This paper presents a study on the utilization of ocean thermal energy in Dalian. Coastal areas are ideal sites for the application of seawater-source heat pump technology (SWHP) to provide district cooling and heating. The technical requirements and the scheme design in the context of marine climate are discussed. A government-commissioned feasibility study of a proposed district energy site in Dalian, with an estimated 68 MW heating load and 76 MW cooling load plant capacity is then described. The economic, energy and environmental impacts are analyzed. In order to get a better understanding of economic justification and benefits of two different systems, annual cost (AC) and net present value (NPV), are used. A series of sensitivity analyses are undertaken to investigate the magnitude of the effect of the parameters variation on cost calculation. The numerical simulations of seawater temperature field are performed by using a two-dimensional convection-diffusion equation model to evaluate environmental impacts. Study indicates that Dalian has great potential for applying SWHP system. It is both technically and economically feasible because of the favorable geographical location and urban environment. (c) 2007 Elsevier Ltd. Ail rights reserved.