The Role of District Energy/Combined Heat and Power in Energy and Climate Policy Solutions

District energy systems deliver heating and cooling services in the form of steam, hot water and chilled water through thermal piping networks to multiple buildings in urban centers, institutional campuses, military bases and, increasingly, in planned sustainable communities. By serving the aggregated thermal loads of an entire community, district energy systems achieve an economy of scale where it is feasible to utilize surplus heat and local or renewable resources such as biomass, landfill gas, geothermal, lake and ocean water for cooling, and others. District energy systems that integrate combined heat and power can operate at 75-80 percent fuel efficiency, compared to the conventional power plants at 30-34 percent. Around the world, over one billion square feet of building space has connected to district energy systems since 1990.

Click here for a video explaining district energy.

Map of district energy systems in the United States (2005):

Example of a district energy/CHP system:

On April 21, the Environmental and Energy Study Institute (EESI) held a briefing to discuss how district energy systems are able to utilize combined heat and power (CHP) as well as renewable and surplus heat resources and the enormous potential for such projects across the country. The International Energy Agency (IEA) recently cited district energy/CHP as a “key near term strategy for cutting carbon emissions.” This briefing explored how urban systems and university campuses are currently operating highly efficient district energy/CHP systems to control operating costs, enhance reliability and reduce community greenhouse gas emissions. The panel also discussed pending energy and climate legislation and its potential impact on the district energy/CHP industry, as well as existing policies intended to support development of district energy/CHP systems, including Sections 471 and 451 of the Energy Independence and Security Act of 2007 (EISA).

• Currently, 85 downtown utilities and 330 campuses in the United States use district energy to reduce costs and greenhouse gas emissions, increase efficiency, and improve reliability.
• District energy enables flexibility with regard to fuel source once the distribution system is in place, and provides opportunities to use local renewable resources such as biomass (e.g. oat hulls used at the University of Iowa), landfill gas (e.g. University of California Los Angeles), or lake-water cooling (e.g. Cornell University) for thermal energy.
• District energy can be used independently, as at the University of Texas at Austin, which has been off of the Texas electrical grid for 80 years. Alternatively, Princeton University uses district energy in conjunction with power purchased from the grid at low-cost, off-peak hours which it stores for use during peak demand so as to optimize economic efficiency. This also benefits the local grid by reducing peak demand.
• St. Paul’s district energy system has enabled the city to eliminate 150 smokestacks, reduce sulfur dioxide and particulate emissions by more than 60 percent, and reduce CO2 emissions by 280,000 tons per year.
• Two-thirds of the fuel used to produce power in conventional power plants is wasted and released as heat exhaust. Capturing this waste heat and utilizing it through a combined heat and power (CHP) system can improve this efficiency rate to 80 percent or higher.
• Any potential cap and trade system should be structured to avoid perverse incentives that would discourage CHP.
• District energy/CHP systems are capital-intensive and often require large initial investments, which will be recouped in subsequent years through lower energy costs. A variety of incentives were proposed to encourage CHP for publicly owned and private for-profit and non-profit institutions.