District Heating Market Size, Share & Trends Analysis Report By Heat Source (Coal, Natural Gas, Renewables), By Application (Commercial, Residential, Industrial), By Plant Type (Boiler Plant, Combined Heat & Power), By Region And Segment Forecasts, 2024 - 2030

District Heating Market Size & Trends

The global district heating market size was estimated at USD 190.5 billion in 2023 and is projected to reach USD 267.7 billion by 2030 and is anticipated to grow at a CAGR of 5.2% from 2024 to 2030. A significant factor driving market growth is the increasing focus on energy efficiency and sustainability. District heating systems offer efficiency gains compared to individual heating systems by utilizing waste heat from industrial processes, power generation, or renewable sources such as biomass and geothermal energy. This efficient use of heat resources not only reduces overall energy consumption but also lowers greenhouse gas emissions, aligning with global climate goals.

Another driver is urbanization and the densification of cities. As urban populations grow and cities expand vertically, the demand for heating in densely populated areas intensifies. District heating systems are particularly well-suited for these environments due to their ability to serve a large number of buildings efficiently from a centralized location. This scalability makes them an attractive solution for urban planners seeking sustainable and cost-effective heating options.

Drivers, Opportunities & Restraints

Technological advancements play a crucial role in the expansion of the district heating market. Innovations in heat production, distribution networks, and heat exchange technologies have improved system reliability, efficiency, and flexibility and subsequently drive market growth.

The high initial capital investment required for building or upgrading district heating infrastructure restrain the market’s growth. The costs associated with building extensive networks of insulated pipes and installing heat generation and distribution equipment are substantial, particularly for smaller municipalities or regions with limited financial resources.

However, technological advancements offer opportunities for growth. Innovations in smart grid technologies, heat storage solutions, and digitalization are enhancing the efficiency and reliability of district heating systems. Furthermore, the integration of district heating with other energy systems such as electricity grids and thermal energy storage facilities creates opportunities for synergies and enhanced overall energy management, a lucrative opportunity for market growth.

Heat Source Insights

“The demand for the renewables segment is expected to grow at a significant CAGR of 5.2% from 2024 to 2030 in terms of revenue”

One of the primary drivers of the segment is the global emphasis on mitigating climate change. As countries strive to reduce greenhouse gas emissions and meet international climate targets, renewable energy sources such as biomass, solar thermal, geothermal, and waste heat recovery are increasingly favored for their minimal carbon footprint compared to fossil fuels.

The oil & petroleum products segment accounted for 41.1% of the global revenue share in 2023 and is projected to expand at a considerable CAGR over the forecast period. One of the key drivers for using oil and petroleum products as a heat source is their high energy content per unit volume or weight, which makes them particularly suitable for applications where space and logistics are constraints. This energy density allows for compact storage and efficient transportation, facilitating their use in urban areas where space for fuel storage may be limited.

Application Insights

"The demand for the residential segment is expected to grow at a significant CAGR of 7.5% from 2024 to 2030 in terms of revenue”

Urbanization and population density drive the demand for district heating in residential areas. As cities expand and become more densely populated, the concentration of buildings and energy demand is increasing. District heating systems are well-suited to serve these urban environments efficiently, leveraging economies of scale and minimizing the physical footprint of heating infrastructure compared to multiple individual heating systems. This scalability supports urban planning goals by optimizing land use and infrastructure development, thereby driving segment growth.

The commercial segment accounted for 19.5% of the market share in 2023. One of the primary drivers for the segment is cost-effectiveness and operational efficiency. District heating systems allow commercial properties such as office buildings, hotels, hospitals, and educational institutions to benefit from centralized heat production and distribution. This centralized approach reduces energy waste associated with individual heating systems, leading to lower operational costs and improved energy efficiency.

Plant Type Insights

"The demand for the combined heat & power segment is expected to grow at a significant CAGR of 8.2% from 2024 to 2030 in terms of revenue”

CHP (Combined Heat & Power) systems enhance energy security by providing a decentralized and reliable source of heat and power. They are particularly suitable for urban areas and commercial districts where there is a high demand for both electricity and heat. By integrating CHP into district heating networks, operators can optimize the utilization of energy resources, improve system resilience against power outages, and enhance grid stability. These benefits associated with the combined heat & power are driving segment growth.

The boiler plant segment accounted for 28.8% of the market share in 2023. The demand for boiler plants is driven by their flexibility and cost-effectiveness in meeting varying heat demand profiles. Boiler plants can utilize a variety of fuels including natural gas, biomass, coal, and oil, providing operational flexibility and resilience against fuel price fluctuations. This versatility allows district heating operators to adapt to local fuel availability and regulatory requirements.

Regional Insights

The district heating market in North America is experiencing substantial growth as the region. Urbanization trends in North America are contributing to the expansion of district heating networks. As cities grow and densify, the demand for energy-efficient heating solutions rises. District heating offers a scalable and cost-effective approach to meeting this demand, particularly in urban areas where space for individual heating systems is limited.

Europe District Heating Market Trends

“Poland to witness fastest market growth at 6.2% CAGR”

Europe's commitment to energy security and resilience is boosting investment in district heating. By diversifying energy sources and integrating renewable energy, district heating networks enhance energy independence and reduce reliance on imported fossil fuels. This strategic approach aligns with Europe's energy transition goals and contributes to the continent's sustainable development agenda.

The district heating market in Poland is estimated to grow at a significant CAGR of 6.2% over the forecast period.As Poland seeks to meet its European Union (EU) climate targets and improve air quality, district heating systems powered by renewable energy sources such as biomass, waste heat, and increasingly, solar thermal, are being promoted. Moreover, economic factors, including the cost-effectiveness of district heating compared to individual heating systems, also drive market growth in Poland. District heating offers economies of scale and reduces operational costs for consumers, making it a competitive option for both urban and rural areas.

Asia Pacific District Heating Market Trends

The rapid urbanization and modernization occurring in Asia Pacific are driving the growth of the district heating market in the region. Countries such as China, South Korea, and Japan are expanding their district heating infrastructures to meet the rising demand for heating in urban areas experiencing population growth and economic development. District heating systems in Asia Pacific often utilize a mix of conventional fuels and increasingly incorporate renewable energy sources such as solar thermal and biomass.

Key District Heating Company Insights

Some of the key players operating in the market include Danfoss Group, Ramboll, and Helen, among others.

• Danfoss Group’s product portfolio includes district heating solutions, district cooling solutions, AC drives, valves, energy recovery devices, energy metering, pumps, sem-safe fire safety, steering, software, filter driers, sight glasses, and more. Danfoss serves customers across various sectors, including automotive, energy, marine, building, industrial, mobility, and others, in regions such as Europe, North America, Asia Pacific, Latin America, Africa, and the Middle East.

• Ramboll is a global engineering, architecture and consultancy company founded in a strong presence in the Nordics, North America, the UK, Continental Europe, Middle East and India, supplemented by a significant representation in Asia, South America and Sub-Saharan Africa. The company provides products and services across the markets of buildings, transport, planning & urban design, water, environment & health, energy, oil & gas and management consulting.

• Helen is a company based in Finland which produces electricity, heating, and cooling in power plants and heating plants around Helsinki. The company operates a diverse range of energy production methods, including hydropower, wind power, solar power, and nuclear power

Recent Developments

• In March 2023, Danfoss Group completed its acquisition of German compressor manufacturer BOCK GmbH. This deal reinforces Danfoss' position as a provider of greener cooling and heating solutions, as BOCK is a significant player in CO₂ and low-GWP compressors. The acquisition unifies the two brands, adding BOCK's compressor innovation to Danfoss' existing portfolio and accelerating decarbonization with climate-friendly and energy-efficient district cooling and heating solutions.

• In March 2022, Fortum and Microsoft announced a collaboration to heat homes, services, and businesses using sustainable waste heat from a new data centre region in the Helsinki metropolitan area, Finland. The data centres will use 100% emission-free electricity, and Fortum will capture the excess heat from the server cooling process to supply approximately 250,000 users through its existing district heating infrastructure. The collaboration combines Fortum's expertise in sustainable energy solutions with Microsoft's innovation in cloud technology, supporting Finland's digital growth and energy transition.

District Heating Market Report Scope

Global District Heating Market Report Segmentation

This report forecasts revenue growth at global, regional & country levels and provides an analysis on the industry trends in each of the sub-segments from 2018 to 2030. For the purpose of this study, Grand View Research has segmented the district heating market on the heat source, application, plant type, and region:

• Heat Source Outlook (Revenue, USD Billion; 2018 - 2030)

  • Coal

  • Natural Gas

  • Renewables

    • Geothermal

    • Biomass & Biofuel

    • Others

  • Oil & Petroleum Products

  • Others

• Application Outlook (Revenue, USD Billion; 2018 - 2030)

  • Commercial

  • Residential

  • Industrial

• Plant Type Outlook (Revenue, USD Billion; 2018 - 2030)

  • Boiler Plant

  • Combined Heat & Power

  • Others

• Regional Outlook (Revenue, USD Million; 2018 - 2030)

  • North America

    • U.S.

    • Canada

  • Europe

    • UK

    • Germany

    • France

    • Finland

    • Sweden

    • Russia

    • Austria

    • Poland

    • Czech Republic

    • Italy

    • Denmark

  • Asia Pacific

    • Japan

    • China

    • South Korea