Why is District Energy not more prevalent in the U.S.?

By Steve Tredinnick, PE, CEM and vice president of services at Syska Hennessy Group, who in HPAC Engineering explores why, despite its ability to improve energy efficiency and grid stability, and to enhance energy independence, district energy has not achieved the traction in the U.S.  that it has elsewhere in the world, most notably in Northern Europe. Tredinnick and Syska Hennessy Group are members of the International District Energy Association (IDEA).

Despite a long and impressive history—it originated with the ancient Romans and was advanced by Thomas Edison—district energy is underappreciated in the United States. It is growing—at present, there are approximately 2,500 systems operating in all 50 states—but not at the pace it is elsewhere. In the Middle East and across Europe and Scandinavia in particular, district energy is extremely popular. Why is it so much less so in the target-rich United States? This article offers an explanation and is intended to inspire discussion of and interest in district energy for the heating and cooling of buildings.

What is District Energy?
By definition, if a single energy source serves more than one building, it is a district energy system. A district energy system has three major components:
– A thermal-energy-generating plant.
– A distribution system (piping).
– Building interconnections (e.g., meters, valves, pumps), often referred to as energy-transfer stations.

Thermal energy typically is in the form of steam, hot water, and chilled water delivered at temperatures and pressures suitable for use by interconnected buildings’ heating and cooling systems. This energy can be generated using boilers and chillers or with more sophisticated, efficient, and sustainable means, such as combined heat and power (CHP), biomass, heat pumps, solar thermal energy, and geothermal energy.

Several district cooling systems serving urban environments (e.g., Atlantic City, N.J.; Chicago; Denver; Houston; Phoenix; Portland, Ore.; St. Paul, Minn.) were developed during the mid- to late 1990s, when chillers fairly commonly were located in high-rise penthouses and, consequently, were extremely expensive—and risky—to replace. Also giving rise to district cooling was the impending phaseout of chlorofluorocarbons per the Clean Air Act and The Montreal Protocol on Substances That Deplete the Ozone Layer, as many chillers were severely derated because of refrigerant retrofits and had to be replaced. Building owners and operators found connecting to a district chilled-water network an extremely attractive alternative because of its relative simplicity, capital-cost avoidance, and efficiency and capacity gains. In some cases, older buildings with older electric chiller plants were able to cut peak electrical demand by 50 percent or more and reclaim electrical-vault capacity for other uses.

Benefits of District Energy
Connecting to a district energy system yields quantitative and qualitative benefits related to:
– Building space. Space that otherwise would be dedicated to heating and cooling equipment in a connected building can be used to generate additional rental income. Additionally, aesthetics are improved, as unsightly air-cooled-condenser farms, cooling towers, boiler stacks, and the like are avoided.
– Operation and maintenance. District energy systems normally are staffed 24 hr a day by highly trained operators dedicated to equipment monitoring and maintenance. A typical building operations staff is somewhat less skilled and often preoccupied with tenant-related matters (e.g., responding to hot and cold calls).
– First and life-cycle costs. Compared with in-building heating and cooling plants, district energy solutions can save millions of dollars in up-front costs. What’s more, life-cycle costs are extremely competitive and often less with district energy than they would be with in-building heating and cooling. (For more, see Chapter 12, “District Heating and Cooling,” of 2012 ASHRAE Handbook—HVAC Systems and Equipment.)
– Energy and the environment. The site efficiency (usable energy out divided by energy in) of district energy incorporated with CHP is well over 75 percent. When fuel combustion and power transmission are taken into account, the overall efficiency of a typical electric utility power plant is less than 33 percent. But localized district energy does more than benefit a congested and inefficient electrical grid; it benefits the environment by emitting less pollution.

Despite its benefits, district energy does not make sense for every project; inadequate customer density or a lack of aggregated thermal loads may make it impractical. District energy is not a magic pill to solve our country’s energy needs, but another tool in our toolbox to promote energy efficiency, grid stability, and energy independence.

Where does District Energy Stand in the United States?
The success of district energy in the United States has been said to be one of the country’s best-kept secrets. That is because most of the generation and distribution components of systems are hidden from public view; many people simply are not aware of the presence of district energy systems in their hometown or on their campus.

Typically, district energy systems are found where load densities are high, reliability is prized, and/or payback requirements are not as stringent as elsewhere. Not surprisingly, in the United States, district energy systems are found serving college and university campuses, major airports, large health-care and corporate campuses, manufacturing facilities, resorts, downtown business districts, government and municipal building complexes, military installations, and the like.

Why District Energy is not more prevalent in the United States
Now, we get to the crux of the matter and again ask the question: With so much support and so many quantifiable benefits, why is district energy not being implemented everywhere in the United States?

First, despite life-cycle economics equivalent to those of self-generated heating and cooling plants, district energy systems have longer paybacks.
Second, most building owners do not know the actual costs of heating and cooling their buildings.
Third, despite a great deal of discussion in Congress, there is not a well-defined energy policy.

Longer paybacks. District energy systems are capital-intensive. Substantial investments are required in the initial stages of a project not only for energy-plant- and distribution-system construction, but business development, design, and contract negotiation. Most real-estate developers are looking for a quicker return on investment—frequently, two years or less—than a district energy system can provide. This is especially the case in commercial real estate, where more than five years of owning a facility is considered a very long time. Private industry tends to focus on short-term value generation and is not inclined to invest capital for long-duration assets.

Difficulty comparing values. There is a great lack of knowledge and understanding—and no shortage of misconceptions—regarding district energy. Unfortunately, discussions often are scuttled before they really get started. In this author’s experience, few building operators know the true cost of producing a unit of cooling or heating in their buildings because it is not easily discernible from the capital, maintenance, and operating expenses of their annual budgets. Often, the first question posed by a prospective end user is, “How much will it cost?” when the better question would be, “What is its value to me?” as value has quantitative and qualitative aspects.

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Source: IDEA