Europe District Heating Market Size, Share & COVID-19 Impact Analysis, By Heat Source (Coal, Natural Gas, Renewable, Oil & Petroleum Products, and Others) By Plant Type (Boiler, CHP, Heat Pump, and Heat Accumulators), By Application (Residential, Commercial, and Industrial) and Regional Forecasts, 2023-2030

The Europe district heating market was valued at USD 131.84 billion in 2022. The market is projected to grow from USD 132.48 billion in 2023 to USD 153.34 billion by 2030, exhibiting a CAGR of 2.11% during the forecast period.

District heating is a centralized heating system that provides heat to multiple buildings from a single source. In district heating, heat is generated at a central plant and then circulated through a network of insulated pipes to buildings. The heat is then utilized to provide space heating and hot water to the buildings. It has numerous benefits over specific heating systems, comprising cost savings, energy efficiency, and others.

COVID-19 IMPACT

The Spread Of COVID-19 Had A Mixed Impact On the Market

The COVID-19 pandemic negatively and positively affected the Europe district heating market growth. Below mentioned are some of the pandemic effects on the market:

• Less Business: The lower energy demand led to fewer revenues for several district heating companies, which might have a major influence on their capability to finance maintaining existing systems or new infrastructure.


• Uncertain demand: The pandemic poses uncertainty in energy demand across many industries, including district heating. With many commercial and industrial activities closed or operating at reduced capacities, companies witnessed demand from the residential sector, which helped them establish stable revenue during the pandemic. According to European Environment Agency, in 2020, industrial and residential cooling and heating demand was around 10% below the average annual level seen from 2005 to 2009.


• Worker Shortages: District heating plant operators faced a shortage of working capital due to the suspending of government policies and delaying tariff payments by the population, curbing investments, and threatening to slow down the expansion of district heating systems.        

LATEST TRENDS

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Digitalization of District Heating Systems is a Key Trend in the Europe District Heating Market

The adoption of digital technologies has changed the industry in Europe, by allowing increased dependability, and efficiency of these systems. Digitalization comprises the utilization of sensors and smart meters to optimize and track the operation of district heating systems. One major advantage of modifying heating systems is enhancing energy productivity. Digital technologies allow real-time tracking of energy utilization, enabling operators to identify and address incompetency in the system. For instance, sensors can determine leaks in the system, while data analytics can enhance the operation of pumps and boilers. This might lead to substantial energy savings and minimize greenhouse gas release. Another advantage of digitalization is that it allows predictive maintenance, enabling operators to identify major faults before they occur and take proactive steps to avoid system letdowns. This can aid in decreasing downtime, boosting system productivity, and improving customer satisfaction.

In addition, digitalization also permits considerable customer engagement. Smart meters and other technologies enable customers to track their energy utilization in real-time, allowing them to make instructed decisions regarding their energy utilization and minimize their energy bills. This can aid in building confidence and engagement between district heating providers and consumers. Siemens is one of the companies that provide digitalization solutions for district heating. It offers a digital district heating substation that makes heat flows transparent. In addition, SAMSON is one of the companies offering digital district heating solutions. It offers SAM District Energy, a web-based solution for optimizing, controlling, managing, heating, and cooling systems.

DRIVING FACTORS

Rising Demand for Sustainable and Energy-Efficient Heating Solutions is Propelling the Market Growth

District heating provides numerous advantages over conventional heating systems, improving reliability, reducing greenhouse gas emissions, and enhancing energy efficiency.

In recent years, there has been a rising awareness of sustainable energy solutions with the aim of lowering the impact of greenhouse gas effects. District heating systems can potentially contribute to the operation by utilizing various types of low-carbon energy sources and renewables, such as waste heat from industrial processes, geothermal, and biomass. By utilizing these sources, these systems can considerably reduce greenhouse gas emissions and assist in lessening the effects of climate change.

In addition to the environmental advantages, district heating also provides economic advantages. District heating systems can be more profitable than conventional heating systems, specifically in densely populated regions with a high demand for heating. By utilizing a central heating system, the providers can accomplish economies of scale and lessen the cost of delivering heat to consumers. This can lead to improved affordability and lower energy bills for customers.

Government support is for adopting energy-efficient and sustainable solutions such as district heating deployment. For instance, grants, subsidies, and incentives for renewables integration: for example, In August 2022, the European Commission accepted a USD 3.70 billion plan to encourage green district heating based on renewable energy and waste heat in Germany. This plan aims to reduce carbon emissions and meet climate change goals.

Focus on Energy Efficiency and Decarbonization is Propelling the Market

District heating is one of the sustainable methods of offering hot water and heat to commercial and residential buildings. It can utilize several energy sources, including renewable sources such as waste heat from industrial processes, biomass, geothermal, and solar. By using these sources, district heating systems can majorly minimize the carbon footprints of hot water and heating provision.

Besides reducing greenhouse gas emissions, district heating systems can also be used to raise energy efficiency. Unlike independent heating systems, which can be inefficient and wasteful, these systems are developed to be extremely efficient. They can provide hot water and heat to several buildings from a primary site. This can aid in lowering energy bills and lessen energy consumption for customers.

A blend of regulatory frameworks, consumer demand, and public awareness propels the focus on decarbonization and energy efficiency. EU has made a commitment by introducing several rules focusing on reducing greenhouse gas emissions and promoting energy efficiency. These comprise the Renewable Energy Directive, Energy Efficiency Directive, and Clean Energy for All Europeans Package, which focuses on encouraging renewable energy sources and improving energy efficiency in many sectors.

Numerous governments are clamping down on decarbonization by providing incentives. For example, as of 2021, there will be an incentive for electric heat pumps in Denmark. The plan is open to companies specializing in district heating. The allowance would be around 15% of the total investment to purchase and install the heat pump, with developers qualified for a maximum of USD 794.91 thousand for each project.

RESTRAINING FACTORS

High Initial Capital Investment Could Hinder Market Expansion

A major restraining factor for the Europe district heating market share is the high upfront expenses for installing these systems. Compared to individual heating systems, which can be installed on a building-by-building basis, these systems need a substantial investment in infrastructure, comprising the network of pipes to distribute heat and the construction of a centralized heat generation plant.

According to International Energy Agency, the Expected investment in district heating pipelines in Europe in 2019 was USD 5.8 Billion.

Building a district heating capacity requires high initial investments, as installing a secure transmission and distribution network is expensive. The insulated pipes and their underground laying require a significant investment, which is a major obstacle for investors. Also, the lack of the required infrastructure and the availability of other economical options for space heating and water heating can hamper the market's growth.

SEGMENTATION

By Heat Source Analysis

Renewable Heat Sources Driving Transformation in This Market

Based on the heat source, the market is categorized into coal, natural gas, renewable, oil & petroleum products, and others. Renewable energy is anticipated to be the fastest-growing segment in Europe owing to the growing utility of renewable heat sources, such as solar thermal, geothermal, and biomass producing heat for district heating systems, substituting outdated fossil fuels such as gas and coal. According to International Energy Agency (IEA), Europe presently leads renewables incorporation in district heating. It has around 25% of its district heat supplies from renewable sources. Specifically, high rates are noticed in countries such as Iceland, Sweden, Austria, Denmark, Lithuania, Estonia, and Latvia, where renewables fuel more than 50% of district heat.

By Plant Type Analysis

Heat Pump Plants to Gain Popularity in the Market During Forecast Period

Based on plant type, the market is trifurcated into the boiler, CHP, heat pump, and heat accumulators. Heat pump plants are expected to dominate the market share during the forecast periods. Heat pump plants are progressively being utilized in these systems as an option to conventional fossil fuel-based plants. The principal factor for this shift is the rising awareness of the requirement to lessen greenhouse gas emissions and improve energy efficiency in the heating sector.

By Application Analysis

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Residential Sector Dominates the Market Share Due to its Focus on Sustainability and Energy Efficiency

On the basis of application type, the market is divided into residential, commercial, and industrial. The residential sector is expected to dominate the European market during the forecast period. The rising focus on energy efficiency and sustainability in the residential sector propels the demand for district heating systems. Furthermore, installing these systems in existing residential buildings is relatively simple and doesn't need huge underlying changes. This makes it an attractive choice for the residential sector looking to reduce its energy costs and carbon footprint.

By Regional Analysis

Poland has the highest market share in the European market. The push towards decarbonization is resulting in a shift towards district heating in Poland. For instance, in 2022, DP bagged Poland's biomass district heating project. An agreement was inked between SBB Energy and OPEC Grudziądz for the execution of a 12.5 MW boiler at the heat & power plant in Grudziądz, with DP providing the fuel to stack – comprising an innovative fuel yard for handling local boiler auxiliary, sourced straw wastes, and flue gas treatment.

Germany district heating market is one of Europe's biggest and most developed. The market in Germany is expected to grow in the coming period, propelled by factors such as the phase-out of coal-fired power plants, increasing interest in energy-efficient heating solutions, and others.

On August 2022, the European Commission accepted, under EU State aid regulation, a USD 3.13 billion German plan to boost green district heating based on waste heat and renewable energy. The action will add to the execution of Germany‘s National Energy and Climate Plan and the EU’s essential goals relating to the EU Green Deal, specifically the EU’s 2050 climate change target.

The U.K. is also one of the major markets in the European market. In February 2023, the U.K. opened USD 33.65 million heat network support program. This scheme focuses on old and unproductive heat networks to produce inexpensive energy and decrease carbon emissions for numerous homes across Wales and England. Through the newly launched heat network efficiency plan, out-of-date equipment will be developed with energy-efficient substitutes such as underfloor heating controls, pipe insulation, and replacement pumps.

The Netherlands is also expected to grow at a noteworthy growth rate. This is attributed to the rising trend of renewable energy-based district heating. For instance, On December 2022, QTS's Groningen data center contributed to district heating in the Netherlands. This data center in Groningen has been associated with the Dutch city's latest district heating project.

KEY INDUSTRY PLAYERS

Veolia is a Global Utility Company and Leader in Resource Management

Veolia has extensive mastery in creating, constructing, possessing, managing, and preserving district heating and cooling systems globally, with an ongoing collection of more than 60 networks. It has the comprehensive in-house capability, from the preliminary feasibility stages to running and maintaining resources, including a gifted pipework team, call center, and customer service and departments. Veolia plants accomplish an eco-friendly transition in cooling and heating services by executing low-carbon and renewable technologies, such as heat retrieval from industrial heat, data centers, and wastewater resources.

• In September 2020, Veolia reinforced its geographical footprint by acquiring Czech Republic-based district heating network operator Prazska Teplarenska. The deal has added USD 270.7 million in annual revenue for Veolia.

List of Key Companies Profiled:

• General Electric (U.S.)


• Engie (France)


• Dall Energy (Denmark)


• Helen Group (Finland)


• Uniper (Germany)


• FVB Energy Inc. (Canada)


• Statkraft (Norway)


• Alfa Laval (Sweden)


• Danfoss Group (Denmark)


• Veolia (France)


• Ramboll (Denmark)

KEY INDUSTRY DEVELOPMENTS:

• In February 2022, the GE-Powered Anyang District Heating Plant added 500 megawatts to support the stable supply of heat and power in the Anyang region of South Korea.


• In October 2021, GE secured a HA gas turbine order for the Naepo District Heating Plant in South Korea. GE’s highly efficient and innovative 7HA.02 gas turbine technology will offer around 500 megawatts to the national grid and steam for district heating for approximately 100,000 citizens of Naepo City.


• In September 2021, Veolia was awarded a 30-year business contract to maintain and operate the district heating system of Tashkent, Uzbekistan.


• In October 2021, Dall Energy announced the grand opening of a 12 MW district heating plant in Sorø. The plant is designed to operate on 100% green waste but can also use conventional wood chips, offering complete fuel flexibility.


• In September 2020, Veolia reinforced its geographical footprint by acquiring Czech Republic-based district heating network operator Prazska Teplarenska. The deal has added USD 270.7 million in annual revenue for Veolia.

REPORT COVERAGE

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The report provides a detailed analysis of the market and focuses on key aspects such as leading companies, product/service types, and leading product applications. Besides, the report offers insights into the market trends and highlights key industry developments. In addition to the factors above, the report encompasses several factors that contributed to the market's growth in recent years.

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