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What is district heating?

District heating involves generating heat in a centralized location and then distributing it to residences, businesses and industry in a local area.

What is the role of district heating in clean energy transitions?

District heating networks offer great potential for efficient, cost-effective and flexible large-scale use of low-carbon energy for heating. However, the decarbonisation potential of district heating is largely untapped, as 90% of the heat supplied in district networks is produced from fossil fuels, especially in the two largest markets of China and Russia.

Where do we need to go?

Aligning with the Net Zero Emissions by 2050 Scenario requires significant efforts to rapidly improve the energy efficiency of existing networks, switch them to 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 new high-efficiency infrastructure.

District heating involves generating heat in a centralized location and then distributing it to residences, businesses and industry in a local area.

District heating networks offer great potential for efficient, cost-effective and flexible large-scale use of low-carbon energy for heating. However, the decarbonisation potential of district heating is largely untapped, as 90% of the heat supplied in district networks is produced from fossil fuels, especially in the two largest markets of China and Russia.

Aligning with the Net Zero Emissions by 2050 Scenario requires significant efforts to rapidly improve the energy efficiency of existing networks, switch them to 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 new high-efficiency infrastructure.

Tracking District Heating

Not on track

In 2022 district heat1 production remained relatively similar to the previous year, meeting around 9% of the global final heating need in buildings and industry. As demonstrated by the best performing networks, district heating offers great potential for efficient, cost-effective and flexible large-scale integration of low-emission energy sources into the heating energy mix. However, the decarbonisation potential of district heating is largely untapped, as fossil fuels still dominate district network supplies globally (about 90% of total heat production), especially in the two largest markets of China and Russia.  

Aligning with the Net Zero Emissions by 2050 (NZE) Scenario requires significantly stronger efforts to rapidly improve the energy efficiency of existing networks and switch them to renewable heat sources (such as bioenergy, solar thermal, large-scale heat pumps and geothermal). Other priorities include integrating secondary heat sources (such as waste heat from industrial installations and data centres), investing in heat storage capacities and enabling sector coupling, and developing high-efficiency infrastructure in areas with dense heat demand.

1. The term "District Heat" in this page refers to the "heat" category as defined by the IEA's Energy Statistics Manual and reported in the IEA's Energy Balances. This heat is defined as the amount of heat produced and sold. In other words, it is the amount of heat leaving the plant for use by persons unrelated to the producer.

Momentum for change is growing within the district heating industry

A number of district heating1 markets have seen increasing dynamism recently, particularly in Europe, where district heating has gained greater policy support since 2022 as a result of energy security concerns arising from the energy crisis. Highlights from around the world include: 

  • In April 2023, the European Union provided EUR 401 million in support for the Czech green district heating scheme.  
  • In the United Kingdom, in March 2023, the Energy Security Bill introduced a heat networks regulation to enable heat zoning. The Climate Change Committee has estimated that around 18% of heat consumption in the United Kingdom could be supplied through heat networks by 2050. 
  • In Denmark in March 2023 the parliament adopted regulation to support geothermal, passing a law that will exempt geothermal heat projects from the price regulation already in place. 
  • Various European countries saw an increase in new network connections in 2022, including Germany and France
  • Finland's first geothermal heating plant started operating in Varisto in 2023, with an expected heat supply of 2600 MWh per year. 
  • The city of Vancouver, Canada, is expanding its district heat network capacity by adding 6.6 MW of sewage heat recovery equipment to capture latent heat from wastewater with heat pumps. 
  • In early 2023 China launched its first project to exploit waste heat from nuclear power plants within district heating networks.


1 The term "District Heat" in this page refers to the "heat" category as defined by the IEA's Energy Statistics Manual and reported in the IEA's Energy Balances. This heat is defined as the amount of heat produced and sold. In other words, it is the amount of heat leaving the plant for use by persons unrelated to the producer.

Decarbonisation efforts have not yet been sufficient to curb associated emissions

CO2 emissions intensity index for district heat production and heat production by country and region, 2022

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In 2022, CO2 emissions from district heat production were 1.5% higher than in 2021 and about 25% higher than in 2010, due to growing demand. District heating currently represents almost 4% of global CO2 emissions, with a significant contribution arising from China and, to a lesser extent, Russia. Europe is the third largest emitter, but on average it has a lower carbon intensity compared to the rest of the world. Over the past decade, the global average CO2 intensity of district heat supplies has been increasing at about 0.4% per year, owing mostly to the development of new fossil fuel-based networks in China. Aligning with the NZE Scenario will require the CO2 emissions intensity of district heat production to be at least 20% lower by 2030 compared with 2022.

Despite large potential for the integration of renewable sources and recycled heat, fossil fuels dominate district heat supplies globally

Annual global energy supplies to district heating networks in the Net Zero Scenario, 2010-2030

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In 2022 the amount of heat produced for district heating networks globally was around 17 EJ, relatively similar to 2021, but about 10% more than 2020 and 17% more than a decade earlier. China, Russia and Europe are responsible for more than 90% of global district heat production, and China is currently recording the fastest growth in district network connections.  

Nearly 90% of district heat globally was produced from fossil fuels in 2022 – predominantly coal (over 48%), especially in China, natural gas (about 38%), in particular in Russia, and oil (3%) – down from about 95% in 2000. The remainder is produced by municipal waste, waste heat recovery, nuclear and renewable sources. Renewables represented just about 5% of district heat supplies globally, althought this share can be over ten times higher in some countries. While bioenergy and renewable municipal waste account for the large majority of renewable district network supplies, large-scale solar thermal systems, geothermal energy and heat pumps are seeing growing interest.  

Europe currently leads renewables integration in district heating, with around 25% of its district heat supplies produced from renewable sources. Particularly high rates are observed in certain countries including Sweden, Denmark, Austria, Estonia, Lithuania, Latvia and Iceland, where more than 50% of district heat is fuelled by renewables

Slightly more than 40% of the heat generated globally in district heating plants is consumed by the buildings sector and around another 40% goes to the industry sector, while the remainder is self-consumed on the production sites, used in agriculture or lost during distribution. District heating supplies accounted for only 9% of total final heat consumption globally. Considering that the main markets experienced mild weather conditions during the 2022 heating seasons, this stability could in fact hide an increase in the number of district network connections. 

In the NZE Scenario, district heating continues to supply a similar share of global final heat consumption, although energy efficiency improvements in district heating networks and in building envelopes allow for a decline in district heat supplies by 2030, down by more than 15% compared with 2022. In the same period, renewable energy used in district networks more than doubles from current levels, with renewable sources (including renewable electricity used by large-scale heat pumps) representing almost one-fifth of district heating supplies by 2030.

The district heating industry is transitioning to lower-temperature networks and integrating renewable energy sources

Innovative developments in district heating include solar thermal distict heating systems, large-scale heat pumps, geothermal and waste heat integration, which all work best with low operating temperatures. Other solutions are also emerging, for example Bioenergy with Carbon Capture and Storage (BECCS), which is being explored in Sweden.

Solar thermal district heat

In 2021, 44 new large-scale solar heating systems were built, with a total capacity of 142 MWth. Denmark hosts the largest solar thermal district heating capacity worldwide. However, due to a policy change, the Danish market collapsed in 2020, with only one new solar district plant and three extensions built in 2020, and only one new system commissioned in the country in 2021. The largest developments in solar thermal district heating in 2021 occurred in China, which represented three-quarters of global installations.

Large-scale heat pumps

The integration of large-scale heat pumps in district heating networks is not new, but it is playing an increasingly important role to decarbonize these systems and to enable sector coupling.  

Heat pumps can harvest waste heat sources such as data centres, metro tunnels, industrial facilities or electrolysers 

One high-potential waste heat source that is available everywhere – particularly in urban areas, where building heat demand is mostly concentrated – is wastewater. A recent study shows that almost 4 000 wastewater treatment plants in Europe are located less than 2 km away from a district heating network. These plants combined could deliver 175 TWh of heat to the networks per year using heat pumps, equal to one-fifth of current district heating supply in Europe.  

A successful example is the Katri Vala Heating and Cooling plant in Helsinki, Finland, operating since 2006. It employs large heat pumps which have a heating capacity of 126 MW using wastewater for space and water heating in residential buildings, as well as a cooling capacity of 80 MW using cool seawater for cooling office spaces.  

  • A recent example of heat pump starting operation at the end of 2022 is the Qwark3 project in Berlin, combining heating, cooling and power supplies via heat pumps. 
  • In Europe, 13 new geothermal heating and cooling plants connected to district heating were announced in 2021. In the Danish city of Aarhus, the development of Europe’s largest geothermal district heating facility was announced at the beginning of 2022, to be partly operational by 2025. 

Geothermal district heat

  • In the United States, a district heating and cooling project consisting of 200 geothermal wells was announced in 2022. 
  • In Iceland, a local heating utility introduced new geothermal district heating in 2021 in Höfn, to replace electric heating. Subsidies are provided for those connected to district heating as well as to the utility company.

Innovative systems harnessing the decarbonisation potential of district heating are emerging

Innovation in district heating networks is currently pursuing several different avenues, such as exploring the integration of secondary heat sources (data centres, metro tunnels, industry, electrolysers, nuclear power plants, either directly or supported by heat pumps and storage systems), and of renewable energy sources; renovating existing networks; enabling sector coupling and circularity; as well as component improvements. Innovation is also been seen in the ongoing development of replicable models to exploit digital solutions to advance building automation and energy management systems at the building site, and to build skills relevant to district heating

The Global District Energy Climate Award has been in place since 2009 to identify best practices and innovations in district energy, with evaluation taking place every two years. The next winners will be revealed in November 2023. The annual International DHC+ Student Awards (launched in 2012) also highlight outstanding and original contributions to district heating and cooling-related research, including economic and technological aspects, energy management and the environmental consequences of energy utilisation.

Policy support is crucial for scaling up district heating and decarbonising existing networks

Financial support and other policies remain key in many countries, with recent examples including: 

  • Grants and other financial incentives: The German government launched a EUR 3 billion programme in 2022 to support new heat networks as well as the decarbonisation of existing networks, for example. In January 2023, the first funds under the GBP 288 million Green Heat Network Fund were awarded to heat network projects in the United Kingdom. In 2023, the Danish Energy Agency opened an application round for DKK 24 million in subsidies to displace fossil fuel use in district heating. Other funding opportunities have recently been introduced in Czechia and other parts of Eastern Europe.  
  • Energy and heating strategies and renewables targets: A range of countries across Europe, Asia and Latin America have strategies or targets to promote clean district heating. Austria, Denmark, Finland and Sweden have put in place targets to fully decarbonise their district heating networks between 2030 and 2040. Denmark aims to achieve this target by providing nearly a third of the district heat supply with heat pumps by 2030. In the European Union, the proposed revision of the Renewable Energy directive (REDII) under the REPowerEU plan includes provisions to raise the target for the annual increase in the share of renewables in district heating and cooling through 2030. 
  • Taxes on fossil fuel consumption, CO2 emissions and pollutant emissions, in place in the Nordic countries and China, for instance.  
  • Zoning policies and integration of district heating into energy standards for buildings, as per the zero-carbon-ready buildings concept. Under the proposed Energy Security Bill, expected to come into force in the United Kingdom in 2024, certain buildings will be required to connect to a district heating network.  
  • Affordability measures: In 2022, high energy prices motivated the launch of subsidy programmes to cover the operational expenses of district heating utility companies (e.g. in Czechia) or to reduce bills for consumers through reimbursements (e.g. Estonia) or reduced VAT rates (e.g. Poland).  
  • Consumer rights: The establishment of consumer protection rights in new markets for district heating, comparable with the rights of other energy consumers, is important to provide the necessary trust to allow the deployment of new systems.  
  • National heat plans can support policy implementation, and many countries are starting to follow this practice, For instance, in February 2022, the Sustainable Energy Authority of Ireland published a National Heat Study looking at 2050 opportunities for district heating, and Germany is discussing a Heat Planning Act. Heat planning or mapping is also often performed on municipal or regional level.

Associations, collaboration programmes and initiatives are also critical to stimulate and promote district heating expansion and innovation

In 2022, the Sino-Danish Clean and Renewable Heating Centre was established by the Danish Energy Agency (DEA) and the China Renewable Energy Engineering Institute (CREEI), in partnership with UNEP Copenhagen Climate Centre (UNEP CCC). It aims to facilitate knowledge-sharing between research, trade and regulatory institutions from Denmark and China with regards to clean and renewable district heating. In April 2023 Denmark and China also signed a new agreement to share knowledge and best practices on renewable energy integration and district heating through 2025.  

Improved collaboration, transparency and communication between stakeholders are an essential condition for accelerating innovation. The District Heating and Cooling Technology Collaboration Programme (IEA DHC TCP) has led research in the field since the 1980s, and now counts 16 member countries following Ireland’s membership in late 2022, and Estonia and the Netherlands in 2023.

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