The top three questions to help you decide between onsite natural gas boilers or district energy

Evaluating your energy options and making the right choice for long-term operations and sustainability goals

Choosing the right energy infrastructure for your building is essential. You need to install appropriate equipment to meet your load requirements and it’s important to consider a variety of factors that impact the best investment for you.

Facility managers and building owners have many options to consider when it comes to heating and cooling. In many U.S. cities, it’s common to compare the costs of installing and maintaining onsite natural gas boilers against using a centralized system, like district energy. However, evaluating these two options isn’t always straightforward. To ensure you’re comparing apples-to-apples and making the best energy decision to meet your business objectives, make sure to ask these three key questions:

  1. What are the lifecycle costs?
  2. What are my opportunity costs?
  3. Does this energy option align with our institutional objectives?


Calculating lifecycle costs

Here are our two cents: It’s easy to look strictly at the price of natural gas today and conclude that onsite gas boilers are the right economic choice for your facility. However, this is not always the case. It’s risky to evaluate a long-term investment by only accounting for one variable – fuel costs.

The most effective way to compare between onsite natural gas boilers and district energy is to calculate lifecycle costs. A lifecycle cost analysis is a powerful tool to determine the cost-effectiveness of the different investment options you’re considering. This analysis considers many factors, including the equipment’s purchase price, financing costs and operating and maintaining the equipment over time. Boiler maintenance is often overlooked but can be a significant expense.

A lifecycle cost analysis provides you with the most comprehensive picture of your energy options’ costs and benefits. You can use the data-backed lifecycle analysis to support your decision when discussing energy alternatives with internal stakeholders. Many of us feel the pressure to make long-term investment decisions in an uncertain and challenging environment, where capital and budgets are tight. Using this tool can help you feel confident you’ve done the work to validate and justify your decision through a robust analysis.

In any lifecycle cost analysis of gas boilers versus district energy steam, it’s essential to include and assess the following variables:

  • Financing costs: Both natural gas plants and district energy connections typically require an up-front investment. The investment size will vary mainly depending on the natural gas equipment and connection costs for district energy. Suppose you need to borrow money from the bank to purchase and install equipment or make other modifications to your space, including loan expenses. In that case, you will need to include the capital cost in your analysis. Interest expense is often overlooked and can be quite large, depending on the project’s size and your borrowing rate.Even if your organization has capital in the bank to cover the cost of a new plant, there is always an opportunity cost to using those funds for energy infrastructure, which we’ll cover in Assessing Your Opportunity Costs. You could use the capital to finance projects that are more aligned and core to your institutional priorities or toward revenue-generating investments.
  • Operations and maintenance (O&M): There are always costs associated with owning, operating and maintaining your equipment. O&M could include full-time staff (consider in your analysis the fully burdened labor costs inclusive of taxes, benefits, etc.) or contractors operating the system. It’s essential to check your local regulations to ensure that you factor in the appropriate number of people with the right qualifications/licensing to meet your city’s requirements. You will also need to account for ongoing maintenance, including parts replacements and future upgrades to keep your system running optimally.Natural gas plants tend to require much higher operating costs, especially over time as systems age, whereas district energy requires little to no O&M budgeting.
  • Variable energy costs: As discussed earlier, many facilities managers and building owners look at the low price of fuel and immediately assume an onsite natural gas plant is the answer. It’s undoubtedly a critical input to the decision-making process. But, to assess your variable energy costs, you need to consider not only the commodity itself but also supply costs and any expectations for increases in future consumption, such as an expansion of a hospital wing.While no one has a crystal ball, we are transitioning quickly to a low carbon economy where carbon taxes are more likely to be a reality. Any decision you make today will have consequences for the next few decades. While the fuel costs are a factor for both district energy and an onsite natural gas plant, many district energy companies are evaluating alternatives to gas and fossil fuels. District energy systems can evolve and adapt to different fuel sources as new technologies emerge.And, finally, evaluate the rate structure(s). It’s vital to ensure you fully understand the rates associated with natural gas and district energy. For example, are you being offered a firm or an interruptible rate? If it’s the latter, while often much less expensive, remember that your service can be interrupted at any time and that this could directly impact your operations.
  • Fixed costs: The fixed costs associated with each option need to be carefully assessed. District energy companies tend to charge a capacity rate, a charge to reserve capacity on the system to ensure your load is uninterrupted. Other fixed costs that should be incorporated are taxes and insurance, which can vary depending upon the option you are evaluating.

Assessing your opportunity costs

Even if you have the capital on hand to finance new equipment, there are always opportunity costs with every investment decision, such as losing potential gain from other alternatives. If you spend your cash on a new mechanical room, that leaves less budget to invest in your core operations. For a hospital, this could mean new technologies or equipment to treat patients, upgrades or expansions to tenant spaces for commercial real estate, or a new lab building on a college campus to educate students. All these examples tie directly to an organization’s core mission. Depending upon the required capital cost for an energy infrastructure project, it’s important to think about the investments you’re giving up or foregoing that could better serve your customers or constituents.

In addition to capital, there are opportunity costs associated with space, particularly in cities where it’s limited and expensive. How property managers utilize and leverage space is vital to the bottom line. Typically, mechanical rooms, large chiller or boiler plants and cooling towers take up a considerable amount of precious space within urban buildings. Of course, there could be other valuable uses for your space to consider, from amenities and retail to storage and parking.

Finally, consider the opportunity cost associated with an outage. Outages can impact your tenants’ safety, comfort or well-being of your patients. Interruptible rates are less expensive but provide the utility with the ability to interrupt your service on what could be a peak winter day or a critical business operation. Evaluating the cost of an outage and downtime is vital in assessing which option to select to best meet your energy needs.

Alignment with other institutional objectives

The last piece worth considering is the alignment of your decision with other institutional objectives. While it’s often difficult to put a dollar figure around objectives, positioning your energy investment to align with your organization’s goals can be valuable.

Many companies and institutions today have environmental, health and safety (EH&S) objectives. Energy decisions have a direct impact and correlation with environmental or sustainability goals. As organizations seek to reduce their carbon footprint, an energy infrastructure decision can be heavily influenced by expected emissions output. However, there are other EH&S-related impacts from an energy infrastructure decision, including the safety of occupants from onsite combustion, other onsite mechanical equipment, air quality and many other factors to consider.

As you evaluate your organization or facility’s options, carefully consider how each of them supports or detracts from your objectives. For example, will steam deliver more immediate carbon savings, relative to onsite combustion, to meet sustainability goals? And, importantly, review the policies your local jurisdictions are considering. These financial impacts on your organization shouldn’t be overlooked.

Making the right choice

Ultimately, the factors that lead to your energy infrastructure decision will be unique to your organization’s goals and circumstances. While there are many factors to consider when making an energy decision – from incentive programs, opportunity costs, sustainability objectives and more – a lifecycle cost analysis ensures you are comparing apples-to-apples to make an informed energy decision that meets your institution’s goals and objectives.

Vicinity Energy Secures 20-Year Contract to Expand District Energy Service to Kansas City’s Hotel Phillips

KANSAS CITY, September 8, 2021 – Vicinity Energy, owner and operator of the nation’s largest portfolio of district energy systems, has secured a new 20-year contract with Kansas City’s Hotel Phillips. Vicinity Energy will now expand its existing steam service to Hotel Phillips to also include chilled water used for cooling.

Once the tallest building in Kansas City, the 1930’s Art Deco-style hotel has opted to swap out its onsite chillers (comprising 190 tons of annual self-generated cooling) with piped-in chilled water service from Vicinity’s robust district chilled water network. Chilled water service became a viable option for Hotel Phillips due to a major chilled water expansion project completed in 2016, which expanded Vicinity’s service to the west side of Kansas City’s downtown. Benefits of this transition for the hotel include forgoing the imminent major capital cost of replacing its aging cooling tower, improved operational efficiency and reliability, and eliminating the need to house, operate and maintain (O&M) large onsite chilling equipment. This switch will substantially reduce upfront capital expenses, associated O&M costs and free up space that can now be used for the hotel’s core operations. Additionally, switching to Vicinity’s district chilled water will yield a sizable reduction in the hotel’s water and energy consumption, as well as an estimated 50% cut in carbon emissions, resulting in a net environmental benefit to the city.

Vicinity Energy has invested significant capital in an expansion on 12th Street to connect Hotel Phillips to the current chilled water line that runs down Wyandotte Street. Construction on this expansion began in June 2021 and was completed in August 2021. Construction also includes street repairs, landscaping and beautification, for the benefit of the entire community.

“Vicinity is proud to expand our relationship with the Hotel Phillips to provide clean, reliable, efficient chilled water service to this renowned and historic Kansas City landmark,” said Jaclyn Bliss, chief revenue officer of Vicinity Energy. “Having served the Hotel Phillips with steam for over two decades, this is a natural marriage; Vicinity can help the hotel keep guests cool and comfortable, while also saving the hotel time, money and space that they can now dedicate to providing the unique, superior guest experience that they’re known for.”

“We’re excited to grow our energy partnership with Vicinity Energy,” said Hotel Phillips General Manager John Glenn of Arbor Lodging Partners LLC. “We’ve been very happy with our longstanding steam service from Vicinity, and look forward to the additional efficiency, reliability and peace of mind we can expect from their chilled water service. Keeping our guests comfortable is our number one priority and we’re also so proud to be reducing our carbon footprint in the process.”

Vicinity Energy provides district steam and hot and chilled water services to over 4 million square feet of space in Kansas City. Due to its superior and efficient central cogeneration operations, Vicinity reduces the region’s annual greenhouse gas emissions by 33,000 tons annually, the equivalent of removing 7,100 cars off Kansas City roads each year. To learn more about how Vicinity is further greening its operations, check out Vicinity’s Clean Energy Future plan to reach net-zero carbon emissions by 2050.

About Vicinity Energy

Vicinity Energy is a clean energy company that owns and operates an extensive portfolio of district energy systems across the United States. Vicinity produces and distributes reliable, clean steam, hot water, and chilled water to over 250 million square feet of building space nationwide. Vicinity continuously invests in its infrastructure and the latest technologies to accelerate the decarbonization of commercial and institutional buildings in city centers. Vicinity is committed to achieving net zero carbon across its portfolio by 2050. To learn more, visit or follow us on LinkedIn, Twitter, Instagram, or Facebook.

Media Contact

Vicinity Energy
Sara DeMille
Marketing and Communications

Vicinity Energy Extends 20 Year District Energy Contract with Mercy Medical Center, Including Steam Infrastructure Improvements and Chilled Water Service Expansion

BALTIMORE, March 30, 2021Vicinity Energy, owner of the nation’s largest portfolio of district energy systems, has extended its contract with Mercy Medical Center into the next 20 years. The agreement will build upon the nearly 60-year relationship between both organizations by combining three existing Vicinity steam contracts under a single agreement, implementing improvements to existing steam infrastructure, and significantly expanding chilled water service to the medical campus.

One of the top hospitals in Maryland, Mercy Medical Center’s relationship with Vicinity’s robust district energy system dates back to 1963. Vicinity historically supplied 32,500 pounds per hour of steam to the entire campus and 425 tons of chilled water for the Weinberg Building annually. With this new contract, Vicinity will now supply the Mercy campus with a total of 1,725 tons of chilled water per year from its central chilled water system, quadrupling the cooling output and bringing Mercy Medical Center’s buildings under a single chilled water and steam agreement. Vicinity will also perform annual preventive maintenance for Mercy’s steam mechanical rooms. Vicinity will tie the district chilled water into Mercy’s existing chilled water facility to keep both resources available for added redundancy to the hospital.

Beginning in January 2021, the project consolidation will dramatically improve system efficiency for the Medical Center by reducing energy costs and decreasing annual maintenance spend. The project is expected to be completed in August 2021 and will include the relocation and replacement of 900 feet of steam piping along Saratoga Street from Charles to Calvert. Vicinity will also be expanding and extending its chilled water system 550 feet east along Saratoga Street to serve Mercy and future customers in this section of Baltimore. The upgrade and replacement of existing steam mains and the addition of new chilled water piping will also bring street beautification along the Saratoga Street to Calvert Street, with road repaving and aesthetic improvements to public spaces.

“Now, more than ever, hospitals and medical facilities require 24/7 energy to ensure that their mission-critical operations will continue uninterrupted,” said Bill DiCroce, president and CEO of Vicinity Energy. “With interconnected central facilities, back-up generation and multiple water and fuel sources, our district energy systems’ built-in redundancy directly addresses this need and delivers the reliability that hospitals and our communities depend upon. We are proud to continue our relationship with Mercy Medical Center by providing sustainable thermal energy that supports the lifesaving work of its physicians and staff.”

“Vicinity has been a reliable long-term partner for well over a half century and we are excited to be extending our relationship with them, while also ensuring long-term energy resilience and cost savings for the hospital,” said Dr. David N. Maine, president and CEO of Mercy Health Services, Mercy Medical Center. “The steam and chilled water services that Vicinity Energy provides are crucial to the operational efficiency of our hospital and support our mission to provide excellent and compassionate clinical care to all citizens of Baltimore,” said Robert Beckwith, vice president of support services and construction at Mercy Medical Center.

District energy harnesses the power of a centrally located facility to generate cost-effective steam and hot and chilled water that yields greater efficiency, reliability and carbon reductions over conventional generation, such as onsite boilers or chillers. In Baltimore, over 50 percent of the steam delivered to customers is generated through renewables—resulting in reductions in greenhouse gas emissions by nearly 30,000 tons annually. The downtown Baltimore business corridor is also supplied with reliable central chilled water services, supported by one of the largest ice thermal storage systems in the country.

About Vicinity Energy

Vicinity Energy is a clean energy company that owns and operates an extensive portfolio of district energy systems across the United States. Vicinity produces and distributes reliable, clean steam, hot water, and chilled water to over 230 million square feet of building space nationwide. Vicinity continuously invests in its infrastructure and the latest technologies to accelerate the decarbonization of commercial and institutional buildings in city centers. Vicinity is committed to achieving net zero carbon across its portfolio by 2050. To learn more, visit or follow us on LinkedIn, Twitter, Instagram, or Facebook.

About Mercy Medical Center
Founded in 1874 in downtown Baltimore by the Sisters of Mercy, Mercy Medical Center is a 183-licensed bed acute care university-affiliated teaching hospital. Mercy has been recognized as a top Maryland hospital by U.S. News & World Report; a Top 100 hospital for Women’s Health & Orthopedics by Healthgrades; is currently A-rated for Hospital Safety (Leapfrog Group), and is recognized by the American Nurses Credentialing Center as a Magnet Hospital. Mercy Medical Center is part of Mercy Health Services (MHS), the parent of Mercy’s primary care and specialty care physician enterprise, known as Mercy Personal Physicians, which employs more than 200 providers with locations in Baltimore, Lutherville, Overlea, Glen Burnie, Columbia and Reisterstown. For more information about Mercy, visit, MDMercyMedia on Facebook, Twitter, or call 1-800-MD-Mercy.

Media Contact

Vicinity Energy
Sara DeMille
Marketing and Communications