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Last edited 24 Feb 2021
District energy networks
District energy (DE) is the process of heating and / or cooling a group of buildings from a central thermal energy generation plant(s) via a network of fluid distribution pipes. It is widely used for urban environments including residential, commercial, local authority, government, and industrial buildings. It is also used extensively for universities and hospitals where there are a variety of discrete buildings located around a campus. District energy is an alternative to the more traditional installation of individual heating or cooling plants in each building.
 How does district energy work?
Heat energy for use in a DE system is generated in a central plant, typically using fired boilers. The heating medium can be steam or hot water which is then distributed to the user buildings via a network of insulated pipes. These pipes are generally installed below ground either buried directly in the soil or located in concrete ducts.
The distribution pipes are connected to energy transfer stations (ETS) located in each user building. The ETS consists of heat exchangers where energy from the DE system fluid is transferred to the heating medium of the local heating system within the building. ETS also include metering equipment enabling the measurement of the amount of energy supplied to the individual buildings for billing purposes. Modern district heating systems generally use pressurised hot water for transferring heat from the central plant to the ETS.
Steam can also be a very effective heat transfer medium and was the most commonly used working fluid for older systems. High-pressure steam generated in the central plants is supplied to the ETS and condensate returned to the central plants for re-evaporation. Steam has the advantages that it does not requiring pumping, and can be transported in higher quantities of heat per unit cross-sectional area of distribution pipework than hot water systems. This reduces the capital cost of the distribution pipework. However, steam systems require more maintenance and have more stringent operating procedures resulting in the current preference for water-based systems.
Combined heat and power systems (CHP and sometimes called cogeneration) are frequently used for the central heat supply plant on DE networks. CHP involves the local generation of electricity with the waste heat from the generation process being recovered and used in building heating systems or industrial processes. CHP is very energy efficient compared with traditional local generation of heat and import of electricity from large centrally-located electricity generation stations. The inherent thermal efficiency of CHP helps the economics of DE. The waste heat is recovered and fed into the district heating network with electricity sold either to the downstream user buildings and/or the local electricity supply companies.
Municipal waste incineration plants can also be used as the heat source for DE systems. This is a good way of harnessing the heat generated from the incineration of waste and is ‘environmentally friendly’ as it replaces fossil fuel that might otherwise have been used to provide the heat for the DE system. Heat from incineration plants is often very competitively priced as it is effectively using a by-product of the disposal process.
DE can involve both heating and cooling. Where user buildings require cooling, chilled water is generated, typically using mechanical chillers, and pumped via flow and return pipework to and from the building ETS. Alternatively, chilled water can be generated from absorption chillers using waste heat from CHP plants. This can be very efficient and cost effective as the waste heat from a CHP plant can be used for heat production and distribution in winter months and for cooling in summer months.
 The history of district heating
DE is not a new approach, with many systems implemented during the 20th century in a number of countries around the world. It is widely used in the former Soviet Union countries with very large systems providing heat to high-rise social housing estates. The central heat generation plants were traditionally coal-fired, then oil-fired, and more recently converted to gas or biomass firing to improve environmental performance.
Scandinavia has been a big user of DE for many years because of their cold climate and their enthusiasm for CHP. For example, in Denmark, legislation was enacted in1979 that demanded that all new electricity generation stations had to include heat recovery; this stimulated power station developers to promote DE as a means of harnessing the waste heat from the electricity generation process.
In the UK, DE was widely developed in the mid-20th century when heating was based on coal or oil. When cheap natural gas became available in the 1970s, very little DE was developed because it was easier and less expensive to install individual gas-fired heating plants.
DE is now enjoying a renaissance in the UK because of the increasing emphasis on energy efficiency, environmental performance, and carbon dioxide emissions. This is because the DE thermal generation plants lend themselves to the use of environmentally friendly energy generation including; biomass, geothermal, geo-exchange, and CHP. Organisations wishing to develop new housing are now required to demonstrate as part of the planning process that they have considered DE instead of individual building energy generation systems. The recent significant increases in gas prices has also reinforced the search for cheaper heat sources that can only be used via DE.
 District energy system owners and operators
DE systems are frequently developed, owned, and operated by central or local government, particularly where they are used for servicing social housing or local conurbations. There are, however, specialist private companies who will take responsibility for the development, installation, operation, and maintenance of complete DE systems. Public private partnerships (PPP) are also common and have the advantage of bringing together the political and planning skills and low cost of finance of the public sector with the technical and operational skills of the private sector.
 District energy financial issues
DE systems are very capital intensive, requiring significant upfront capital expenditure for both energy generation and distribution systems in advance of any financial return from energy sales. Because of this, there is significant risk attached to the development, installation, and operation of DE systems. System owners look for reasonable assurances about the size and time profile of DE revenues in order to underwrite capital expenditure.
It is important to ensure that the capacity of the generation and distribution systems are well matched to the anticipated build-up of the building energy loads. For the generation plant, this means that installation is often phased to match the anticipated load profile. For the distribution system, the main trunk supply and return pipework has to be sized for the final load and installed at the project outset, but with smaller spurs added as new buildings are brought on line.
Load factor and economies of scale are very important contributors to providing adequate financial returns on investment. This means that DE economics are very dependent on building density and climate. For example, in dense conurbations and colder climates, heat revenues will be higher than in low-density areas in mild climates, so promoting better financial returns. For cooling systems, warm climates or buildings where internal heat gains are high help financial returns.
Attracting and retaining building loads is extremely important for the economics of DE systems. If buildings do not connect up as planned, or, at a later date come off the system, revenues will fall with a consequent negative impact on system economics. This risk can be managed by local authorities making it a condition of planning consent that new buildings purchase their energy from the local DE system.
The capital and running costs of DE systems are recovered by the owners levying charges on building occupiers. Tariff structures are frequently two-part, with some form of monthly standing charge designed to recover fixed-system costs, such as capital and labour, combined with a volume charge according to the amount of energy supplied to recover variable costs such as fuel. Single part tariffs using only a volume charge can also be used, but these can be riskier for DE system owners in terms of their recovery of fixed costs. This can be overcome by using a minimum take. Historically, there have been cases where flat monthly charges are levied with no recognition of the volume of energy used. This approach is not recommended as it does not encourage energy efficiency.
 Advantages and disadvantages of district energy.
The benefits of DE include:
- Lower capital costs for building owners as they do not need to provide heating or cooling generation plants.
- Elimination of space normally used in buildings for individual boiler and chiller plant rooms. Space is required for the ETS, but this is minimal. This reduces building capital costs or alternatively frees up space for the core activity of the building.
- There is no need for building owners to have access to technical staff to operate and maintain heating and chiller plant. DE systems, including the ETS, are generally operated and maintained by external parties other than the building owners, such as local authorities or private-sector specialist DE companies.
- The larger size and corresponding economies of scale of DE systems generally result in cheaper energy for the end users. They also permit the more cost-effective use of renewable technologies such as biomass and CHP.
The key disadvantages of DE are:
- High capital intensity.
- Potential impact on system economics due to building loads not materialising as planned, or loss of building loads.
DE is an increasingly popular method of supplying thermal energy to groups of buildings, hospitals, universities, and some industrial sites. By its very nature, DE is very fuel and technology flexible and is a particularly well-suited to renewable energy sources and CHP.
The cost of energy supplied can be very competitive compared with the traditional approach of using individual heating and cooling plants in each building because of economies of scale, higher operating efficiencies, and the potential to use lower-cost, primary-energy sources. Capital intensity is high and there needs to be a strong emphasis on risk assessment and management to ensure that schemes can be financed and target returns achieved.
 Related articles on Designing Buildings Wiki
- Allowable solutions.
- BSRIA guide to heat interface units.
- Capital allowances.
- Climate Change Levy.
- Combined heat and power.
- Community energy network.
- Community heating.
- Energy targets.
- Geothermal energy.
- Heat interface units.
- Heat meter.
- Heat Networks Investment Project HNIP.
- Heat Networks (Scotland) Bill.
- Heat sharing network.
- Municipal energy - briefing sheet.
- National heat map.
- On-site generation of heat and power.
- Planning permission.
- Waste heat.
- Water source heat map.
- What can government do about district heating.
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