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350 million building units connected to district energy networks by 2030, provide about 20% of space heating needs

Part of Technology and innovation pathways for zero-carbon-ready buildings by 2030

About this report

This analysis is part of a series from our new report, Technology and innovation pathways for zero-carbon-ready buildings by 2030, and provides the strategic vision of experts from the IEA Technology Collaboration Programmes (TCPs) on how to help achieve some of the most impactful short-term milestones for the buildings sector outlined in the IEA’s Net Zero by 2050 Roadmap; each report’s title reflects one of these milestones. Learn more about the report and explore the TCPs.

Highlights

District energy networks are a key stepping stone to meeting zero-carbon heating and cooling, with 350 million connections in cities globally targeted by 2030. The expansion of these systems is projected to provide about 20% of global space heating needs. That compares to around 15% of space heating needs in 2020. In other words, further expansion of district heating network plays a crucial role in achieving net zero emissions by 2050. District energy networks are fuel flexible, thus, they future-proof heating and cooling supply choices.

In existing and new networks, integration with low-temperature district energy (flow temperatures of 70°C and below) can boost the penetration of heat pumps, solar thermal, and other renewable energy sources such as deep geothermal. It can therefore complement several other IEA milestones on the road to Net Zero Emissions by 2050 (NZE Scenario) such as 400 million dwellings using solar thermal and 600 million heat pumps deployed by 2030.

Directly or together with large-scale heat pumps (powered by green electricity) and thermal storage systems, district energy enables extensive use of secondary heat sources that are already available from renewable energy sources (e.g. river and sea water), urban and tertiary sector waste heat (e.g. sewage water, data centre cooling, underground metro cooling) and industrial waste heat (e.g. from steel and paper industries). In the near future, excess heat from carbon capture and Power-to-X processes, an umbrella term for the conversion of electricity into an energy carrier or material, will also play a role. Where necessary, temperatures are increased by heat pumps (large-scale or at the building level) and heating/cooling is distributed by network.


Relevance

District energy networks are a cost-effective solution for meeting net zero emissions for dense urban environments. Once installed, the district energy infrastructure can utilise heat from any source so that investment in heat networks allows for future fuel flexibility. Consequently, existing thermal networks can progressively decarbonise just as electricity networks can.

District energy networks unlock the potential for thermal renewable energy sources, e.g. renewably supplied heat pumps and recyclable thermal energy. They also provide for individual and community involvement in the evolution of sustainable local networks with both consumers and prosumers (where consumers can become producers depending on real-time circumstances).

Modern district energy systems help to deliver energy security, increasing independence from energy imports, while also creating jobs, and raising associated tax revenues and regional revenues.

Together with storage, district energy networks offer substantial balancing of future electricity systems with high power market saturation.

District energy encompasses a very wide range of systems that differ in magnitude, type of buildings/communities served, climatic circumstances, utilisation of heat source(s), operational temperatures and pressures. 

Current state

District energy networks are already a proven solution with effective systems in many countries, and currently cover around 10% of global heat demand in buildings. In some countries, district heating is already the majority heat supply. For example, in Denmark, 65% of heat demand in buildings is covered by district heating. There are many district energy systems in operation that show the efficacy of low-temperature district heating as a way to maximise the integration of renewable and secondary energy sources, demonstrating the flexibility of district energy solutions. District cooling, while less prevalent than district heating, is emerging as a sustainable alternative to conventional air conditioning systems. Some countries are developing both district heating and cooling networks, including those with very different climates, such as Spain and Finland.

Many countries (importantly this includes countries with very little tradition of district energy) are trying to increase the penetration of district energy, often accelerating this with financial support programmes.

Over the lifetime of a district energy system, consumers linked to a network are likely to pay less for their heating as a service than non-district consumers who bear the local investment costs, maintenance and risks themselves.

Evolution of the environmental impact on district heating production in West Copenhagen, 1990-2020

Openexpand

Challenges

Despite being cost-effective over the long term, district energy infrastructure is highly capital intensive for utilities, and costs are often even more in countries with non-mature district energy markets. Long-term cost-benefit methods, as well as support measures, are required to overcome this discrepancy.

There is often a skills shortage in countries that are trying to establish district energy systems, and in particular for workers who can deliver new, or adapt existing, systems that integrate low/zero-carbon technologies. This underscores the need for the ongoing research effort being delivered by the IEA District Heating and Cooling (DHC) TCP, and training programmes such as the International DHC+ Summer School.

District energy systems are based at a town or city level so that there is a dearth of structured data and absence of the political and lobbying “clout” of national level electricity companies. They may also lack the resources and skills base to integrate new techniques such as Artificial Intelligence that could help reduce their operational costs.

New district energy systems based on non-fossil fuels are evolving too slowly; policy frameworks tend to be structured according to the fossil fuel-based society. In order that fossil fuel district heating can be phased out before 2050, research work on integration of renewables needs to continue.

Existing district heating systems that need to transition (to lower temperature operation, and to integrate more renewables) often lack the resources to do so quickly enough, and regulatory frameworks lack the economic drivers for decarbonisation. Research efforts devoted to such transitions need to stay a major focus over the current decade.

The transition from old, often very large, district energy networks presents a significant organisational and financial challenge. This is an issue of scale that requires time.

Greater attention to the correct commissioning and operation of internal heating systems on the customer side of substations is required in order to derive the full benefit from district heating systems.

The benefits of district energy systems are also not fully known across the buildings construction industry. For instance, not using available low-carbon heat sources within heat networks will likely increase electricity demand and costs and delay decarbonisation. The contribution of heat networks to a future integrated sustainable energy system needs to be highlighted more frequently.

Innovation themes covered by the IEA TCPs
Policy recommendations

Strategies

Policy recommendations

Market creation and standards

 

Develop and deploy zero‑carbon‑ready building (ZCRB) codes by 2030

Building codes. Advance national building energy codes moving toward deep energy efficiency, zero-carbon-ready metrics, renewables integration and flexibility to take into account the corresponding evolution of DHC networks and the electricity grid.

Enable the expansion of district heating with renewable energy by mandating connections in relevant areas

Regulations. Exploit the value of large heat pumps, large-scale solar DH systems together with seasonal storages, deep geothermal for heat networks and the circularity which might derive (as opposed to individual building level plant) in high-density areas through mandating connections.

Expansion of energy from recycled sources (e.g. waste heat)

Regulations. Mandatory connections in relevant areas.

Phase out fossil fuels in district heating systems

Regulations. Implement the progressive phase-out of fossil fuels in district heating, starting with the closure of coal-fired plants that are not operating in combined heat and power (CHP) mode. Plan for the transitioning of coal and natural gas-fired CHP that is supplying district heating networks. No new coal-fired plant should be built.

Adopt new metrics for technology comparisons in regulations

Regulations. Adopt new metrics for comparing technical solutions, including the ones proposed in the ZCRB concept and beyond, such as resource exergy to supersede primary energy as basis for comparisons.

Planning instruments

 

Integrate district energy planning and national/local planning

National and local energy planning. Plan for integrated approaches, e.g. value the role of district energy networks for electricity balancing services; and for enabling and valuing the role of digitalisation and automation. Where appropriate establish local planning for replacement of gas-boilers by district heating. National plan to identify which districts/cities would be best served with district heating and which by individual solutions.

Economic and financial instruments

 

Deploy financial instruments to deploy clean district heat

Incentives. Include district heating in buildings renovation incentives schemes, defined on a life cycle carbon and economic assessment with respect to alternatives (e.g. individual heating, electricity grid expansion and hydrogen).

Develop economic drivers that favour decarbonisation of district energy systems

Incentives. Carbon tax or market support in district heating networks especially to compensate for large upfront investments.

Cooperation-based instruments

 

Develop open-source platforms and tools

Local open-source information databases. Develop online energy grid maps to communicate opportunities to connect to current or future renewable energy grids or district heating/cooling networks.

Organise participative workshops

Stakeholder engagement. Municipalities to engage with and motivate local residents and utilities into assisting with the decision-making process for new district heating connections (communication, project management, process guidance, co-creation initiatives, strengthening mandatory building inspections and energy audits).

Enable local cooperation-based programs

International collaboration across cities. Adopt “twinning” cities for knowledge transfer and/or mutual learning.

Public support to R&D

 

R&D to test enhanced flexibility options and system optimisation

Allocate funding. Provide financial resources for research and innovation for comparing and testing power-to-heat conversions with other storage solutions. Allocate funding for research and innovation to optimise district energy systems operations, fully exploiting the potential of digitalisation in the buildings, the network and the generation mix.

Education and training

 

Capacity building

Capacity building. Enable support for establishing training programmes, apprenticeships, knowledge sharing, “twinning” cities for knowledge transfer and/or mutual learning.

Analysis