The International District Energy Association claims that district energy: improve energy efficiency, enhanced environmental protection, fuel flexibility, ease of operation and maintenance, reliability, comfort and convenience for customers, decreased life-cycle costs, decreased building capital costs, and improved architectural design flexibility. In the U.S.A. most of the installed district energy systems are found in buildings such as colleges and universities, healthcare installations, government installations, airports and community utilities, as well as industry. All these applications have proved the advantages of district energy. However, for typical neighborhoods in small cities in the U.S.A., the dispersion of the dwelling imposes additional challenges to the economic feasibility of district energy for residential applications. This paper presents results from the analysis of comparing single homes with standard/decentralized HVAC systems (air conditioning and furnace) with the same homes connected to a hypothetical residential district energy system. In order to obtain the energy consumption of the standard HVAC and of cooling and heating loads for the simulation of the district energy, the software Building Energy Optimization (BEopt) was used to simulate a hypothetical home. The analysis is based on a variable number of residences coupled to the district energy system in order to determine the operating costs and capital costs as a function of the number of homes. The operating costs and capital costs were used to present results of the economic analysis based on the internal rate of return (IRR). The IRR is used as a measure of the discount rate needed to compensate the net present value of negative cash flows with positive cash flows associated to the district energy system. Results shows the impact that the cost of the piping system has on the economic feasibility of the district energy system.