District Energy Economics
All district energy business models create and harvest value by producing electrical and/or thermal energy and conveying it to a cluster of nearby buildings. The amount of customer value created depends upon how economically and efficiently the district energy provider does this relative to rival centralized energy sources or customer solutions such as on-site boilers and chiller plants, electric space heating, individual heat pumps, or building-scale cogeneration facilities.
Energy Charges: District Energy vs. Onsite Energy
Source: DESP/Xcel Energy 2005 Via International District Energy Association
Since urban energy consumers typically have multiple alternatives for heating and cooling buildings, the economic competitiveness of the district energy option is enhanced by the ancillary benefits including capital savings from avoided investment in building equipment; reduced labor and maintenance expenses due to simplified operating systems; lower costs for water, chemicals, insurance and fuel (including storage); and generally higher operating efficiencies due to scale and better load matching. Additionally, in a dense urban environment, there is often a premium value for space that can be reclaimed for other productive uses by displacing mechanical equipment, flues and cooling towers. In particular, rooftop and penthouse space can be shifted from a cost center for large mechanical systems to profit center for third parties (i.e. cell and microwave towers; restaurants, leasable footprints).
Content Courtesy of International District Energy Association