District Heating Market Size, Share & COVID-19 Impact Analysis, By Heat Source (Coal, Natural Gas, Renewables, Oil & Petroleum Products, and Others), By Plant Type (Boiler, CHP, Others), By Application (Residential, Commercial, Industrial), and Regional Forecast, 2021-2028

The district heating market size was USD 173.97 billion in 2020. The market is expected to grow from USD 182.36 billion in 2021 to USD 270.35 billion in 2028 at a CAGR of 5.8% in the 2021-2028 periods. The global impact of COVID-19 has been unprecedented and staggering, with the district heating industry witnessing a slow demand shock across all regions amid the pandemic. Based on our analysis, this market exhibited growth at a stagnant pace of 0.3% in 2020 compared to the average year-on-year growth during 2017-2019. The sudden rise in CAGR is attributable to this market’s growth and demand returning to pre-pandemic levels once the pandemic is over.

The district energy system can be defined as a system that provides heat for regulating temperature at industrial and commercial spaces and other heating applications at different end-use sectors in the form of hot water or steam. The heat energy is generated at a central heat plant, and from that plant, it is distributed through a well-established heat network of insulated pipes. The heat generation is carried out using combined heat and power systems, pumps, or boilers. These systems help reduce the setting up of individual heating systems and reduce greenhouse gas emissions as heat is generated at the central plant, which can meet the growing demand for heat for many customers. 

COVID-19 Impact: Freezing Effect of Covid-19 on Heating Networks to Impede Market Progress

The Covid-19 crisis has significantly affected the whole energy supply chain across the globe. During the COVID-19 pandemic, several countries have imposed nationwide lockdown, which has interrupted several construction activities, supply chains, and others. This factor resulted in government organizations and private companies involved in the construction of heat networks delaying the commissioning of several district heating projects due to the unavailability of manpower to complete the project in a stipulated time. For instance, India has pushed ahead of the deadlines for 3GW solar installation. This development will certainly harm future investments in heating networks as the economies of various countries are facing a rough patch. The main reason behind this is that a major focus in the current situation is bolstering the health infrastructure.

On the bright side, renewable energy sources have gained the upper hand in energy production during the lockdown periods. As per the study conducted by the International Renewable Energy Agency (IRENA) on the impact of COVID-19 on the renewable energy sector, the existing renewable energy projects in operation have witnessed higher utilization rates than ever before. In Europe during the first quarter of 2020, renewables accounted for 41% of total energy production, which indicates an increase of 16% compared to the first quarter of previous years.

LATEST TRENDS

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Market to Grow Backed by Investments in Heating Sector

As the tensions regarding global warming and the harmful effects of carbon emissions such as ozone depletion are rising, countries all over the globe are moving towards renewable sources. Several efforts are being made to maximize clean energy and enable cleaner environments by setting green energy targets in the forthcoming years to help the global cause. For example, Brazil aims to generate nearly 42.5% of its primary energy supply from renewable sources by 2023. As per the brief carbon analysis, the U.K. government aims supply half of its electricity by using renewable energy resources by 2025. Also, the government has started the decommissioning of coal-fired power plants in the country. Germany has also set a target for renewables to account for 65% of its total energy by 2030. In Asia, China has planned to satisfy 16% of the country’s energy requirements using renewable energy sources by 2030. Renewable energy industry is expected to hold 26% share and surpass the country’s targets because of rising investments. This factor increases the installation of renewable sources fuels the growth of the heating sector globally as it enables the generation of electricity and heat energy.

DRIVING FACTORS

Government Initiatives in Improving Heating Sector to Boost Market Growth

The energy demand is increasing dramatically worldwide, and governments are looking for sustainable options to fulfill the growing energy demand. District energy can cope with various input sources and be efficient in producing energy with fewer carbon emissions is being looked upon as the best cost-effective solution. Several countries have announced massive investments to boost the district heating sector in their country. For instance, according to International Energy Agency, Europe had invested around 5.8 billion in district heating systems in 2019. The U.K. has announced a stimulus package of USD 2 billion investment for the heating sector during 2015-2025. Poland has announced an investment of USD 5 billion forms 2018-2028 in the heating sector. Germany has announced an investment of approximately USD 1 billion by 2030. Similar packages are expected in Denmark, Netherlands, and China in the coming years.

Increasing Demand for Heating Systems with Increasing Population in Urban Areas Will Aid Growth

Urbanization is increasing tremendously around the world, and this is increasing the energy demand at an exponential rate. The population is also increasing, and people are heavily migrating from rural to urban areas, which has boosted the infrastructure projects at residential, commercial, and industrial locations. This, in turn, has created the demand for district energy networks across all three sectors. As per the study released by Oxford University, by 2050, around 2/3^rd of the population will be living in urban areas. With the rising economy, the disposable income of the population also increases, which further increases the living standard. Thus, increasing demand for heating systems. This trend is expected to drive the global district heating market growth.

RESTRAINING FACTORS

High Initial Capital Investment and Lack of Infrastructure Restricts the Market Growth

The installation of heating capacity requires an initial heavy capital investment as establishing a safe transmission and distribution lines network is very expensive. The insulated pipes and their underground laying require a considerable investment, which is a major obstacle for investors. Also, the lack of required infrastructure and availability of other economical options for space heating and water heating may hamper the market's growth in the coming years.

SEGMENTATION

By Heat Source Analysis

Renewable Segment to Dominate the Global Market in 2020 Owing to Rising Focus on Power Generation

Based on the heat source, the market is segmented into coal, natural gas, renewable, oil and petroleum products, and others. In recent years, power utilities have been focusing on increasing power generation capacity from fossil fuels to renewable sources as environmental safety increases among people and the government. This factor increases the installation of renewable energy sources worldwide, and renewable sources acquired a dominant share in the district heating industry in 2020. The advantages of the concept, such as better efficiency and negligible carbon emissions, have driven the growth of this segment.

The natural gas segment is likely to expand significantly during the forecast period. Exploration activities are rising around the world. Natural gas plants are considerably cost-effective and have less harmful effects on the environment, unlike fossil fuels. Natural gas is abundantly available. The installation of natural gas plants is increasing around the world. This factor drives growth in the natural gas segment in the district heating market during the forecast period. 

By Plant Type Analysis

CHP Segment is Likely to Expand at a Highest CAGR Owing to the Rising Demand for Electricity

Based on plant type, the market is segmented into boilers, combined heat and power plants (CHP), and others. The CHP systems enable electricity generation and heat being produced for the heating systems. This is the major factor in the growth of their market share in recent years. The other factor indirectly contributing to the segment growth is the increasing electricity demand. Further, the CHP systems have higher efficiency than the traditional boilers and reduce the costs as they avoid distribution and transmission losses. Also, the support from governments in promoting the utilization of the CHP systems has aided the growth of the market.

The boiler segment is also likely to witness growth during the forecast period due to increasing demand for electricity worldwide. The installation of different energy plants is also increasing widely around the world.    

By Application Analysis

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Residential Segment to Dominate the Global Market Attributable to Rising Demand for Heating Networks

In terms of the application, the global market is segmented into residential, commercial, and industrial. The residential segment holds the largest district heating market share owing to the increased requirement for heating networks at residential locations for various uses such as space heating and water heating. Also, there has been a rise in the number of construction projects in the residential sector due to increasing urbanization, which has been the catalyst for segment growth.

Industrialization is widely increasing around the world. The infrastructure development is also increasing in the industrial sector with the ongoing revolution. This factor increases the implementation of heating spaces in the industrial sector. Thus, driving growth in this segment.

REGIONAL INSIGHTS

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Geographically, the global market has been analyzed across four key regions, including North America, Europe, Asia Pacific, and the Rest of the World. Europe has dominated the market as the region has low-temperature conditions for most of the year. Europe consists of large industries and power plants from which heat is generated that goes into waste. Such heat is utilized to meet all heating demands within the region. In 2019, NEFCO launched the Sweden-Ukraine District Heating program in Kyiv. The launched program is directed to support and finance district heating projects in Ukraine. Sweden has supported this program financially. The installation of renewables sources of energy is also increasing, and the waste heat from such plants are widely used for the heating purpose only due to extreme weather conditions. Thus, driving growth in the European region during the forecast period.   

The Asia Pacific stands as the most lucrative market, with countries such as China is increasing investments in heating networks. The Northern part of China, which experiences low- temperature, has witnessed the maximum deployment of the heating plants. The market has also seen a significant growth rate in North America, and the United States has certain projects in the pipeline that will drive the investment for the heating network. The Rest of the World would witness slow growth in the market as these systems stand as a new concept and have started the deployment as a cost-effective measure for power in the country.  

KEY INDUSTRY PLAYERS

Key Players Concentrate on New Contracts to Fuel Competition

The competitive landscape of the market depicts a fragmented market with manufacturers and service providers such as Ramboll, Danfoss Group, and Veolia occupying a considerable share in the global market. These companies have been successful in acquiring contracts from different countries in several regions. Also, customer preference, established brand name, and well-established supply chain are factors responsible for their success. Major players such as Helen, Alfa Level, GE COWI, Statkraft, and others expand their customer reach to establish a remarkable footprint in the global industry. This expansion is expected to fuel competition for heating systems in the upcoming years.

In 2020 Deutsche Telekom and Vattenfall AB signed an energy supply contract that is based on solar power for 10 years. The electricity will come from a new 60 MW solar park which will be built in 2021 in Mecklenburg-Western Pomerania. 

LIST OF KEY COMPANIES PROFILED:

• Danfoss Group (Denmark)


• Ramboll (Denmark)


• Dall Energy (Denmark)


• Veolia (France)


• Helen (Finland)


• Alfa Level (Sweden)


• GE (U.S.)


• COWI (Denmark)


• Statkraft (Norway)


• Uniper (Germany)


• ENGIE (France)


• ABB (Switzerland)


• Kelvion (Germany)


• GRUNDFOS (Denmark)


• E.on Energy Services (Germany)


• FVB Energy Inc. (U.S.)


• NextGen Heating (U.K.)


• NRG Energy (U.S.)


• Shinryo Corporation (Japan)

KEY INDUSTRY DEVELOPMENTS:

• June 2020 – Savosolar Plc has won the contract to deliver two solar heating systems to NewHeat SAS in France. NewHeat SAS will own the systems and sell the generated heat to district heating companies of Narbonne and Pons.


• December 2019 – Veolia announced the sale of its district energy assets in the U.S. to Antin Infrastructure Partners for USD 1.25 billion. The assets included in the sale are steam, hot and chilled water, and electricity production plants, including cogeneration, and 13 networks in 10 U.S. cities.

REPORT COVERAGE

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The global district heating market research report provides a detailed analysis of the market and focuses on key aspects such as leading companies, plant types, heat sources, and leading applications of the system. Besides this, the report offers market insights into the trends and highlights key industry developments. In addition to the aforementioned factors, the report encompasses several factors that have contributed to the growth of the market over recent years.

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