📄➡️ The 2023 Insights & Trends are also available in PDF format. Click here to view and/or download it.
The war in Ukraine has exposed the dependence of Europe on fossil fuels and created a new impetus to decarbonise the heating sector. Space heating and hot water heating represent roughly half of Europe’s final energy demand, with over 60% coming from fossil fuels1.
The momentum for clean heat technologies has come, unleashing new opportunities for the District Heating and Cooling (DHC) sector. As an energy infrastructure DHC is a Swiss army knife for decarbonisation enabling the combined use of local renewable heat sources (e.g. sustainable bioenergy, geothermal, solar thermal), renewable electricity, and the recovery of excess heat from industrial and urban sources.
District Heating currently meets about 12% of final energy use for space and water heating for households, service and industry sectors2. The Heat Roadmap Europe3 project highlighted the significant potential of District Heating to cut imported fossil fuels by using renewable energy and waste heat sources: the sector could grow to meet 50% of demands for space and water heating from the service and residential sectors!
DHC is also a critical infrastructure to provide energy storage enabling thereby the deployment of a greener and more resilient energy sector. Large-scale thermal storage is 100 times cheaper4 than battery storage and the only proven and available energy technology to provide monthly and even seasonal storage.
The current survey shows that in 2021, 43 % of European District Heat is supplied5 from renewable and waste heat sources, highlighting the capacity of District Heating to reinforce Europe’s energy independence and decrease CO2 emissions. The decarbonisation DHC roadmaps for the various countries – available to members in the country chapters – show that the sector is expected to further decarbonise its supply sources in the near future, to grow and support the decarbonisation of the respective heat markets in Europe.
Sources:
1Eurostat
2European Commission, Renewable Space Heating under the Revised Renewable Energy Directive, 2021
3Heat Roadmap Europe 4 - Quantifying the Impact of Low-Carbon Heating and Cooling Roadmaps, Aalborg University, 2018 and Excess heat is world’s largest untapped source of energy’, Danfoss, 2023
4Energy Storage and Smart Energy Systems, Henrik Lund, Poul Alberg Østergaard, David Connolly, Iva Ridjan, Brian Vad Mathiesen, Frede Hvelplund, Jakob Zinck Tehllufsen, Peter Sorknæs,Aalborg University, 2023
5The reference to Europe in the document refers to the surveyed countries: Austria, Belgium, Bulgaria, Croatia, Czechia, Denmark, Estonia, Finland, France, Germany, Hungary, Iceland, Italy, Latvia, Lithuania, the Netherlands, Norway, Poland, Portugal, Serbia, Slovakia, Slovenia, Spain and Sweden.
As in previous years, the DHC Outlook aims to provide a comprehensive overview on the state of play of District Heating and Cooling markets in Europe and beyond.
This year the Outlook presents many essential changes, compared to previous editions. The geographical scope is extended: Poland, Iceland, Ireland, Belgium, the UK and Qatar are now included in this publication.
New sections complement the individual country chapters. A section on the current energy crisis is added to help understand better its impact on the heat sector. A new section on the legislative and regulatory frameworks covers key aspects in the development of DHC schemes. This is meant to support the DHC community in the comparison and benchmark of the different markets and help share best practices on regulatory instruments. There are indeed lessons that can be drawn from countries moving faster to transform the heat market! Like its previous edition, the District Heating and Cooling Outlook is published as an online tool. This flexible format allows the Euroheat & Power’s Market Intelligence team to edit content and add updated information as it becomes available to keep track of new developments.
The District Heating and Cooling Outlook is based on an extensive questionnaire completed by members and associates of Euroheat & Power at international level. As a result of the improved feedback and the support from our members, the questionnaire was amended to improve the comparability of data across countries and focus on the most relevant indicators.
Quantitative data is supplemented by qualitative descriptions of the market environment for each country, providing insights about the latest industry trends, regulatory frameworks and differentiated challenges and opportunities. This edition also covers a dedicated section presenting the evolution and role of DHC in the decarbonisation pathways for the different countries, based on scenarios from national associations and/or authorities.
It is important to note that, due to different national data collection practices, some information is still missing for some countries. In spite of progress, this remains in particular true for the use of waste heat, and for District Cooling where less information is available – in comparison to heating.
Nevertheless, this Outlook already provides an improved overview on the use of waste heat, compared to previous editions.
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European Commission Foreword
The new geopolitical and energy market realities require us to drastically accelerate our clean energy transition. In March [2023], as part of the European Green Deal and the REPowerEU Plan, the EU provisionally agreed stronger EU laws to speed up the rollout of renewable energy. This includes more or less doubling the existing share of renewable energy in the EU by raising the EU’s binding renewable target for 2030 to 42.5% with the ambition to reach 45%. At the last G7 meeting in Sapporo, leaders agreed on a target for 150 GW of offshore wind and a collective increase of solar PV to more than 1TW by 2030.
When talking about renewables, the focus is often on power – wind, solar PV. However, it is renewable heat that may hold the key to achieving our objective of climate neutrality. About half of all the energy we consume in the EU today is used for heating and cooling. Over 70% of that is still fossil fuel-based, mostly natural gas. Renewables technologies such as heat pumps, geothermal and solar thermal are still very limited, although 2022 saw a record increase in heat pumps as a result of high gas prices. Without further dedicated EU action, 22 million old individual heating appliances and several thousand large old fossil-based heating units are at risk of being replaced by fossil boilers.
Close to 80% of all energy used by households is for heating and cooling. The cost-effective potential is there, and the benefits are not only long-term security of supply but will also be felt directly, in the form of more secure and affordable energy for consumers.
The REPowerEU Plan encourages frontloading investments in renewables and energy efficiency to reduce fossil fuels imports as well as doubling the current deployment rates of heat pumps in buildings. It also calls for faster deployment of large district heating and cooling network heat pumps.
To make this possible, earlier this year, the Commission announced a Heat Pump Action Plan, which aims to accelerate heat pump deployment and markets in the EU. It will include a partnership between the European Commission, Member States, the sector itself, financial institutions and training providers across the whole heat pump value chain; targeted communication and a Heat Pump Skills Partnership. It will also help focus the ongoing policy work and facilitate access to financing.
There is a provisional agreement between the European Parliament and the Council on new, tighter targets for renewable heating and cooling and district heating and on renewable energy use in buildings. The new rules established in the Energy Efficiency Directive will drive the decarbonisation of district heating and cooling and be a powerful vehicle for clean energy use in the sector.
Delivering on these objectives also requires sharply reducing energy use from new and existing buildings. The Renovation Wave Strategy set out measures aiming to at least double the annual energy renovation rate by 2030; and the ongoing revision of the EU regulatory framework on buildings will be an essential building block in decarbonising heating and cooling. It will increase the rate of renovation, modernise the building stock and allow strong synergies with heat pumps, district heating and other renewables.
Commissioner Kadri Simson
Kadri Simson is the European Commissioner for Energy, a position she has held since December 2019. She previously held the position of minister of economic affairs and infrastructure of the Republic of Estonia from 2016 to 2019. During the Estonian presidency of the Council of the EU (from July to December 2017), Ms Simson chaired both the meetings of the energy ministers and transport ministers in the Transport, Telecommunications and Energy (TTE) Council as well as the meeting of economy ministers in the EU Competitiveness Council. From 2007 to 2016, she was a member of the Estonian Parliament (“Riigikogu”) and was re-elected in 2019. Ms Simson has a degree in history at the University of Tartu and holds a master’s degree in political science from the University College London.
IEA Foreword
THE INTERNATIONAL ENERGY AGENCY SEES AN IMPORTANT ROLE FOR DISTRICT HEATING AND COOLING TO ACHIEVE NET ZERO EMISSIONS.
The International Energy Agency (IEA) is at the heart of global dialogue on energy, providing authoritative analysis, data, policy recommendations, and real-world solutions to help countries provide secure and sustainable energy for all. The IEA was created in 1974 to help co-ordinate a collective response to major disruptions in the supply of oil. While oil security remains a key aspect of our work, the IEA has evolved and expanded significantly since its foundation. Taking an all-fuels, all-technology approach, the IEA recommends policies that enhance the reliability, affordability and sustainability of energy. It examines the full spectrum issues including renewables, oil, gas and coal supply and demand, energy efficiency, clean energy technologies, electricity systems and markets, access to energy, demand-side management, and much more.
The decarbonisation of heating and cooling is critical to curb carbon emissions in the buildings sector. In 2021, heating was responsible for around 80% of buildings direct emissions, with fossil fuels accounting for more than 60% of heating energy consumption. At the same time, space cooling will expand more rapidly than any other building end-use, adding 2.4 billion households air-conditioners as incomes and temperatures rise.
In 2021, the IEA published its landmark report Net Zero by 2050 which shows a possible pathway on how to transition to a net zero energy system by 2050 while ensuring stable and affordable energy supplies, providing universal energy access, and enabling robust economic growth.
In the report, clean district heating and cooling (DHC) networks are highlighted as critical systems for the transition towards zero-carbon-ready buildings. In particular. In the Net Zero by 2050 Scenario DHC is expected to cover 20% of global space heating needs by 2030, up from 15% in 2020.
However, as highlighted in our Tracking Clean Energy Progress page, DHC systems are currently not on track to meet the Net Zero by 2050 Scenario targets. While there are several networks showcasing “best practices” towards low temperature and clean DHC operation - as highlighted by the finalists of the Global District Energy and Climate Awards - nearly 90% of district heat globally was produced from fossil fuels in 2021. To fully play its role in the transition, DHC system requires significant efforts to rapidly improve the energy efficiency of existing networks, integrate 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. In our IEA Future of Heat Pumps report, we particularly emphasise the contribution that large scale heat pumps can provide to reduce the dependency of DHC network from fossil fuels, for example by allowing heat recovery from wastewater or by increasing temperature at local substations where needed.
The transition of DHC systems can also highly benefit from technology innovation. The expertise provided by the IEA Technology Collaboration Programme (TCP) on District Heating and Cooling (DHC TCP) has been advancing research in DHC since 1983. With more than 80 research projects completed, the program is dedicated to innovate and share knowledge on multiple aspects of DHC systems touching on distribution systems, operations, customers, addressing both technical and policy-related issues. Jointly with IEA, in 2022 buildings-related TCPs published a report to 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. The report also includes an article on DHC, highlighting main innovation themes, challenges and recommendations associated to DHC systems – highlighting the role that international collaboration can play.
Stronger international collaboration also facilitates the exchange of data collection, best practices and the harmonisation of reporting, an area which would greatly propel the transition of DHC systems. Improving statistics and reporting of data associated to district heating and cooling systems and their benefit for the environment and the community would enable clearer understanding on the potential of DHC systems. Currently, data reporting on DHC is fragmented, being scarce in the case of district cooling systems and highly heterogeneous in the case of district heating systems. While this is a challenging and complex task, it is also a crucial aspect to ensure informed policy decisions and investments in the sector. This market outlook is an important resource towards a better understanding of the status and potential of DHC in Europe.
Chiara Delmastro
Chiara Delmastro is a energy analyst and modeler at the International Energy Agency, with main focus on the buildings sector. She is member of the Steering Committee of the Global Alliance for Buildings and Construction and member of the board for the Global District Energy and Climate Award, also acting as desk officer for the IEA District Heating and Cooling Technology Collaboration Programme. Previously research fellow in Politecnico di Torino with main focus on energy access in developing countries and decarbonisation of heat in buildings. Chiara holds a M.Sc in Energy and Nuclear Engineering and further specialized with a PhD in urban energy planning and energy modelling for policy-oriented scenarios analysis.
EHP Foreword
Welcome to the District heating and cooling Outlook 2023!
In the past decade, the EU has made giant steps towards accelerating the decarbonisation of the electricity sector. It is now time to address the hidden part of the iceberg: heating and cooling!
The size of the challenge is unprecedented: heating accounts for half of Europe’s energy demand and remains heavily dependent on fossil fuels. However, as always, there is a bright side to it. The potential of local clean and renewable heat sources is significant in Europe and heavily untapped. The EU is also home to leading clean heating technologies and infrastructure, such as district heating and cooling, heat pumps and high-efficiency cogeneration. We have the solutions at our fingertips, but where do we start?
A venerable Socrates once said, “To know thyself is the beginning of wisdom.”
This is exactly the ambition of Euroheat & Power’s DHC Market Outlook. This publication sheds light on the development of European District Heating and Cooling markets, identifies key political and business trends shaping the future of our sector, and supports our members and policymakers to take informed decisions about the future.
The DHC Market Outlook is already a well-established deliverable, but the 2023 edition brings significant improvements.
First, the EU indicators on district heating and cooling are fully updated, including new data on waste heat in some surveyed countries. Some results are striking, hinting at the true potential of our sector! Who knew there are nearly 190 000kilometress of district heat data sets on ing pipes in our cities, supplying 70 million citizens across Europe? The updated renewable and waste heat are also very exciting: in 2021, more than 43% of our supply came from renewable and waste heat sources!
Second, the outlook integrates qualitative chapters on the impact of the energy crisis, recent EU policy developments and latest DHC innovation trends.
As the energy transition pursues its course, district heating and cooling is more relevant than ever. It enables the combined use of local renewable heat sources (e.g. sustainable bioenergy, geothermal, and solar thermal), renewable electricity, and the recovery of excess heat from industrial and urban sources. Coupled with thermal storage and large-scale heat-pumps or e-boilers, district heating and cooling becomes a precious ally to support the resilience and flexibility of the future energy system.
The heat revolution is underway, and it starts with you!
We hope that you will find this 2023 edition useful and inspiring, and take the opportunity to thank all our members and partners for their unwavering support.
Best regards,
Aurélie Beauvais
Aurélie has over a decade of experience in political strategy, advocacy and EU energy & climate policies. She previously held the position of Deputy CEO and Policy Director of SolarPower Europe from 2017 to 2021. She has also headed the European Affairs department of the French Union of Electricity from 2012 to 2017.
Eloi Piel
Eloi joined Euroheat & Power in 2002. From January 2014 he was head of the policy unit. In August 2022 Eloi was promoted to Director of Market Intelligence.
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District heating in Europe
1. Market share
The share of District Heating in the final energy-use for space heating and water heating is evaluated at 12% at EU level. There are over 17 000 District Heating networks1 in Europe supplying heat to 70 million2 citizens.
As illustrated in Figure 1, the share of District Heating also varies significantly across the continent. District Heating is by far the most common heating solution in Northern and Eastern Europe, but still has a large potential to grow in these countries which developed in the 1980-2000 a heat market relying to a great extent on natural gas and/or electric heating (e.g. Germany, the Netherlands, the UK and France).
District Heating is experiencing a real renaissance on some markets. In 2021, 22% of new buildings in Germany were connected to District Heating. In September 2022, a new support scheme (BEW) entered into force with the objective of greening the fuel mix of existing schemes and developing new ones.
The sector is also growing in France with an increase of 70% of buildings connected to heat networks within the last ten years. In both countries the current energy crisis has led policy-makers to consider new ways to accelerate the pace of change on the heat market.
The Netherlands is another example of a country where change is about to happen. Natural gas has been traditionally very strong on the heat market: it represents 82% of heating for residential/service sectors. This country has developed a new legislative framework that will provide opportunities for cities to roll-out District Heating. More detailed information is provided in the individual country chapters.
As above-mentioned, the Heat Roadmap Europe projected that District Heating and Cooling using renewable and waste heat could provide 50% of the EU heat demand from buildings by 2050.
2. District Heating sales
Heat sales are a key indicator for the sector. Sales can vary from a season to another on the basis of weather variations, like the warm winter of 2020 which caused a logical decrease in heat demands.
In Europe District Heating sales amount to nearly 500 TWh for 2021. For countries with comparable statistics, the year 2021 saw an increase in heat sales as a result of colder seasonal temperatures, the end of the COVID19 lockdowns - which reduced demand from the secondary sector - as well as new connections.
Over the last decade growth can be reported on the different market types.
In Northern Europe, the share of District Heating continues to progress. District Heating has accompanied the growth of urban centres - e.g. Helsinki or Stockholm areas – and will be instrumental in phasing out the small remaining share of fossil-fired individual heating – e.g. Finland and Denmark.
In Eastern and Central Europe, incremental growth is occurring while the competition with individual solutions has been very harsh, in particular with boilers using natural gas.
The growth is logically higher on new and emerging markets. In Switzerland and Austria space heated by District Heating have grown by respectively 50% and 68% over the last ten years (2011-2021).
3. Installed capacity
The total installed capacity within the European District Heating sector is about 300 GWth (2021) for the countries surveyed3.
The countries with the largest installed capacity are Poland and Germany followed by the Czech Republic, France, Denmark, Finland and Austria. Sweden is not covered in the aggregated figure, as the national association does not collect data on capacity.
As illustrated in the DHC Roadmaps in the country chapters the installed capacity of District Heating installations is set to grow to accompany the decarbonisation of heating4. In the meantime, the sector will evolve and integrate a wider range of sources as well as support system-integration with projects to tap the potential for waste heat as well as the use of renewable and clean electricity.
4. Energy networks
The distribution networks represent 186 5905 km across Europe. The growth of networks is correlated to the increase of heat sales.
The size of networks varies very much between large ones – over 1000 km in capital cities such as Berlin, Vienna, and Bucharest – and smaller ones which connect a few municipal buildings and/or blocks of dwellings in communities and rural areas.
As shown in Figure 4, it is worth highlighting that the upward trend for infrastructure development continues, with variations across countries. In France the length of networks has nearly doubled between 2009 and 2021.
The analysis shows that DHC infrastructure still grow on mature markets. Finland shows a 20% increase over the last decade. The evolution for Germany in the graph below – the increase from 2017 to 2019 – may reflect a growth of the network. However its main explanation is a change in the scope of data collection. For 2019 onwards the data have been provided by the Federal Statistical Office.
Compared to other countries, data for the Czech Republic show a slight decrease of trench length over the last ten years. This situation is explained by recent investments to upgrade networks, which aim systematically at system optimisation by re-deploying networks around the largest points of heat delivery – hence leading in some cases to a reduction of the overall length of heating infrastructure. Figure 2 above shows that this decrease has occurred while district heat sales kept growing in the Czech Republic.
5. Fuel mix
5.1 A diverse and changing fuel mix
The fuel mix of District Heating systems still varies very much across countries (Figure 5), depending on fuels available at regional levels as well as the regulatory conditions.
The DHC Roadmaps available in the country chapters shows a sector in the middle of a transition towards sustainable fuels and identified by many Governments and cities as the infrastructure of choice to decarbonise heating. At European level, the heat sources (Figure 6) used in District Heating have evolved over the last 20 years to integrate a higher share of renewable and waste heat.
5.2 Combined Heat and Power
CHP has always played a key role in the portfolio of generation assets within the District Heating sector in Europe. These installations ensure the co-production of power and heat with the highest efficiency, in comparison to electricity-only production, or decentralised heating systems (e.g. individual boilers and block heating). Although the economics of CHP installations has been impacted by low wholesale power prices within the last decade, this solution still plays an important role in heat production on mature, upgrade and growing markets, as seen on the graph below.
The share of heat generated in CHP installations varies across the surveyed European countries, as illustrated below in Figure 7. The figure for Portugal (100%) refers to two installations using mainly natural gas and bio-energies.
For the European countries with the largest established District Heating sector, CHP represents over two thirds of the total district heat production as illustrated in figure 8, based on information sourced by national associations.
In the context of the transition towards climate neutrality CHP remains a strong option to use fuels in the most efficient way. This solution will also be increasingly relevant to provide critical services in day-ahead and frequency regulation, accompanying a fast-changing energy system to integrate rising shares of intermittent renewable electricity production. This is particularly true when these installations are coupled with large-scale thermal storage and heat pumps/e-boilers.
In Germany hydrogen and climate-neutral fuels are expected to be used in new and refurbished gas-fired CHP installations to both supply heat and provide flexibility to the power grid, especially in winter. It is particularly difficult to anticipate the amount of hydrogen that will be available for the heat sector, due to high demands from other sectors. Cautious analyses predict district heat production to represent 5 TWh by 2030 and between 14 to 30 TWh respectively by 2045 and 20506.
In the Czech Republic, the decarbonisation of the heat sector will imply a diversification of sources with the use of CHP fired with natural gas (until 2040) and an increasing share of sustainable biomass, biogas as well as municipal waste.
In Austria, the Energy Agency forecasts an increasing share of supplies from bioenergy (biomass, biogas and green gases) by 2030 and 20507. It is expected that CHP will play a significant role to ensure both high efficiency production and system stability.
5.3 Fuel mix: a rising share of renewable energy sources
The share of renewable energy sources in the DHC sector continues to grow, driven by policies aiming at both decarbonising the heat supply and increasing energy security by valorising local resources.
In total bio-energies, geothermal, solar heat and the output of heat pumps (including e-boilers) represents today 43% for the European countries surveyed8. The shares of renewable energy sources vary very much across countries. Iceland has a 93,4% share of renewable heat (geothermal) displaying the full potential of District Heating.
Between 2011 and 2021 the combined amount of renewable heat within District Heating doubled for France, Austria, Czech Republic and Denmark, where comparable data from the last ten years is available. The evolution of these markets provides a clear indication on the transition pathway of the sector.
Sustainable bio-energies represent the first renewable fuel in District Heating systems. The new policy measures under the Fit for 55 Package proposed by the Commission in July 2021 to ensure the sustainable use of biomass will secure the use of sustainable bio energy sources in Europe, while pushing for a diversification of the renewable sources used in District Heating.
The evolution of the use of bio-energy in District Heating reflects the diversity of local markets. For example in the Czech Republic, the growing biomass share in District Heating is explained by the conversion of existing electricity-only biomass plants to cogeneration plants. In France, important investments are planned to harvest the country’s’ highly untapped potential for the use of sustainable bio-energy sources, in particular in rural areas. In Sweden, recent developments show an interest from utilities in fitting bio-energy plants with Carbon and Capture Storage facility to develop negative-emission projects.
Other renewable heat sources, in particular solar thermal and geothermal energy, are making a strong breakthrough in District heating and Cooling systems.
In Europe, 13 new geothermal heating and cooling plants connected to district heating were announced in 2021. In Aarhus (Denmark), the development of Europe’s largest geothermal district heating facility was announced at the beginning of 2022, to be partly operational by 20259. In Iceland where 90% of homes are heated with geothermal the city of Höfn inaugurated a new system at the end of 2021.
In France, according to the ‘Transitions 2050’ study developed by ADEME (French Agency for Ecological Transition), the share of geothermal in District Heating is set to increase from the current 5.5 % share to 16-18% of the fuel mix in a context where the market share of District Heating increases from the current 5 to 20%.
In the Czech Republic, the share of geothermal is set to become the third largest heat source after solid biomass and biomethane by 2050, rising to 417 in 2030 and 3056 GWh by 2050.
According to projection studies, in Germany the share of geothermal and solar thermal within the mix of a growing District Heating sector will increase significantly. Geothermal is expected to reach 10 TWh in 2030 and 18 TWh in 2045; solar thermal 6 TWh in 2030 and 13 TWh in 2045. More detailed information on these projections is available in the country chapters.
Solar-based District Heating is also developing with projects across Europe. Denmark hosts the largest capacity with 1,5% or 623 GWh of District Heat produced on the basis of solar energy (2021).
The graph below shows a correlation between a high share of renewable energy in gross final consumption for heating and cooling and the share of District Heating for various European countries.
5.4 Waste heat
District Heating and Cooling provides the infrastructure of choice to use and valorise a wide range of heat flows that are by-products of industrial processes and would otherwise be wasted – without DHC.
Based on the statistical feedback to the survey, waste heat represents 2,5% of DHC’s total district heat deliveries for 2021. This figure refers to the use of waste heat from both secondary and tertiary sectors.
The highest shares of waste heat (Figure 10) are found today on markets where District Heating is well established, and where both heat planning and taxation provide a context leading to these projects.
There is a vast untapped potential for waste heat in Europe. The Heat Roadmap Europe Project10 assessed that waste heat from power generation, industrial and waste-to-energy installations amounts to 2,860 TWh/y in the EU, almost corresponding to the region’s total energy demand for space and water heating in the residential and service sector buildings.
The waste heat from heavy industrial sites in the EU amounts to over 267 TWh a year, which is more than the combined heat generation of Germany, Poland and Sweden in 2021. The sEEnergies Project estimates the potential of waste heat sources over 95°C located within 10 km of existing District Heating infrastructure at 64 TWh already, corresponding to 12% of the energy supplied to EU District Heating infrastructure annually11.
In Germany, Europe’s industrial powerhouse, waste heat represents only 0.1% of total district heat supplies. However, the potential in some specific urban areas is significant. There are approximately 50 industrial sites in the areas around Essen, which produce 11.98 TWh/year of waste heat. This is about the amount of heat required to heat 1,200,000 households – or close to half of the households in the area.
The evolution of technology, particularly the development of efficient large heat pumps, has broadened the scope of available sources, including new urban waste heat sources. The project ReUseHeat12 established the potential for low-temperature waste heat that can be used with the medium of heat pumps. In particular the project looked at the potential from wastewater treatment plants, data centers as well as buildings from the residential and service sectors. The project estimated that ‘accessible’ sources of low-temperature waste heat located ‘inside or within 10 kilometres’ of existing District Heating areas could represent over 300 TWh or about 12% of the total European heat demand for buildings.
Data centres appear particularly promising amongst new sources available for District Heating. In 2020, these installations consumed 100 TWh of electricity or around 3.5% of the EU’s final electricity demand. The electricity is principally used by the equipment and cooling units, which basically remove the excess heat from the air and replace it with cooler air. The ReUseHeat project counted 1269 data centres in the EU (+UK) representing a total of 95 TWh/year of accessible excess heat.
The DHC Roadmaps available in the country chapters show rising shares of waste heat in all national scenarios.
5.5 Large heat pumps
As a reaction to the crisis between Ukraine and Russia, the Commission identified heat pumps in the REPowerEU Communication (May 2022) as key solutions to phase out imported fossil fuels, along with the deployment of other renewable and waste heat sources. The report on ‘The future of heat pumps’ published by the International Energy Agency (IEA) in November 2022 highlights that while individual units fit perfectly in rural and low-heat density areas, District Heating is the infrastructure of choice to support the deployment of large heat pumps in urban areas.
According to a report13 by Euroheat & Power large heat pumps already play a crucial role in District Heating and Cooling networks on some markets where they upgrade sources such as waste and renewable heat to a temperature suitable for heating and cooling buildings (Figure 12).
Combined with thermal storage, electric boilers and CHP heat pumps enable the integration of sustainable sources into the energy system and open up ways for sector integration. Additionally, they also maximise the decarbonisation potential of intermittent renewable electricity sources and provide stability to the energy system.
Large heat pumps are versatile in their capacity to use a wide range of low-temperature heat sources, enabling energy diversification and accelerating the decarbonisation of heating. Combined with efficient and intelligent buildings, large heat pumps open the way for high energy performance and the deployment of 4th and 5th Generation District Heating.
The main energy sources which can be harvested via the means of large heat pumps include:
- Renewable heat sources (geothermal and ambient energy)
- Waste heat from industrial processes
- Urban excess heat (e.g. from service/residential sectors – supermarkets, underground metro, data centres etc.)
- Sewage water treatment facilities
Large heat pumps in District Heating help reduce the overall electricity demands for heating and cooling. In the context of the electrification of many usages, they will further contribute to free up capacity for other sectors such as mobility and industry. Together with city-scale thermal storage, large heat pumps can absorb excess renewable electricity (for direct or postponed use) and modulate production to ensure grid balancing with a quick ramp-up/down of generation as well as providing weekly and even seasonal flexibility.
The use of large heat pumps within District Heating is set to increase in all countries. Based on the investment plans of some of the largest DHC systems in Europe, this capacity is expected to increase by at least 80% by 2030 representing changes in generation portfolio and growth of networks.
The projections made by associations and/or national authorities in the DHC Roadmaps anticipate an important contribution from large heat pumps in the perspective of a growing and changing sector.
The market uptake will be driven by the opportunities related to low-temperature sources whether from waste heat or renewable energy sources.
In France, the greenfield Geothermal heat network in Arcueil/Gentilly (Paris region) was developed in only 2 years and provides a heat supply based on a share of 60% renewable energy with geothermal and large heat pumps replacing heating previously based on fossil fuels. With the optimisation of the secondary circuit (heating distribution within the buildings), the overall return temperature of the water in the network was lowered increasing the uptake of geothermal heat. In Denmark, the network in Odense is another example of the significant potential associated with large heat pumps. Here the waste heat from a Data center owned by Meta is valorised by heat pumps. Coupled with renewable electricity this approach delivers a 100% renewable heat supply and provides grid stability.
Sources:
1 Following the definition of District Heating in article 2 (19) of Directive 2018/2001 on renewable energy sources ‘district heating’ or ‘district cooling’ means the distribution of thermal energy in the in the form of steam, hot water or chilled liquids, from a central or decentralised sources of production through a network to multiple buildings or sites, for the use of space or process heating or cooling’
2 This figure is an evaluation based on the number of households supplied in the surveyed countries: Austria, Belgium, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Hungary, Iceland, Italy, Latvia, Lithuania, Tthe Netherlands, Norway, Portugal, Serbia, Slovenia, Spain and Sweden and the UK. For Slovakia and Bulgaria, figures for 2019 are used. For Poland the latest figure available (16.5 million citizens) is from 2017.
3 Austria, Bosnia Herzegovina, Bulgaria, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Hungary, Iceland, Italy, Latvia, Lithuania, Norway, Poland, Portugal, Romania, Serbia, Slovenia, Spain, Sweden and Switzerland. No figures for Belgium, the Netherlands.
4 District Heating Infrastructure deep dive, IEA, 2022
5 This figure covers: Austria, Belgium, Bulgaria (figures for 2019), Bosnia and Herzegovina, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Hungary, Iceland, Italy, Latvia, Lithuania, Norway, Poland, Portugal, Serbia, Slovenia, Spain, Sweden (2019), Switzerland and the Netherlands (2013).
6 Klimaneutrales Deutschland, Agora Energiewende & Prognos, 2021
7 Updated roadmap to the decarbonisation of District Heating in Austria, Austrian Energy Agency, 2022
8 Austria, Croatia, Czechia, Denmark, Estonia, Finland, France, Germany, Hungary, Iceland, Italy, Latvia, Lithuania, Norway, Poland, Serbia, Sweden and Switzerland. Bulgaria, Portugal and Spain did not report data although bio-energies are being used in these two countries.
9 IEA, District Heating – Analysis - IEA
10 Heat Roadmap Europe 2, Aalborg University, 2013
11 Excess heat potentials of industrial sites in Europe, sEEnergies Project, 2020
12Report on the amounts of urban waste heat accessible in the EU 28, ReUseHeat , 2020
13 EHP Technology Briefing – Large Heat Pumps in District Heating and Cooling Systems, Euroheat & Power, 2022’
District Heating and the energy crisis
Competitiveness and consumer protection
The economic rebound following the end of the COVID19 lockdown in 2021 led to an increase of energy prices across Europe, in particular natural gas. The crisis in Ukraine and the phase-down fossil fuel imports from Russia reinforced the upward evolution of fuels and power prices. Increased energy costs impacted the competitiveness and liquidity of DH operators, in particular those still relying on natural gas. Investment costs for all new energy projects went up over the last two years. The increase was fuelled by the shortage of important components with the economic rebound and the general high level of inflation. The inflation in the Eurozone reached 8.5% in February 2023 year to year (source: Eurostat). The conflict in Ukraine had also impacted industrial sectors - including energy - with a disrupted supply for important input to projects – cable, steel etc, - leading project developers to search for alternative providers.
If the crisis has resulted in a more difficult environment for all energy operators it has also demonstrated the resilience of District Heating in such a crisis.
Despite project costs increase DHC was actually less exposed to price volatility depending on the fuel mix of individual systems. In particular networks using already a large share of renewable and waste heat have been able to provide customers with fair and stable prices and face increasing requests for connections from new customers.
Figure 14 provides evidence that consumers connected to District Heating using renewable and recovered heat were well sheltered from volatile prices for fossil fuels.
The Figure below shows the compared evolution of energy prices in Denmark within the last ten years. District Heating prices have remained stable for 2020-2022 when the prices for other heat sources sky rocketed.
European and national responses
In such a context of uncertainty with a clear impact on households and industries, national governments have taken action and implemented measures to shield consumers from the rising costs of energy. Governments implemented measures such as reduced rates of taxation, direct compensations, aid to address liquidity and bail-out in extreme cases.
The European Commission took measures to provide a framework for Member states to address the impact of rising energy costs on undertakings and households. The State aid rules were modified three times to this effect, the last time with a proposal in February 2023. In March 2023, new legislative proposals were published to reform the electricity market and address prices volatility.
Outlook for District Heating: perspective 2030
Rather than postponing the energy transition, the current crisis has provided a new impetus to accelerate the transformation of the heat sector. Next to responses to address the short or medium term impact of the crisis, measures with a more long-lasting effects were taken in many countries to quicken the pace of the heat transition. The focus was to a great extent on small heat pumps. However, it also features on many markets a renewed interest in accelerating the growth of District Heating. This is very well illustrated in the country chapters.
Based on national objectives and estimates from the sector (see table below) to reach national energy and climate goals of selected countries, over 5 million additional households are expected to be connected to District Heating by 2030. This growth is particularly important in new and growing markets. On mature markets, the crisis has confirmed the choice of District Heating to decarbonise heat supply before 2050. In Denmark where District Heating is well established, authorities decided to accelerate the phase out of the remaining boilers using natural gas.
This estimation is very likely an under-estimation as it does not cover all Europe and many Governments are engaged in processes to accelerate the heat transition as a response to the current energy crisis.
At the time this report was finalised, discussions were underway in several countries. In France, for example, discussions are ongoing regarding the law on programming investments in energy infrastructure, which may increase the target for growing the share of renewable energy sources, including heating. In Germany, a federal law is under discussion to accelerate the transition towards renewable heating.
This projection shows a growing awareness that District Heating and cooling networks are critical infrastructure to phase out imported fossil fuels and reduce the risk of volatile prices for households.
While these projections are encouraging, the implementation of new projects could be impacted by the lack of skilled workforce in many countries. All ambitious national/regional objectives should be accompanied with dedicated measures in the field of education and training.
Country Focus: Austria, France and Germany
Austria
District Heating is a success story in Austria. Heat sales have been multiplied by 3 between 1990 and 2021 - and by 20% within the last ten years. The growth of heat networks has been instrumental in phasing down the use of fossil fuels and valorising local bio-energy resources. Today District Heating has a market share of 30% in the residential and service sectors. This success is explained by policy instruments such as investment aid, a commitment to develop sustainable bioenergy as well as the strong role of cities.
The current energy crisis provided additional incentive for Austrian authorities to boost the country’s heat transition. Under a new Renewable Heat Law (2022), funding will be available to end the use of fossil fuels with dedicated support for end-users to switch fuels and operating aid to develop heating infrastructure.
In total 252 million EUR are expected to be allocated by the Government for District Heating and Cooling for 2023-2026 out of a total of 5.7 billion EUR allocated for the ‘green transformation’ in the residential, service and industrial sectors.
The Austrian Energy Agency forecasts an expansion from 1.4 to 2.1 million building units supplied with District Heating by 2040 with networks reaching 13,000 kilometres in total, be it an increase of 37% compared to today.
To carry out the heat transition the Agency foresees a total of 10 billion EUR of investment by 2040, as illustrated in figure 17.
France
France belongs to the category of fast developing markets. District Heating has experienced a renaissance since the adoption of an unprecedented package of measures1 covering efficiency and renewable sources that followed a broad consultation of stakeholders on ways to drive the energy transition in 2007. With a 5% market share there is still a large growth potential to replace fossil-fuel heating (over half of heat consumption for the residential sector2).
Since 2009 the length of heat networks has nearly doubled, from 3450 to 6529 km (2021) and systems have halved their CO2 emissions thanks to the introduction of renewable and waste heat sources.
The Heat Fund, providing investment aid, has been the key instrument to drive the heat transition. Between 2009-2020, the fund supported 6000 projects – including 1200 DH projects - for a total budget of 2.5 billion EUR. The efficiency of the Heat Fund - managed by ADEME - to accelerate decarbonisation has been praised twice in reports published by the French Court of Auditors.
At the average price of gas in 2021, national agency ADEME estimates that the 39 TWh of renewable energy produced by all the projects supported by the Heat Fund since its creation allowed savings on the annual fossil fuel import bill of around 1.6 billion EUR in 2021.
The current energy crisis highlights the benefits of efficient District Heating in providing sustainable heat at a fair and stable price. As a result, demands for connections to District Heating have significantly increased compared to previous years according to French District Heating operators.
In this context French authorities have taken new measures in 2022 to accelerate the heat transition.
On top of already existing measures, the most impacting decision was to increase the amount of funding available under the Heat Fund to 520 million EUR for 2022. The Government also took steps to incentivize the ‘quick connections’ of buildings located in areas supplied by an existing efficient District Heating. A decree adopted in April 2022 also set out the principle of a mandatory connection to efficient District Heating for new and renovated buildings. These new measures are expected to provide an additional boost for new projects.
In spite of the high growth, France will still need to increase the level of funding to exceed the objective3 of 39,5 TWh of renewable heat by 2030. According to FEDENE, this objective implies the development of 1600 new District Heating projects (211 extensions and 1337 new systems) and will require an estimated 25 billion EUR of new investment.
At the time this report was being finalised the French Government was holding talks with stakeholders on updated objectives for 2030, that may include an increased level of ambition for renewable and recovered heat.
Germany
District Heating has a long tradition in German cities and currently accounts for 14% of households and 10% of energy used to satisfy heat demands from residential and service sectors. There is a significant potential for the sector to grow with a view to replacing individual oil and gas boilers that represent 75% of the heat market.
Current levels of energy prices and the uncertainty regarding future developments have impacted the whole energy sector in Germany, including the District Heating sector where natural gas represents 48% of heat production (BDEW, 2020).
In terms of projection, the objective of climate neutrality by 2045 set in the 2021 national Climate Change Act will lead to the expansion of decarbonised District Heating systems in urban areas and the deployment of heat pumps in areas with less density.
A new financing scheme BEW (Bundesförderung für effiziente Wärmenetze) started operations in September 2022 to support the transition in the District Heating sector. Based on the available budget (3 billion EUR until 2026), the scheme is expected to mobilise over 1 billion EUR of additional investment per year. According to the German Ministry of economic affairs, the implementation of the scheme will lead to the installation of an additional annual capacity of 681 MW renewable heat, representing a reduction of 4 million tCO2/y until 2030.
The objective of BEW is to support the conversion of existing DH systems to alternative sources (renewable and waste heat) and to develop new schemes with a share of renewable/waste heat of at least 75%. The whole energy chain from production facilities to buildings is eligible for support under the form of investment and/or operating aid.
According to Government forecasts conducted before the energy crisis, hard coal and lignite are expected to be replaced with natural gas, which will peak at 53% in 2025. Climate-neutral sources such as heat pumps, hydrogen, renewable energy, and waste heat are expected to replace natural gas between 2030 and 2045.
There are several studies on the future of heating, notably from BMWK, Prognos and Ariadne, with slightly varying projections. Overall, the heat supplied to buildings by district heating is expected to rise to approximately 18% by 2030 and to around 26% by 2045. This is equivalent to almost doubling the current share by 2045. According to several projection studies from BMWK, district heating will play an important role in decarbonising the heating sector and achieving climate goals, especially in larger cities and more densely populated urban areas.
Source:
1 Programmation Law 2009-976 (2009)
2 French Ministry
3 This objective was laid down in the Energy Transition and Green Growth Law (2015)
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The war in Ukraine has put pressure on the EU to further accelerate its efforts to deploy energy efficiency and renewable energy sources. The REPowerEU Plan and successive emergency measures aimed at accelerating the pace of the energy transition, by facilitating funding and the establishment of renewable projects. The crisis occurred when the European Union was negotiating the Fit for 55 package (FF55) presented by the European Commission in 2021. This package provides the regulatory instruments for the European Union to reduce the EU's greenhouse gas emissions by 55% by 2030 in line with the pathway towards climate neutrality goal by 2050.
The package is expected to drive forward the integration of sustainable heat sources and enhance synergies with other energy grids. It further recognizes the importance of DHC networks to achieving energy and climate goals, enabling the decarbonization of heat supply, while increasing the efficiency of the overall system.
Provisions dedicated to DHC build on previous EU legislation bringing some positive evolutions while taking into consideration the specificities of the sector (e.g., the integration of third-party supplies of sustainable heat in larger systems is encouraged within the conditions of technical and economical feasibility).
While many files have been agreed upon, including the EU Emissions Trading system (EU ETS), some others will be finalized by the end of 2023. The revisions of the Renewable Energy Directive (RED) and the Energy Efficiency Directive (EED) are expected to be formally adopted and published in the coming months, following the informal agreement reached by institutions in Q2. Negotiations on the Energy Performance of Buildings Directive (EPBD) will continue until this fall.
The package reflects several positive trends in legislation and represents opportunities for the growth of the District Heating and Cooling market. The role of DHC as a key solution to decarbonise heating and to bring flexibility to the energy system is further recognized. Co-legislators also agreed on an overall binding renewable target of 42.5% in 2030, with a non-binding 2,5% increase bringing the target to 45%. This ambition is also reflected in the Heating and Cooling sector with a binding target for the annual increase of renewables of 0.8 percentage points for 2021-2025, and 1.1 percentage points for 2026-2030.
A new definition of efficient District Heating and Cooling is introduced, which gradually puts the sector on track to carbon-neutrality by 2050 and includes waste heat along with renewable targets. It acknowledges the potential of waste heat to complement renewable energy sources in decarbonizing heat. Waste heat can also contribute to the renewable sub-targets for buildings, industry, heating and cooling, and DHC. With greater recognition of the role of waste heat, the RED outlines a toolbox of measures (risk mitigation frameworks, increased coordination between waste heat actors) to support the exploitation of both renewable and waste heat sources, as part of a diversified energy mix.
In addition, the package places greater emphasis on the local level by introducing compulsory comprehensive heating and cooling assessments for cities with populations above 45,000 inhabitants. This requirement will enable cities and municipalities to actively participate in the energy transition by developing and implementing sustainable heating and cooling solutions.
The package includes a carbon price on all fossil fuels used in buildings with the EU ETS2. Although the price for CO2 is capped at 45 EUR per ton until 2030 to protect consumers this is an important development to establish a level-playing field between boilers and larger installations already covered under the Emission Trading scheme.
The combination of targets and incentives outlined in the FF55 package, the new State aid rules, the Resilience and Recovery Fund have the potential to significantly boost the uptake of renewable and recovered heat. A close follow-up of the implementation at national levels will be important so that these new measures translate into opportunities to build a more sustainable heat sector.
In spite of the good signals from Brussels, more attention and additional support for the heating and cooling sector will be necessary to achieve the decarbonisation goals of the EU.
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Introduction
At global level, energy demands for space cooling increased more than twice as fast as the overall energy demand in buildings over the last decade. This rush for cooling is driven by higher temperatures caused by climate change, increasing incomes and growing populations1.
Cooling demands are one of the main contributors to electricity demand growth in emerging and developing economies; the STEPS scenario (keeping current policy options) by the IEA forecasts an extra 2 800 TWh globally for space cooling by 2050 to be necessary to meet these demands or ‘the equivalent of adding another European Union to current global electricity demand2.
In Europe the repeated summers with extraordinary seasonal temperatures combined with rising consumers’ expectations in terms of comfort is leading to growing demands for cooling.
These demands are to a great extent embedded in power demands; they are generally met with building-bound units supplying a large building, typically in the secondary sector. The diffusion of air-conditioning units in the residential sector has also developed dramatically across the surveyed countries within the last 20 years.
Functioning along the same principle as district heating – with a central production unit supplying thermal energy through a network of pipes, district cooling offers a high efficiency alternative to stand-alone air conditioning units providing access to new resources such as renewable (e.g., free cooling from sea/lake water) and waste heat sources and the capacity to offer flexibility to the power grid.
This capacity of district cooling to off-load the last kilometre of the grid becomes a strong asset in the context of high-density urban centres engaged in the ‘electrification of all things.’
Additionally, district cooling networks offer an optimal climate solution as they use fewer working fluids (in heat pumps and chillers) than small units. Generation units sited within a cooling network have also the capacity to control strictly all working fluids - to avoid leaks - and comply with dedicated regulations which do not apply to small units.
Sales of district cooling amounted to 3 TWh with over 150 systems across Europe in 2021 (Figure 16). district cooling supplies nearly exclusively buildings from the tertiary sector but offers the capacity to provide integrated solutions for other sectors such as storage sites requiring constant cold temperature (e.g., food sector).
In terms of infrastructure, the cooling networks in Europe represent 1358 kilometres of pipes (Figure 17) with 70% of the total based in 3 countries – Sweden, France and Finland.
Sources:
1 International Energy Agency, Sustainable, Affordable Cooling Can Save Tens of Thousands of Lives Each Year, March 2023
2 International Energy Agency, World Energy Outlook, October 2022
Outlook for District Cooling
Existing schemes across Europe are expected to grow to supply existing buildings and accompany new urban developments.
After a strong growth first in Sweden (early 2000’s) followed by Finland (after 2010), district cooling is now growing swiftly in Denmark and Norway. Projects are also recorded in France, Germany and Austria.
New projects are materialising in southern Europe after a lost decade following the financial crisis when all projects were stopped. For instance, in Barcelona, the Ecoenergies network supplying the Zona Franca will start to use the residual cold waste from the regasification of liquid natural gas by Enagás. By November 2023 this new capacity (18 MW) will come in addition to the existing generation assets of the network. This system will be the first district cooling network at global level to make use of surplus cold from an LNG terminal.
This example shows the versatility of district cooling to adapt to local contexts and its ability to valorise energy streams that would be otherwise wasted- or in this case dumped to the sea.
In Sweden, district cooling is expected to reach a 50% market share by 2030 on the basis of investment forecast by operators. In France, under the new concession contract the network in Paris will double by 2042. In Austria after a strong growth over the last decades – since 2009 cooling sales were multiplied by 7 – developments will continue in many cities. Vienna alone intends to double the network by 2030.
However, the analysis shows factors that may generate uncertainty and limit investments into capital-intensive infrastructure such as DC networks. Under current conditions a proper framework to recognise and address the cooling challenge is missing at European level. The contribution of district cooling networks to develop sustainable and resilient urban areas is not recognized. At the end of 2020 Member States delivered their heating and cooling Strategies1. The analysis of the first 21 countries to deliver their plans showed that only 6 countries mentioned cooling demands.
Sources:
1 The Energy Efficiency Directive (2012) requires Member States to deliver every 5 years a plan (or ‘comprehensive assessment’) highlighting the potential for District Heating and Cooling as well as High Efficiency Combined Heat and Power.
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District heating network generations
A common and useful way to understand the development of District Heating is through the use of "generations", as illustrated in figure 21. While this approach is not yet universally accepted in the District Heating and Cooling community, it remains the best way to provide an overview of the technological advancement of a heat network. Currently, most European heat networks fall under the third generation, though there are significant differences between individual markets.
Several European countries have made notable progress in incorporating renewable energy sources into their district heating systems, with at least eight countries achieving more than 40% renewable energy in their DH supply. This trend has contributed significantly to the overall increase of renewable energy sources in the region's heat demand. Recently, there has been a shift towards the adoption of fourth generation district heating (4GDH) or low-temperature district heating (LTDH) to replace third generation district heating (3GDH) networks. This new technology offers numerous benefits, including reduced heat losses, lower thermal stress and scalding risks, and the ability to use low-temperature waste heat and renewable energy sources.
Currently, the Nordic countries have the most advanced heat networks, with fourth or even fifth-generation district heating systems featuring fully decarbonised energy supplies, a wide range of integrated renewable energy sources, low-temperature distribution, and high energy efficiency in heat distribution and consumption. In central and southern Europe, there are many innovative heat networks that still rely on fossil-fuel-based cogeneration, but there is a trend towards increased integration of renewable energy sources, digitalisation, and lower heat distribution temperatures. In contrast, many Eastern European markets still use second- or even first-generation heat networks that primarily rely on solid fossil sources with relatively high temperatures.
Although the concept is relatively new and somewhat controversial, there is growing recognition of the potential of fifth-generation district heating (5GDH) in the scientific literature. This innovative approach prioritizes individual end-user heat/cold supply through the use of individual heat pumps and leverages a diverse range of decentralized, sustainable energy sources to operate at ultra-low temperatures. One of the key differentiators of 5GDH is the use of temperature adjustment, such as heat pumps and specialized substations, to enhance the overall efficiency and sustainability of the system. With optimized networks and a high degree of digitization, 5GDH systems have the potential to revolutionize district heating technology and pave the way for a more sustainable and efficient energy future.
Low temperature district heating (LTDH)
District heating networks are evolving towards lower distribution temperatures, which leads to reduced heat losses and enables the integration of sustainable heat sources. As mentioned before, this shift from 3rd to 4th generation networks is crucial for decarbonizing European cities. The not-widely accepted concept of 5th generation networks that operate at ultra-low temperatures has also emerged in recent years. This generational leap impacts all aspects of the thermal energy flow, from generation to end-user consumption. It will bring changes in pipe dimensions, network construction and installation methods, and new substation development. These changes will enable the integration of new kinds of sustainable energy sources and network optimization through digitalization.
The transformation from 3rd to 4th generation networks is closely linked to the transformation of the building stock towards high efficiency and reduced CAPEX and OPEX of components, allowing for lower network operating temperatures. Individual heat pumps in buildings can be used to increase water temperatures to supply district hot water and eliminate the risk of legionella. The lower operating temperature of 4th/5th generation networks enhances system efficiency, lowers distribution heat losses, and increases integration of locally available renewable and waste heat resources. The development of these networks will enable a cost-efficient and technically viable decarbonization of the European DHC sector.
Several H2020 projects are currently engaged in advanced research on low-temperature district heating and cooling (DHC). For instance, the COOL DH project examined and evaluated technological alternatives for utilizing low-quality heat sources. In addition, RELATED soke to decrease the operating temperature of networks through the integration of renewables at both the building and district levels. Meanwhile, the TEMPO and REWARDHeat projects are focused on developing fresh business models that offer heat as a service.
Waste heat recovery
Waste heat from industrial processes, data centres, wastewater, and supermarkets can be reused for heat, cold, and domestic hot water via district heating and cooling systems, representing a promising source of low-carbon energy. Despite barriers such as limited availability of district heating networks in some countries and a low interest among waste heat owners, unconventional waste heat sources like sewage water, data centres, and tertiary buildings could potentially cover 10% of the EU's total energy demand for heat and hot water, while the energy efficiency of the industrial sector can be improved through waste heat recovery.
Waste heat recovery can help displace primary energy demand for heating, reducing GHG emissions and addressing climate change. However, technical, and economic barriers such as temporal and locational mismatch and long payback periods pose significant challenges, and legislative and regulatory barriers, such as waste heat not being considered on par with renewable energy sources, must be overcome. Initiatives like EMB3Rs, INCUBIS, ReuseHeat, Heat4Cool, and RES-DHC are addressing these barriers and accelerating the adoption of waste heat recovery solutions to promote the transition to more sustainable energy systems.
Thermal storage
Thermal energy storage (TES) is a crucial component in the transition to sustainable energy systems, and several innovative building technologies are currently being developed for this purpose. These technologies are at various stages of development and can be classified into two categories: large, sensible thermal energy storage and compact thermal energy storage. Large-scale TES is essential for providing flexibility and enabling the increased use of renewable energy sources (RES) in district heating and industrial heating up to 100°C. Additionally, it can help absorb excess electricity at short notice, allowing for a higher degree of renewable power generation. While TES research has historically focused on seasonal storage of RES, recent advancements will enable multifunctional use of TES, including seasonal storage of RES, avoidance of fossil fuel-based peak load cover, and integration with the renewable electricity market via sector integration.
Notable TES projects are ongoing in Europe, including giga_TES in Austria for the development of next-generation TES systems, HEATSTORE in Denmark for the monitoring of large TES systems, and the IEA Annex39 program for large thermal energy storages. Demonstrations of large-scale, sensible TES have been carried out in various European countries, with PIT and TTES in development in Austria, Denmark, and Germany. High-temperature BTES is in use in Germany, Denmark, and Belgium, while ATES is being developed in the Netherlands. Compact thermal storage of solar energy is being explored in projects such as COMTES, MERITS, CREATE, SOTHERCO, and HEAT INSYDE, and phase change materials systems are being developed by initiatives like SAM.SSA and EUROPA for low-temperature applications.
Digitalisation
The integration of digital technologies has brought about a revolution in the field of District Heating and Cooling, leading to several advancements that have made it easier to optimize network operations while empowering end-users. One of the most significant advancements is the use of smart meters, thermostats, and sensors, which have become more intelligent and less expensive. This has enabled higher monitoring and control of the system, allowing for real-time optimization of networks with the help of artificial intelligence and digital twins.
Moreover, stakeholders can leverage the Internet of Things (IoT), automation, AI, and big data to gain access to more data from the field and obtain a complete digital view of assets. This, in turn, enables district energy systems to fully optimize their operations and empower end-consumers with transparency and benefits. These developments have the potential to lead to new business models, such as incentivizing end-users through demand response to reduce system costs and increase the use of renewable energy sources.
However, despite these significant advancements, challenges such as data security and privacy, as well as questions about data ownership, still need to be addressed. Additionally, interoperability remains a significant challenge in large-scale systems like district energy systems, which require detailed digital information not only from sensors and SCADA systems but also from components and subsystems throughout the plant.
The field of digitalisation for District Heating and Cooling is seeing several innovative projects that are transforming buildings and heat networks into smarter ones. For instance, the DigiBUILD project aims to create an open, interoperable, and cloud-based toolbox that can help transform current buildings into digital and interoperable ones. Another project, SRI-ENACT, focuses on facilitating the Smart Readiness Indicator (SRI) uptake in Europe.
Energy system integration
Energy system integration is a complex and multifaceted process that requires the coordination and optimization of various energy carriers, infrastructure, and consumption sectors. District Heating and Cooling networks are a critical component of this process, as they create connections between different parts of the energy system and provide flexibility through a range of commercially and technically available technologies.
In recent years, modern low-temperature district heating systems have been designed to connect local energy demand with renewable and waste energy sources, as well as the wider electricity and gas grids. By doing so, they contribute to the optimization of supply and demand across energy carriers, which can help to reduce curtailment and the need for direct electricity storage. Additionally, increasing the synergies between electricity and heat networks through multi-energy carrier integration can further maximize the use of renewable energy sources and improve the efficiency of the whole energy supply.
One of the key benefits of coupling the electrical and thermal grids, along with energy storage, is that it leads to more stable electricity demand and a reduction in electrical peaks. This means that DHC networks can also be coupled with the gas grid by using excess heat from fuel cells or other CHP processes involving hydrogen and biomethane. Recovering heat losses from electrolysis processes for hydrogen generation can also increase overall system efficiency.
However, successful energy sector integration requires an optimal control of the system to exploit fuel shift capabilities and energy storage. Innovative business models and market designs are necessary to encourage stakeholders from the heating and cooling sector to develop new control strategies and benefit from the additional flexibility DHC systems can provide. Additionally, improved collaboration, transparency, and communication between stakeholders from different sectors are essential. Standardized monitoring systems and data sharing protocols, as well as collaborative platforms, can facilitate the development of all sectors towards higher integration.
Several initiatives are focused on integrating district heating and cooling systems into the overall energy system. For instance, projects like SENERGY-NETS, SMILE, MAGNITUDE, and PLANET concentrate on energy system integration, smart grids, and storage solutions to enhance energy system flexibility.
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The consequences on consumers and undertakings of the conflict in Ukraine have further demonstrated the urgency to accelerate the deployment and decarbonization of District Heating. Developing more resilient energy systems (less exposed to the volatility of international prices of fossil fuels) and implementing the Green deal objectives requires a faster Heat transition.
The deployment of locally sourced, sustainable heating solutions such as district heating is key to ensuring more renewable and sustainable heat in our homes.
The top European countries with the highest national shares of renewable heating and cooling, also have the highest shares of district heating in their heat markets (Iceland, Sweden Estonia, Finland, Latvia, Denmark and Lithuania). It is a clear indication of the correlation between district heating and renewables shares.
District heating adapts to national/local energy specificities and enables decarbonisation through the integration of a wide range of local renewable energy sources (RES) such as biomass, geothermal or solar energy, and the use of various forms of waste heat and cold that otherwise would remain untapped (industries, data centres, etc.). Additionally, it fosters important energy efficiency gains through the integration of excess heat that would otherwise be wasted or the storage of thermal heat to be used during peak demand periods.
70 million citizens are currently supplied with district heating across Europe, while another 80 million live in an area with at least one district heating system, reflecting the potential for quick expansion. The 2023 edition of the DHC Outlook highlights countries where district heating is growing fast, replacing the use of fossil fuels – e.g., France, Austria, Switzerland..
The implementation of the Fit for 55 Package and cooperation among countries to disseminate DHC best practices will be critical to accelerate the heat transition and drive further the expansion and modernisation of efficient DHC in the next 5 years.
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