District Energy

District Energy

By Alannah Bird


The household sector accounts for 15 to 25 percent of energy use in developed countries and an even higher share in developing countries6. This rate is increasing globally year-over-year, despite government intervention to curb consumer demand. There are a number of products driving energy consumption in a home, but two of the biggest drivers are space heating, at 32% of household energy use, and space cooling at 13%.

Certain solutions for heating and cooling are better than others when it comes to their impact on the environment. The majority of North American households still depend on a central furnace to provide heat, which can be powered by electricity, natural gas, or fuel oil. Air cooling, for the most part, is done through central air conditioning. For homes that rely on centralized systems, as opposed to space solutions, the energy wasted can be enormous, as a large amount of space may not even be in use while temperature is being regulated.


District Heating and Cooling Explained

A system that has been adopted in cities worldwide is district heating and cooling systems. District heating and cooling is produced in one or several central production facilities and distributed to buildings through underground pipes. There are large efficiencies to be gained from generating heating and cooling from a distribution source rather than allowing consumers to generate independently in their own homes. District energy systems use 90% of energy generated on site. Beyond that, waste energy can be recycled, households no longer have to maintain their own boilers, and for the most part heating and cooling bills should be less expensive for the end consumer1.

District heating is not a new innovation. In fact, the first commercially successful district heating system was launched in LockportNew York, in 1877. The modern innovation behind it has come with the advent of smart technologies, and the optimization of the grid through heat meters, heat exchangers, and monitoring systems. These systems allow for real-time usage data in order to better manage demand peaks, and create efficiencies that allow energy providers to reduce operational costs and shorten capital payback periods.

The other innovative trend is a growing use of renewable energy sources to fuel the district energy system. Energy in these plants can be generated by a variety of renewable and non-renewable sources.  Examples of growing trends in sustainable sources include:

1.     Waste-heat, which is the incineration of combustible waste

2.     Industry excess heat –  using the excess heat created by heat intensive industries

3.     Renewables, including biomass, geothermal, and solar based energy

Why don’t we use District Heating everywhere?

There are environmental risks to implementing district energy systems. It is impossible to know what technological advancements will take place that may displace district energy. There are serious environmental consequences of constructing and maintaining these large-scale subsurface infrastructure systems, and if they go obsolete before the payback period the cost to society would be significant.

The main explanation for low penetration to date is the relatively high cost to build when compared to conventional gas or electric-based heating systems. Constructing a new district energy system is risky, and that means there are typically very few private investors willing to provide the capital required to build. It should also be noted that district energy does not always make financial sense. Studies have shown that district energy is best suited for high density and mixed-use developments, as this allows a central plant to operate more efficiently. Plants that serve only one type of building will have peak loads and low loads typically at the same time every day. Networks in low density environments have to serve fewer units over a larger area of land, which would increase the cost for consumers and the upfront capital requirements11.

Constructing a new district energy system is risky, and that means there are typically very few private investors willing to provide the capital required to build

The Denmark Example

The extensive use of district heating in Denmark is one of the main reasons why it has been able to reduce its carbon emissions over the past several decades. More than 60 % of heating in private Danish houses is provided by district heating. In 2035, their goal is for all electricity to be based on renewable energy.

In recent years, the share of renewable energy in district heating has increased significantly, as demonstrated in the figure below:

Figure 1: Fuel composition for district heating, percentage of distribution 1990-201110

AffaldVarme Aarhus (AVA) is one of Denmark’s major district heating suppliers, and it has recently replaced more than half of its 56,000km of network with Kamstrup Smart Meters. By making this switch, it has reduced its water loss by 100 m3 a day. The utility expects to reduce its payback period by 50% on its EUR 33 million investment9.


With the increase of global GDP and urbanization, household energy use is rising and poses a major threat on the environment. Heating and cooling homes accounts for a staggering amount of this household energy use, and that amount could grow with the changing global climate. Smart-technology enabled district energy systems could be part of a solution to this complicated problem. These systems will allow certain regions to optimize energy use, inform consumer decisions, and will enable the use of recycled and renewable energy sources.


  1. Pierce, M. 1994. Competition and cooperation: The growth of district heating and cooling, 1182–1917. Proceedings of the International District Energy Association LXXXV:19–29.
  2. Zinko,H.,B.Bøhm,H.Kristjansson,U.Ottosson,M.Rämä,andK.Sipilä.2008.District heating distribution in areas with low heat demand density. Report No. 2008: 8DHC-08-03,AnnexVIII,InternationalEnergyAgency,Paris,France.
  1. The role of district heating in future renewable energy systems Energy, Volume 35, Issue 3, Pages 1381-1390 H. Lund, B. Möller, B.V. Mathiesen, A. Dyrelund
  2. Households and the Environment: Energy Use. Statistics Canada, 2007.
  3. Whitehead, Frederika. “Lessons from Denmark: how district heating could improve energy security.” The Guardian, Guardian News and Media, 20 Aug. 2014, www.theguardian.com/big-energy-debate/2014/aug/20/denmark-district-heating-uk-energy-security.
  4. “Buildings sector energy consumption.” International Energy Outlook 2016, U.S. Energy Information Administration, 2016.
  5. “District Energy Workshop.” Energy Services Acquisition Program (ESAP), Public Services and Procurement Canada, 2017.
  6. IRENA (2017), Renewable Energy in District Heating and Cooling: A Sector Roadmap for REmap, International Renewable Energy Agency, Abu Dhabi. irena.org/remap.
  7. New possibilities with smart metering. Kamstrup, 2017.
  8. District heating- Danish and Chinese Experience. Danish Energy Agency, 2016, ens.dk/sites/ens.dk/files/energistyrelsen/Nyheder/district_heating_danish-chinese_experiences.pdf.
  9. District Energy Review. HH Angus Consulting, Nov. 2017.

About the Author

Alannah Bird
Alannah BirdSREIC Co-President
Prior to joining the MREI program, Alannah worked for a development advisory company that manages major mixed-use developments in Ottawa, Canada.
Alannah was also founding member of Bridgit, a successful software startup that simplifies issue tracking for Developers and

Recent Tweets


Training Courses

Contact Info

Schulich School of Business 111 Ian MacDonald Blvd North York, ON M3J 1P3

Recent Posts