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2 History and Background HISTORY OF DISTRICT HEATING Urban district heating (although generally not cooling) has been adopted outside the United States to an even greater extent than it has in this country. More than 1,000 cities from Sweden to Italy to the Soviet Union to Japan have district heating systems. In Western Europe, in particular, such systems have flourished in recent decades. District heating was initially developed in the United States (OTA, 1982; RDA, 1981~. Probably the earliest system was developed by Benjamin Franklin in Philadelphia in the eighteenth century. Franklin's system provided heat to several adjacent residences from a central source. The world's first financially successful system was developed in Lockport, New York. Designed in 1877 by Birdsill Holly, the Lockport system provided steam from a central boiler plant to a few nearby residences and other users. By 1890, district heating systems were being rapidly installed in numerous small cities and towns in upstate New York. They soon spread to other small cities in the United States, especially in northern industrial states. They also spread to large cities, such as Chicago, Pittsburgh, and Baltimore. Most of the early systems distributed steam produced from a reciprocating engine that was used primarily to generate electricity. The early systems used the heat lost during the generating process to produce steam. Electrical generators continued to be the principal energy source for district heating well into the twentieth century. For many utility-owned systems, district heating was a way to get customers to connect to a centralized electrical generating system. Previously, many customers had relied on their own onsite generator to supply electricity and heat. For such systems, district heating was a small and subsidiary part of the utility's business. 25

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26 This arrangement was possible as long as power plants remained small and located in town. In this century, however, turbines began to replace reciprocating engines and technical advances reduced power losses in transmission lines. These developments led to new, larger electrical generating plants located farther from the centers of cities. These changes caused many urban systems to fail, beginning in the late 1920s, as they lost their sources of nearby, relatively cheap fuel. Other systems continued to provide steam, but at a higher price. Urban systems continued to decline after World War II as low-priced oil and natural gas began to be used for heating, and as yet larger and more efficient power plants were located even farther from the centers of cities. In addition, urban renewal programs sponsored by the Department of Housing and Urban Development (HUD) and its predecessor agencies often unwittingly contributed to district heating's demise. Beginning in the 1950s, older buildings in downtown areas were torn down and replaced by modern structures. Many of the former were connected to district heating systems; most of the latter have individual boilers or were designed as "all electric" buildings. The decline of district heating has been accelerated in the last decade by rising fuel costs and the effect of air quality regulations that either require expensive cleaning equipment or limit fuel choices. Taken together, these developments have favored individual heating and cooling systems for each building as opposed to the central systems that characterize district heating and cooling. In Rochester, New York, for example, the local investor-owned utility system requested permission to discontinue its district heating service in 1983. Over many years, urban renewal had gradually eliminated most of its customers. The Rochester system had also been subject to incremental pricing of natural gas, which made its price too high for it to compete successfully with onsite systems. There are relatively few commercial urban systems today selling both steam and hot or chilled water in the United States. The number has declined from about 250 in 1951 (Figure 2-1) to the 59 reported by the Electric Power Research Institute (EPRI) in 1980 (RDA, 1981; OTA, 1982~. These systems contribute an insignificant amount of energy to U.S. homes and buildings compared with the fossil fuels and electricity used in individual buildings or properties. EPRI surveyed the working urban district heating and cooling systems in 1982. The survey found that the 35 reporting systems delivered 0.065 quadrillion Btu of energy in 1982,* down from 0.095 in 1979. More than 75 percent of the fuel used to generate this energy was premium oil and natural gas (IDHA, 19831. Most of the remaining systems are older, deteriorating, and inefficient. Few are making money (OTA, 1982~. *Less than one-tenth of one percent of the 73.3 quads of energy used in the United States in 1982. By comparison, the United States used 78.8 quads of energy in 1979 (DOE, 1983~.

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27 ~ ;> ~ :':..~ C4L\~L~ ~...4 ,~;~,V~ 7~ it, AR12. | N ~ ONT. _ ~_i it, ' -a (_ :~: TEXAS FIGURE 2-1 Commercial district heating systems in the United States and Canada in l9S1 (courtesy International District Heating Association).

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28 Because of economic and environmental regulation, the investor-owned electric utilities that operate most of these urban systems have little incentive to maintain, upgrade, and modernize their plant equipment or distribution systems. One current trend, seen, for example, in Youngstown, Pittsburgh, and Rochester, is for electric utilities to sell their district heating and cooling systems to entrepreneurs who are not subject to state utility regulation (see the Baltimore and Pittsburgh case studies in Appendix A). Other systems, such as that in Chicago (Table 2-1), have stopped operating altogether (OTA, 1982~. THE RECENT REVIVAL More recently, urban systems have undergone a revival of sorts in several U.S. cities. Beginning in the 1970s, a series of government and corporate-sponsored demonstration projects have contributed to the revitalization of interest in district heating and cooling. New systems have been built or old ones rehabilitated in cities such as Provo, Utah, Lawrence, Massachusetts, and Baltimore, Maryland (see Figure 2-2 and Appendix A). These systems have sometimes been known by names other than district heating and cooling. They have often relied on cogeneration and invariably have served more than one user. Most are small-scale systems located in the centers of cities. These and other new or revitalized systems have been funded in part by a variety of HUD and Department of Energy (DOE) programs, including HUD's urban development action grant (UDAG) program and a joint HUD-DOE district heating and cooling assessment program (see Chapter 5) . In addition, DOE began sponsoring cogeneration projects in 1977 that resulted in retrofitting power plants in central cities. These cogeneration projects were typically tied to district heating and cooling systems. Participating cities include Trenton, New Jersey, and Piqua, Ohio, among others (see Figure 2-2 and Appendix A). As a result, many private groups are either evaluating or designing district heating and cooling systems for U.S. cities. Most have been not-for-profit and municipally incorporated or owned. Some, like those in Trenton and Baltimore, are being run by private entrepreneurs. No new or revitalized system is operated by an investor-owned electric utility. A further boost to urban systems occurred when Congress passed the Public Utility Regulatory Policies Act (PURPA) in 1978. PURPA required electric utilities to purchase power from small producers or cogenerators at rates equal to the "avoided cost" of generating equivalent amounts of power by conventional means. This requirement has helped to ensure a market and a price for electricity. In addition, a few tax modifications in 1982 and 1984 have made capital investments in district heating and cooling, as well as other alternative energy systems, more attractive.

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29 TABLE 2-1 Typical U.S. Steam District Heating and Cooling Utilities Most Current recent average Percent of steam Losses in Fuels used, percent ORnef.'uxred p(r1~978)f Ownership produced by sendout system, Number of Resid. Natural assets, steam City of system cogeneration (103 Ib/hr) percent customers Coal oil gas percent (S/103 Ib)b New York-Consolidated Edison Investor 55 11,663 16 2,285 099 1 7.4 6.76 actual (1 4,983) maximum possible Chicago-Commonwealth Edison Investor (Closed July 5, 1979-last 4 customers disconnected) Philadelphia-Philadelphia Electric . Investor 70 2,431 12 670 100 5.8 5.84 (3,857) Detroit-Detroit Edison Investor 38 1,724 18 8434 9 87 - 7.0 5.26 (2,931 ) (#2) Boston-Boston Edison Investor 0 1,975 21 465 76 24 10.3 7.05 (2,340) Baltimore-Baltimore Gas and Electric Investor 0 819 14 720 49 51 1.8 5.47 (990) (#2) Indianapolis-Indianapolis Power & Light Investor 46 1,428 15 70391 8 1 4.5 4.21 (1,722) (#2) Lansing-Lansing Board of Water ~ Light (Large) 0 260 12 488100 - 3.66 municipal (400) (loss of S245,000 in 1978) Virginia, Minn.-Virginia Department of Public Utilities (Small) 79 266 42 3,301100 75.0a 4.70 municipal (270) (70 percent connection) Piqua, Ohio-Piqua, Ohio Municipal Power System ..... (Small) 100 42 6.5 8 100 Not2.10 municipal (80) available aThev do not include generating plant in net assets of the steam system-they allocate it to the electric system. bOne thousand Ibs of Steam has a heat content of about 1 million Btu. NOTES: 1 Four largest systems in the United States are New York, Philadelphia, Detroit, and Boston. New York is by far largest in the United States and is one of the largest in the world. 2Baltimore is a successful system with predominantly commercial customers, but is now owned by a private entrepreneur (see Appendix A). 31ndianapolis is a successful system with a large number of industrial customers. 4Chicago's system has been closed; they lacked interest in D/H and cogeneration and pushed electric heating in new buildings and nuclear power. 5Piqua is expanding by adding new hot water system (see Appendix A). SOURCE: OTA (1982) .

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30 .-l u] o := W r ~ ~ / o U] o - f J - - : ~ Con ~ _ z 1 U] .~1 - >, ~ W r-~ 0 ~1 ~1 0' Q4 - , O O C) U) . - ~ O U] ~ - a, Q hi; ~ H

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31 THE CURRENT EXTENT OF DI STRICT HEATING AND COOLING IN THE UNITED STATES Until recently, little data was available to indicate the extent of district heating and cooling systems in the United States. The data that existed were scattered, difficult to correlate with other data, and often unreliable. To a large extent, that is still the case. In the last several years, however, several trade associations have undertaken surveys to estimate the extent of district heating and cooling in the United States. Most have dealt with the institutional systems that have grown so rapidly in the last couple of decades. These surveys are by no means exhaustive, but they seem to indicate that the United States has more miles of district heating and cooling pipes than any Western European country. In one, the North American District Heating and Cooling Institute (NADHCI) asked the U.S. Army Corps of Engineers to survey U.S. Army installations. The Corps found more than 4,900 miles (7,900 km) of district heating and cooling piping (U.S. Army Corps of Engineers, personal communication to NADHCI, December 1982~. Another recent survey of 2,000 U.S. colleges and universities found 2,157 miles (3,479 km) of district heating and cooling piping in place, with an annual heat production of 337.5 trillion Btu (APPA Newsletter, March 1984~. Another source puts the total number of institutional systems at about 3,000 (NADHCI Newsletter, Spring 1984), which may be a conservative estimate. Assisted by NADHCI, the committee surveyed the Washington, D.C., and Baltimore metropolitan area to determine the number and types of institutional systems currently operating. A total of 160 systems were identified (see Appendix B). They include several college and university campuses, the White House and other major government buildings (Figure 2-3), the U.S. Capitol (Figure 2-4), downtown office buildings, hospitals, residential complexes, and the National Zoo. While the list is only a partial one, it illustrates the extent of district heating and cooling in this metropolitan area. THE EUROPEAN EXPERIENCE District heating has had a different history in Europe than in the United States. It has flourished in post-World War II Europe, particularly in West Germany and Scandinavia (Figure 2-5~. Just as in its early growth in the United States, district heating systems in Western Europe arose and grew in response to a special set of economic and technical circumstances. District heating has become an integral part of the national energy plans of almost all Western European countries (Table 2-2~. Energy has traditionally been a more serious problem for Europe than the United States. In fact, many European countries depend on foreign

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33 3L~C' w a ~ . c) . - sit o it U] c )1 11 11 -~c 1 1 -~c 11 ~)-/ 1~ ~.- ~UI zoo j EMU LO ~ H :~ <~ ~ L -- u ~ ~T~ ,. ~ ~ ~ i ~1 unrig ~ ~ mu/ ~ ~t 0~r:~ ~ c) ~ . - 3 "L) U] H C4 ~

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34 (0 USSR 493,860 Chart from data compiled by Oak Ridge National Laboratory 20 o o o - 10 1 960 196S it_ ~1 s , 1~/ ~- 7 , ~ , WEST G E FMANY / . /' SWEDEN EDEN MARK , f RANCE o ; ~ 1970~Z5 Q 198S ~?~ FIGURE 2-5 District heating growth in selected European countries, 1960-1980 (courtesy North American District Heating and Cooling Institute).

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Country Existing Penetration 35 TABLE 2-2 Energy Contributions of District Heating and Combined Heat and Power Systems in Selected Countries, 1981 Projections for Early l990s Installed Capacity of District Heating (MW(th)) Connected Load (MW(th)) Industrial Combined Capacity (MW(e)) Austria 4% of low temperature end use energy needs 5,500 Belgium 0.4% of useful 1,059 3,530 energy demand for residential space and water heat Denmark 42% of final consumption for residential and commercial sectors 40% of space heating needs in residential and commercial sectors 30% of single family dwellings 50% of multi family dwellings 0.76 million dwellings Finland 8% of total primary energy 23% of space heating needs in the residential and commercial sectors and 38% of space heating needs in the industrial sector 23,000a 9,500 5,500

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36 TABLE 2-2 Energy Contributions of District Heating and Combined Heat and Power Systems in Selected Countries, 1981 (continued) Country Existing Penetration Projections for Early l990s Installed Capacity of District Heating (MW(th)) Connected Load (MW(th)) Industrial Combined Capacity (MW(e)) Germany 4-5% of residential and commercial energy demand 1.5 million apartments 1.7 million nonresi dential buildings 16% of space heating needs in large cities (population above 100,000) 2% of space heating needs in medium sized cities (population 10,000-100,000) 7% of low-temperature heat demand Ireland Netherlands Norway Sweden 27% of space and water heating demand 47% of multi family dwellings 3% of single family dwellings 67,000b 5,000 100 16,000 100-150 2,500 25,000 1,200

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37 TABLE 2-2 Energy Contributions of District Heating and Combined Heat and Power Systems in Selected Countries, 1981 (continued) Country Existing Penetration Projections-for Early 1990s Installed Capacity of District Heating (MW(th)) _ Sweden 16% (by volume) of (continued) public and commercial buildings United 1-2% of space Kingdom heating demand United States Connected Load (MW(th)) 23,000C 1.5% of total 130,000 primary energy 200,000C 4% of space and water heating demand including 1,800 MW(e) of combined production capacity. "Midpoint of estimated range, 56,000-78,000 MW(th). SLong-term technical potential only, not a market projection. SOURCE: TEA, 1983. Industrial Combined Capacity (MW(e)) 2,000- 3,000 33,000 countries for most of their energy supplies. Few have extensive sources of oil or natural gas. Finland, for example, imports all oil and natural gas it uses (IEA, 1983~. About 40 percent of energy consumption in Europe goes for space heating and hot water, a need that can be met most economically by district heating. Indeed, it provides economies of scale in such European cities visited by the committee as Copenhagen, Mannheim, Paris, and Malmo, Sweden. In general, the more well-established systems serving the larger cities were initiated in the 1950s. They are highly integrated within their communities and serve up to 98 percent of their potential market. These systems are now focusing on improved energy efficiency, often achieved through cogeneration, and on their competitive positions. Small- and medium-sized cities generally began adopting

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38 district heating in the late 1960s and early 1970s. These systems are now planning to expand their distribution systems and service areas. District heating has allowed European countries to mitigate their urban air quality problems, which came to light in the 1960s and 1970s. District heating systems consolidated the individual heating units of scattered residences, commercial centers, and industrial plants into one centralized source. It is much easier and more economical to control emissions from one power plant than from many individual boilers. In the 1970s, the Arab oil embargo spurred Europe to improve its energy efficiency further to reduce its dependence on imported oil. Several European countries began awarding government grants, loans, and subsidies to encourage new district heating systems. Both central and local governments adopted energy plans that emphasize cogeneration plants to provide both heat and power. District heating has also benefited from centralized planning. In general, European political systems give greater authority to their central governments than does that of the United States. Most European countries have adopted national energy plans. Within each country's national energy plan, municipal governments often have legal authority to site industrial facilities and mandate the use of district heating. In general, European district heating systems have been developed in response to national or local energy plans or incorporated into plans adopted later. There are few district cooling systems in Europe. Some small systems supply cooling, but no citywide systems now do. Most European cities with district heating are located farther north than most major U.S. cities. In addition, Europeans are generally not as accustomed to air conditioning as Americans. Nevertheless, air conditioning has been installed in many new European office buildings, particularly in southern Europe, which suggests that district cooling could be economically viable in many European cities. Analysts have cited six conditions that have fostered the growth of district heating systems in Europe: densely populated urban areas, cold winters, the technical ability to combine heat and power generation, nearby cheap energy sources, high prices for imported oil and gas, and utilities with the capacity to supply adequate heat and power during long winters (Santini, 1981~.