District energy systems produce energy in the form of hot and chilled water, or steam, at a central plant, and distribute this energy through underground pipeline loops for heating or cooling multiple buildings. Smaller distributed HVAC systems serve clusters of buildings such as hospitals, airports, universities, or sectors within cities.

The technology currently employed consists of "off-the-shelf" cooling (chilled water) and heating (steam or hot water) equipment. Electricity may be generated as a by-product of creating steam (CHP), and in this case, the facilities are referred to as Integrated Distributed Energy Systems.

The following is a schematic drawing of a large scale District Energy System courtesy of the International District Energy Association (IDEA):