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OCR for page 39
The Market for District Heating
and Cooling
As of 1982, urban district heating and cooling systems in the United
States had about 7,400 megawatts MW(th) or 25,240 MBtu/h of installed
capacity (OTA, 1982~. There are no comparable figures for the
installed capacity of institutional systems, although one survey of
colleges and universities cited in Chapter 2 found that they have an
annual heat production of 337.5 trillion Btu. Given the number of
systems in the Washington and Baltimore metropolitan area alone, one
can assume that institutional systems have even more installed
capacity than urban ones.
What are the prospects for expanding the number of urban district
heating and cooling systems in the United States? The committee
cannot provide definitive answers to that important question. Recent
studies seem to indicate they could supply up to 10 percent of the
total energy demand in this country by the year 2004 (Teotia et. al.,
1981; Karnitz, 1983~. Even under the best of circumstances, it seems
unlikely, however, that district heating and cooling will supply much
more than that.
THE ARGONNE MODEL
Nevertheless, there is good reason to think that district heating and
cooling will increase its current share of the energy market. A
recent Argonne National Laboratory study (Teotia et. al., 1981)
constructed several scenarios estimating the growth of U.S. district
heating by the year 2004 (Figure 3-1~.
One Argonne scenario foresees district heating accounting for 0.4
quadrillion Btu of energy by 2004 compared with 0.065 quadrillion Btu
in 1982 (see Chapter 2~. This scenairo assumes that nothing
additional will be done to encourage district heating.
A second scenario shows that an additional 1.5 quadrillion Btu
could be provided, using the Argonne model, if Congress clarifies the
IRS tax regulations regarding depreciation of energy equipment and
enacts energy investment tax credits for district heating (similar to
those provided for other energy conservation devices). If, in
39
OCR for page 40
40
Quads
5.0
4.5-
4.0-
3.5-
3.0-
2.5-
2.0
1.5
1 .0-
0.5
/
1'
I Capital Support
/~ Im/proved
I Regulatory
I Financial Incentives
~- Demonstrations
/ I Project Packaging
Technical
Assistance
~ .
Base Case
1984 1988 1992 1996
2000 2004
FIGURE 3-1 District heating market penetration (courtesy Argonne
National Laboratory).
OCR for page 41
41
addition, capital support were provided by state and local
governments, as is done in Sweden, West Germany, and other European
countr ies, the Argonne model shows district heating providing a total
of 3.5 quadrillion Btu by 2004.
If a seasonal load factor of 30 percent is assumed, these growth
figures indicate increases in installed U.S. capacity of 166,800
MW(th) to 311,200 MW(th). A total of 3.5 quads would represent about
5 percent of the 1983 energy demand in the United States (see Figure
3-1 and Tables 3-1 through 3-4~.
Whether district heating will be able to achieve its potential, as
outlined above, will depend on how it is perceived by potential
customers and how well it is able to overcome various impediments to
its implementation (Chapter 43.
Although data on energy savings are not available for district
heating in industrial applications, district cooling, and district
heating and cooling systems that are noncogeneration based, it is safe
to assume that the net energy savings would substantially increase if
these were introduced into the model developed by Argonne National
Laboratory. When these systems are introduced into the model, the
amount of energy supplied by district heating and cooling could reach
about 10 percent of the national energy demand.
The funds spent on district heating and cooling systems will be
retained in urban areas and will be respent in the local economy. The
Department of Commerce estimates a threefold income multiplier effect
(the number of times a dollar will be respent locally) for large urban
areas. In the base case, the local economies will experience spending
of $7.5 billion and in the financial incentives case the local effect
will be $168.9 billion. This is a rather significant amount of
spending in cities as a result of money invested in new district
heat ing and cool ing systems .
System size will vary by city, as will the end user's costs for
thermal energy e These var tables will determine the value to the local
economy of district heating and cooling development (Argonne National
Laboratory, 1981~.
PROSPECTS AND USES
Chapter 2 noted six conditions that have favored district heating in
Europe: densely populated areas, cold winters, nearby cheap energy
sources, high prices for imported oil and gas, the technical ability
to cogenerate, and utilities with the capacity to supply adequate heat
and power during long, cold winters.
Three of the six conditions apply almost as well to the United
States as to Europe. Our cities are densely populated--some more so
than their European counterparts--and many have long, cold winters.
The U.S. technology certainly exists--and has been encouraged by
federal legislation such as PURPA--for cogeneration.
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42
TABLE 3-1 Net Energy Savings from Cogeneration District Heating,
Residential and Commercial Applications
Million Barrels of Oil
Case Quads (Equivalent)
-
Base 0.128 22.07
Improved regulation 0.850 146.54
Financial incentives 1.585 273.25
SOURCE: Adapted from Argonne National Laboratory.
TABLE 3-2 Scarce Fuel Savings from Cogeneration District Heating
Residential and Commercial Applications
Million Barrels of Oil
Case Quads (equivalent)
_
Base -0.102
Improved regulation 1.038
Financial incentives 1.779
SOURCE: Adapted from Argonne National Laboratory
l
-17.58
178.95
306.70
.
1
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43
TABLE 3-3 National District Heating and Cooling Employment Generation
Construction Employment
Expenditure All Job
(Millions of Dollars) Years Job Years
Case
Construction
Base 2,88267,43927,091
Improved
regulation 40,298942,973378,801
Financial
incentives 70,5321,650,449663,001
SOURCE: Argonne National Laboratory
TABLE 3-4 Retention Model
United States--Base Case
$/MMBTUa
$/MMBTUa Capita1 Retained O&M Retained Fuel Retained Retained
11.09 5.55 4.71325 2.77 2.77 2.77 0.27725 7.76
MMBTU sold 325,485 Retention Factors
Total $ retained 2,526,740.06
Local multiplier 3 Capital 0.85
Years 20 O&M 1
Annual cities Fuel 0.1
benefit 379,011.01
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44
TABLE 3-4 Retention Model (continued)
United States--Improved
atorv Case
$/MMBTUa Capital
Retained O&M Retained
S/+BTUa
Retained Retained
23.66 11.83
MMBTU sold
Total $ retained
Local multiplier
Total cities
benefit
Years
Annual cities
benefit
al
10.0555 5.92 5.92
1,886,730
31,248, 002.26
3
93,744,066.78
20
4, 687, 203.34
5.92 0.5915 16.S6
Retention Factors
Capital
O&M
Fuel
United States--Financial Incentives Case
Retained O&M Retained Fuel Retained
23.62 11. 81 10.0385 5.91 5.91
MMBTU sold
Total $ retained
Local multiplier
Total cities
benefit
Years
Annual cities
benefit
3,404'910
56,296, 781.94
3
168, 890, 345.82
20
8, 444, 517.29
MMBTU means 1 million or 106 Btu.
SOURCE: Argonne National Laboratory
.
0.85
1
0.1
$/MMBTUa
Retained_
5.91 0.5905 16.53
Retention Factors
Capital
O&M
Fuel
0.85
1
0.1
OCR for page 45
45
The relative lack of urban district heating and cooling in the
United States can be explained, in part, by large domestic supplies of
relatively inexpensive oil and natural gas that have made the older,
investor-owned systems economically uncompetitive (Santini, 1981~.
Since the Arab oil embargo, however, the United States has become more
interested in reducing oil imports, in increasing energy efficiency,
and in the reducing energy costs of rising fuel prices.
A number of other f actor s have contributed to the successful
implementation or revitalization of some district heating and cooling
systems in the United States. These include a high level of expertise
among project management, low financing costs, commitment from all
participants, and political leadership (see Chapter 5~.
All the above factors vary in their significance from country to
country and, within the United States, from city to city. Some may be
crucial while others count for little in deciding whether to build a
district heating and cooling system and in determining how successful
it will be. They may also vary depending on whether the system is
municipally owned or incorporated, an investor-owned utility, or an
institutional system.
A cold climate, for instance, reduces the relative cost of
distributing thermal energy by extending peak heating demands over a
longer time. It also provides more favorable load factors (ratios of
average to peak demand), which reduces the cost of heat per million
Btu produced (see Tables 3-5 and 3-6 and Appendix D).
In St. Paul, Minnesota, for example, the total of 8,159 heating
degree days yields an annual or capacity load factor of 0.29 (OTA,
1982~. By comparison, Dallas, Texas, has only 2,382 heating degree
days and a load factor of 0.15, half that of St. Paul. Such
considerations were included in St. Paul's decision to create a new
municipally incorporated system to replace an older, investor-owned
utility system (see Appendix A).
As district heating can benefit from a cold climate, district
cooling can profit from the long, hot summers typical of the American
South and Southwest. In Los Angeles, for instance, a district heating
and cooling system provides chilled water for air conditioning and
steam or hot water for heating in Century City. This 180-acre site
includes offices, shops, restaurants, apartments, theaters, and a
hotel. It was built on former Twentieth Century Fox movie lots (see
Appendix A).
An even larger and more complex system serves the Regency Square
shopping center in Jacksonville, Florida. The center cogenerates both
power for electricity and steam for both heating and cooling, using an
absorption unit. Since 1981 the center has shut its system down late
at night and depended instead on electricity supplied by the
Jacksonville Electric Authority. During the day, Regency Square sells
power back to the utility (MERRA, 1981~.
OCR for page 46
46
TABLE 3-5 Comparative Urban Heat Load Density Values
Degrees
Below
Annual Temperature 65°F(18°C)
Heating on Heating on Heating
Degree Design Design Load
Region and City Days Day (OF) Day Factora
Northeast and North Central
Boston 5,621 g 56 0.28
Milwaukee 7,444 -4 69 0.30
Minneapolis-St. Paul 8,159 -12 77 0.29
South and West
Los Angeles 1,819 40 25 0.20
Baltimore 4,729 13 52 0.25
Dallas 2,382 22 43 0.15
Memphis 3,227 18 47 0.19
Seattle 5,185 26 39 0.36
2The load factor is calculated by dividing the total heating degree
days by the product of degrees below 65°F on the heating design day
(the systems designed peak load) times 365 days.
SOURCE: Office of Technology Assessment (1982~.
OCR for page 47
47
TABLE 3-6 Heating Degree Days (Below 65°F; 18°C) and Population
Densities
Annual
Per Capita
Residential
Heating Total Population Space Heat
Degree Population Density Consumption
City Days (103) (people/acre) (106/Btu)
1. Helsinki] 8,4007502.4 17.1
2. Minneapolis 8,40043412.3 42.7
3. Stockholm 8,10075016.2 21.8
4. Buffalo 7,10046317.5 36.1
5. Malmo 6,7002549.5 18.0
6. Hamburg 6,3001,8009.7 19.9
7. Denver 6,3005158.4 32.3
8. Chicago 6,2003,36723.6 31.319
9. Detroit 6,2001,51117.1 31.3
10. West Berlin 6,1002,00016.9 19.0
11. New York 5,000 7,895 41.3 25.6
Metropolitan area.
NOTE: European cities listed are known to have extensive district
heating systems.
SOURCE: J. Karkheck et al. (1977~.
OCR for page 48
48
In some cities, district heating and cooling can be used
successfully because many modern office and other commercial buildings
require heating in one part and cooling in another at the same time.
In addition, modern office buildings require cooling even on days when
most residences do not, because their windows are often sealed shut to
meet the requirements of high internal energy loads caused by lighting
equipment and density of people.
District heating and cooling likewise benefits from the recent
surge in the number of multifamily residences built in or near
downtowns in U.S. cities. Apartment complexes, in particular, create
a favorable potential market for district heating and cooling. The
Century City development in Los Angeles includes two high-rise
apartment buildings (one 28 and the other 20 stories). A third high
r ise is planned.
District heating and cooling for urban residential units need not
be limited to new construction or upper-income dwellings, as in Los
Angeles. In Baltimore, for example, the Cherry Hill public housing
development, with some 1,600 units, was linked to a new district
heating and cooling system using thermal energy produced by a
privately owned solid waste incinerator (see Appendix A).
A similar development may take place in New York City, where an
industrial park has been proposed to replace the Brooklyn Navy Yard; a
district heating and cooling system is planned for the park that would
also supply thermal energy to nearby public housing units. The plans
may depend, however, on whether New York City builds a municipal waste
incinerator at the site. No final decision has yet been made.
Many cities are interested in encouraging the economic development
and revitalization of their downtown areas. New urban residential
units are just a part of this development. Cities like St. Paul,
Minnesota, Piqua, Ohio, and Jamestown, New York, have used their new
or revitalized district heating and cooling systems to attract
business and commercial development to their downtowns (see Appendix
A).
A new, privately owned, for-profit system provides district heating
and cooling to the downtown area in Trenton, New Jersey (see Appendix
A). The system offers heating without the expense of new boilers in
each building, thus permitting new structures to be built and operated
more economically. In fact, four new commercial structures designed
without individual boilers were under construction in 1983.
The Trenton system cogenerates electricity and thermal energy using
diesel generators providing hot exhaust gas to a supplementary fired
boiler that recovers the waste heat. The unique distribution system
consists of three independent loops. Each delivers hot water at a
different temperature to meet the different thermal requirements of
the customers served.
The high-temperature loop delivers water at 400°F, the medium-
temperature loop at 320°F, and the-low temperature loop at 235°F.
The high-temperature water is flashed into steam at the customer's
site by heat exchangers and the low-pressure steam is distributed
OCR for page 49
49
internally. The medium-temperature loop serves new buildings and the
low-temperature loop serves customers near the power plant, mostly for
older buildings with internal steam heating equipment.
In New York City, a privately owned, 46-building apartment complex
in Brooklyn gets its heating, cooling, and electricity from an onsite
cogenerating power plant (Figure 3-2~. Star rett City, as the complex
is called, consists of 20,000 residents plus retail, medical,
recreational, and educational facilities. The project's owners
estimate the cost of Starrett City's thermal energy as about one-third
that of retail rates.
Several older, steam-based systems have recently been revitalized
and expanded by adding hot water. Fairbanks, Alaska, added a new
12,000-foot hot water system in 1982 to its steam-based district
heating system built in 1905 (see Appendix A).
Another opportunity for urban systems may come from combining
several existing institutional ones. The current district heating
system in Copenhagen, for example, began as separate systems that were
later combined. Later still, the new system was expanded to serve new
customers. Now, half of the residential dwellings in Copenhagen
itself and 40 percent of those in the greater metropolitan area are
served by district heating (Trojborg, 1984~.
One can envision similar developments in the United States. In
Washington, D.C., for example, the institutional systems operated by
American, Georgetown, and George Washington universities could be
combined to form one system that could serve a variety of other users
in the northwest part of the city. On the other side of the city, the
Howard University, University of Maryland, and Gallaudet College
systems might be similarly combined. In both cases, the three
campuses are within five miles of one another (see Appendix B).
Such new systems could help financially pressed colleges and
universities generate additional revenue to finance their educational
programs. In a similar vein, Mannheim, West Germany, uses the profits
from its district heating system to help finance the municipal transit
system.
Instead of switching from institutional to urban systems, the U.S.
Army Corps of Engineers has adopted the opposite course. The Corps
has decided to link U.S. Army bases in West Germany to 31 municipal
district heating systems to decrease oil and natural gas use by 98
percent and the number of individual boilers from more than 8,000 to
750 (U.S. Army Corps of Engineers, letter to Senate Committee on
Appropriations, 1984~.
In the United States, four military installations in San Diego--the
Naval Training Center, Marine Corps Recruiting Depot, San Diego Naval
Station, and North Island Naval Air Station--buy steam from Energy
Factors Company, a former subsidiary of San Diego Gas and Electric
Company. The latter had supplied downtown San Diego with district
heating since 1921. Energy Factors, now a public corporation, uses
heat recovery boilers attached to turbines to cogenerate electricity
and steam for its military and other customers (MERRA, 1981~.
OCR for page 50
~50
,',:,;.,~,-,f.'.~::" 2'>-':,<~'',.,.2 ~
FIGURE 3-2 Starrett City: A New York community served by district
heating and cooling (Star rett City Energy Office, Grenadier Realty
Corporation) .
OCR for page 51
51
College campuses represent one of the best potential markets for
district heating and cooling (see Chapter 2~. In fact, the number of
systems on college campuses increased from 25 in 1900 to 150 in 1950
and about S80 in 1982 (NADHCI Newsletter, October 24, 1983~.* Four-
fifths of those provide cooling as well (Figures 3-3 and 3-4~.
The fuels used by these systems vary: 433 colleges reported using
natural gas, 250 oil, 65 coal, 47 cogenerated heat, 2 refuse, and 39
"other" (Figure 3-5~. As the numbers indicate, several use more than
one fuel. This illustrates the flexibility district heating and
cooling systems possess in their ability to use more than one fuel at
a time.
While many universities and colleges have their own systems, others
buy thermal energy from off-campus systems. The Indianapolis Power
and Light Company, for example, sells steam for district heating to
the campuses of both Indiana and Purdue universities in Indianapolis.
The system serves more than 600 other commercial, residential, and
industrial customers.
The above examples illustrate a range of prospects for district
heating and cooling in expanding its share of the energy market in the
United States. The situations described can probably be found in many
other U.S. cities too. Many other possibilities are discussed in
Appendix A, the committee's symposium proceedings, and the references
cited.
DI STM CT HEATING AND C~LING MEETS
To take advantage of the potential markets for district heating and
cooling outlined above, new or expanded systems will have to address
the issues and challenges each market type poses.
District heating and cooling serves commercial, industrial,
residential, and institutional markets. Each has different
requirements for service, payback periods, innovativeness, and
financial participation. These requirements can make planning complex
and time consuming, and can determine whether district heating and
cooling systems are adopted or expanded.
Commercial users generally require reasonable first costs with the
shortest payback periods for energy-related investments. Customer
disruption from construction is often an issue. These concerns can be
minimized by careful planning, community involvement, and modern
construction techniques. The simplest and least costly approach is to
develop the system while installing or replacing other public
services, such as water or sewer systems.
*These figures are based on an NADHCI survey of
universities, of which some 700 responded. These numbers may thus be
conservative.
2,000 colleges and
OCR for page 52
52
550
500
450
400
us
in
350
LL
o
cr
UJ
~ 250
in
200
300
i'
l
Total Growth in College District Heating;
\
l
Steam Only,
150 I_ Hybrid-Steam and Hot Water ~doff
100
50
o
1900 19:10 1920 1930 1940 1950 1960 1970 1980
-
r'
Cut HI
r~_~_
,~-'.W ~
~ Hot Water Only
YEARS
FIGURE 3-3 The growth of district heating on college campuses (NADHCI
Newsletter, October 24, 1983)
.
OCR for page 53
53
500
450
400
UJ
In
11
o
a:
UJ
m
me
350
300
250
200
150
100
so
Total DHC Cool ing Growth
~1
1
l
I /
Distributed Chilled Water Based Systems I I/
' 1i
\i J
Use of Absorpti°n Equips ~j/
L
1900 1 910 1920 1 930 1940 1950 1960 1970 1980
YEARS
FIGURE 3-4 The growth of district cooling on college campuses (NADHCI
Newsletter, October 24, 1983~.
OCR for page 54
54
Co mparative Levels of Types
of Fuels Used in Campus
DHC Systems
Natural
Gas
Oil
FIGURE 3-5
1983).
Coal
Refuse
Other
Fuels used in campus systems (NADHCI Newsletter, October 24,
OCR for page 55
55
Industrial markets require reliability and straightforward
Btu-equivalent comparisons. They want to know which energy system
will provide the most Btu of delivered energy at the least cost.
Industry can often afford to invest in energy systems that serve their
own manufacturing or office requirements. Such systems are smaller
and less costly than urban ones, experience no cash shortfall before
all users are connected, and can be depreciated. Likewise, financial
risk assessments are different for industrial projects, although such
projects pay higher interest rates than those charged municipal or
other nonprofit systems.
Fuel price plays a more important role for industrial markets than
it does for other potential users. Some industries have
low-temperature heat requirements and are thus prospective district
heating and cooling customers. Others require high-quality energy,
which they produce themselves. In this case, industrial processes
often yield large quantities of waste heat that can be captured and
sold to other customers.
Institutional markets are like commercial ones: they require space
conditioning and have few process applications. For colleges and
universities, for example, operating and maintenance costs are more
important than fuel price. District heating and cooling systems can
reduce costs by replacing boilers in each building on the campus with
one central generating plant. Colleges and universities also have
access to the lowest interest rates on loans because, like municipal
governments, they can pledge their "full faith and credit." As for
commercial markets, reliability and the Btu-equivalent comparisons are
important.
There is considerable debate as to whether district heating and
cooling can serve residential customers economically because of
distribution costs. The costs of distributing steam and hot or
chilled water to single-family homes are large. Medium- and
high-density residential areas provide more desirable loads. Any
service for low-density housing will require careful, site-specific
economic analysis and will probably result from expansion of an
efficient system built to serve high-use markets.
Issues for district heating and cooling arise in part from the
flexibility inherent in the systems' development and growth. Even
though each system will produce energy and transport it to end users,
each community will construct its own suitable technical,
institutional, and financial structures (see Chapter 51. Each will
consider a variety of factors, including the following (Hanselman,
1984~:
o system size
0 growth and planning
o system location
o transmission distance
o community dynamics
OCR for page 56
56
o local goals and problems
o alternative ownership schemes
o fuel availability
o national law and policy
o state and local regulation
o end-use requirements (including thermal fluid temperatures)
o load distribution
o alternative financing mechanisms.
When all of the prospects and potential markets for district
heating and cooling systems are evaluated, the most important
considerations are the trends discussed in Chapter 2: urban,
investor-owned utility systems continue to stagnate or decline, urban
systems owned by municipal governments or nonprofit corporations
continue to expand slowly, and institutional systems continue to
expand rapidly.
A number of factors have contributed to the decline of
utility-owned urban systems and the slow growth of municipal ones
(IEA, 1983~:
o Low regulated prices for easily obtained fuels such as oil and
natural gas.
o A misalignment of federal, state, and local legislation.
O Utility disinterest and, in some cases, hostility.
O Lack of public awareness and acceptance.
O The problems involved in siting coal-fired power plants or
waste incinerators close to population centers.
O The uncertain economic advantage of coal because of
environmental considerations.
o The inapplicability of the U.S. Environmental Protection
Agency's (EPA) "bubble policy" for district heating and cooling
systems.
o High interest rates that raise the cost of building a new or
revitalizing an old system.
A number of other specific problems also impede the further growth
of urban district heating and cooling systems. These include the lack
of adequate data, the tax and fee structure, economic regulation by
public utility commissions, and the need for complex institutional
arrangements.
Representative terms from entire chapter:
argonne national
