retrieved September 30, 2021
[2] Original plans for DLWC contemplated releasing water warmed through the heat transfer process back into the lake; as the project progressed, improvements were made to the design and engineering innovations avoided the need to discharge warmed water directly back to the lake.
[3] There have been major improvements in chiller technology in recent years.
[4] Memo from Enwave to the authors September 23, 2021
[5] Renewable Energy at Your Doorstep: Feasibility Study for Freecool Project, Toronto, Ontario. April 1982 Canada Mortgage and Housing Corporation (File 5962-7) prepared by Engineering Interface Ltd.
[6] The significance of choosing the anniversary of the blackout to launch DLWC is underscored by the fact that around 2000, demand for air conditioning in Ontario had increased to the point where the province was now a ‘summer peaking’ jurisdiction – presentation to a Canadian Urban Institute seminar, 2004 – which precipitated the blackout.
[7]Legislation to curb CFCs was eventually enacted in 2003 (Federal Halocarbon Regulations, 2003)
[8] Funding for these studies came from multiple sources, including the federal and provincial governments.
[9] In addition to 24 meetings of the DLWCTG, two formal meetings were held with community groups (Cooling Buildings in Downtown Toronto, Canadian Urban Institute, February 1993)
[10] The eight technical studies were: Engineering Interface (Position Paper for a Lakewater Cooling System for Downtown Toronto), MacViro Consultants (Environmental Studies Report for DLWC Investigation Group), Pollution Probe (An Examination of the Ecological Impacts of the DLWC System on Nearshore Ecosystems), Canadian Institute for Environmental Law and Policy (DLWC Cost Recovery and Ownership Issues), Energy Probe (Is DLWC a Megaproject?), Allen Associates (DLWC Alternatives), Metro Toronto Works Dept (DLWC as a Supplemental Municipal Water Supply), City of Toronto Dept of Public Works and the Environment (DLWC Construction Impact on Downtown Toronto).
[11] https://archive.macleans.ca/article/1995/7/31/pushing-canadas-last-megaproject – describes how Hibernia delivered “the most expensive oil from the earth’s most vulnerable environment.” https://en.wikipedia.org/wiki/Darlington_Nuclear_Generating_Station#Cost_overruns
Estimates to construct the Darlington Nuclear Plant, which supplies 20% of Ontario’s electricity, suffered from major cost overruns, mismanagement, labour disruptions and safety concerns resulting from the Chernobyl disaster.
[12] CUI published a conference proceeding in June 1991, and its final report in February 1993.
[13] Site inspections of major buildings carried out in cooperation with BOMA revealed that only four of 38 chiller systems were located in building basements, which would facilitate connections to TDHC’s cooling system. With more than 700 chillers operational in downtown as of 1990, it was clear that there could be a significant cost saving for landlords if they could avoid the cost of replacement in favour less expensive connections to DLWC. As noted in CUI’s final report (93-2), one BOMA member said, “Give owners a deal they can’t refuse and they won’t refuse it.” In the end, a suitable business arrangement was devised that met the needs of everyone.
[14] Glenn Miller experienced this first hand as an employee in Metro Toronto’s planning department.
[15] One of the benefits of the Metro system was that ‘Metro councillors’ were exposed to big picture needs of the place as a whole while ‘local councillors’ could focus on the needs of constituents in their wards. Politicians like Jack Layton moved seamlessly between the two levels of government. He was instrumental in the creation of the Toronto Atmospheric Fund (TAF) among other environmental initiatives.
[16] Kevin Loughborough, Enwave’s director of engineering, quoted in the Toronto Star, January 1999
[17] Enwave Case History, 2007 Retrieved September 17, 2021
[18] Toronto Hydro’s Board is appointed by the City of Toronto, including three councillors. Aware that Toronto Hydro was legally prohibited from undertaking conservation programs or signing agreements that encouraged reduced electricity consumption, the issue was brought to the attention of Council, which passed a motion directing the utility to support DLWC in December 1998. In 2002, the province deregulated the electricity market with the goal of reducing the number of LEDs through a process of consolidation and/or privatization. The CUI was actively involved in providing educational support to LEDs and worked with the province to establish regulations that specifically provided for LEDs to legally allocate a percentage of revenue towards conservation measures – a principle that first came to light during debates at Council on the merits of DLWC.
[19] According to individuals working with Borealis, persuading the OMERS Board to accept the risks of investing in a still unproven technology was an unparalleled achievement in balancing economic, environmental and technological innovation factors.
[20] The list of accomplishments resulting from field testing, technological innovation and new product development is extensive, and catalogued separately from this article.
[21] FCM case study, 2012
[22] The official opening of the system was delayed a month to coincide with the anniversary of the blackout. The idea was to emphasize Toronto’s move towards reducing its electricity demand, thus mitigating the potential for future blackouts.
[23] Extending the DLWC system north to Queen’s Park was not in the original business plan due in part to the cost of building additional infrastructure that far north.
[24] More condos followed in the years after Tridel connected to DLWC as developers became sufficiently comfortable with the concept to be able to recover the capital costs for connecting while avoiding the need to install traditional air conditioning.
[25] Retrieved from https://www.enwave.com/case-studies.htm September 30 2021
