Originally featured in PHC News September addition. Click here to read the article.
Connecting the Dots on District Energy Systems
As these developments continue to gain traction in the U.S., the mechanical industry needs to adapt.
District energy systems efficiently heat and/or cool multiple buildings in a “district.” One or more DE plants generate thermal energy, which is then distributed to the buildings in the district through pipes carrying steam, hot water or chilled water. District systems replace the traditional approach of each building containing independent heating and cooling generation, resulting in much more energy efficiency for the built environment.
The DE concept has been around for hundreds of years in Europe. Denmark is the most significant example. According to the Danish Energy Agency, around 64 percent of all private Danish residences are connected to district heating for space heating and hot water production.
The U.S. currently has more than 700 operating DE systems. The systems serve college campuses, airports, cities, prisons, and business parks where multiple buildings are clustered together.
A start-up system can overcome economic development hurdles if there is a significant existing source of thermal energy nearby.
For example, if a business park includes a large data center, the waste heat from the data center may be enough to prove out the economics a new DE system by providing a heat source for the adjacent buildings.
The idea of using one building’s “waste heat” for another is key in these systems to be economical, and greatly improves their sustainability metrics. Other factors include the feasibility of installing the piping network and existing building system compatibility.
Sources of thermal energy
DE systems provide steam or hot water to provide comfort heat and domestic water heating to multiple buildings. The sources of heat can include traditional fossil fuel boilers, electric boilers, heat pumps, combined heat and power, solar, waste heat recovery, waste to energy, geothermal, thermal storage or any combination of these.
(On the other hand, district cooling sources include traditional chillers and more innovative sources such as lake-water cooling, thermal storage, heat pumps, absorption chillers, and so on.)
Many traditional heating systems have, or will, phase out fossil fuels and retrofit utilizing innovative clean energy solutions. The technology advancements for DE systems continue to accelerate.
In the May 2022 issue of PHC News, I wrote an article about waste heat recovery called “Waste Not, Want Not” (bit.ly/3z3FepH). One source producing considerable waste heat is a key resource to DE systems. Waste heat can be recovered from data centers, sewage waste lines, industrial processes, or from the connected buildings themselves.
Buildings competitively served by resilient, sustainable, self-sustaining DE systems benefit from sharing heating and cooling, space savings and resource efficiencies afforded by scale. DE systems connecting refreshed old buildings and new green buildings alike help each structure achieve its own maximum performance.
The 2021 Washington State Energy Strategy, for example, highlighted the zero-carbon opportunity for campus district energy:
As energy-sharing networks grow, the members buildings’ benefits increase and emissions overall decrease:
• Efficiency/carbon reduction: Individual building systems, even the most efficient ones, are not collectively as energy efficient as one DE plant serving the same buildings.
And while it may not be economically feasible to implement innovative clean energy concepts such as lake water cooling or sewage waster heat recovery for one building, DE systems can incorporate these and other concepts to further increase the efficiency, reduce carbon, and widen the efficiency gap with individual building systems.
As local governments continue to require electrification and efficiency standards in buildings, it is easier to change the energy source in one place as opposed to dozens of individual buildings.
• Capital cost: Building developers avoid the initial capital cost of developing and building the mechanical plant for their individual buildings.
Depending on the terms of the specific energy offtake agreement, the only initial cost may be a connection charge that is insignificant relative to the cost of a new plant.
Moreover, the space previously utilized for the mechanical plant and equipment can now be utilized to produce income and increase the space efficiency in the building. And DE systems become magnets for development due to the development benefits of simply connecting to thermal energy like you would to power and water.
• Operational efficiencies: Building owners with buildings connected to a DE system avoid the operations and maintenance management and cost associated with building-specific mechanical systems.
And while each building pays its share of energy usage, capacity, and connection fees, they will avoid large cash outlays for significant repairs and replacements of major heating and cooling equipment.
• Resilience: With built-in redundancies as well as the implementation of ongoing technological advances, DE systems provide for resiliency in both thermal and power supplies.
Many DE systems, for example, incorporate CHP systems. According to the International District Energy Association: “Traditional power plants effectively convert only 40% of fuel energy into electricity, while 60% of energy is rejected or “wasted” as heat vented through a smokestack or released to a local body of water. By utilizing the thermal byproduct of electric production, CHP plants regularly see fuel efficiencies of 70%-85% or higher.”
CHP plants recover the waste heat from power generation to provide hot water or steam, which, in turn, serves the DE system. Further, the distributed power generation provides redundancy to the grid, as well as power balancing and overall resiliency.
Energy balancing and resiliency are increased further with the implementation of short and long-duration thermal storage (thermal battery) systems.
• Flexibility of usage: When building usage and/or occupancy changes, the demand for heating and cooling often changes as well.
Independent building plants will then be under- or oversized. While significant usage changes can challenge the DE system as well, the building owner has more flexibility and is not stuck with a wrong-sized plant.
DE as a revenue stream
On a large commercial development in Seattle, UMC collaborated with the developer from the outset to consider the benefits of district energy. This opportunity included the creation of a separate, profitable business entity to deliver thermal energy.
The development consisted of more than 1,000 apartments, 14 swimming pools, and an adjacent full city block comprised of two office towers. Overall, the project included significant scale, an important factor in the DE equation.
An early task included understanding the regulatory landscape of the proposed multi-block thermal utility. This background helped define the business structure and laid the foundation that would drive the engineering concepts for the thermal production plant. A broad expansion strategy for adding adjacent customers was also incorporated. Success relied on continuously balancing the financial cost model with appropriate design options.
Viewing the new thermal utility as a revenue stream allowed for investment in high-performance equipment and technologies that improved the financial model.
As a utility business, knowing all production costs and distribution costs, and implementing automation to report and react was integral to the customer-facing brand. In this case, the developer and the utility owner were the same. Ultimate success was achieved by turning future “lumpy cash flow” into a viable district utility business.
An understanding of the current and future status of DE is important to the mechanical contracting industry. As DE asset development continues to gain traction in the U.S., the mechanical industry needs to adapt. While many in our industry currently service, renew and repair DE systems, as the trend grows our industry will change. Over time, the sheer number of mechanical systems will be reduced, while the size and complexity increases.
It’s time to get in a district state of mind.
Jerry Bush is CEO and a 30-year veteran of UMC, founded in 1920 to serve the Pacific Northwest as a mechanical contractor. Bush is a past president and active member of the Mechanical Contractors Association Western Washington. He can be reached at email@example.com
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