Tenant Engagement Series: District Energy Systems

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Integrating buildings into district energy systems is disrupting familiar approaches to heating.

Read the rest of our Tenant Engagement Series for more insights


  • District energy systems (DES) deliver heat from a centralized source to a wider area, akin to municipal water supply, and draw heat heat away to heat sinks.

  • DES can be applied to every size of municipality, improving community resilience, stabilizing energy bills, and reducing the number of outages.

  • DES have to be custom designed to each situation, which takes long-term planning and substantial capital expenditures.

Why do we individually heat and cool our homes and businesses? This is probably not a question that has crossed your mind, but when you think about it, it’s kinda strange. The vast majority of us get our other municipal services like water and electricity from a shared, communal system – so why not heating as well?

Municipalities looking to reduce greenhouse gas (GHG) emissions, improve service, and save money would do well to look at the benefits of thermal grids, otherwise known as district energy systems (DES).

District energy systems aren’t a new idea (New York’s steam system started operations in 1882) and while the technology is mature, the implementation of district heating systems in North America has been slow. In 2019, there were 217 such systems in Canada, servicing 3,203 buildings.

In comparison, district energy systems provide 12 percent of Europe’s total heating needs and up to 90 percent in Nordic countries. Similarly, these systems supply 30 percent of China’s and 50 percent of Russia’s heating needs.

It’s clear that DES technology is proven and effective, and there is substantial savings and emissions reduction potential in North America. According to the United Nations Environment Program, DES are a “key measure for cities and countries that aim to achieve 100 percent renewable energy or carbon neutral targets.”

In Canada, buildings are the third-highest source of GHG emissions, after oil and gas, and transportation, according to Environment and Climate Change Canada. Moreover, two-thirds of the energy used by buildings is dedicated to heating and cooling, so any reduction in HVAC energy needs can directly translate into substantial savings.

Don’t think that only big cities can benefit from district energy systems – the right plan can drastically cut energy bills for even the smallest communities. Take Teslin, Yukon (population 124) for example. The town implemented a district energy system using locally sourced wood chips, which has helped create jobs and saves the town $300,000 per year in imported diesel costs.

What are district energy systems?

District energy systems collect heat (either directly through combined heat and power plants or indirectly from capturing waste heat from generation sources) in a central heating facility. This heat is then directed along a connected system to all buildings that are part of the DES.

This means that instead of each building having its own boiler room, heating and cooling are supplied in the same way as other municipal utilities. Many communities (such as Richmond, BC) that are in the process of introducing or considering introducing DES are changing building codes to ensure all new builds are ‘district energy ready’.

This means that new buildings incorporate sufficient below-ground space for future heat distribution systems as well as the necessary connection points to allow for DES use.

DES can also draw heat away from connected buildings by connecting them to heat sinks, such as boreholes or bodies of water, which themselves can also provide sources of cooling.

For example, the city of Halifax uses seawater to chill a large mass of bedrock under the city; this chilled mass is in turn used to provide cooling to parts of the city during the summer.

Vancouver uses a similar system that extracts waste heat from hot showers, dishwater, and laundry loads at sewage pumping stations.

This grey-water heat was just being flushed away, but with a DES the city can reuse this heat to lower energy costs. Other sources from which waste heat can be extracted using a DES include; sewage systems, data centres and server farms, and grocery store refrigeration units.

What are the benefits of district energy systems?

By utilizing local energy resources and mitigating heat waste, DES can help keep energy dollars in the local community, providing jobs (construction and operation related) and reducing imports.

Alongside the considerable potential savings, DES installation can lead to a significant reduction in GHG emissions when coupled with low-carbon energy sources, such as switching from coal or oil to natural gas, biomass, and/or a mix of renewables.

Creating a DES also makes the community more attractive for developers, as they can save money by not having to install individual heating systems in new developments.

If paired with a combined heat and power station, DES can further improve community resiliency, by stabilizing and reducing energy bills and aiding local electricity generation during blackouts. DES are also very reliable, helping reduce the number of outages from mechanical failure.

For instance, the city of Markham in Ontario has been connecting every building built in the down-town since 2000 to a DES, and this system has maintained a 99.99 percent reliability rating for the past 20 years: in 20 years there have only been 2.5 hours of unscheduled downtime.

As we’ve already seen, DES allow communities to extract value from waste heat from; existing thermal generation sources, industrial waste heat, sewage systems, or server farms, among others. Creating a DES also makes the community more attractive for developers, as they can save money by not having to install individual heating systems in new developments.

Similarly, buildings that are part of a DES benefit from increased safety, since oil and gas tanks, and boilers are removed from residential and commercial properties.

What are the challenges associated with district energy systems?

The versatility of DES can also be a challenge since there is no one-size-fits-all way of implementing them. This means that each DES has to be custom made for the needs and resources of each community or institution. This means a long start-up and planning period which can tax the resources of smaller communities.

Similarly, the creation of a DES, especially larger ones, requires substantial capital expenditures which in turn means communities will need to secure financing options in order to move forward.

Given the expansive and inclusive nature of DES, municipalities will need to engage with a wide range of stakeholders in order to implement their plans. For instance, for infrastructure on private land, municipalities will need to secure statutory right of way.

Moreover, if municipalities wish to retain some ownership of local DES they will have to create a public utility if they do not already have one. The cheap price of natural gas – the favoured heating fuel source – also creates headwinds for municipalities seeking to transition to DES from legacy heating plans.

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