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District Heating

Infrastructure deep dive
Not on track
Shutterstock 1024717066

About this report

In 2021 district heat production increased by around 3%  compared with 2020 and met nearly 8% of the global final heating need in buildings and industry. District heating networks offer great potential for efficient, cost-effective and flexible large-scale integration of low-carbon energy sources into the heating energy mix.  

However, the decarbonisation potential of district heating is largely untapped, as fossil fuels still dominate district network supplies globally (about 90% of total heat production), especially in the two largest markets of China and Russia.  

Aligning with the Net Zero Emissions by 2050 Scenario requires significant efforts to rapidly improve the energy efficiency of existing networks, switch them to renewable heat sources (such as bioenergy, solar thermal, heat pumps and geothermal), integrate secondary heat sources (such as waste heat from industrial installations and data centres), and to develop high-efficiency infrastructure in areas with dense heat demand.  

CO2 emissions

China, Russia and Europe are responsible for more than 90% of global district heat1 production.  

In 2021, due to growing demand, CO2 emissions from district heat production accounted for about 3.5% of global CO2 emissions, an increase of 3.5% on 2020 and 15% on 2010. Over the past decade, the global average CO2 intensity of district heat supplies has been stable. Aligning with the Net Zero Scenario requires the CO2 emissions intensity of district heat production to be at least 20% lower by 2030 compared with 2021.  

CO2 emissions intensity index for district heat production and heat production by country and region, 2021

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Energy

Annual energy supplies to district heating networks in the Net Zero Scenario, World, 2010-2030

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In 2021 the amount of heat produced for district heating networks globally was nearly 16 EJ, about 10% more than a decade earlier. However, district heating supplies still accounted for only about 8% of total final heat consumption globally. 

Nearly 90% of district heat globally was produced from fossil fuels in 2021 – predominantly coal (over 45%), especially in China, natural gas (about 40%), in particular in Russia, and oil (3.5%) – down from about 95% in 2000. Renewables represented less than 8% of global district heat supplies. While bioenergy and municipal waste account for the large majority of renewable district network supplies, large-scale solar thermal systems and heat pumps are seeing growing interest. At the end of 2021 almost 300 solar district heating systems representing 1.6 GWh were in operation worldwide. 

Europe currently leads renewables integration in district heating, with about 25% of its district heat supplies produced from renewable sources. Particularly high rates are observed in countries such as Sweden, Denmark, Austria, Estonia, Lithuania, Latvia and Iceland where more than 50% of district heat is fuelled by renewables. 

In the Net Zero Scenario, district heating continues to supply a similar share of global final heat consumption, although energy efficiency improvements in district heating networks and in building envelopes allow for a decline in district heat supplies by 2030, down by around 20% compared with 2021. In the same period, renewable energy used in district networks almost doubles from current levels, with renewable sources (including renewable electricity) representing almost one-fifth of district heating supplies by 2030. 

Activity

Global annual heat deliveries to end-use sectors through district heating networks, 2000-2021

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Many buildings and industrial sites rely on district heating, ranging from large urban networks in Beijing, Seoul, Milan and Stockholm to smaller networks such as university and medical campuses.  

Around 40% of the heat generated globally in district heating plants is consumed by the buildings sector. Globally, district heating supplies a relatively small share of the heat used in buildings, at only 11% of the sector's final space heat consumption – a share that has remained impressively constant since 2000, considering that the floor area increased by 65% during the same period. However, while the global average share is low, district heating does cover a high proportion of the heat delivered in buildings in some European countries, such as Denmark (around 65%) and Sweden (above 45%), as well as in Russia (about 40%) and China (above 15%). 

Around 40% of the heat generated globally in district heating plants goes to the industrial sector, which also affects a network’s ability to reduce distribution temperatures, as industrial users often require high-temperature heat. Using heat pumps to increase temperatures at local substations can offer solutions in some cases. China leads industrial district heat use, accounting for about 55% of the global total in 2021, up from around 35% in 2010. By contrast, Russia’s share fell to less than 25%, down from more than 35% in 2010. 

Deployment

The market is expanding, and new projects were announced in 2021 and the first half of 2022, including some with low-emission energy sources.  

In 2021, 44 new large-scale solar heating systems were built, with a total capacity of 142 MWth. Denmark hosts the largest solar thermal district heating capacity. However, due to a policy change, the Danish market collapsed in 2020, with only one new solar district plant and three extensions built in 2020 and only one new system commissioned in the country in 2021. The largest developments in solar thermal district heating in 2021 occurred in China, which represented three-quarters of the global market. 

  • In Europe, 13 new geothermal heating and cooling plants connected to district heating were announced in 2021. In the Danish city of Aarhus, the development of Europe’s largest geothermal district heating facility was announced at the beginning of 2022, to be partly operational by 2025. 
  • In the United States, a district heating and cooling project consisting of 200 geothermal wells has been announced
  • In Iceland, a local heating utility introduced new geothermal district heating in Höfn, to replace electric heating. Subsidies are provided for those connected to district heating as well as to the utility company.  

Projects integrating secondary heat sources – that is, heat obtained through waste heat recovery – are also on the rise. In 2022 an energy company in Vienna, Austria, launched a heat-recycling programme that intends to take advantage of the warm water (30°C) from local thermal baths with the use of a heat pump. Another example from Austria is the district heating system exporting waste heat from Interxion's data centre to the neighbouring Floridsdorf Hospital in Vienna. The Austrian federal government is funding the project with a EUR 3.5 million subsidy. In Ireland, the construction of the country’s first large-scale district heating network started in May 2021. The Tallaght District Heating Scheme uses waste heat from a local data centre to heat different public, residential and commercial buildings in the Tallaght town centre area. 

Innovation

Greater heat source diversification (especially shifting from fossil fuels to renewables, electricity and excess heat) and the integration of both large-scale and decentralised consumer heat pumps will propel the transition towards lower-temperature and more flexible district heating networks – a progression from third-generation to what is called fourth-generation district heating, and alternatively, the electricity-based and decentralised fifth generation Innovations are principally related to: 

The Global District Energy Climate Award has been in place since 2009 to identify best practices and innovations in district energy, and the last edition in 2021 nominated seven winners. The annual International DHC+ Student Awards (launched in 2012) highlight outstanding and original contributions to district heating and cooling-related research, including economic and technological aspects, energy management and the environmental consequences of energy utilisation. 

Supporting infrastructure

Many networks operating today distribute heat by pipe as pressurised water at supply temperatures of over 80°C, with heat losses ranging from 10% to 30%. The renovation of existing networks towards lower operating temperatures, improved piping insulation and integration of digitalisation techniques can significantly reduce heat losses, potentially containing them below 10%. In Northern China, projects to limit losses even with very long-distance transmission networks (20-150 km, to exploit waste heat) are ongoing. 

Demand response can be employed for peak-shaving, reducing installed capacity requirements and also optimising overall network operations, including loss reduction. For example, as part of its modernisation process, the district heating system of Bolzano, Italy, introduced a control system that reduced overall energy losses by up to 5%.  

Modern telemetering also opens opportunities for demand-side management, as in the electricity market. Adequate pricing mechanisms – such as tailored pricing based on the quantity of energy used and the time of consumption – can give signals to the final users and reduce the load on the district heating network, reducing losses and heat consumption.  

However, greater attention should also be paid to the correct installation and operation of final customers’ heating systems to ensure they fully enable the benefits of optimised district heating systems to be realised. Full district heating and buildings renovation packages can help to optimise overall heat flows. 

This should be done in a holistic way, supporting the transition both from the network side and final use side.  

Policy

District heating deployment is often spurred by the benefits it can offer (economies of scale, energy efficiency, reduced pollution, etc.) and by national/local policy frameworks. Policies that prompt greater district heating penetration and modernisation have been linked to:  

  • Grants, subsidies and incentives for renewables integration: for example in the United Kingdom, GBP 250 million has been provided to develop district heating projects, such as in East Devon and London, via the Heat Networks Investment project since 2018. In 2022 the Green Heat Network Fund replaced it, and opened for applications with a total of GBP 288 million. Other funding opportunities have been introduced in Austria, the European Union, France and Canada. In August 2022 the European Commission approved a EUR 3 billion scheme to promote green district heating based on renewable energy and waste heat in Germany. 
  • Taxes on fossil fuel consumption, CO2 emissions and pollutant emissions (for instance in the Nordic countries and China).  
  • Energy and heating plans/strategies and renewables targets: in 2021 Chile’s National Heat and Cold Strategy was issued, also promoting district energy projects using ground- and air-source heat pumps; in Europe, by the end of 2021 at least 29 countries had committed to renewable heating and cooling targets. China has been supporting a shift from fossil fuel-based district heating to greater use of renewables and recycled heat under the 14th Five-Year Plan for Renewable Energy Development
  • Zoning policies and integration of district heating into energy standards for buildings, as per the zero-carbon-ready buildings concept. Under the proposed Energy Security Bill in the United Kingdom, certain buildings would be required to be connected to a district heating network. 
  • Tariffs: the Danish government dedicated EUR 13 million at the end of 2021 to financial support for those affected the most by energy price increases (including district heating costs). In 2022 high commodity prices motivated the launch of subsidy programmes to cover the operational expenses of district heating utility companies, such as the one announced from the Czech government
  • Consumer rights: the establishment of consumer protection rights in new markets for district heating, comparable with the rights of other energy consumers, is important to provide the necessary trust to allow the deployment of new systems. 

Policies

Policy
Country
Year
Status
Jurisdiction
International collaboration

Improved collaboration, transparency and communication between stakeholders are an essential condition for sharing and expanding best practices. For instance:  

  • The District Heating and Cooling Technology Collaboration Programme (IEA DHC TCP) has led research in the field since the 1980s and now comprises 13 members from major district energy markets.  
  • The District Energy in Cities Initiative, a multi-stakeholder partnership coordinated by UN Environment Programme, helps local and national governments increase their investments in district energy.  
  • In Europe, Euroheat & Power connects several district energy stakeholders to create momentum for sustainable heating and cooling. As part of Euroheat & Power, the DHC+ Technology Platform enables further networking and organises several events to promote district energy and increase awareness of technology options, including the International DHC+ Summer School.  
  • The Celsius Initiative (created from the Celsius Project concluded in 2017) is a collaboration hub that helps cities exchange information on innovations, best practices and policies to develop their heating and cooling networks.  
  • In the United States, with over 2 400 members, the International District Energy Association works to connect, inform and expand the district heating industry.  
  • In China, the China District Heating Association supports the nationwide deployment of district heating. 
Recommendations for policy makers

Together with broader policy goals, targets related specifically to district heating (e.g. district heating penetration, integration of renewable energy sources, waste heat recovery plans) are important to drive the transition to efficient district heating networks. 

Good knowledge and anticipation of current and future heat demand and resources (through heat mapping) is fundamental to set such targets, design coherent long-term heat strategies, assess district heating potential and define its role. See, for example, the Heat Roadmap Europe.  

In addition, building capacity for energy and infrastructure mapping at the local level allows advanced urban planning practices to integrate energy, infrastructure and land planning. For instance, excavation costs for district energy systems could be shared with other infrastructure construction projects, and district heating expansion could be co‑ordinated with building renovations. 

Building and expanding district heating networks is highly capital intensive, and market expansion requires investors to have visibility and be supported by long-term measures. These can include specific financing tools, stable economic incentives (which can be financed through land value capture strategies), regulation to define and mandate connection zones thus ensuring an anchored load and economies of scale, and the integration of specific criteria into buildings energy codes. Policy makers should also streamline administrative procedures for modern district heating projects. 

Improving the technology and expanding its application in the longer term calls for allocated funding for research and innovation to optimise district heating system operation with high shares of renewable sources, for testing different technology solutions, and for establishing training programmes for all stakeholders involved. 

Recommendations for the private sector

Demonstration projects help assess the real-world effectiveness of different technologies to enhance district system flexibility. For instance, digital controls and sensors can help optimise network operations, maximise the integration of renewables and facilitate system maintenance. Broader diffusion of heating system-connected meters and data-driven advanced control systems could help balance generation and consumption patterns.  

Storage is another key parameter to optimise in order to enhance both short- and long-term flexibility. District system operators can exploit the storage potential of the network itself, as well as decentralised storage at the consumer level.  

Taking full advantage of cross-sector synergies (buildings, industry, and heat and power generation) and cross-service synergies (heating and cooling) requires integrated infrastructure planning as well as developing and testing interoperability standards.  

Identifying business models that are scalable and replicable in different contexts can spur district heating deployment, in particular in new markets. Such business models can vary stakeholder engagement processes, ownership structures (including cooperative and no-for-profit schemes), billing strategies, investment and financing schemes, ways to couple buildings renovation with network expansion, and the technologies and energy sources employed (waste heat, heat pumps, storage, artificial intelligence, etc.). 

Additional resources
Acknowledgements
  • Jack Corscadden, Euroheat & Power, Reviewer 
  • Lars Gullev, VEKS, Reviewer 
  • Domenico Lattanzio, IEA, Contributor 
  • Eloi Piel, Euroheat & Power, Reviewer  
  • Robin Wiltshire, IEA DHC TCP, Reviewer 
References
  1. The term "District Heat" in this page refers to the "heat" category as defined by the IEA's Energy Statistics Manual and reported in the IEA's Energy Balances. This heat is defined as the amount of heat produced and sold. In other terms, it is the amount of heat leaving the plant for use by persons unrelated to the producer.