Latest developments with district energy in cities

The clank of boilers is a telltale winter soundtrack in many older cities in more temperate zones, where many buildings tend to have their own own heating and cooling system. But in downtowns and dense neighborhoods, smart decisions made decades ago and current retrofitting strategies are generating warm and cool air in a central location, then piping this to a connected network of buildings.

District energy 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.  It also addresses one of the toughest nuts to crack:  half of the world’s energy is either used as heat by industry to make the products of modern life or used to heat buildings, according to the International Energy Agency. And three-quarters of that building heat is supplied by fossil fuels or other nonrenewable sources.

In 2013, in an investigation of low carbon cities worldwide, district energy systems emerged as a best practice approach for providing a local, affordable and low-carbon energy supply. District energy represents a significant opportunity for cities to move towards climate-resilient, resource-efficient and low-carbon pathways.

Port Louis, Mauritius, is developing the first seawater-based district cooling system in Africa. China and Eastern Europe historically have high shares of district heating and now are working to modernize old systems to boost efficiency.  Paris developed Europe’s first and largest district cooling network, part of which uses the Seine River for cooling. The Paris Urban Heating Company serves the equivalent of 500,000 households, including 50% of all social housing as well as all hospitals and 50% of public buildings, such as the Louvre Museum. The district heating network aims to use 60% renewable or recovered energy by 2020.

Even legacy networks in the United States and Europe are now transitioning to renewable energy sources at the district scale. And Dubai is on track to meet 40 percent of its cooling needs with a district approach by 2030 — saving half on the standard energy consumption for air conditioning, the Gulf city’s major energy hog.

This economy-of-scale approach saves energy and cost. After all, one large heating and cooling system is typically cheaper than hundreds of smaller individual ones.  District energy systems can contribute to the transition to a green economy through cost savings from avoided or deferred investment in power generation infrastructure and peak capacity; wealth creation through reduced fossil fuel expenditure and generation of local tax revenue; and employment from jobs created in system design, construction, equipment manufacturing, and operation and maintenance.  St. Paul, USA, uses district energy fuelled by municipal wood waste to displace 275,000 tons of coal annually and to keep US$12 million in energy expenses circulating in the local economy. In Toronto, Canada, the extraction of lake water for district cooling reduces electricity use for cooling by 90 per cent, and the city earned US$89 million from selling a 43 per cent share in its district energy systems, which it could use to fund other sustainable infrastructure development. Oslo, Norway’s, employment benefits from district energy are estimated at 1,375 full-time jobs.

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. 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.

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.

The United Nations Environment Programme (UNEP) has been studying several models for implementing district energy systems.  “Sustainable energy for cities could mean that socio-economic and environmental burdens such as blackouts, resource price shocks, energy poverty and air pollution are confined to the past,” the report states. “Huge opportunities to lift these burdens exist in cities’ heating and cooling sectors, which can account for up to half of cities’ energy consumption.”  With a plethora of mixed public and public-private models, the UNEP report offers options for nearly every regulatory situation in which a municipal government or utility might find itself.

In Europe there are 4,500 district heating systems and 100 million people receiving heat or air conditioning.  In Helsinki, Finland, district heating feeds 90% of buildings.  District heating systems are the means to use the energy produced by the industrial process and to use the renewable energy that would otherwise be wasted.

The development of modern district energy is one of the least-cost and most efficient solutions in reducing emissions and primary energy demand in cities. Local governments have a key role to play in this transformation. The Global District Energy in Cities Initiative provides capacity building and technical assistance to local governments and their partners to develop enabling policies, address barriers, unlock investment and scale-up modern district energy in cities. This initiative includes both district heating and district cooling systems.

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.

The illustration below shows a typical urban district-cooling-and-heating installation. Chilled-water supply and return piping is in blue, while heating (steam and condensate or hot-water supply and return) piping is in red. Typically, these pipes are installed under streets or sidewalks.

Rajikot, India

Rajikot, a model Urban-LEDS city in India, committed to become the first pilot city of the Global District Energy in Cities Initiative in April 2015. Rajkot’s Municipal Commissioner Mr. Vijay Nehra: “Rajkot is delighted to be the first pilot city in India to partner with UNEP and ICLEI for implementing District Energy Systems. We are hopeful that our experience in implementing the Urban-LEDS project together with ICLEI will help us apply the District Energy Systems pilot project.” The Commissioner referred to the importance of the creation of such community of practice and peer-learning between cities to contribute to advance district energy systems, while simultaneously highlighted the need to consider the local circumstances to ensure the solutions implemented adequately address local needs. Technical visits have already started. Rapid assessment of feasibility of district cooling are being carried namely in public buildings and along a Transit Oriented Development

Tokyo, Japan

The Tokyo Metropolitan Government introduced its District Energy Planning System for Effective Utilization in 2009, based on the principle that district-wide energy planning and energy consideration in the early stages of planning are necessary to further promote the design of energy efficient buildings and to introduce renewable energy. New developments above 50,000 m2 of floor area are required to provide an Energy Plan for Effective Utilization in order to obtain a building permit. The Plan submission requires studying the introduction of unused energy, renewable energy, and district heating and cooling. For buildings that exceed 10,000 m2 or residential developments that exceed 20,000 m2 in total floor area, developers also are required to provide an economic and technical assessment of district energy and consultation with district energy supplier.

Helsinki, Finland

In Helsinki, nearly all the heating and cooling needs are supplied via district networks, and its energy utility has been distinguished with awards due to its high level of innovation and efficiency: “Helsingin Energia’s DHC smart city- solution combines CHP, district heating and district cooling in the most energy-efficient way in the world” (IDEA, 2015). A few examples: the system has tri-generation capacity, its CHP plants run up to 93% efficiency, heat is captured from district cooling return water for zero-waste, and a heat pump captures 165,000 GWh of heat from the city’s wastewater – making it the largest heat pump station in the world. The utility has set targets to increase cooling capacity of over 200 MW by 2015 and expand cooling to new residential areas by 2020. This will contribute to achieve the target of City of Helsinki to reach 20% share of renewables in energy production in 2020 (up from 7% in 2013).

Vancouver, Canada

Vancouver is making progress in its plans to create centralized heat delivery systems, the Vancouver Sun reports.  As part of the city’s goal to reduce greenhouse gas emissions by 120,000 ton per year by 2020, officials want to adapt the existing steam heat plants at Vancouver General Hospital and Shaughnessy Hospital (as opposed to building new district heat systems) to support residential development on the densely populated Broadway and Cambie corridors.

Vancouver, like many urban areas, has many high rises.  While it is true that high-rises, when combined in large numbers, create GHG-efficient districts, the buildings themselves are not as efficient as mid-rise buildings. While it is possible to build a very energy-efficient high-rise and indeed possible to build one that even produces energy, that type of building is not the norm in our city. High-rise buildings are subject to the effects of too much sun and too much wind on their all-glass skins. And all-glass skins are, despite many improvements to the technology, inherently inefficient. Glass is simply not very good at keeping excessive heat out, or desirable heat in. Our high-rises, according to BC Hydro data, use almost twice as much energy per square metre as mid-rise structures.

To increase energy efficiency and livability, Vancouver aims to gently infill all existing residential streets, build tens of thousands of primarily mid-rise wood frame mixed use commercial/residential buildings on arterial streets, and expand the city’s district heating system. Every street in the city has sewer pipes that waste a staggering amount of heat.

The City of Vancouver, for the 2010 Winter Olympics, developed a publicly owned district heating utility that captures waste heat from sewage. The financial structuring of the project proved the commercial viability of district heating in Vancouver and has encouraged private sector development of district heating elsewhere in the city. The system became fully operational in 2010, only five years after the first feasibility study. The City of Vancouver controlled 17% of the initial system load and, as part of a neighborhood wide development plan, was able to implement a service-area bylaw to ensure connection of the remaining loads.

The demonstration project at the Olympic village proved that it is technically possible to recapture heat. The problem is the cost of installing all those district heating pipes in existing streets.  That’s a lot of streets to dig up, and a lot of money to spend. If expanding this system at all is even possible, it would require an affordable, long-term plan but in some areas this was in process.  The City of North Vancouver already uses this strategy along Lonsdale Street, where new developments tap into and help finance the expansion of the Lonsdale Energy Corporation’s district heating system. Through this self-financing mechanism, a more extensive City of Vancouver system could eventually tie into new plants at Oakridge/41st and Marine Gateway. With this main spine in place, the system could follow the many east-west transit arterials to serve districts to the east and the west. Somewhere between 2050 and 2070, assuming a steady and incremental addition of new dwelling units along the city’s many arterials, a city-wide nearly zero-GHG heating system, one that is almost energy free to operate, would be in place.

Some 120 Canadian cities have direct energy systems. The city of North Vancouver, for example, has more than 1,000 residential customers, plus commercial and civic facilities, for its $8 million Lonsdale Energy Corporation system.  Also, Prince George, BC is investing $14.4 million in a biomass district system.

Paris, France

The City of Paris has extensive experience with district heating. In 1927, the city created a first concession to deliver steam for heating national and public buildings and thus reduce the city’s coal and wood use, and associated logistics, and minimize fire risk and improve air quality. Today, the network continues to flourish using the underground tunnels that already serve the Paris metro system. The network provides cheap, safe and reliable heating to all of the city’s hospitals, half of all social housing units, and half of all public buildings equivalent of 500,000 households. Heat is produced at eight facilities – including two cogeneration facilities and three waste-to-energy plants. Currently Paris is working to increase the renewable energy share with biomass, geothermal and heat recovery from sewers.

United States

US District Energy Systems Map by StateDistrict energy can be found in nearly every state,, though the roadblocks are widespread.  These include utility barriers such as a dearth of shared standards for interconnection and a low return on the sale of excess electricity to the grid. Additionally, initial capital costs are high and federal and state financing programs and incentives are lacking. The report says there’s also a general lack of awareness as to the energy-saving and economic benefits of district energy and CHP.

One case in Cleveland involves Ohio’s Medical Center Company (MCCo), a nonprofit district energy provider. MCCo uses coal and natural gas to generate steam heat and chilled water for nine member organizations, including Case Western Reserve University and Case Medical Center. In 2010, it decided to become coal-free. In the coming years the nonprofit will add a CHP system to its existing central steam plant. It expects the cogeneration system will increase fuel efficiency to about 70 percent, cut energy use about 28 percent and reduce carbon emissions 49 percent. However, policy and financial obstacles — it needs to finance a $100 million CHP facility without affecting member institutions’ balance sheets — hinder MCCo’s progress toward adopting CHP. State-level incentives aren’t relevant to tax-exempt nonprofits like MCCo, and its electricity provider, Cleveland Public Power, does not offer any rebates.

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.

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.

In the United States, master-plan studies incorporating district energy and energy independence have been conducted for several areas, including the State of New York; Washington, D.C.; and Loudon County, Va. Additionally, a district heating system serving state and city government buildings and portions of the downtown is being developed in Montpelier, Vt.

Reaping the Benefits of District Energy Systems


District energy allows for a transition away from fossil fuel use and can result in a 30–50 per cent reduction in primary energy consumption. Denmark has seen a 20 per cent reduction in national CO2 emissions since 1990 due to district heating, and many cities are turning to district energy as key components of climate action plans. District energy is a core strategy in putting Paris on the pathway to a 75 per cent reduction in CO2 emissions by 2050; the city’s waste-to-energy plants alone avoid the emission of 800,000 tons of CO2 annually. In Copenhagen, recycling waste heat results in 655,000 tons of CO2 emission reductions while also displacing 1.4 million barrels of oil annually. And Tokyo, Japan’s, district heating and cooling systems use 44 per cent less primary energy and emit 50 per cent less CO2 compared to individual heating and cooling systems.


By reducing fossil fuel use, district energy systems can lead to reductions in indoor and outdoor air pollution and the associated health impacts. In Gothenburg, Sweden, district heating production doubled between 1973 and 2010, while CO2 emissions fell by half and the city’s nitrogen oxide (NOx) and sulphur dioxide (SO2) emissions declined even more sharply. As the share of oil used in Sweden’s district heating networks dropped from 90 per cent in 1980 to less than 10 per cent in 2014, the country’s carbon intensity similarly declined. In China, the city of Anshan will reduce its use of heavily polluting coal by a projected 1.2 million tons annually through the pooling of separate networks and the capture of 1 gigawatt of waste heat from a steel plant in the city.


Linking the heat and electricity sectors through district energy infrastructure and utilizing low-grade energy sources, such as waste heat or free cooling, can greatly improve the operational efficiency of new or existing buildings. All buildings require basic efficiency measures; however, as the efficiency in a building improves, connecting to a district energy system can be more costeffective than a full retrofit, as Frankfurt, Germany, discovered when evaluating its 12,000 buildings with historic façades. Experience in Rotterdam, the Netherlands, has similarly shown that above a certain threshold for energy efficiency labelling, district energy is more cost-effective than retrofits. Helsinki’s CHP plants often operate at very high levels of primary energy efficiency, utilizing up to 93 per cent of the energy in their fuel source to produce electricity and heat. In Japan, the high efficiencies of CHP plants make it possible to reduce imports of natural gas relative to business as usual. And in many cities – such as Dubai in the United Arab Emirates – district cooling can result in 50 per cent reductions in electricity use compared to other forms of cooling.


Through economies of scale and the use of thermal storage, district energy systems are one of the most effective means for integrating renewable energy sources into the heating and cooling sectors. District energy also enables higher shares of renewable power production through balancing. Several countries with high shares of wind and solar power – such as China, Denmark and Germany – have begun using district heat systems to utilize excess renewable electricity during periods of oversupply. In China’s Inner Mongolia region, the city of Hohhot is piloting the use of curtailed wind to provide district heating in order to meet rising heat demand. In Germany, a key reason that the national Energiewende (“Energy Transition”) policy promotes CHP is because it allows for the integration of higher levels of solar photovoltaics into the electricity grid.


District energy systems can boost resilience and energy access through their ability to improve the management of electricity demand, reduce the risk of brownouts and adapt to pressures such as fuel price shocks (for example, through cost-effective decarbonization, centralized fuel-switching and affordable energy services). In Kuwait City, where air conditioning accounts for 70 per cent of peak power demand and for more than half of annual energy consumption, district cooling could reduce peak demand by 46 per cent and annual electricity consumption by 44 per cent compared to conventional air-cooled systems. Botosani, Romania, was able to reconnect 21 large-scale district heating consumers by modernizing its district energy infrastructure to provide more affordable heat. And Yerevan, Armenia, was able to provide heat below the price of residential gas boilers by opting for gas-fired CHP instead of gas boilers for its district heating network.


District energy systems can contribute to the transition to a green economy through cost savings from avoided or deferred investment in power generation infrastructure and peak capacity; wealth creation through reduced fossil fuel expenditure and generation of local tax revenue; and employment from jobs created in system design, construction, equipment manufacturing, and operation and maintenance. In Bergen, Norway, electricity companies supported district heating because it reduced reinforcement costs and provided additional revenues. St. Paul, USA, uses district energy fuelled by municipal wood waste to displace 275,000 tons of coal annually and to keep US$12 million in energy expenses circulating in the local economy. In Toronto, Canada, the extraction of lake water for district cooling reduces electricity use for cooling by 90 per cent, and the city earned US$89 million from selling a 43 per cent share in its district energy systems, which it could use to fund other sustainable infrastructure development. Oslo, Norway’s, employment benefits from district energy are estimated at 1,375 full-time jobs.


 Upcoming webinars

  • Solutions Package for District Cooling, May 2016
  • Solutions Package for District Heating, June 2016
  • Integrated land use and energy planning, July 2016
  • Development of district energy feasibility studies, August 2016
  • Development of a viable business plan and financial structuring of district energy projects, September 2016
  • Integration across levels of government to accelerate modern district energy, October 2016

If you are a city that wants to engage in the initiative contact Ana Marques at the Bonn Center for Local Climate Action and Reporting – carbon Center ( at the ICLEI World Secretariat :

IDEA Annual Conference 2016, St. Paul, Minnesota, USA, June 20-23, 2016
Local Renewables Conference, Freiburg, Germany and Basel, Switzerland, 26-28 October, 2016