District Energy: Essential Infrastructure for Energy-Efficient Communities

On September 23, 2011, the Environmental and Energy Study Institute (EESI) held a briefing on an under-appreciated yet essential part of many communities’ infrastructure: district energy. District energy systems distribute thermal energy (steam, hot water, and/or chilled water) through a network of underground pipes to multiple buildings in an area, such as a downtown district, college or hospital campus, airport, or military base. By aggregating the heating and air conditioning supply for multiple buildings, district energy systems optimize thermal energy efficiency. They also achieve economies of scale that allow for the use of low-carbon, cost-effective thermal energy sources – such as the “waste” heat from power plants or industrial processes, combined heat and power, geothermal energy, deep lake water, or municipal solid waste and other types of biomass – that may not be feasible for individual buildings. At this briefing, district energy experts provided an overview of the technology and discussed case studies where district energy reduced operating costs, created jobs, strengthened grid reliability, reduced emissions, and converted waste streams into useful thermal energy.

Although federal energy policy has tended to focus on electricity and transportation fuels, thermal energy is equally important. According to a May 2011 report by the International Energy Agency, heat represents 37 percent of final energy consumption in OECD countries and 47 percent globally. There are currently more than 700 district energy systems in the United States (including at least one system in every state), but there are many appropriate locations without district energy and hundreds more with expansion potential. As Congress debates policies and opportunities to invest in infrastructure that will provide multiple economic, security, and environmental benefits, district energy can be considered as an effective, strategic option.

• Over 740 district energy systems are operating in the United States in most major metropolitan areas and on many college campuses.
• District energy systems are often connected to combined heat and power (CHP) plants, which can be up to 80 percent efficient at converting fuel to useable energy. By comparison, conventional power plants are around 33 percent efficient at converting fuel into power; 2/3 of the fuel is wasted as heat vented through cooling towers or released into rivers, lakes, and oceans.
• In 1973, Denmark’s energy supply was 99 percent reliant on imported oil. In response to the oil crises of that decade, the nation invested heavily in district energy, CHP, and renewable energy – and transformed itself into a net energy exporter.
• The Thermal Energy Corporation (TECO) in Houston operates the district energy system for the Texas Medical Center, the largest medical center in the world. The TECO system was recently converted to unite a district energy system with CHP, increasing overall efficiency from 42 percent to 80 percent while saving a projected $200 million over 15 years. Due to increases in efficiency during its first year of operation, $9 million in collected costs were returned to the 18 not-for-profit health care institutions that are TECO’s customers.
• TECO produces 100 percent of its electrical requirements on site, reducing grid demand and ensuring reliable energy for the medical center even if the grid experiences brownouts or blackouts. This was particularly important over the summer when Texas experienced unprecedented heat and set numerous records for electricity demand.
• In 2005, Veolia Energy took over a Cambridge, Massachusetts, steam distribution network that was discharging its waste heat into the Charles River, damaging the aquatic ecosystem. Veolia Energy has started a project to integrate this steam into its district energy network that serves downtown Boston, resulting in zero heating discharge into the river.
• Massachusetts has an Alternative Energy Portfolio Standard that recognizes the value of thermal energy (in addition to electricity). Utilities are required to buy one percent of their load from CHP, but the supply of CHP-generated power is scarce and has not kept up with this relatively modest demand.
• Detroit’s district energy system provides up to 70 percent savings to businesses in avoided in-house boiler, labor and maintenance costs.
• Detroit’s district energy/CHP system uses municipal solid waste (MSW) as its fuel source, providing a waste and energy production solution. Each ton of processed MSW eliminates the need for a barrel of oil.
• Several presenters expressed their desire for a U.S. infrastructure bank to help attract private capital for district energy updates and expansions. District energy and CHP are attractive investing options because they are fixed assets and revenue streams.
• Another option that would stimulate development of district energy and CHP is a policy requiring a certain level of efficiency from power generation, similar to how the federal government requires fuel efficiency for vehicles.

Background

Although federal energy policy has tended to focus on electricity and transportation fuels, thermal energy is equally important. According to a May 2011 report by the International Energy Agency, heat represents 37 percent of final energy consumption in OECD countries and 47 percent globally. There are currently more than 700 district energy systems in the United States (including at least one system in every state), but there are many appropriate locations without district energy and hundreds more with expansion potential. As Congress debates policies and opportunities to invest in infrastructure that will provide multiple economic, security, and environmental benefits, district energy can be considered as an effective, strategic option.