In an era where energy costs continue to rise and climate concerns intensify, the inefficiencies of traditional power generation have become increasingly difficult to ignore. Conventional power plants often convert only 30% to 35% of their fuel input into electricity, with the remaining energy lost as waste heat that dissipates into the atmosphere. This fundamental inefficiency represents not just an economic burden for consumers and businesses, but a massive squandering of natural resources at a time when both energy security and environmental stewardship have never been more critical.
Combined heat and power (CHP) systems offer a compelling alternative by capturing and utilizing the heat that would otherwise be wasted in electricity generation. By simultaneously producing both electricity and useful thermal energy from a single fuel source, CHP systems can achieve overall efficiencies of 70% to 90%, nearly doubling the energy output compared to separate heat and power generation. This dramatic improvement in efficiency translates directly into reduced fuel consumption, lower emissions, and substantial cost savings for facilities ranging from hospitals and universities to industrial plants and residential complexes.
Beyond the immediate economic and environmental benefits, CHP technology represents a strategic tool for enhancing energy resilience and grid stability. As extreme weather events and aging infrastructure increasingly threaten centralized power systems, distributed CHP installations provide critical backup power capabilities while reducing strain on the electrical grid during peak demand periods. This dual function positions CHP not merely as an efficiency upgrade, but as an essential component of a more robust and sustainable energy future.
District Energy: A CHP Opportunity
District energy systems offer one of the more common and practical implementations of CHP technology. These centralized networks produce and distribute thermal energy (heating and cooling) to multiple buildings through underground pipes. Instead of each building operating its own boiler or chiller, a central plant generates steam, hot water, or chilled water that flows through insulated distribution pipelines to serve entire neighborhoods, campuses, or city districts. This is often done while also generating electricity as part of the process.
District energy systems create significant efficiencies through economies of scale—a single large, modern plant typically operates much more efficiently than dozens of individual building systems. The centralized approach also enables the use of advanced technologies, including CHP, that wouldn’t always be practical for individual buildings. District energy systems can aggregate diverse thermal loads across different building types and uses, smoothing out demand peaks and valleys to maintain steady, efficient operation.
Beyond efficiency gains, district energy offers useful advantages including reduced maintenance burden for building owners, improved air quality by eliminating individual combustion equipment, enhanced reliability through redundant systems, and the flexibility to easily upgrade or switch energy sources at the central plant level. Many systems also provide both heating and cooling from the same infrastructure, maximizing utilization of the distribution network year-round. From urban planning perspectives, district energy frees up valuable building space otherwise occupied by mechanical equipment while reducing the visual impact and noise of individual heating, ventilation, and air conditioning (HVAC) systems throughout a community.
In This Issue
Full issue“There’s over 600 operating district energy systems in the U.S., and that’s in cities, also on college and university campuses, healthcare, military bases, airports, pharma,” Rob Thornton, president and CEO of the International District Energy Association (IDEA), said earlier this year as a guest on The POWER Podcast. “Even our sort of newer industries like Meta, Apple, Google, their campuses are utilizing district energy, because, frankly, there’s economies of scale.”
Thornton noted that district energy systems are not only common in the U.S., but also in Canada, throughout Europe, in the Middle East, and many other parts of the world. However, the prevalence of these systems is not always well-known. “Basically, the assets are largely underground, and so we don’t necessarily have the visibility opportunity of like wind turbines or solar panels,” Thornton said.
Benefits and Innovations Abound
Many CHP systems struggle with variable thermal demand. District energy solves this by aggregating diverse heat loads from residential, commercial, and institutional buildings, creating the steady, substantial thermal demand that allows CHP plants to operate at optimal efficiency year-round. Notably, district energy is particularly valuable in dense urban areas where individual building CHP may be impractical due to space constraints
While individual CHP provides some grid relief, district energy systems with large central CHP plants can offer substantial grid services—load balancing, frequency regulation, and emergency backup power for entire communities rather than just single facilities. Furthermore, district energy often aligns with urban planning goals and can be integrated into new developments or urban renewal projects, making it a natural vehicle for deploying CHP at scale through public-private partnerships.
Meanwhile, new solutions are constantly being developed. For example, as data centers have become more prominent, engineers have found ways to tap into the heat generated at these facilities, turning it from a liability into a reliable asset.
“There’s a proliferation of data centers in Dublin, Ireland, and one of the large hyperscalers was actually told they were not going to get a permit for their data center unless and until they were using the heat for district energy,” Thornton explained. “So, it’s interesting that we’re seeing now recognition that this heat has value and that by itself it’s a cost center, but when the heat can be utilized with either a heat pump to polish and improve the heat or use it for heat and cooling, district energy really becomes sort of the aggregating, integrating technology that can reduce downstream emissions, generate efficiencies, and provide economic benefit both to the grid and to the local community.”
—Aaron Larson is POWER’s executive editor.
