US: District Energy – an energy idea more municipal leaders need to consider

Date: 10 January 2014

Attorney Dave McGimpsey, Special Counsel with the law firm Lewis Roca Rothgerber LLP, writes in The National Law Review about the value of district energy as an infrastructural asset that provides high economic value to municipalities. The following is an extract from his article:

Municipal leaders, both first-termers and seasoned incumbents, are reviewing energy usage by and within their municipalities. The buck often starts and stops with using CFL light bulbs, installing LED traffic lights, and adding insulation. Here’s one idea that more municipal leaders need to consider.

It’s a new year. And in 2014, the mission for municipal leaders remains the same: to deliver services efficiently, to promote community investment, and to secure their respective community’s future. Energy opportunities offer a significant chance to accomplish many of these goals. To maximize their opportunities in the energy sector, municipal officials must solve problems creatively, build consensus among stakeholders, and provide bold leadership for their communities. One energy idea that municipal leaders need to consider is district energy.

What is District Energy? 

Locations of district energy systems in the U.S. (Graphic: International District Energy Association)–Click map for more information.

In a nutshell, district energy systems provide heat (through steam or hot water) or air conditioning (through chilled water) from a central plant to buildings connected on a loop system that transfers the thermal properties of the loop (either heat or cold) to those buildings. Common installations of district energy systems occur in downtowns, college or university campuses, hospitals and other developments or redevelopments with sufficient density or energy load to support the system.

District Energy Delivers Heating and Cooling Services Efficiently

A district energy system can greatly increase efficiency in the delivery of heating and/or cooling services to a downtown area. Paired with combined heat and power (CHP or co-generation) technologies, district energy can boost efficiencies into the 80 percent range – far above traditional power plants, which are closer to 30 percent in their efficiency.

District Energy Promotes Economic Development

Every municipal official is eager to attract investment to his or her community, especially when it comes to revitalizing downtown areas and supporting existing businesses. Being a magnet for investment helps the community maintain and strengthen its vitality. Infrastructure has long been a major concern that businesses consider when reviewing whether to expand or relocate their operations. With a well-operated district energy system, the municipality can ensure that this element of the infrastructure puzzle will not be a reason businesses decide to locate, or worse relocate, elsewhere.

Too often, municipal leaders do not grasp the connection between energy and municipalities. Andy Wales, Sustainable Development Officer for brewing giant SABMiller, asserted in a November 2011 interview that municipalities may not always be on the cutting edge of energy issues. Wales identified three main challenges to solving problems with the energy/water/food security nexus. Municipalities play a leading role in two of the three challenges. Wales stated that solutions “can only really be achieved if you get a number of different companies, owners and municipalities involved.”

To get involved and lay the foundation for a community’s vibrant energy future, municipal leaders need to understand the economic importance of energy issues. Municipal leaders seizing the district energy opportunity can capture these energy dollars. By building a central plant and related infrastructure – essentially establishing a thermal utility – the municipality can bring the initial investment to its own local economy and can market local energy control to prospective businesses. A recently announced transaction demonstrates the value of these thermal utilities – a downtown district energy system in Omaha, Nebraska, was sold debt-free for $120 million in cash.

Source: IDEA