Leveraging District Energy to Increase Your Building’s Value


Understanding the Burden of In-Building Thermal Energy Generation

Developers, owners, and operators of commercial buildings in urban areas typically do not think twice about connecting to the local water supply or electric utility. Rather than generating onsite electricity or drilling a well for water on the property, utilities are trusted to provide these commodities for the building owners and operators to use and control at their discretion. This approach, however, is often not taken with thermal energy generation for heating and cooling buildings. So often, the initial inclination is to install equipment like boilers, chillers, cooling towers, or heat pumps at the building to generate the thermal energy needed for heating and cooling. This equipment takes up valuable space inside the building and on the rooftop, requiring significant upfront capital investment. Furthermore, thermal energy generation equipment requires regular maintenance to provide reliable heating and cooling to a building. The ongoing maintenance and equipment replacement cost requires capital that could otherwise be spent on building improvements and amenities.

 District Energy: How it Works

District energy systems supply steam, hot water, and chilled water from a central plant to multiple buildings in a district through a network of underground piping. This eliminates the need for boilers, chillers, cooling towers, or heat pumps in the building. A simple heat exchanger transfers the thermal energy to the building’s HVAC system, eliminating onsite fossil fuel combustion. By aggregating the load of multiple buildings in a district, the equipment at the central plant operates at higher load factors and, therefore, higher efficiencies than equipment at individual buildings. The distribution piping acts as a form of thermal storage, which further smooths the load for the central plant and provides built-in system redundancy. Economies of scale allow for industrial-grade, high-efficiency equipment that is not feasible on an individual building basis, which provides low-cost and reliable thermal energy to the buildings in the district.

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Leveraging District Energy to Increase Your Building’s Value and Success

 District energy, a long-standing asset in cities like Cleveland, New York, and Chicago, as well as on healthcare and college campuses, is rapidly gaining momentum across the United States as developers and municipalities recognize the value it brings to buildings. Building owners gain efficient and reliable energy at competitive and predictable rates and free up building space that would have been used to house the heating and cooling equipment. These spaces can be transformed into gyms, rooftop bars, or additional leasable space.

As an added benefit, by connecting to a district energy system, the building eliminates its onsite greenhouse gas emissions, a key concern for forward-looking tenants and a priority for many regions of the United States. For example, the Washington State Energy Code 2021 bans the use of fossil fuel and electric resistance sources in buildings. In 2022, New York passed NY Senate Bill S9422 that establishes the Utility Thermal Energy Network and Jobs Act to promote the development of thermal energy networks throughout the state. This summer, Boston’s century-old district steam network will begin supplying the city with green steam produced by renewable energy from New England’s electrical grid. These are just a few examples of the shift towards district energy in the United States.

Leveraging valuable assets like district energy can improve the value of the building while also helping to attract and retain tenants in a competitive market.

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