How century-old ​‘district energy’ networks can help decarbonize cities

Buildings need to switch from being heated with fossil fuels to being heated with clean electricity to meet the world’s decarbonization goals. That switch can happen one building at a time — or, for city centers and university and corporate campuses that have district energy systems, there’s another option.

One example is the eSteam plan being pursued by Vicinity Energy for the nearly 90-year-old district steam system serving about 65 million square feet of buildings in the cities of Boston and Cambridge, Massachusetts. Over the coming years, Vicinity plans to augment its fossil-gas-fired cogeneration plant in downtown Cambridge with electric-powered boilers and industrial-scale heat pumps.

That could serve as a template for electrifying more of the district heat and cooling systems the Boston-based company owns and operates in cities including Baltimore, Philadelphia and Oklahoma City and college campuses across the U.S. Northeast, Vicinity CEO Bill DiCroce said.

“We can become a converter of electric renewable power to steam, and our customers don’t have to do a damn thing,” he said. The grid power for those electric heating systems will increasingly come from the gigawatts of onshore solar and offshore wind power being built to meet Massachusetts’ clean-energy targets.

Vicinity’s gas-fired cogeneration plant is already connected to a major transmission substation that will allow it to get the megawatts of clean power it needs to switch to electric-powered heating. Plus, it can contract for its own zero-carbon resources.

That’s a lot less expensive and complicated than converting every building now served by its network to all-electric heat, DiCroce said. Vicinity pays for electricity at wholesale prices that are a lot cheaper than the retail prices that building owners pay for electricity to power their own heat pumps, the core technology available to electrify building heating, he noted.

Buildings tied to Vicinity’s network can also avoid the hassle and price volatility of managing their own heating systems, and they can monetize the indoor and roof space they’d have to dedicate to heating equipment if they tried to decarbonize on their own, he said.

District energy can also be more resilient during power outages, DiCroce said. Vicinity plans to install molten-salt batteries that can store clean electricity for hours or days at a time to ride through lulls in wind and sun or other electricity supply shortfalls, he said. And while it expects to run its gas-fired power plant less and less as the need for its steam is replaced by electric boilers and heat pumps, that generator will still be available for emergencies, he said.

Many of the cities and universities where Vicinity runs district energy systems have set their own aggressive decarbonization goals, DiCroce said. Boston has a goal of getting its large buildings’ emissions to net zero by 2050, and Massachusetts has adopted a decarbonization roadmap that calls for halving economywide emissions by 2030 and reaching net zero by 2050. Those targets will require millions of building retrofits to address the one-third of carbon emissions that now come from building heating in Massachusetts.

Retrofitting hundreds of millions of square feet of buildings with zero-carbon heating is ​“going to be expensive. It’s going to take time to build in that electrical infrastructure,” DiCroce said. Not all cities have a district energy system that could serve as an alternative to that approach, he said. But Boston and Cambridge do, and ​“we’re coming in and saying, ​‘We can take 65 million square feet off your hands really quickly.’”

The promise of district energy: Combining resources and loads at scale

The key benefit of district energy systems is their ability to combine electricity and heat production from multiple sources. Power plants that aren’t part of district energy systems, like the vast majority of those operating today, dump their waste heat into rivers or oceans or into cooling towers and smokestacks. But district heating cogeneration plants, also known as combined heat-and-power plants, recapture heat from power plants and convert it to steam or hot water flowing through networks of insulated pipes.

District energy systems can also recapture heat from industrial plants, waste treatment facilities, commercial buildings and other locations that would otherwise be dumped into water cooling systems or the atmosphere. This graphic from the International District Energy Association trade group indicates just how much useful energy that’s lost in a centralized generation system can be recaptured by a district energy system.

There’s a huge opportunity for expanding and greening district energy around the globe. Only about 8 percent of the world’s district heating systems use renewable fuels or electricity today, according to a 2021 report from the International Energy Agency. But that share should grow to roughly one-third by 2030 if we want to get down to net-zero carbon emissions globally by 2050, the agency says.

China and Russia have the largest number of district energy systems. While the majority of China’s systems run on coal, the Chinese government ​“attaches great importance” to cleaner and more efficient approaches, according to a 2017 report from the International Energy Agency and Tsinghua University.

The United Nations Environment Programme has targeted district energy networks as a tool for reducing carbon emissions and energy waste, with the potential to cut heating and cooling energy use in half compared to delivering electricity and heat via separate systems. U.N.-backed projects are being built to cool the Indian cities of Amaravati and Rajkot and to heat the Chilean city of Coyhaique.

Many European cities use district energy systems for a large portion of their heating and cooling needs, and many of those systems are converting from fossil fuels to low- or zero-carbon electricity. The system serving the Danish capital of Copenhagen is one of Europe’s largest, with 98 percent of the city’s heating needs provided by plants that have already switched from fossil fuels to biomass.

Copenhagen and many other European cities are augmenting their central heat-and-power plants with heat pumps that can use the temperature differentials of river and ocean water to improve their efficiency. Others are tapping into underground thermal resources, whether via ground-source thermal networks or via deep-bore geothermal wells, as German utility E.ON is doing in the Swedish city of Malmö.

While Europe and China have invested more heavily in district energy, the U.S. has about 900 systems, ranging from ones at airports and college and corporate campuses to some of the world’s first citywide networks, as this map from the International District Energy Association indicates.

Those include the largest district steam system in the world, the 140-year-old network in Manhattan operated by utility Con Edison, said International District Energy Association President Rob Thornton. Over the decades, this network of 105 miles of steam tunnels serving about 1,700 customers has switched from burning coal to oil to fossil gas, he said. Now Con Edison is exploring a variety of options for decarbonizing its steam network, including switching to fuels like biogas or hydrogen made via low- or zero-carbon methods, or to electric boilers and industrial heat pumps.

New York City’s building decarbonization targets are forcing building owners to take a hard look at how expensive it might be to switch from fossil fuels to electricity for heating. Tapping into an existing district energy infrastructure may be a far more practical way to decarbonize than electrifying individual buildings, both from a building-owner perspective and from a utility-service perspective, Thornton said.

From the utility perspective, expanding an urban power grid to support a dramatic increase in electricity required to heat buildings is ​“really not that simple when you’re talking about energy-dense cities,” where infrastructure for delivering power, gas, water and telecommunications services already occupies much of the city’s underground space, he said. Using existing district-heating pipes makes more sense than trying to add new high-capacity electrical infrastructure.

From an individual building owner’s perspective, relying on a decarbonizing district energy system can come ​“without disruption or increased risk, or exposure to a real-time power market, where you know the price of electricity can increase by 1,000 percent on a hot August afternoon,” he said.

The challenges of district energy: Rightsizing and covering electrification costs 

All of these potential benefits aside, there are a few important challenges to tapping the carbon-cutting potential of district energy systems. The first and biggest is simply having a district energy system in place to begin with.

The same factors that make it hard to upgrade underground urban electrical grids will make it even harder and costlier to deploy the networks of pipes needed to start moving water or steam from building to building. DiCroce estimated the cost of building new district energy infrastructure in such environments at $5,000 to $10,000 per foot, making it a very difficult prospect for wide-scale deployment today, except in smaller urban redevelopments. ​“Where these systems exist, they’re like gold,” he said.

There’s also the challenge of ensuring that an existing district heating system can secure the density of customers needed to achieve the economies and efficiencies of scale that makes it worth keeping the system running. That’s less of an issue for campus or airport systems where a single entity owns all the buildings involved, but it can be a significant issue where older citywide networks must vie against alternative utility services for providing energy to individual buildings. ​“We have to compete every day,” DiCroce said.

That’s become a problem for the Denver, Colorado steam system operated by utility Xcel Energy. That 140-year-old system has raised costs to cover plant upgrades, which has led to more customers choosing to depart the system and replace it with gas or electric heat over the past few years. It’s also facing an uncertain role in the city’s and state’s plans to decarbonize its buildings.

At the same time, other district heating systems are seeing an uptick in investment and capturing a growing percentage of customers in the areas they serve, Thornton said. The district energy system serving the Canadian cities of Toronto and Mississauga, which combine a steam heating system with a cooling system using water from Lake Ontario, is now in the midst of a $1.4 billion capital upgrade, for example.

“We think one of the best ways to decarbonize any large metro area is to electrify the district energy systems, if there is indeed one within that city,” said Kevin Genieser, senior partner with Antin Infrastructure Partners, which formed Vicinity Energy in 2020 from its purchase of the North American district energy assets of French water and infrastructure firm Veolia. ​“One in every four buildings a district energy system passes under is linked into the system, which means that three of every four is not. That’s a huge potential for densification in the systems themselves.”

A major question for existing district energy systems seeking to switch from burning fuel to tapping electricity to generate heat is whether the costs and carbon reductions can beat upgrading buildings individually, said Mike Waite, a senior manager in the buildings program of the American Council for an Energy-Efficient Economy.

At a high level, ​“cleaning the supply” of existing heating is ​“likely going to be more cost-effective than trying to go into each individual building,” he said. But the cost of generating steam with electrode boilers is still quite a bit more expensive than generating steam by burning fossil gas, at least in places that don’t have rock-bottom electricity prices, he noted.

“That changes with heat pumps,” he said. That’s because heat pumps are far more efficient at extracting heat from the surrounding environment. The nonprofit’s recent report on industrial heat pumps states that improvements in efficiency and cost of these large-scale heat-conversion systems are putting them within price parity of gas-fired heating systems for a growing set of applications.

In that sense, district energy systems share some characteristics with the kinds of systems that will be needed to decarbonize industrial processes more broadly, Waite pointed out. ​“There could be opportunities for lessons learned, and translating best practices and technologies to other applications, with the push coming from an initial focus on building decarbonization,” he said.

Geothermal heat networks: A new model to expand district energy?

Not all district energy systems rely on steam to transmit heat throughout their networks. Steam tends to be more effective for dense urban cores or for buildings that need high-temperature heat, such as hospitals or industrial facilities, Vicinity CTO Kevin Haggerty noted in a February interview. But converting water to steam also takes more energy than simply heating and circulating water at temperatures below the boiling point, as many of Europe’s largest district energy systems do, he said.

Hot-water systems also lend themselves to tapping into geothermal heat as a resource. Europe has hundreds of geothermal district heating systems. Thornton of the International District Energy Association pointed out that a handful of U.S. district energy systems that are pursuing similar approaches, including Ohio’s Oberlin College, which raised $80 million in certified climate bonds last year to carry out its plans.

Underground geothermal energy networks could also tap into the potential for expanding the concept of district energy systems beyond their current footprint, and into the much broader scope of U.S. gas utilities.

That’s the idea behind the ​“micro-geo-district” pilot projects being developed by gas utilities in Massachusetts, which will test the viability of replacing gas pipes with pipes and boreholes that can employ the steady temperatures hundreds of feet below the earth’s surface to heat or cool water that can be used by heat pumps in buildings.

New York state lawmakers have just passed a bill that would promote similar ​“utility thermal energy network” pilot projects, said Panama Bartholomy, executive director of the Building Decarbonization Coalition. The legislation now awaits action by the governor. Gas utilities, which face the threat of having their primary fuel phased out to meet decarbonization targets, could secure“a much better future” if they make the switch to become thermal energy network providers than if building heating is entirely electrified, he noted.

There’s a big difference between a system that directly provides heat to buildings and a system that provides water at a constant temperature to help building heat pumps operate more efficiently, of course. But as Thornton pointed out, district energy systems have evolved quite a bit from their early purpose of replacing the need for indoor coal furnaces and boilers. Decarbonization is now the major threat facing the world, so ​“we’re now evolving for this next challenge,” he said.