Sustainable Urban Energy Planning: Development of a District Energy Business Model in Canada

District energy is widely regarded as an integral part of the sustainable energy transition for its ability to utilize sources of low-carbon heating and cooling, provide energy security, resiliency, and integrate high shares of renewable energy into the energy system. In the absence of clear provincial and national policy and regulatory frameworks in Canada business models have struggled to get off the ground and compete with other more institutionalized energy production technologies. Although many successful models for district energy system implementation can be found around the world, Canada has seen limited uptake and has been unable to achieve larger scale buildout to realize economies of scale and capture the full benefits of district energy. With shifts to energy market liberalization and increasing reliance on private capital to provide public infrastructure the business model for district energy must adapt. This paper seeks to define the business model and identify the barriers and challenges to larger-scale adoption in the context of energy liberalization. The development of DE in four European countries are reviewed to understand the different contexts and key factors that can be adapted to Canada. Interviews with customers of district energy systems in Canada are analyzed to better understand stakeholder decision-making processes and values in relation to energy to inform the business model. The paper concludes with a literature review and discussion of the components of the business model and different methods in which risks can be mitigated. This study finds that under market liberalization district energy business models become more complex and difficult to implement especially at a larger-scale, although not impossible. Clear targets and supports from federal and provincial governments for city-scale district energy systems are needed to legitimize its use and level the playing field with alternatives. Institutional barriers need to be addressed and adequate carbon price is needed to allow district energy to be competitive with conventional sources of thermal energy.