Technologies used for the construction and operation of today's modern District Energy systems are proven and reliable, but success in marketing, financing and gaining customer commitments for a District Energy system must overcome significant market barriers. Some of these constraints include:Major reasons for constructing a system are:
- limited knowledge about modern District Energy systems among potential site managers and investors
- negative perceptions associated with older steam systems
- lack of capital to perform early design and financial packaging tasks
- difficulties in gaining long term purchase agreements for thermal energy from a large number of credit worthy customers.
Businesses in today's market, however, commonly want a two to three year payback on any capital investment. The District Energy industry lacks both the critical mass of proven projects, and the accepted, standardized assessment procedures that it can use as a strong response to this short-term perspective.
- lower life-cycle costs
- higher energy efficiency
- long term environmental benefits.
Technical improvements can help address some of these market constraints. As one example, District Energy systems have high initial capital costs that could be significantly lowered with attention to thermal distribution and piping technology. The distribution network can represent 50 to 60 percent of a system's total development cost. A 30 percent reduction in distribution cost could result in a 15 to 20 percent reduction in the capital cost of a District Energy system. A reduction in system cost and operating economics of this magnitude could potentially double the market penetration prospects for District Energy. The District Energy industry, however, is a community of relatively small owners and operators who have few resources for the significant research and development initiatives needed to realize such improvements.
District Energy systems have potential applications within both commercial and residential markets. In 1990, total primary energy for commercial and residential uses in the United States totaled about 29.5 quads (1 quad = 10E15 BTU = 1.05 EJ). Energy used for space heating, space cooling, and water heating was about 17.3 quads. District Energy systems supplied only about 0.7 quads of this total demand, with most of that supply provided to commercial buildings. As shown below, there is a substantial opportunity for District Energy to expand its share of both commercial and residential end-use energy markets.While it is not realistic to assume that District Energy can capture the majority of these markets, it is clearly feasible for District Energy to capture much more than it currently serves. Over the next decade, building owners and commercial establishments will face increasingly stringent environmental regulations, higher equipment costs, and uncertain fuel prices. Communicating the ability of District Energy to address these problems, while improving its economics and continuing its reliable customer value are challenges shared by the entire District Energy community.