How can district heating help decarbonise the heat sector by 2024?

Analysis from Renewables 2019

District heating and cooling (DHC) networks distribute heat for domestic hot water, space heating or cooling in buildings, and industrial processes. In 2018, a little less than 6% of global heat consumption was supplied through DHC networks, of which Russia and China each accounted for more than one-third.

China, responsible for more than one-quarter of global heat demand, has the world’s fastest-growing district heating capacity. In 2005, district networks heated around 40% of floor area in the provinces that make up the Northern Urban Heating Area. Since then, over 95% of floor area growth resulting from greater urbanisation has been covered by district heating, and the amount of heat supplied through DHC has almost doubled, amounting to 8% of the country’s heat consumption in 2018. In Russia, despite a decline since 2012, DHC still provides more than one-third of the country’s heat consumption. DHC networks are also well established in the European Union, where they meet more than 8% of total heat demand. Finland, Denmark, Sweden and Baltic countries have the highest penetrations of district heating in Europe.

Fossil fuels are still by far the dominant energy source in DHC globally, due to the extensive use of natural gas in Russia and coal in China; overall, renewables accounted for only less than 8% of energy used in district heating in 2018. Yet, renewable energy consumption for DHC increased more than two-thirds during 2009‑18, mainly as a result of the extensive transition from fossil fuels to bioenergy in the European Union.

Bioenergy is indeed the largest source of renewable energy in district heating worldwide by far, although Iceland has achieved close to 100% renewables owing to its excellent geothermal resources. Even though heat pumps and solar thermal systems still account for only a marginal share of district heating energy, development continues, as new high-efficiency district systems with lower operating temperatures make their integration possible.

Denmark leads the way in integrating solar thermal energy in district heating, accounting for more than three-quarters of the 1.2‑gigawatt thermal (GWth) of installed capacity worldwide by the end of 2018 (Although solar thermal production for district heating in Denmark has expanded more than tenfold since 2010, it still made up less than 3% of district heating energy supplied in 2018.) (IEA SHC,2019).

Share of renewable energy in district heating networks, 2018

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Globally, energy demand met by district heating is expected to increase modestly (+4%) over the next six years, its share in total heat demand remaining flat. However, renewable energy consumption for DHC is anticipated to expand more than 40% globally, contributing a little more than 8% of renewable heat consumption growth over 2019‑24. China is responsible for more than 80% of this increase.

Replacing inefficient individual coal-fired boilers with district heating systems, and using alternative fuels such as bioenergy and waste in these systems, is part of the country’s strategy to fight air pollution in large cities. Outside of China, the expansion of renewables in DHC decelerates from the previous six-year period in many countries and regions. European countries are expected to be the second-largest contributors to projected renewables growth during 2019‑24, mostly because more bioenergy is used in existing and new DHC systems. In Russia – where district network infrastructure is old and very inefficient – and in the United States, renewable expansion in DHC remains limited or non-existent due to lack of policy support.

Heat supplied through DHD and % of renewables, 2007-2024

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Growth in RE use in DHC in selected countries, 2013-2024

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Interest in DHC in cities is often motivated by a combination of energy security, economic, environmental and governance considerations. Indeed, DHC networks are potentially one of the most effective means to harness renewable energy to meet heating and cooling demand because they offer:

  • Economies of scale and high efficiency potential through aggregation of demand.
  • A way to circumvent building suitability and consumer awareness barriers.
  • Renewable energy storage possibilities (thanks to thermal inertia), and the opportunity to integrate thermal storage technologies and benefit from heat and power coupling.

This potential remains largely unexploited, however, as there are opportunities in many countries to deploy new DHC infrastructure, improve the energy efficiency of ageing ones (e.g. with better-insulated pipes and higher-efficiency heat generators), and integrate higher shares of renewables into existing networks.

Municipal and city-level policies are needed to boost the use of renewables in district heating. Local governments can use their authority as planners and regulators not only to influence DHC deployment, but also to control network ownership and management (either directly through municipal energy companies, or through tendering procedures), as most business models for district energy involves the public sector. Common policies and strategies for establishing district networks include heat-mapping exercises, the leveraging of public assets, support for demonstration projects, financial and fiscal incentives, connection regulations for buildings, and development-based strategies that capture land value (UNEP, 2015). Given that district heating schemes generally imply situations of natural monopoly or oligopoly, pricing transparency and customer protection deserve specific attention. National-level support also strengthens local initiatives significantly.