Capacity design in district energy systems with thermal energy storage – a new planning paradigm

Planning future district energy systems is increasingly challenged by uncertainties in demand growth and spatial development. Conventional planning resolves this by oversizing infrastructure to meet projected peak demand – tying up capital in assets used only a fraction of the year, with reactive upgrades still required where demand develops beyond projections. The result is a persistent trade-off between cost, emissions, and resiliency. This study proposes a new paradigm for capacity design that treats thermal energy storage (TES) – and particularly strategically placed decentralized TES (DecTES) – as an integrated design element that adds a degree of freedom to the capacity design problem. While centralized TES reduces peak production requirements, DecTES additionally resolves transmission bottlenecks by absorbing peak demand locally, adding a spatial dimension to system flexibility. The approach is demonstrated on district cooling and heating systems at Stanford, California, and Aalborg, Denmark. At Stanford, existing TES reduces OPEX by ~12% and CO₂ emissions by ~7% annually; doubling TES potentially adds ~2% OPEX and ~1.5% CO₂ savings, and DecTES enables 20-23% local demand growth without infrastructure expansion. In Aalborg, existing TES delivers ~10% OPEX savings and ~17% CO₂ reductions; DecTES enables 20-28% local demand growth at baseline and 54-62% under adaptive operation, potentially adds ~2.5% OPEX and ~5% CO₂ savings, and phases out decentralized fossil peak production. The analyses also indicate derived electricity-grid benefits, with connection capacity reducible by 24% and 39% respectively. Unlike conventional peak capacity, TES delivers year-round value from day one – reducing planning risk regardless of how demand unfolds.