District Heating Market by Heat Source (Coal, Natural Gas, Geothermal, Biomass & Biofuel, Solar, Oil & Petroleum Products), Component (Boiler, Heat Exchanger, Heat Pumps), Plant Type (CHP, Boiler), Application and Region - Global Forecast to 2028
[221 Pages Report] The global district heating market is expected to be valued at USD 191.5 billion in 2023 and is projected to reach USD 242.1 billion by 2028; it is expected to grow at a CAGR of 4.8% from 2023 to 2028. The district heating market is propelled by a rising need for energy efficiency, supported by stringent environmental regulations advocating cleaner heating solutions. The demand is further fueled by the expanding urbanization, emphasizing centralized heating requirements. Opportunities in the market manifest through the incorporation of renewable energy sources, technological innovations for improved system efficiency, and government initiatives endorsing sustainable district heating solutions as integral components of comprehensive energy transition strategies.
District Heating Market Forecast to 2028
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District heating market dynamics
Driver: Increasing shift towards renewable sources in district heating
The driver behind the increasing shift towards renewable sources in the district heating market stems from a global commitment to sustainable energy practices. Governments and utilities worldwide are recognizing the environmental benefits of incorporating renewable energy into district heating systems. Technologies such as biomass, geothermal, and solar are gaining prominence as viable alternatives to traditional fossil fuels, offering both economic and environmental advantages. The desire to reduce carbon footprints and combat climate change has positioned renewable sources as integral components of modern district heating infrastructure. As a result, the market is witnessing a steady transition towards cleaner, more sustainable energy solutions, reinforcing the role of renewables in shaping the future of district heating.
Restraint: Regulatory and permitting hurdles
Regulatory and permitting hurdles act as a restraint on the district heating market's growth. Complex and stringent regulations, varying across regions, create challenges in project approvals and execution. Navigating through multiple regulatory frameworks requires considerable time and resources, leading to project delays and increased costs. The diverse nature of district heating projects, involving multiple stakeholders and infrastructure components, adds complexity to the permitting process. Streamlining regulations, enhancing transparency, and establishing standardized permitting procedures are crucial for overcoming these hurdles and fostering a more conducive environment for district heating projects to thrive.
Opportunity: Digitization in district heating network
The digitization of district heating networks presents a significant opportunity for optimizing system performance and efficiency. Advanced technologies, including smart meters and sensors, enable real-time monitoring of energy consumption, allowing for dynamic adjustments and load balancing. Data analytics offer insights into usage patterns, enabling predictive maintenance and efficient energy management. The integration of digital solutions not only enhances operational efficiency but also contributes to energy conservation and cost savings. Furthermore, the implementation of smart grids and IoT (Internet of Things) technologies facilitates better communication and control within district heating networks, unlocking opportunities for increased reliability and responsiveness to changing demand patterns.
Challenge: Limited availability of waste heat recovery plants
A challenge facing the district heating market is the limited availability and integration of waste heat recovery plants. While the concept of utilizing excess heat from industrial processes is promising, identifying suitable sources and establishing the necessary infrastructure connections can be challenging. Technical and economic barriers, including retrofitting existing industrial facilities and developing cost-effective heat recovery systems, pose obstacles to widespread adoption. Overcoming this challenge requires collaborative efforts between industrial sectors and district heating providers, along with targeted investments and innovative solutions to unlock the full potential of waste heat recovery in enhancing the overall efficiency of district heating systems.
District Heating Market Ecosystem
The district heating market is dominated by established and financially sound manufacturers with extensive experience in the industry. These companies have diversified product portfolios, cutting-edge technologies, and strong global sales and marketing networks. Leading players in the market include Knowles Fortum (Finland), Vattenfall (Sweden), ENGIE (France), Danfoss (Denmark) and Statkraft (Norway).
Natural gas among heat source is expected to hold the second-highest market share during the forecast period
The natural gas segment secures the second-largest share in the district heating market by heat source due to its reliability, cost-effectiveness, and versatility. Natural gas provides an efficient and readily available fuel source for heating, making it a popular choice for district heating systems. Its combustion process is relatively clean, contributing to lower emissions compared to some traditional fuel sources. Additionally, the existing infrastructure for natural gas distribution facilitates its widespread use in district heating networks. As a transitional and flexible energy source, natural gas aligns with the evolving energy landscape, enabling a smoother integration of renewable energy solutions while meeting immediate heating demands. These factors collectively contribute to the prominence of the natural gas segment in the district heating market.
Based on plant type, the boiler plants to hold the second-highest market share during the forecast period
The boiler plant segment secures the second-largest share in the district heating market by plant type due to its widespread applicability and reliability in providing cost-effective and consistent heat. Boiler plants are well-established technologies, known for their versatility in utilizing various fuel sources, including natural gas, biomass, and oil. Their adaptability makes them suitable for different scales of operation, catering to both residential and industrial heating needs. The familiarity, ease of installation, and proven performance of boiler plants contribute to their significant market share, particularly in regions where existing infrastructure and consumer preferences favor this established heating technology. Additionally, the incremental shift toward cleaner and more sustainable fuels within the boiler technology domain further sustains its position as a prevalent choice in the district heating market.
Industrial application hold third-highest market share in district heating market
The industrial segment holds the third-largest share in the district heating market by application, driven by the substantial demand for reliable and cost-effective heat in various industrial processes. District heating systems provide an efficient means of supplying thermal energy to industrial zones, contributing to enhanced energy efficiency and reduced operational costs. The centralized nature of district heating aligns well with the concentrated heating needs of industrial facilities, offering a practical solution for large-scale heat requirements. Additionally, the integration of waste heat from industrial processes into district heating networks further enhances the overall sustainability and economic viability of these systems. As industries increasingly seek environmentally friendly and economically efficient solutions, the industrial segment remains a significant contributor to the broader district heating market.
District heating market in Europe to hold the highest market share during the forecast period
Europe dominates the market share by region in the district heating market due to several key factors. Firstly, many European countries have a long history and established infrastructure for district heating systems, creating a robust foundation for widespread adoption. Secondly, stringent environmental regulations and a strong commitment to reducing carbon emissions have accelerated the transition to more sustainable and efficient heating solutions, favoring district heating. Additionally, the continent's focus on energy security, coupled with initiatives promoting the use of renewable energy sources, aligns with the capabilities of district heating systems. Finally, the high population density in European urban areas contributes to a concentrated demand for centralized heating services, making district heating an attractive and practical solution for meeting the heating needs of both residential and industrial consumers. Collectively, these factors position Europe as a leader in the global district heating market.
District Heating Market by Region
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Key Market Players
The district heating companies is dominated by players such as Fortum (Finland), Vattenfall (Sweden), ENGIE (France), Danfoss (Denmark) and Statkraft (Norway), LOGSTOR Denmark Holding ApS (Denmark), Vital Energi (UK), kelag energie & wärme (Austria) and others.
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Report Metric |
Details |
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Market size available for years |
2019-2028 |
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Base year considered |
2022 |
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Forecast period |
2023-2028 |
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Forecast units |
Value (USD Million/Billion) |
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Segments Covered |
By Heat Source, By Plant Type, By Application |
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Geographies covered |
Americas, Europe, Asia Pacific |
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Companies covered |
The major market players include Fortum (Finland), Vattenfall (Sweden), ENGIE (France), Danfoss (Denmark), Statkraft (Norway), (Total of 25 players are profiled) |
District Heating Market Highlights
The study categorizes the district heating market based on the following segments:
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Segment |
Subsegment |
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By Heat Source |
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By Plant Type |
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By Application |
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By Region |
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Recent Developments
- In October 2023, Vital Energi has received a project by Newport City Homes to install 7.5km of district heating pipework, replacing the original 1970s heat network that suffered leaks in early 2023. This project aims to enhance heating and hot water performance for over 1,000 customers in the Duffryn district.
- In March 2022, Ameresco, Inc., a leading cleantech integrator specializing in energy efficiency and renewable energy, announced that it had been chosen as a partner in the Bristol City Leap project, a 20-year concession to decarbonize the city. Ameresco, in collaboration with Vattenfall Heat UK, will work through a unique public-private partnership structure to provide services such as energy efficiency upgrades, wind and solar services, project financing, long-term operation and maintenance.
- In March 2022, Fortum and Microsoft announced a novel partnership in which Fortum will collect the surplus heat produced by a new data center to be constructed by Microsoft in the Finnish capital of Helsinki. The data centers will run entirely on emission-free electricity, and Fortum will use the server cooling process to transfer clean heat to nearby homes, businesses, and other buildings connected to its district heating system. The data center will have the largest waste heat recycling concept in the entire world.
Frequently Asked Questions:
What are the major driving factors and opportunities in the district heating market?
Major driving factors in the district heating market include increasing demand for energy efficiency, stringent environmental regulations favoring cleaner heating solutions, and the growth of urbanization driving centralized heating needs. Opportunities lie in the integration of renewable energy sources, technological advancements for enhanced system efficiency, and government initiatives promoting sustainable district heating solutions as part of broader energy transition strategies.
Which region is expected to hold the highest market share?
The market in Europe will dominate the market share in 2023, owing to the rapid adoption of district heating in Europe is propelled by rigorous environmental regulations and a resolute dedication to carbon emission reduction, facilitating the shift toward sustainable and efficient heating solutions. Moreover, the continent's emphasis on bolstering energy security, combined with initiatives encouraging the utilization of renewable energy sources, is in harmony with the capabilities of district heating systems.
Who are the leading players in the global district heating market?
Companies such as Fortum (Finland), Vattenfall (Sweden), ENGIE (France), Danfoss (Denmark) and Statkraft (Norway) are the leading players in the market. Moreover, these companies rely on several strategies including new product/service launches and developments, collaborations and partnerships, and acquisitions. Such strategies provide these companies with an edge over other players in the market.
What are some of the technological advancements in the market?
Technological advancements in the district heating market include the integration of smart grids for more efficient energy distribution, enhanced control systems for optimizing heat production and delivery, and the incorporation of digital monitoring and analytics to improve overall system performance.
What is the impact of the global recession on the market?
The impact of a recession on the global district heating market is likely to be mixed. On one hand, economic downturns may pose challenges by limiting capital investments and affecting project financing for district heating infrastructure. Reduced construction activity and overall economic uncertainty could potentially slow down the expansion of district heating projects. Additionally, government stimulus packages aimed at promoting infrastructure development and green initiatives could mitigate some of the negative effects, providing opportunities for growth in the district heating sector. The overall impact would depend on the severity and duration of the recession, as well as the specific economic and policy conditions in different regions.
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The study involved four major activities in estimating the current size of the district heating market. Exhaustive secondary research was done to collect information on the market, peer, and parent markets. The next step was to validate these findings, assumptions, and sizing with industry experts across the value chain through primary research. Both top-down and bottom-up approaches were employed to estimate the complete market size. After that, market breakdown and data triangulation were used to estimate the market size of segments and subsegments.
Secondary Research
Various secondary sources have been referred to in the secondary research process for identifying and collecting information important for this study. The secondary sources include annual reports, press releases, and investor presentations of companies; white papers; journals and certified publications; and articles from recognized authors, websites, directories, and databases. Secondary research has been conducted to obtain key information about the industry’s supply chain, the market’s value chain, the total pool of key players, market segmentation according to the industry trends (to the bottom-most level), regional markets, and key developments from market- and technology-oriented perspectives. The secondary data has been collected and analyzed to determine the overall market size, further validated by primary research.
List of major secondary sources
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Source |
Web Link |
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International District Energy Association (IDEA) |
https://www.districtenergy.org/home |
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International Energy Agency (IEA) |
https://www.iea.org/reports/district-heating |
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Euroheat & Power (EHP) |
https://www.euroheat.org/ |
Primary Research
Extensive primary research was conducted after gaining knowledge about the current scenario of the district heating market through secondary research. Several primary interviews were conducted with experts from both the demand and supply sides across four major regions—Americas, Europe, and Asia Pacific. This primary data was collected through questionnaires, emails, and telephonic interviews.
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Market Size Estimation
In the complete market engineering process, both top-down and bottom-up approaches have been used, along with several data triangulation methods, to perform market estimation and forecasting for the overall market segments and subsegments listed in this report. Key players in the market have been identified through secondary research, and their market shares in the respective regions have been determined through primary and secondary research. This entire procedure includes the study of annual and financial reports of the top market players and extensive interviews for key insights (quantitative and qualitative) with industry experts (CEOs, VPs, directors, and marketing executives).
All percentage shares, splits, and breakdowns have been determined using secondary sources and verified through primary sources. All the parameters affecting the markets covered in this research study have been accounted for, viewed in detail, verified through primary research, and analyzed to obtain the final quantitative and qualitative data. This data has been consolidated and supplemented with detailed inputs and analysis from MarketsandMarkets and presented in this report. The following figure represents this study’s overall market size estimation process.
Bottom-Up Approach
The bottom-up approach was used to arrive at the overall size of the district heating market from the revenues of the key players and their shares in the market. The overall market size was calculated based on the revenues of the key players identified in the market.
- Identifying approximate revenues of companies involved in the district heating ecosystem
- Identifying different offerings of district heating
- Analyzing the global penetration of each offering of district heating through secondary and primary research
- Conducting multiple discussion sessions with key opinion leaders to understand the district heating systems and their applications; analyzing the breakup of the work carried out by each key company
- Verifying and crosschecking estimates at every level with key opinion leaders, including chief executive officers (CEO), directors, and operation managers, and then finally, with the domain experts of MarketsandMarkets
- Studying various paid and unpaid sources of information such as press releases, white papers, and databases of the company- and region-specific developments undertaken in the district heating market
Top-Down Approach
In the top-down approach, the overall market size has been used to estimate the size of individual markets (mentioned in the market segmentation) through percentage splits from secondary and primary research.
The most appropriate immediate parent market size has been used to implement the top-down approach to calculate the market size of specific segments. The top-down approach has been implemented for the data extracted from the secondary research to validate the market size obtained.
Each company’s market share has been estimated to verify the revenue shares used earlier in the top-down approach. This study has determined and confirmed the overall parent market and individual market sizes by the data triangulation method and data validation through primaries. The data triangulation method in this study is explained in the next section.
- Focusing initially on the top-line investments and expenditures made in the district heating ecosystem; further splitting into offering and listing key developments in key market areas
- Identifying all major players offering a variety of district heating systems, which were verified through secondary research and a brief discussion with industry experts
- Analyzing revenues, product mix, and geographic presence for which district heating systems are offered by all identified players to estimate and arrive at the percentage splits for all key segments
- Discussing these splits with industry experts to validate the information and identify key growth domains across all major segments
- Breaking down the total market based on verified splits and key growth domains across all segments
Data Triangulation
After arriving at the overall market size from the estimation process explained above, the overall market has been split into several segments and subsegments. The data triangulation procedure has been employed wherever applicable to complete the overall market engineering process and arrive at the exact statistics for all segments and subsegments. The data has been triangulated by studying various factors and trends from both the demand and supply sides. Additionally, the market size has been validated using top-down and bottom-up approaches.
Market Definition
According to the International District Energy Association (IDEA), “district heating is an underground infrastructure asset, through which thermal energy can be provided to several buildings from central energy plants”. These plants produce steam or hot water that can be transmitted continuously through highly insulated underground thermal pipeline networks. District heating systems can contribute to a more integrated and efficient energy infrastructure by centralized heat production and delivery, lowering overall energy consumption and costs for end users. Therefore, district heating offers end-use customers improved energy efficiency, reduced carbon emissions, fuel flexibility, simplification of building operations and maintenance, decreased infrastructure costs, etc. Moreover, the heat required is produced by various plants, such as boilers and combined heat and power plants. The produced heat is distributed for space heating and water heating requirements of residential, industrial, and commercial consumers.
Key Stakeholders
- Raw material suppliers
- Original equipment manufacturers (OEMs)
- Original design manufacturers (ODM)
- Research institutes
- District heating producers and component manufacturers
- Forums, alliances, and associations
- Governments and financial institutions
- Analysts and strategic business planners
Report Objectives
- To describe and forecast the size of the district heating market, in terms of value, by heat source, plant type, and application
- To describe and forecast the market size of various segments across three key regions—the Americas, Europe, and Asia Pacific, in terms of value
- To describe the components used for district heating.
- To provide detailed information regarding the major factors influencing the market growth (drivers, restraints, opportunities, and challenges).
- To provide an overview of the value chain pertaining to the district heating ecosystem, along with the average selling prices of district heating systems
- To strategically analyze the ecosystem, tariffs and regulations, patent landscape, Porter’s five forces, regulations, import and export scenarios, trade landscape, and case studies pertaining to the market under study
- To strategically analyze micromarkets1 with regard to individual growth trends, prospects, and contributions to the overall market
- To analyze opportunities in the market for stakeholders by identifying high-growth segments
- To provide details of the competitive landscape for market leaders
- To strategically profile the key players and comprehensively analyze their market position regarding ranking and core competencies2, along with detailing the competitive landscape for market leaders.
- To track and analyze competitive developments, such as partnerships, collaborations, agreements, joint ventures, mergers and acquisitions, expansions, product launches, and other developments in the district heating market.
- Updated market developments of profiled players: The current report includes the market developments from May 2020 to October 2023.
Available Customizations
With the given market data, MarketsandMarkets offers customizations according to the specific requirements of companies. The following customization options are available for the report:
- Detailed analysis and profiling of additional market players (up to 5)
- Additional country-level analysis of the district heating market
Product Analysis
- Product matrix, which provides a detailed comparison of the product portfolio of each company in the district heating market.
Generating Response ...
Growth opportunities and latent adjacency in District Heating Market