District energy technology is nothing new for North America, but it is currently in a growth phase, due to pressures on energy costs and carbon emissions. Rowan Sanders examines the trend towards new systems being built and existing systems being expanded, in both cities and campuses.

District energy – the production of thermal energy products (steam, hot water or chilled water) at a central plant, which are then distributed to nearby buildings through underground piping networks – was first implemented in the United States in the late 19th century. District energy’s adoption in the US has not been nearly as pervasive as in Europe, primarily because the US enjoyed an extended period of low fuel prices during much of the 20th century. As a result, the number of district energy systems implemented in central business districts did not even total 100.

A 2005 survey by the Energy Information Administration (EIA) of US district energy industry capacity compiled the data summarized in Table 1 below.

Today, district energy is at the onset of a renaissance period in the US because of the convergence of the following factors:

  • climate change has increased emphasis on environmental responsibility
  • fuel prices have been highly volatile for the last decade
  • the current economic recession is forcing businesses and governments to take a close look at initiatives that save money and preclude capital investments

These factors all represent prime opportunities for increased emphasis on district energy and the combined heat and power (CHP) technology that often powers district energy systems.

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If we look at the energy mix of the US in terms of net generation by energy source, we can see that the nation is heavily dependent on fossil fuels – see Table 2 .

With 70% of the nation’s net generation emanating from fossil fuels, it is apparent there is no one solution to address climate change. Nuclear is the only source of energy not based on fossil fuels, which also comprises a significant portion of the country’s energy mix. As such, nuclear energy will have to play an important role in addressing climate change but, realistically, we cannot expect that it will fully replace the percentage of electricity that is generated from coal and natural gas.

With coal and natural gas producing so much of the country’s net generation, district energy is re-entering the energy debate because it facilitates more efficient utilization of fossil fuels, and also permits the introduction of renewable fuels into the mix. Although district energy may not represent a silver bullet to address our nation’s challenges, it will definitely be an important component of the ultimate solution – part of a ‘silver buckshot’ approach.

With district energy back in vogue in the US, several important trends are emerging:

  • existing systems in central business districts across the country are both adding and renewing customer buildings
  • district energy is playing a role in both the US Environmental Protection Agency’s EnergyStar and the US Green Building Council’s LEED certifications of sustainability
  • upgrade investments are being made in downtown systems to optimize their performance
  • new systems are being evaluated and implemented in major metropolitan areas, small cities (using renewable fuels), university campuses and hospital campuses
  • federal and local governments are creating legislation and incentives to support district energy

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Veolia Energy’s Grand Rapids system provides steam to more than 130 downtown customers, including hospitals, college campuses, cultural and exhibition centers, commercial offices and retail stores Photo: Veolia Energy North America

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A diagram of Cornell University’s cogeneration facility


Since 1990, the International District Energy Association (IDEA) has tracked the customer building additions and renewals of its members which own and operate district energy systems.

According to the IDEA’s data, 126 North American customer buildings – 40 million square feet (371 hectares) of space – were committed or recommitted to district energy service during 2008. The figure reported for 2008 brings the 19-year total to 468 million square feet (4347 hectares) of customer space added or renewed. Significantly, 50% of this growth occurred between 1990 and 2002 (first 13 years), and the remaining 50% occurred between 2003 and 2008 (the last six years). These data demonstrate the rate of customer growth in existing district energy systems has accelerated in recent years.

Some 45% of the square footage added or renewed in 2008 represents commercial office space. We should expect to see this trend of growth and renewal in existing downtown systems to continue, as the dual pressures of the need for optimized economics and greater environmental responsibility encourage businesses to explore all of the alternatives that can help them achieve their objectives.


The second trend is related to the first trend of customer growth. As businesses increasingly pursue the US Environmental Protection Agency’s Energy Star certification and the US Green Building Council’s LEED certification, building owners are finding the inclusion of district energy can facilitate the certification process.

An example of this is seen in Philadelphia’s Comcast Center, which opened its doors in June 2008 as the tallest sustainable building in the country, designed for LEED certification by the US Green Building Council. The principals in charge of the project researched multiple energy sources, considering many different options and evaluating them on a variety of criteria, from utility flexibility to sustainability to construction and maintenance cost. District energy was ultimately determined to be the best long-term solution when all factors were considered.

Steam from the district energy system in Philadelphia is used by the Comcast Center for cooling as part of a hybrid chilled water plant. In addition, steam from district energy is also used to heat building common areas and to preheat all office ventilation air. By using steam in these systems, the winter peak electrical demand is effectively eliminated.

In general, building design is simpler and easier once district energy is part of the equation. Thermal energy is delivered to the buildings via heat exchangers, which eliminates the need for boilers, furnaces, hot water heaters, chillers, air-conditioning units and all such equipment inside a building, along with stacks, evaporative condensers and cooling towers outside a building.

District energy system developers install the necessary pipes, heat exchangers and associated controls and energy meters to interface with the buildings. This equipment, usually referred to as the Energy Transfer Station (ETS), is located inside the customers’ buildings. The ETS is located in the basement or the ground floor, and usually requires only about 20% of the space of the equipment it displaces.


In recent years, private operators have purchased district energy systems from electric utility owners and these private operators have been able to invest their capital in system upgrades.

An example of this is seen in Grand Rapids, Michigan, where the downtown district energy was sold by Kent County in late 2008. Since the privatization of the district energy network, a systematic implementation process has begun to increase the efficiency of the operations. Scheduled upgrades, include

  • installing a cutting-edge condensing heat exchanger, a heat recovery technology that will:
    • reduce the volume of fuel consumed by at least 5%– lower the cost per kg of steam produced
    • reduce the system’s overall carbon footprint by the approximate equivalent of the emissions from 1000 cars
  • re-insulating piping in manholes to reduce heat loss and reducing distribution system leaks
  • replacing the old low pressure distribution system, which constitutes about one quarter of the total distribution system, with a high pressure system over the next three years

A second example of a major system upgrade is seen in Nashville, Tennessee. The project was financed entirely with municipal bonds. The city of Nashville retains ownership of the facility, but has hired an outside firm to operate and maintain the facility.

For decades, the Nashville district energy system relied on an old plant that consumed trash as its fuel. After evaluating all of the alternatives, the city of Nashville opted to build a new $46 million district energy system, which began operation in December 2003. The new facility reportedly saves on trash-disposal costs, and has lowered heating and cooling costs significantly for downtown customers.

System upgrades such as these can spur economic development by making the systems more sustainable, and also delivering low costs to customers in the process.


Another emerging trend is that of new systems being developed in major metropolitan areas.

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The city of Toronto, Ontario, Canada is actively working to become a global leader in sustainable development. As part of this mandate, Waterfront Toronto was created to oversee and lead waterfront revitalization, and the organization has elected to implement district energy to meet all heating and cooling demands of the new neighbourhoods developed. All new buildings in West Don Lands and East Bayfront will be required to rely on the district energy system. Although the district energy central plants will use natural gas, the systems are being designed for eventual conversion to alternative fuels once they are approved for urban use.

In Calgary, Alberta, Canada, construction is underway for the Calgary Downtown District Energy Centre, which is part of a multi-phase district energy project to provide heating for up to 10 million square feet of new and existing downtown buildings. The C$32 million (US$30 million) project is made possible with funding from the governments of Canada and Alberta and the city of Calgary.

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A visual map of how a standard district energy system works underneath a city Image: IDEA

While the two examples cited here are both in Canada, we should expect to see this model adopted by major US cities as well.


The city of Montpelier, Vermont and the state of Vermont have evaluated district energy for a number of years. In February 2009, the Montpelier City Council voted to issue a request for proposals (RFP) to solicit a partner for the development of a system. The drivers behind the RFP were the city’s desire to provide:

  • reliable and affordable heating for city buildings
  • an economic development tool for downtown Montpelier
  • security, economic and environmental benefits of increasing reliance of locally-harvested wood rather than fossil fuels


District energy and CHP systems have been adopted extensively by US university campuses, which are essentially mini-cities in a number of ways. Universities are prime candidates for district energy and CHP because:

  • having multiple building loads under common ownership enables load aggregation
  • the close proximity of buildings ensures that connecting buildings with pipes is not prohibitively expensive
  • high occupancy levels create high load factors for amortization of the investment in the systems

Increasingly, university campuses are installing district energy and CHP systems in response to campus load growth, replacement of old boilers, and because of the financial benefits of fuel efficiency.


Hospitals are fertile ground for adoption of district energy and CHP too. In general, hospitals are good targets for green design because:

  • they require large quantities of water, fresh air and energy
  • they constantly use fresh air to reduce infection and prevent the transfer of germs
  • air must be cooled or heated and dehumidified
  • they operate under very strict regulatory requirements

The requirements above are a great fit for district energy, along with the very high reliability requirements, which are typically associated with district energy – in excess of 99.99% reliable.

In addition, according to the US Green Building Council: ‘Every dollar saved on energy is equivalent to generating $20 in new revenues for a hospital and $10 for a medical office building’. These data underscore the business case for district energy in healthcare.

Federal and Local Legislation and Incentives

The final trend we should see is greater emphasis on district energy and CHP in the form of new laws, regulations and incentives.

The most notable recent example of an incentive is the $156 million in grants for district energy and CHP that was included in the American Recovery & Reinvestment Act of 2009. When the solicitation for projects closed in July 2009, the Department of Energy had received 359 proposals with the federal share of funding requested at $3.4 billion. This deluge of project funding requests represents a need to grant ratio of 25:1 and will shine a brighter spotlight for politicians on the efficiency, fuel flexibility, emission reduction, and high reliability benefits that district energy and CHP can deliver.

Furthermore, Senate Bill S.1621 – Thermal Energy Efficiency Act – submitted by Senator Bernie Sanders (VT) and Senator Jeff Merkley (OR) potentially provides up to $1.5 billion per year for the design and development of district energy systems.

What’s next

District energy is a mature industry, but it is currently at the beginning of a renaissance because of widespread concerns about both energy efficiency and environmental sustainability. The desire to address climate change by limiting greenhouse gas emissions should lead to the proliferation of district energy, especially where systems are powered by CHP plants that can achieve thermal efficiency of up to 90%.

New systems and existing system upgrades will be implemented in major cities that wish to become leaders in sustainable development. Smaller cities will also implement district energy in order to take advantage of local renewable fuel resources (e.g. biomass). Commercial office buildings have already recognized the benefits, as have university campuses, so we should expect to see the steady rate of adoption by these sectors continue. Hospital campuses will also follow suit.

Finally, we will see the removal of barriers and the creation of incentives from federal, state and local governments. District energy is a proven technology that works and produces results today, and the recognition of these factors will inevitably lead to increased adoption across the country.


Rowan Sanders is director of marketing and communications at Veolia Energy North America, Boston, MA, US.
e-mail: rsanders@veoliaenergyna.com.