February 21, 2024

Advancing Technology and Environment Protection Drive the Global District Heating Market

District heating involves the production and distribution of steam, hot water or chilled liquids from one or more central sources to residential and commercial buildings through a network of insulated underground pipelines for space or process heating requirements. It provides an efficient way to deliver heating services through community-scale systems, without needing individual boilers or furnaces in every building. The technology facilitates reduction in air pollutant emissions and carbon footprint by enabling utilization of renewable energy sources and recovery of residual heat from power plants and industrial processes. It is increasingly being adopted across Europe, Asia and North America to support decarbonization goals and curb environmental impacts.

The global district heating market is estimated to be valued at US$ 50.8 Bn in 2023 and is expected to exhibit a CAGR of 1.5% over the forecast period 2023 to 2030, as highlighted in a new report published by Coherent Market Insights.

Market key trends:

One of the key trends driving growth in the district heating market is the increasing focus on integrating renewable energy sources in district heating systems. Solar thermal, geothermal, biomass and waste heat recovery are being utilized on a larger scale to produce heat in an environment-friendly manner. Countries across Europe have announced targets of generating significant portions of heat demand from renewable sources by 2030. Advanced technologies for efficient storage and distribution of heat are also being developed. Growing support through favorable policies and incentives is promoting modernization of aging infrastructure and expansion of heating networks to new areas. Rapid urbanization coupled with stringent emission reduction norms will further propel the demand for sustainable and greener district heating solutions over the coming years.

Porter’s Analysis

  • Threat of new entrants: The high initial capital investment and infrastructure required to enter the district heating market makes it difficult for new players to enter.
  • Bargaining power of buyers: The bargaining power of buyers is moderate as many utilities operate as natural monopolies in their service areas.
  • Bargaining power of suppliers: Fuel is a major input cost for district heating systems. Dependence on a single or limited number of fuel suppliers can increase bargaining power of suppliers.
  • Threat of new substitutes: Alternate heating sources like individual electric/gas heating systems pose a threat, though they are less efficient and environment-friendly compared to district heating.
  • Competitive rivalry: The market has a few large utilities that dominate regional markets due to economies of scale.

Key Takeaways

The global district heating market is estimated to be valued at US$ 50.8 Bn in 2023 and is expected to exhibit a CAGR of 1.5% over the forecast period 2023 to 2030/

The global district heating market is expected to witness high growth over the forecast period. The European region currently dominates the market owing to supportive government policies for efficient heating across nations like Germany, Poland, Sweden etc. Stringent emission norms are driving replacement of inefficient individual heating systems with centralized district heating networks that are more environment-friendly.

Key players operating in the district heating market are Vattenfall AB, SP Group, Danfoss Group, Engie, NRG Energy Inc., Statkraft AS, Logstor AS, Shinryo Corporation, Vital Energi Ltd. District heating solutions provider Vattenfall AB is the largest player based in Sweden serving over 1.3 million customers. Danish industrial group SP Group is another prominent supplier of district heating and cooling in Scandinavia. Logstor AS of Denmark is a leading manufacturer of pre-insulated piping systems for district heating networks.