Northeast Clean Energy Application Center

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District Energy Energy

The commercial U.S. district energy industry can be considered in two distinct segments: pre-1960 downtown steam systems, and post-1960 combined downtown district heating and cooling systems. In many cases, the systems in the first segment actually date back to the late 1880's or 1890's when investor-owned utilities were first being formed to provide electricity services in central cities.

In fact, when the original "Edison Electric Utilities" were being formed in major US cities like Boston, New York, Chicago, Detroit, Philadelphia, Baltimore and others, many utility operators found that steam service revenues were very important to the profitability of the early enterprise. In some cases, the offering of a.c. (alternating current) electricity service from the fledgling investor utility required displacement of an in-building dynamo or a dc generator which also happened to produce the steam used for building heating. In order to convince the prospective customer to purchase electricity from the local nascent power grid, and therefore shut down his building generator and heat source, the electric utility had to sometimes simultaneously agree to provide "piped-in steam".

These large urban district heating systems in center city locations (e.g., New York City, Boston, Philadelphia, Denver, Indianapolis, Cleveland, San Francisco, Baltimore, etc) generally distribute steam (78 % of all U.S. heating systems distribute steam versus hot water) to multiple buildings for buildings to use for space heating, humidification, and domestic hot water. In some cities, district steam systems supply high pressure steam (125 to 150 psig) for buildings to operate on-site steam driven chillers for air conditioning.

By and large, these vintage steam systems were originally owned by the local investor-owned or municipal electric utility. The steam distribution was essentially a by-product of electric generation at downtown combined heat and power stations. In the 1960's and 1970's, with the advent of larger power generating stations (both coal and nuclear stations) being constructed in more remote locations and funded by utility consortiums, many electric utilities began to cease electricity production at these smaller scale generating plants downtown. Additionally, the combination of emission restrictions taking hold in central cities and fossil fuel cost escalation with the Second Oil Embargo, a number of investor-owned electric utilities began to make plans divest of steam business assets. Without electricity production and running boilers to only make steam, steam rates began to increase and the businesses needed to re-allocate fixed and variable operating costs to lessen rate impacts on existing steam customers.

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