District energy systems are an economical option for heating fast-growing Canadian cities and quickly helping municipalities to decarbonize, a report by the RBC Climate Action Institute states.

Already used in cities such as Toronto (Enwave), Vancouver (Creative Energy) and London, a district energy system employs networks of pipes connected to a heat-generating node which distributes heating for buildings. University campuses, commercial buildings, government facilities and urban neighbourhoods with aging infrastructure have been linked to district energy systems.

Traditionally powered by steam generated from natural gas, modern solutions offer an alternative which can eliminate the need for fossil fuels. District energy can tap into heat from warm sewer water or biomass, and use heat pumps or heat exchangers powered by electricity to transit the energy through the pipe network.

Citing an analysis by the Climate Action Institute of a study by engineering consultants RWDI, building emissions in Canada’s largest cities could be cut 36 per cent annually by 2030 if 27 per cent of all new building floor space is connected to a district heating system powered by low or zero-carbon energy sources.

“You have high capex costs, but overall, you’ll have lower operating costs and less demand on your grid as well, because a lot of the district energy systems are designed to be very energy efficient,” Myha Truong-Regan, head of climate research at the RBC Climate Action Institute, said in an interview with Sustainable Biz Canada.

Helping cities in a cash and climate crunch

The Climate Action Institute says municipalities are searching for tools that can shift the high costs of paying for and greening infrastructure from taxpayers to ratepayers.

Truong-Regan said an option for municipalities is to own and operate the district energy assets themselves, accessing an essentially free and reliable heat feedstock. This enables cities to set their own rates for market flexibility and competitiveness.

“System owners take on the initial capital risk of designing and building the infrastructure. These capital costs, in addition to operating costs, are directly passed onto ratepayers once a system enters operations,” the report states. “System owners are compensated for the asymmetric risks at project onset, through 30 years of steady, predictable and recession-proof stream of revenue.”

Other financial efficiencies can be realized from being freed from or lowering natural gas costs, and the sophisticated technology behind district energy which requires fewer people to maintain compared to steam-powered systems, Truong-Regan explained.

A frame of reference for the cost of a district energy system was given by Truong-Regan: the Creative Energy Sen̓áḵw District Energy System covering two million square feet of floor space is estimated at $26 million. Compared to the billions of dollars needed to deploy carbon capture in Alberta’s oilsands, it is a more affordable decarbonization option, she said.

As over 90 per cent of district energy systems in Canada are powered by fossil fuels, according to a figure provided by Truong-Regan, green retrofits would cost too much for economical decarbonization. But the Climate Action Institute sees a good opportunity for growing cities without district energy such as Milton, Waterloo, Calgary, Langley and Longueuil to adopt the use of these systems.

Mid- to high-rise buildings and mixed-use buildings would also provide opportunities for connection.

It addresses questions over electrical load, she said, and creates more attractive returns to developers.

Policies to push for district energy

To encourage adoption of district energy systems, the Climate Action Institute laid out five policies.

The first is bylaws mandating connections in every development, similar to regulations in Vancouver. If all developers must connect their projects to district heating systems, it can scale-up demand.

While it may restrict choice, developers will not incur costs which have to be passed on to the asset owner or homeowner, Truong-Regan said.

Other solutions include:

• promoting integrating district heating in new projects, such as requiring developers to consider district energy systems when planning new neighbourhoods;
• rewarding developers that use district energy by refunding some development charges or fast-tracking applications;
• pointing out where district energy systems could be built in municipal energy plans to attract developers interested in district energy systems; and
• requiring real estate developers to construct “district energy-ready” buildings.

Though district energy systems are not “silver bullets” to mitigate the effects of climate change, they do hasten the pace of building-sector decarbonization, Truong-Regan said. It will be a matter of political will to encourage greater, faster adoption, she concluded.