Comment by matt-p

I don't think I ever said it reduced capital cost. I agree (though you might be willing to take more risk on reducing redundancy e.g instead of 2+1 cooling towers you may be more willing to just buy 2).

You cannot put a power station in the middle of a city centre, you can put a datacentre there. The main reason this isn't done more is that it's expensive to build heat network between the 'far out of town industrial area' where they put the heat sources and the city centre where the heat consumers are.

I don't know why a municipality is involved, but regardless you can simply install a backup heat source and/or add a mix of heat suppliers to the network. Backup gas boiler or similar is not that problematic or expensive to add particularly because you don't need to add redundancy as it's just there for a backup scenario.