Does District Energy Work, and Can My Business Use It?

by | Jul 8, 2013

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According to a report recently released by the International Energy Agency, the world’s energy-related carbon dioxide emissions rose 1.4% in 2012, to a record high of 31.6 billion tons.  Furthermore, the agency reported that the energy sector accounts for about two-thirds of global emissions of CO2 and other greenhouse gases.

Obviously, for any business with an expressed concern over climate change, energy consumption can be a big piece of the puzzle.  Moreover, in an age where energy security is an increasing concern, and cheap sources of energy are getting harder to come by, business are looking harder for any edge they can get in reducing their energy consumption, and by extension, costs.

Of course, the cheapest and cleanest energy is always the energy you don’t use.  Given a choice between decreasing energy consumption through increased efficiency, or sourcing cleaner energy, energy efficiency projects are almost always the way to go.  Examples include T5/T8 lighting retrofits, higher grade insulation, building resealing, more efficient windows, building automation systems (BAS) for heating and cooling, tankless water heaters, and much more.  These can yield major reductions in a building’s GHG emissions, as well as reductions in energy costs.  And, if energy prices rise, the ROI on such projects becomes more attractive.

The other side of the equation is the sourcing of energy.  Companies with mandates to use more clean energy need to pay closer attention to where their energy is ultimately coming from.  Furthermore, if the business is planning to purchase carbon offsets, in order to achieve carbon neutrality, the choice of energy sources takes on an added financial dimension.

Traditionally, companies have addressed this by installing onsite renewable energy technology, such as rooftop solar arrays or wind turbines.  Another option has been the purchase of renewable energy credits, whereby the company pays a renewable energy provider to dump electricity from renewable sources back on to the grid equal to the amount the company is drawing.  Still others relocate to regions where the energy mix is trending towards more renewable sources, such as California or Ontario, or to regions where the GHG emissions from energy sources have historically been low, such as Quebec.

However, in recent years, a niche market has developed for a new approach to power generation and distribution: district energy.  A number of municipalities and local energy providers are discovering that by using existing physical conditions, such as the proximity of large buildings and their proximity to natural heating and cooling sources, they can supplement and even replace traditional HVAC technology.

The principal behind district energy is relatively simple.  Rather than ship natural gas, the prevailing means of space heating in Canada, to each building, where it is then combusted, heat is produced offsite at a central location.  It is then circulated to surrounding buildings via pipes in the form of hot air or steam.  In a similar way, chilled water can be drawn in from a local source, and circulated through surrounding buildings, providing a cooling effect to the space inside.

So, how can this technology help your business?  First, let’s consider district heating.  The principal advantage of using district heating is that the heat or steam can be produced using whichever fuel is most available and cost-effective at the time.  A properly designed and operated plant will be able to switch among them.  This is a contrast to on-site combustion, where the only option for replicating this effect would be to stockpile multiple fuel types and combustion technologies on the premises, at high up-front, storage, and maintenance costs.  Furthermore, a facility using district heating no longer has to maintain heating equipment such as furnaces or boilers, nor deal with the noise and safety concerns such units incur, according to Enwave Energy Corporation. If the particular district energy plant is fortunate enough to be located near a geothermal heat source, participating businesses can also forgo the expense of extracting and transporting the fuels required to produce the heat/steam.

District cooling technology operates a little differently in that it relies on natural heat sinks to provide space cooling. Currently, Enwave’s Deep Lake Water Cooling (DLWC) in downtown Toronto is the world’s largest lake-source cooling system. By using pipes extending deep into Lake Ontario, water from the bottom of the lake, which is always cold, is drawn in to an energy transfer station. Heat exchangers allow for this cold water to absorb heat from the permanent chilled water loop that runs in pipes through all the buildings connected to this network. It is this now-colder water in the closed loop that goes on to the buildings, absorbing excess heat, while the lake water continues on to the city’s water distribution system.  This approach allows the same water to harnessed for two purposes: replacement of conventional cooling systems (mainly powered by electricity), and potable water.  Like district heating, projects such as this one can decrease the risk to commercial consumers associated with the price volatility of the energy market, as well as eliminate many of the costs associated with on-site cooling equipment.

But do these technologies deliver the environmental benefits, as well as the cost incentives?  Since Fall 2011, e3 Solutions has completed four GHG reports against the Canadian Standards Association’s CleanStart Registry protocol, under the guidelines of ISO 14064-1.  All four have been verified by a third-party, and are available at  All are commercial spaces.  Two use conventional HVAC; one uses district heating to supplement conventional heating; and one uses district energy, exclusively.

Taking into account changes in calculation methodology, such as emission factors, the total GHG emissions, normalized by area (kg CO2e/sq.ft.), showed that the building running exclusively on district heating had the lowest GHG emissions.  However, one of the buildings running on conventional HVAC did noticeable outperform the building using imported steam to supplement conventional natural gas.

An analysis of the effects of district cooling on GHG emissions yields even more curious results.  The same building that runs exclusively on district heating also had the lowest combined emissions from electricity, chilled water, and refrigerant leaks.  However, the other building running exclusively on district cooling, in fact, had the highest.

These four buildings cannot form the basis for a comprehensive study, by themselves.  Furthermore, emissions from electricity represent many activities besides space cooling.  As such, the high performance of the All District Cooling B building may be just as easily attributable to other energy efficiency projects, such as a lighting retrofit.  Also bear in mind that the emissions per kWh of electricity in Ontario, where all these buildings are located, are quite low compared with many other jurisdictions.  As such, the benefits of switching to district cooling may not be as substantial.

To properly assess the achieved value of using district energy, it would be advisable to establish what the GHG emissions for the two buildings using district energy were when they were still using conventional HVAC.

Coming back to the original question, “Does district energy work, and can I use it?”  The second part of this question is easier to answer.  Your building can use district energy if it is available.  District energy facilities and the required infrastructure (pipes) can’t be located just anywhere.  In order for district energy projects to be effective, they must be located in high-density areas, meaning urban centers with many large square-footage buildings in close proximity to each other.  Otherwise, you end up with a lot of extra piping between buildings, and energy loss begins to take its toll.  In the case of projects such as deep-lake cooling, a large body of cold water or other natural cold source is required to make the project cost effective.

Most importantly, the projects typically require the support of the local municipal authority and of the business community (landlords).  Without buy-in from a large number of buildings in close proximity to one another, such projects are just not worthwhile from the energy provider’s perspective.

Does it work?  As seen in the previous examples, district energy can be a helpful tool in a business’s drive to lower GHG emissions and reduce energy consumption, but this effect can be eroded by many other factors.  Here are some questions to consider if you are thinking about making a switch to district energy.

  • What are your energy costs and GHG emissions due to heating and cooling now (for help in calculating GHG emissions, see this video)?  How much energy could you potentially save?
  • Is district energy available in your area?  How do the rates compare with conventional energy suppliers?  If district energy is not available in your area, would the cost of relocating to take advantage of this technology outweigh the benefits and savings?
  • What maintenance, servicing, and other operating costs do you pay on your current HVAC equipment?
  • Is your company purchasing offsets to achieve carbon neutrality, as part of its environmental sustainability strategy?  This is an important question, since it affects the cost-benefit analysis of all GHG reduction projects.
  • Are there lower-cost, faster-payback projects you could undertake to lower energy consumption?  Remember, the cleanest energy is the energy you don’t use.

If district energy is available for your business, the vendor will likely want as many people to know about it as possible.  Not only is this good PR, but more customers helps spread the costs of initial infrastructure setup and ongoing maintenance.  Therefore, you should have no difficult in quickly determining if district energy is an option.

If there is no existing service, but you believe your building’s locale is a good candidate for it (proximity to water, high urban density), influencing the decision to invest in district energy is possible, but there are several steps involved.  A potential energy provider will want to conduct a feasibility study that will examine not only the physical aspects of such a project, but the potential ROI, as well.  Any government authority involved in the decision-making process will want to see the results of this study, or they may choose to conduct their own.  Unfortunately, district energy is not something that can be mounted independently by businesses, since it involves laying infrastructure through public areas, and integration with public systems (ex. water treatment).  And of course, the potential customers would need to see the value of district energy, before agreeing to participate.

The order in which these steps are undertaken can vary, depending on the local situation.  In addition, vendors, governments, and businesses may be waiting on each other to make the first move.  Therefore, if you are lobbying for the development of district energy, it is advisable to approach elements of all three, possibly by using existing business connections with these parties.

Modern district energy is still an emerging technology, at this stage.  In time, improvements such as reduced transmission loss, may allow for increased use by businesses.  For buildings currently using district energy, continual tracking of energy consumption, costs, and associated GHG emissions is critical, so that the business community can properly assess its value, both financial and environmental.

J.P. Brown is a sustainability analyst with e3 Solutions, a Toronto-based environmental software company.  He also sits on Seneca College’s Environmental Committee, and assisted in the preparation of its Sustainability 2020 whitepaper.

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