District Energy - 2005 Third Quarter

Members
Speak Out

Is District Energy

Too Risky?

systems. Simply stated, the investment in a long-term technology like district energy can only be expected when the long- and short-term energy climate is predictable.

Our industry must address this challenge in three ways:

1. We must emphasize the reliability of district energy systems.

2. We must increase the efficiency of systems so they are the choice of cost-conscious planners and developers.

3. We must make our systems adaptable to fuel switching so that we can always use the lowest-priced fuels.

Editor’s Note: “Members Speak Out” runs in periodic issues of District Energy magazine. Its purpose is for a member to briefly share his/her district energy experiences and opinions – and obtain feedback from fellow members. If you have comments on this column, please email David Wade at the address below – or email IDEA with your response for publication in the next issue.

Ask anybody these days and they will tell you that energy prices are going to keep going up well into the foreseeable future. Ask engineers and they will tell you that district energy systems have been around for more than a hundred years; they are reliable and provide energy at stable prices. But ask utility executives to develop a district energy system, and they will tell you it is too risky.

District energy technology is not risky; it’s the overall energy environment that is risky.

How can a proven technology that stabilizes energy prices be considered risky? Of course, district energy technology is not risky; it’s the overall energy environment that is risky.

In the late 1970s, the U.S. Department of Energy and the U.S. Department of Housing and Urban Development sponsored feasibility studies to look at district energy development in numerous cities throughout the country. At that time, the oil embargo of 1973 was fresh in people’s minds, and the combination of inflation and rising energy prices made the future look bleak.

Spreadsheet models were new then, but we used them to demonstrate how investments and capital-intensive projects like district energy and trash-to-energy plants would be financially attractive when compared to oil and natural gas expected to increase in price at ten percent to fifteen percent per year. Even with long-term

This energy climate has dampened capital-intensive energy conservation investment and development of district energy systems.

David W. Wade, P.E., is
president of RDA Engineering
Inc. in Atlanta and has been
an IDEA member for more
than 20 years. He has served
on IDEA’s board and is a past
chairman of ASHRAE’s
national technical committees
dealing with Building Steam and Hot Water
Systems and District Heating and Cooling.
Wade may be reached at dww@rdaeng.com.

Column also available at
www.districtenergy.org/de_magazine.htm

benefits, most capital-intensive energy projects still faced a short-term deficit before savings were realized. Clearly, the financial feasibility of capital-intensive projects depended on long-term escalation of competing energy sources.

As we moved into the 1980s, few communities embraced the idea of district energy. Why? The double-digit inflation predicted for natural gas and oil did not occur. In fact, we began a roller-coaster ride where the “I-told-you-so” crowd was able to demonstrate that the price of energy was going down, not up. Current NYMEX natural gas prices are approaching $10.00 per MMBtu for January 2006; the 2005 price was $6.20, 2002 was $2.55, 2001 was $9.98, and 10 years ago it was $3.99. Care to place a bet on what it will be five years from now?