Fact Sheet | What is District Energy?

District energy systems are a highly efficient way to heat and cool many buildings in a given locale from a central plant. They use a network of underground pipes to pump steam, hot water, and/or chilled water to multiple buildings in an area such as a downtown district, college or hospital campus, airport, or military base. Providing heating and cooling from a central plant requires less fuel and displaces the need to install separate space heating and cooling and hot water systems in each building.

The sources of thermal energy distributed by district energy systems vary. Often, district energy systems are connected to combined heat and power (CHP) plants. Also known as cogeneration plants, CHP plants generate electric power in addition to heating and cooling, and can achieve energy efficiencies above 80 percent. (This is far more efficient than a conventional power-only plant, which exhausts two-thirds of the energy content of its fuel as heat into oceans, rivers, and/or the atmosphere.)

Other sources of thermal energy include “waste” heat from industrial processes, coal- or gas-fired boilers, and renewable energy such as geothermal, hydrothermal, solar thermal, biogas, municipal solid waste, or other types of biomass.

District energy systems that were built on college campuses and in central cities many decades ago were usually powered by fossil fuels. The majority of district energy systems being built today run on natural gas, but many take advantage of locally-produced renewable fuels.

According to the International District Energy Association, there are more than 700 district energy systems in the United States (including at least one system in every state), some of which date back to the 1800s. But there are many more locations where district energy would be appropriate and hundreds of district energy systems with expansion potential.

District energy helps communities reduce their operating costs and keep more energy dollars local by reducing their need to import fuel for heating and cooling. Environmental impacts from heating and cooling are significantly reduced because of the greatly improved efficiency of these systems and developing district energy/CHP systems can help ease the transition of the power sector as older, polluting coal plants are shut down and removed from the grid. District cooling can cut peak electrical demand that typically occurs in the late afternoon – reducing strain on the grid and avoiding expensive peak power costs.

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. Yet federal energy policy has focused primarily on electricity and transportation fuels, largely excluding the important role of thermal energy.

Constructing a new district energy system is a major infrastructure project, involving connecting all of the buildings in a district to the central plant through underground pipes. Even though the long term energy savings and environmental benefits are significant – and the project would generate many good paying jobs – the high upfront costs can discourage developers. Connecting CHP systems to the power grid can also be problematic. The federal government can play an important role in encouraging investment in district energy/CHP systems through various financing and regulatory mechanisms.

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