Heat is the largest energy end-use, accounting for half of global final energy consumption, significantly more than electricity (20%) and transport (30%). With modern renewables1 meeting only 11% (21.5 exajoules [EJ]) of global heat demand in 2019, fossil fuels continue to dominate heat supplies, which contributed 40% (13.3 gigatonnes [Gt]) of global CO₂ emissions in 2019.

About 50% of total heat consumed in 2020 is used for industrial processes, another 47% is consumed in buildings for space and water heating, and, to a lesser extent, cooking; the remainder is used in agriculture, primarily for greenhouse heating. More than one-quarter of global heat consumption takes place in China – two-thirds of which is for industry – while the United States, the European Union, India and the Russian Federation (“Russia”) together account for another 35%.

In industry, bioenergy accounts for the large majority of renewable heat consumption (almost 90% in 2019, including indirect consumption via district heat networks). It is used predominantly in industries that produce biomass waste and residues: food and tobacco, sugar and ethanol (Brazil and India), and especially pulp and paper (mainly in North America, Europe and Brazil). The cement industry is also boosting industrial bioenergy consumption as municipal waste is increasingly used in China and the European Union. Most of the remaining renewable heat consumed in industry is supplied by renewable electricity, used in steel recycling and aluminium production as well as by large-scale heat pumps for low-temperature processes such as drying. However, renewable electricity represents only 1% of current total industrial heat consumption.

Bioenergy also leads renewable heat consumption in buildings, used mainly in wood and pellet stoves and boilers as well as in district heating networks, for which municipal waste and biomass comprise the majority of renewable supply. With around 11% of global electricity generation used by electric heaters, boilers and heat pumps for buildings, renewable electricity is the second-largest renewable energy commodity used for heat in buildings after bioenergy.

The rapid spread of heat pumps over last decade is making ambient heat an increasingly important renewable heat source, although its importance globally is difficult to estimate because data are unavailable for some markets. In the European Union, about 0.5 EJ of ambient heat are transferred to buildings annually by the 13.5 million heat pumps in operation at the end of 2019 (EHPA, 2020; Eurostat, 2019). Finally come solar thermal – used essentially for domestic water heating – and geothermal heat, of which almost 60% is harnessed by ground-source heat pumps (Lund and Toth, 2020).

In industry, the share of renewables in heat consumption globally is expected to remain almost unchanged at 10% in 2020, as the heat demand shock also affects bioenergy-intensive subsectors (for instance pulp and paper). The consumption of other renewables in industry is expected to expand slightly this year, but not enough to counterbalance the overall trend because their share is small in absolute terms and therefore cannot make up for the significant drop in bioenergy use.

Industrial heat demand is expected to recover during 2021‑22 and even exceed the 2019 level, resulting in a global increase in non-renewable heat consumption – despite expansion of bioenergy-intensive subsectors in India, higher bioenergy consumption in China, and greater renewable electricity and heat pump use, especially in China, the European Union and the United States.

In buildings, while heat demand falls somewhat, expanding solar thermal, geothermal and – most of all – heat pump and renewable electricity contributions raise renewable heat consumption slightly, allowing renewables – excluding ambient heat – to meet 11.5% of global demand in 2020 (an increase of 0.5 percentage points from 2019), despite bioenergy consumption remaining unchanged. Furthermore, this share is expected to rise slowly to 12.3% during 2021‑22, owing primarily to the continued expansion of renewable electricity use for heat, then to the progression of solar thermal and bioenergy consumption, and finally to the wider utilisation of geothermal energy through both ground-source heat pumps and district heating.

The heat demand shock translates into a temporary 4% drop in global industrial bioenergy consumption in 2020, since less commercial, industrial and construction activity has implied lower demand for a variety of products manufactured in bioenergy-intensive subsectors (e.g. printer paper, cement and lumber). The United States is expected to record the largest drop in industrial bioenergy consumption this year, followed by Brazil and the European Union.

At the global scale, assuming industrial activity rebounds during 2021-22, bioenergy consumption is projected to exceed the 2019 level as early as 2022 due to continued growth in India, China and, to a lesser extent, Canada. Higher municipal waste use in the cement subsector is expected to play a key role in China, while expanding sugar and ethanol production is the main driver in India. 

The trends are different for other renewable sources and technologies, for which the largest applications are in the buildings sector, or for which demand has not been affected to the same extent.

Even with global electricity demand for heat falling in the industry and buildings sectors in proportion with heat demand, heat-related renewable electricity consumption rises in both sectors in 2020 owing to higher shares of renewables in electricity generation. This results not only from renewable capacity additions in the power sector, but also from lower operating costs and priority access to the grid in many markets leading to greater shares of renewables in electricity generation when demand decreases. In 2020, the United States, China and the European Union together comprise three-quarters of the annual increase in renewable electricity used for heat, of which the buildings sector accounts for more than 85%. Overall, heat uses continue to claim 16% of global renewable electricity generation.

Heat-related renewable electricity consumption is projected to continue trending upward in 2021 and 2022. While rebounding industrial heat consumption (+5% globally during 2021-22) and greater reliance on electricity for heat (especially for industrial use in China) will have a noticeable effect, expanding shares of renewables in electricity generation is expected to remain the strongest factor globally.

Despite lockdowns disrupting new installations in many countries during the first half of the year, global solar thermal consumption – more than 90% of which is for domestic water heating – is expected to increase more than 4% in 2020, similar to the year before. Despite shrinking of its domestic market, China continues to lead this expansion, followed distantly by the United States, the European Union and countries in the Middle East. Positive developments have recently been observed in key European markets: in Germany, for instance, the number of collectors sold from January to July 2020 was 14% higher than during the same period last year, thanks to improved financial support for clean heating projects under the Market Incentive Programme (Solarthermalworld 2020).

Global solar thermal consumption is projected to accelerate during 2021-22 (+8% annually) with the key markets of China, the United States, the European Union and the Middle East together responsible for more than 70% of the growth. In these large markets, however, limited policy attention and increasing policymaker interest in electrification of heat end-uses mean that small-scale solar water heating systems face competition not only from heat pumps but also from rooftop PV systems (IEA SHC, 2020).

In developing countries, the technological simplicity and limited maintenance of standalone systems remain an important asset. Policy support, in the form of regulations (Greece, Denmark, South Africa) or economic incentives (Cyprus),2 sometimes linked to social housing programmes (Namibia, Brazil), will remain a determining factor for future solar thermal markets.

After increasing twofold over the last seven years, global geothermal heat consumption has risen very little in 2020. Growth is forecast to resume in 2021 and 2022, albeit still at half the pace of the last ten years. China, the United States and the European Union together are expected to be responsible for more than 80% of the increase in 2021-22, primarily benefitting the buildings sector.

Despite heat accounting for a large share of final energy consumption, it has so far received limited policy attention globally compared with other end-use sectors. The number of countries with national targets for renewable heat is less than one-third those with targets for renewable electricity – and fewer than half of the countries that have a renewable heat goal currently have nationwide regulatory heat policies in force (REN21, 2020).

At the end of 2019, more than half of global heat consumption was not subject to any regulation, and more than one-quarter was not covered by national financial incentives or regulatory policies. These numbers have remained stable over the past three years.

However, given contextual specificities and the local nature of heat supply, an increasing number of policy initiatives are being developed at the subnational level, with cities and local governments using their regulatory and purchasing authority to encourage the use of renewables through municipal mandates for buildings or through their management of urban district networks (REN21, 2019; 2020).

Notable recent policy updates pre-Covid‑19 include the European Union’s indicative target of a 1.3‑percentage-point annual increase in the share of renewables in heating and cooling for 2020‑30, introduced in the 2019 revision of the Renewable Energy Directive (RED II). Also in 2019, a number of jurisdictions, including the countries of Austria, Norway and the United Kingdom, as well as the cities of Vienna (Austria), Berkeley (California) and Montreal (Canada), also committed to ban the use of certain fossil fuels in some categories of buildings (REN21, 2020). France, Germany and Lithuania also reinforced financial incentives for more efficient and renewable heating systems.

More recently, the critical economic situation created by the pandemic has led to a wave of government policy responses. Among them, various measures announced as part of economic recovery and stimulus plans are expected to benefit renewable heat directly or indirectly. Most fall under the category of energy efficiency measures, the largest recipient of clean energy stimulus packages. Some measures consist of extending or boosting existing policies (e.g. New Zealand’s Warmer Kiwi Homes programme and France’s MaPrimeRénov scheme), while others implement new support schemes (e.g. Finland’s grants to phase out oil-based heating in residential and municipal buildings).

Some of these stimulus measures consist of new or additional financial support in the form of grants or tax credits for electric and renewable heat technologies such as heat pumps3 in Denmark, France, Italy, New Zealand and the United Kingdom, renewable district heating in Denmark and the United Kingdom, or wood and pellet burners in New Zealand.

Other policies do not explicitly target renewable heat but support building insulation retrofits (e.g. France, Germany, Italy, Sweden, Denmark, Korea and the United Kingdom), which can create new opportunities for renewable heat technologies. For example, by lowering heat demand, well-insulated buildings make it possible to downsize heat pumps and operate them at lower output temperature, hence more efficiently. This reduces both the upfront and operating costs of heat pumps, improving their economic case and making them more cost-competitive with fossil fuel-based technologies.

Energy efficiency requirements for buildings can also spur the replacement of fossil fuel heating systems with heat pumps or other renewable technologies, depending on their design. For example, the EU Renovation Wave Strategy, which was published in October 2020 and aims to double renovation rates during 2020‑30 through multiple integrated areas of intervention, may be an effective driver for renewable heat integration in buildings (EC, 2020).

In the long term, other measures could pave the way to further renewable heat uptake in hard-to-abate industrial subsectors. This is the case for support given to renewable or “green” hydrogen projects in countries such as Australia, France, Germany and Korea. It also applies to material efficiency measures, such as steel recycling in the United Kingdom, which can engender heat savings and encourage greater shares of (renewable) electricity in the steelmaking process.

Although they may not directly spur renewable heat uptake, other policies support heat decarbonisation by reducing the demand for non-renewable heat and carbon-intensive products. For example, Finland’s promotion of wood construction could reduce demand for cement.

Although most stimulus measures consist of economic incentives such as grants, tax credits and loan schemes, a variety of non-economic challenges to renewable heat uptake will persist, including consumer inertia and lack of awareness, and split incentives in the buildings sector (IEA, IRENA and REN21, forthcoming). With low fossil fuel prices currently making renewables less cost-competitive, regulatory policies may also be instrumental to scale up the use of renewables for heat.