District heating and cooling/community energy systems (sometimes also called district energy or DE) are technologies designed to deliver hot or chilled water from a central thermal source (preferably heat pumps, which are among the most efficient sources of energy) through pipes to customers for space heating and cooling. DE systems (DESs) offer energy savings, end-user cost reduction, substantial reduction of greenhouse gases (GHG), improved air quality, reduction of electric peak, retention of dollars in the communities, improvement of balance of payments, increase of employment, economic development/revitalization, new business opportunities, and national security. DE is extensively used throughout Europe, where national policies promote its use (Denmark, for example, relies on DE for more than 60% of space heat conditioning requirements). DESs have the flexibility to:

  • Utilize local energy resources, such as sewer; ground soil; lakes; rivers; solar; biomass; and municipal, commercial, and industrial waste; and
  • Be a major component in the provision of energy services to the community optimized for efficient resource utilization.

Throughout the last several decades, various DESs have been constructed in New York under the sponsorship of NYSERDA. A number of these systems have been integrated with DE supply to communities. This paper presents analysis of successful and unsuccessful DESs.

Components of a DES

DE is the distribution of thermal energy in the form of hot and chilled water from a central source to multiple users (buildings) in the surrounding area. The thermal energy is distributed through an underground piping system to customers’ premises, where it is used to heat and cool the building. Existing heating sources (fossil fuel-fired boilers and electric resistant sources) in individual buildings are retired or retained temporarily for standby capability.

The central DE plant consists of the equipment required to produce and distribute hot water and can be comprised of large electric-driven heat pump units (efficiency up to 400%) combined with thermal storage. The systems could be supplemented with solar photovoltaics (PV) and thermal production.

Compatibility of existing buildings and their own heating and cooling systems to a DE supply is largely a function of the type of installed systems in each building. Buildings utilizing electric-resistant and steam heating deserve closer scrutiny to plan for conversion to low-temperature hot water-based DE. The potential savings achieved in a DES generally justify the cost to retrofit the existing building systems for utilization of hot water.

Energy Cost Reductions for Customers

Energy cost reduction of a DES  is achieved via several mechanisms. Cost reduction is realized directly through energy generation efficiency (like heat pumps), increased efficiencies, and reduced expenses associated with the operation, maintenance, and replacement of components of individual fossil fuel-based conventional systems. DESs exhibit higher thermal efficiencies, which correspond to more useful energy output per a given quantity of energy input. Reducing energy consumption while delivering the thermal requirements of customer buildings translates to energy cost savings — a primary objective when constructing a DES. Energy transfer from a DES to individual buildings is more efficient in that the consumer pays only for the thermal energy supplied by the DES. For individual conventional systems, a customer purchases a quantity of fossil fuel exceeding his actual needs by an amount measured by the inefficiency of his equipment. This means energy is wasted to produce useful thermal energy and at higher cost.

A higher energy efficiency is sustained by a central plant, matching the thermal load with an optimum combination of plant generation equipment. A DES is comprised of the requirements of many buildings that tend to flatten thermal peaks, leveling the load on the plant and achieving high generation efficiencies. A central plant consumes large quantities of energy at a single location. This bulk demand enables operators to purchase energy at a discount over individual customers, which contribute to the lower costs of DES.

The central plant can more easily adapt to alternate energy sources (like electric-driven heat pumps) than individual customers and, based on market prices for different energy, select a low-cost energy source.

Maintenance and Capital Cost Considerations

Apart from the direct cost of energy, a customer must cope with a variety of associated costs to properly operate and maintain their individual systems. With the removal of in-house heating and cooling generating plants, the buildings would no longer require maintenance and operations personnel or service contracts with outside service companies. Maintenance to the point of entry to the building would be the responsibility of the district system operator, and equipment within the building would exhibit simple design that is more easily maintained and repaired.

Because the cost of installing thermal generation equipment and facilities is buried within initial building expenses, the true price of providing in-house energy supply is usually not realized by building owners. When the building’s thermal generation system is replaced or extended, these costs become painfully apparent. Connection to a DES, when major replacement or a new installation is planned, will result in major capital investment savings.

Energy Conservations

The ability of a DES to reduce energy costs is directly related to its energy conservation potential. Energy conservation is achieved by improved energy utilization and the effective substitution with an alternate energy source. The higher efficiency of the central plant is demonstrated through a higher degree of operating flexibility and control. Centralization of load eliminates sharp spikes in demand of individual buildings. In the case of electric-driven heat pumps, this causes the heat pumps to flatten the grid’s electric peak and reduce investment in the transmission and distribution system.

Load leveling (referred to as load diversity) is a major characteristic of DESs and occurs when the needs of many buildings are interconnected to a single loop. This phenomenon permits the central plant to operate at reduced peaks and at longer sustained intervals, which contributes to enhanced energy utilization.

Proper dispatch of centralized plant equipment enables operation over a wide range of load without loss of performance. The DES monitors customer temperature requirements and can modulate send-out temperatures from the central plant to minimize energy loss and conserve energy. Another key advantage of DE technology is the use of alternate energy sources not readily adaptable to individual systems.

Economic Development

The technical aspects of DESs, which promote energy conservation and cost savings directly, impact the prosperity of the communities. Potential benefits are tied to community economic development and energy cost stabilization issues, which are of vital importance to the community future growth opportunities.

DESs suggest long-term planning, which can be linked to other directed programs for economic revitalization. While the objective of all approaches is to encourage positive economic activity, DESs promote incentives through reduced energy consumption and cost. DESs contribute by alleviating strained operating budgets of local development and spur new growth by attracting outside commercial and industrial interests. Implementation of a DES leads to long-term energy cost stability and is a major contributor in keeping jobs and revenues supporting self-sufficiency. DESs are community oriented with involvement from public and private entities elicited at different stages throughout project development.

The potential savings of enhanced energy utilization would provide an immediate positive cash flow for most customers. This concept applies to all segments of the community, including businesses, institutions, public and private housing, and government. Accumulated savings by individual properties are directly reinvested into the community to upgrade living spaces, provide better services to the tenants, and improve exterior appearance. The introduction of a DES would place a brake on escalating costs of operation and maintenance experienced by everyone in the community. Lower energy costs significantly contribute to retaining affordable housing.

Reduced energy costs also provide an incentive for investment on the part of the private sector and financial community. DESs offer varied and real opportunities for developers and investors to realize increased returns from their investments.

DESs imply the stabilization of future energy costs, which have a beneficial impact on community revitalization efforts. Since a central energy plant can adapt to a broader mix of low-temperature energy sources than individual systems, future supplies of energy are more assured at better prices. If customers are confident of predictable energy costs, they will be more inclined to stay or join the DE for the long term.

Construction of a DES has a ripple effect throughout the community, primarily in the form of lower energy costs. The construction of a system creates jobs for low and moderate skill workers. Operation and maintenance of the system provides job opportunities for technicians, administrators, and others. Ancillary services and byproduct businesses also provide job openings.

Environmental Improvement

The generation and operation of the DES also results in the improvement of environmental quality. Environmental issues pertain to the operation of central sources instead of distributed plants in individual customer buildings. Existing boilers and chillers used by individual customers cycle on and off, producing a loss in efficiency partially associated with the incomplete combustion of fuel. The more efficient and continuous operation of a DE heat pump-based plant results in elimination of hydrocarbon emissions that are characteristic of GHG release.

A DE plant is manned by trained personnel to achieve optimum performance, and, with the latest technology, can control pollution, enhancing the quality of the air and improving the desirability of the outside environment. Construction of a DES in a community causes replacement of numerous uncontrolled individual plants with no sources of emission. The attentive maintenance a DE plant receives produces a cleaner environment.

In summary, the DE system has many attractive characteristics:

  1. DE is energy efficient — DE plants have higher seasonal efficiencies than the individual building energy generating facilities.
  2. DE reduces the consumption of electricity and fossil fuels — A DES can use a wide variety of energy sources, which then substitute for the fossil fuels consumed by the building; individual plants; and individual heating and cooling units in residences, commercial buildings, and industrial facilities.
  3. DE is environmentally advantageous — With centralized, electric-driven heat pumps, the most efficient pollution control equipment and reduction of GHG is achieved.
  4. Community-level energy systems contribute to jobs and the economy — DE creates a demand for construction and manufacturing employment (many of the resulting jobs could go to people with low and moderate skills). DE also provides for retention of dollars in the community and increases the local tax base.

Analyzing DESs in New York

The major reasons for successful development of DESs in New York, including Jamestown, Buffalo, Schenectady, Chautauqua County, JFK Airport, and Jamestown Community College, include:

  • NYSERDA sponsorship and financial and technical support for initiating the feasibility assessment of the system economics, financing, and implementation;
  • Strong support from the city (persistent leadership of the mayor), economic development agencies, downtown development corporations, and departments of public works, and developers;
  • The overall cooperation and strong community support for the project enabling local officials to enthusiastically promote the system;
  • Efficient cooperation and support of local electric utility;
  • The technical expertise of the consulting engineer specialized in all stages of system development: feasibility assessment, use of cost-effective technology, aggressive marketing, system design, construction supervision, building retrofit, and financing support;
  • Integration of the high-efficiency technologies in development and renovation of the city downtown facilities;
  • Gradual, staged system development;
  • Use of cost-effective modern energy generation and energy distribution piping technology; and
  • Use of cost-effective modern building retrofit technology.

The major reasons for delay in development of DE systems were the following factors:

  • Lack of the city, economic development, private and public utility, or private developer organizations ready to assume the leadership and the responsibility for the development of the DES;
  • Change of the city administration;
  • Limited knowledge of modern cost-effective DE technology;
  • Lack of funding for implementation of the DES;
  • Barriers to DE implementation created by local utilities;
  • Lack of mature and reliable distributed generation technology;
  • Limited number of consulting engineers specialized in DE systems; and
  • Lack of comprehensive guidelines for developing site-specific DE projects.

Developed DES in Jamestown, and Schenectady, New York

The successful development of the Jamestown DES (Figure 1) was the result of the following factors:

  • Strong support from the city (persistent leadership of the mayor), the board of public utilities (BPU), and NYSERDA;
  • The technical expertise and well-orchestrated effort of the consulting engineer involved in all stages of system development: feasibility assessment, aggressive marketing, system design, construction supervision, building retrofit, and financing support;
  • The overall cooperation and strong community support for the project enabling local officials to enthusiastically promote the system, obtain financing, and meet an ambitious construction schedule;
  • Availability of a municipal owned power plant;
  • Gradual, staged system development;
  • Use of cost-effective modern piping technology; and
  • Use of cost-effective modern building retrofit technology.

Description of System Development

The Jamestown DE concept was a result of a preliminary feasibility study, financed by the NYSERDA and the BPU. Considering the positive findings, a comprehensive second-phase study was contracted to develop the necessary information for a final decision. The second-phase study included an engineering reference design as a basis for the financial analysis, a marketing program, a final design, the engineering bid and specifications, the basis for the financial instruments for project financing, and a project implementation plan. Based on the favorable results of the feasibility studies, the city of Jamestown committed to build a pilot DES and expand it to include selected buildings in the downtown core area during the following year. The Jamestown DES consists of three major components: the combined heat and power (CHP) plant, the medium-temperature transmission and distribution network, and the participating buildings or customers.

The 50-MW municipally owned Carlson Generating Station was selected as the central energy source for the Jamestown DES. The 25,000-kW Unit 6 was selected for CHP modification, considering its larger heat output and relative ease of retrofit to cogeneration.

The transmission and distribution network transports district hot water from the central plant to the customers and back (Figure 1). It is an underground, two-pipe, closed system with a maximum operating pressure of 232 psi and pumps sized for a total design discharge pressure of 140 psi.

FIGURE 1: A diagram of the Jamestown district energy system. Image courtesy of Joseph Technology Corp.

The piping is sized for the peak load supply and return temperatures of 250°F and 160°. The prefabricated conduit system consists of a thin-wall carbon-steel carrier pipe, polyurethane insulation, polyethylene casing, and a leak-detection system. The leak-detection system combines alarm and fault locator capabilities and is built into the conduit during manufacture to protect the system and facilitate service. The piping is installed in shallow trenches, requiring minimal excavation and no shoring. The conduits are set directly in the trenches on a sand bed. The system requires no manholes or expansion joints.

The building conversions to DE depended largely on the existing individual heating systems. Conversion of two-pipe steam heating systems to DE was the most prevalent building retrofit in the city of Jamestown. A plate-and-frame heat exchanger replaced the existing boiler as a heat source. Existing steam and condensate piping, wherever possible, was used to form a closed-water loop with the installation of circulating pumps, an expansion tank, and an air removal system. All steam traps were removed, and air vents were installed at system high points.

Conversion of gas-fired, hot-air-heating systems involve the installation of a new hot water heating coil in the return air duct along with an associated plate-type heat exchanger and closed-loop hot water circulating system. Existing hot water heating systems were the simplest and most cost-effective to retrofit. In most cases, it merely required the installation of a plate-type heat exchanger.

The conversion and interconnection of all DE customers was timely and economical.  This is mainly attributed to the extensive bid packages, which introduced, in detail, the various concepts of the conversion of individual heating systems to DE. Consulting engineers also furnished the necessary training and consultations to the installation contractors via the bid packages.

Parallel development of the three main system components, power plant, piping network, and building retrofits was necessitated by the inflexible schedule. Work had to be completed by the end of the summer for the system to be operable during the start of the heating season.

The system was developed in stages, spreading the capital expenditures in incremental investments over the development period, allowing the system to generate revenues to offset the capital investment. The system was developed in three phases, starting with a pilot system in the first phase, a core system in the second phase, and planned annual growth in the third phase (currently close to 80 customers).

The installation of the pilot system created a public awareness, which, coupled with the marketing activities, replaced the initial skepticism with enthusiasm for DE and its benefits. The marketing aspects of DE development in the city of Jamestown involved the combined efforts from the mayor's office, the BPU, other city officials, and the consulting engineer. A marketing campaign through newspapers/magazines, radio, and television was used to establish a public consciousness and acceptance, offering evidence through the operation of the pilot system.  Brochures were prepared to complement this effort. The marketing venture targeted a diverse customer base, including school, church, hotel, hospital, retail, office, residential, and industrial customers. An ad hoc committee consisting of representatives from major customers and contractors, manufacturers' associations, the department of economic development, the department of industrial development, and the department of public works was formed under the sponsorship of the mayor's office and the BPU to develop a complete community awareness and involvement.

As part of this coordinated effort, the consulting engineer examined prospective customers and presented them with economic packages indicating conventional heating costs, DE costs, and anticipated savings. The benefits and advantages of DE were reiterated. Once a potential customer expressed interest in participating in DE, the consulting engineer was responsible for the conversion of the heating system to DE.

The municipal ownership alternative was selected based on the minimal impact by regulatory constraints. The city of Jamestown presented a distinct advantage over most other localities, which have instituted DE systems, because it already operates a municipal electric plant. This electric utility is experienced in dealing with the regulatory environment and attuned to the city's needs and procedures. The existing structure of the Jamestown BPU presented a unique opportunity for the city to institute a DH system, which is fully responsive to the interest of the city with only limited additional procedural, administrative, and managerial costs. The Jamestown BPU has existing authority to use public rights-of-way. Other important factors in the selection of municipal ownership include the federal and state tax-exempt status and the customer acceptance and trust of municipalities over profit-oriented, private entities.

The positive economic analysis results served as the cornerstone for the development of the Jamestown System. The analysis employed the required revenue approach to determine the necessary charges for DE sales. The method used was to develop the total system costs and compare them with the total quantity of heat sold to determine the minimum required charge for DE. The phase-one development of the Jamestown DH system, involving the institution of a pilot system, was financed with short-term bonds. The later phases were financed with long-term bonds, including the refinancing of the first phase.

The benefits derived from the implementation of a DES were multifaceted. The benefits included environmental advantages (about 130 individual boilers have been shut down), demand-side management application (up-to date, 250 Jamestown apartments have been successfully converted from electric heat to hot water-based district heating), customer savings, and potential for urban economic revitalization. During the 25-year period, the DE customers have experienced a cumulative savings of about $16 million from participating in this system instead of operating their individual equipment.

The successful development of the Schenectady DES was the result of the following factors:

  • Strong support and leadership of the management and board of directors of the Proctor’s Theater;
  • NYSERDA support for initial feasibility study;
  • Downtown Schenectady Improvement Corporation and the Schenectady Metroplex Development Authority support for system construction;
  • Integration of the CHP system with the renovation of the Proctor’s Theater;
  • The technical expertise and well-orchestrated effort of the consulting engineer;
  • Gradual, staged system development;
  • Use of cost-effective modern piping technology; and
  • Use of cost-effective modern building retrofit technology.

Description of System Development

The development of the DES in downtown Schenectady was integrated with the renovation and expansion of the arts center and theater (Proctors). Proctors was developing a 313,000-square-foot block consisting of four buildings in downtown Schenectady. Proctor was previously heated with a number of boilers and cooled with various distributed cooling systems. Most of the equipment was old and needed replacement.

The management of the Proctors Theater has previously participated in the Jamestown DES development and was well familiar with the DE advantages. Under the leadership of the Proctors management with the NYSERDA support, a DES feasibility study was conducted. The study evaluated the potential of DE supply to all major downtown buildings. The building’s owners, the Schenectady Metroplex Development Authority, the mayor and his administration, and real estate developers (such as Omni Development Corp.) indicated high interest in a DES and actively cooperated with the study.

It was proposed that the DE supply to Proctor’s Theatre and other customers would be handled by a separate private energy company that would have its own balance sheet. This allowed separation and allocation of all the expenses associated with the production and distribution of thermal energy to the DE company owned by Proctor. Proctor financed and constructed the district heating and cooling plant and a small CHP facility consisting of four 60-kW micro turbines and one 120-kW absorption chiller. The central plant room has enough space to install additional heating and cooling equipment for DE supply to additional buildings located in relative proximity to the Proctor block.

Four 8-inch underground mains (two for heating and two for cooling) were installed to supply hot water and chilled water energy. The original customers included Proctors Theatre, Atrium IWERKS Black Box Theatre, and Hampton Inn (a 97-room hotel). Additionally, a snowmelt system was installed under the 400 State Street block sidewalk in front of the theatre district. The four-pipe DES was also installed under State Street (during street reconstruction). Using this piping, Proctor started the supply of hot and chilled water to the city center building, located on the opposite site of the State Street.

Proctor currently operates the central DE plant and is responsible for operation and maintenance (O&M) of the piping system (Figure 2). Proctors and other customers are billed for usage in accordance with actual metered consumption and established rate structures. The DE plant and piping have a substantial excess capacity to supply additional customers. The Proctors is marketing the DE supply to additional customers identified in the original feasibility study. The existing DE is serving as an anchor for system expansion to downtown customers.

The successful experience with community-scale projects indicates that one of the feasible options is to create a district piping loop connecting the customers. The loop allows aggregation of customers into a district system and increase the efficiency of the energy source. The district loop is gradually expanded into a community-scale system.

FIGURE 2: An overall view of the Proctor district energy plant. Image courtesy of Richard Lovrich

Summary of Benefits of the DESs

  • The operational experience demonstrates that DESs provide about 30% energy savings versus on-site self-generation of thermal energy to customers;
  • Customers are freed from both maintenance and operation of on-site energy facilities;
  • Besides providing cost-effective and reliable energy for connected buildings, customers avoid capital investments for expensive boilers, chillers, and other on-site energy equipment;
  • Frees up valuable building space. No boilers, chillers, cooling towers, and other auxiliary energy equipment are located in the building;
  • Not having to manage and maintain energy systems allows customers to focus on their particular business rather than providing their own energy services;
  • The DES operates year-round and without service interruptions, providing exceptional reliability;
  • The district cooling system reduces peak electric power demand in the buildings, helping businesses avoid expensive peak demand charges that are typical with on-site cooling systems;
  • There is no release of any pollutants from building energy systems, including greenhouse gases (GHG). This reduces the area’s carbon footprint;
  • The system stimulates economic development and downtown revitalization; and
  • Customers enjoy energy stability as the keeps the energy rates have remained stable.