The global district heating market size had a revenue worth USD 165.2 billion in 2022. It is expected to reach USD 211.81 billion by 2031, growing at a CAGR of 2.8% during the forecast period (2022-2031). District energy is a well-established technology that has existed for decades. A district energy system is present in most large cities, and it provides thermal energy to famous structures worldwide. The provision of thermal energy to numerous buildings from one or more central energy plants is known as district heating. Through underground thermal piping networks that are highly insulated, steam or hot water produced at the facility is distributed around the clock. There is no need for boilers in individual buildings because the thermal energy is transported to the heating system of the building. A district heating system contributes to energy efficiency and lowers costs for residential and business customers. In Europe, demand for the solutions is anticipated to be incredibly high. It is anticipated that investment will increase in the following years.
District heating services streamline building operations, give customers fine-grained control over heating, and give them the adaptability they need to modify as occupant needs evolve or building efficiency increases. The crucial benefit is the development of economies of scale that allow for deploying more effective, robust local energy resources due to connecting several buildings to a district system. The world's governments are emphasizing switching from fossil fuels to renewable energy sources, which could create enormous prospects for advancements in the district heating industry.
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Increased Need for Cost-Effective and Energy-Efficient Heating Systems and Rapid Urbanization
The adoption of new technologies is being pushed by the rising need for energy-efficient heating options on a global scale. For instance, a study conducted in the US in 2019 by Johnson Controls revealed that almost 75% of the surveyed firms intended to raise their investment in energy efficiency, renewable energy, and smart building technology—a 16% increase over 2018. Additionally, compared to 72% in past years, about 85% of the organizations expected to have at least one certified green building. These advancements are anticipated to increase the need for effective heating and cooling systems in buildings. Additionally, a significant portion of the energy used in residential spaces is consumed by heating equipment, which raises the cost.
Government laws that support the use of district heating systems also favorably impact the market's expansion. The quest to replace fossil fuels with renewable energy sources is anticipated to significantly alter consumption in the DHC industry. In some countries, national laws and sub-national policies significantly impact the viability of DHC systems. Germany and Denmark have the most comprehensive national laws, even though most countries have adopted DHC policies. Policies in these nations provide information on federal support, targets, connection requirements, and customer protection.
Additionally, rapid urbanization fueled the demand for and pressure to switch to renewable energy sources for centralized heating and cooling. These energy sources can help meet the increasing energy needs of cities while also increasing efficiency, lowering emissions, and providing cost-effective temperature control. For instance, China's use of centralized systems in the northern parts of the country has expanded quickly due to urbanization. District energy systems naturally fit in with urban environments because they support and benefit from them. Urban demographics benefit from the technology's compatibility with the surrounding conditions as well as the needs of the working population. China and Munich are two of the best examples currently available in the market of how urban center growth facilitates district network construction.
Compared to other market options, district heating systems require more capital investment. The DHC system requires a network of trenches and ongoing maintenance of pumps and systems, which is why there used to be fewer DHC systems. Although the number of DHC systems has rapidly expanded in nations like France and Spain, these nations have chosen to use DHC systems with capacities under 100 MWth.
Due to the accessibility of reasonably priced, considerably less expensive individual heating and cooling equipment, district heating is also experiencing considerable market challenges. Reforming DH's price models is an efficient strategy to increase its competency. The cost of DHC keeps going up even though the technology is thought to be crucial for achieving excellent energy efficiency and low environmental impact. Consequently, this constrains the market for district heating.
Fourth Generation District Heating System
Fourth-generation district heating systems are already being used, and the water they circulate is between 50 and 60 degrees. The relatively low temperature of this generation's architecture reduces heat loss or wastage within the network, allowing for more cost savings. Additionally, this new generation of systems keeps the benefits of centralized district heating networks, such as saving time and money on boiler maintenance and, most importantly, lowering carbon emissions.
District heating networks are one example of a utility that has expanded investment in cutting-edge service delivery methods and quickly digitized its operations to put data utilization front and center. District heating suppliers can identify inefficiencies and take corrective action using fully integrated data systems. Additionally, data can give utilities a better insight into how much heat their customers use, allowing for more efficient district heating operations and management. In particular, analysis of customer heat consumption aids utilities in implementing new control strategies, customizing demand management for particular customer groups, and empowering customers to optimize their behavior.
The global district heating market is classified across the plant type, heat source, application, and region.
Per the plant type, the sections include Boiler Plant and Combined Heat & Power (CHP).
The combined heat & power section is forecasted to hold the largest revenue share, proliferating at a CAGR of 2.75%. In contrast to boiler stations, built expressly for producing thermal energy, combined heat and power (CHP) systems generate thermal energy as a by-product of producing electricity. Compared to the boiler systems outlined above, cogeneration of heat and electricity is more effective since the waste heat from power production may be recovered. This is accomplished using a power plant or heat engine that simultaneously produces heat and electricity. The CHP systems allow for the production of heat for the heating systems as well as electricity. This has contributed to their market share growth in recent years. The rising power demand is another element that is indirectly causing the segment to rise.
The boiler plant section will hold the second-largest share. As developed nations continue to consume enormous amounts of energy, the demand in developing nations rises. The electricity demand is driven by increasing incomes, rising industrial output, and an expanding services sector. Areas that receive heat from a single source are called heat networks. The ability to supply different types of buildings, including home, commercial, and public ones, inside the same network is a distinguishing quality. Boiler stations are specifically designed to produce thermal energy, which is achieved by burning solid waste, biomass, or renewable fuels (fossil fuels). Standard transmission mediums include steam or water.
Per the heat source, the sections are Coal, Natural Gas, Renewables, and Oil & Petroleum Products.
The natural gas section will likely have the most significant revenue holding growing at a CAGR of 1.1%. Global exploration operations are increasing. Natural gas plants are far more affordable than fossil fuels and less destructive to the environment. There is an abundance of natural gas. Natural gas plants are being installed in many places around the world. The district heating market's natural gas segment is expected to develop due to this factor. Natural gas now accounts for 68% of all European urban heating, gradually increasing over the past few decades.
The renewables section will hold the second-largest share. In district heating and cooling, historically, biofuels have been the dominant substitute for fossil fuels. However, recent advancements in building insulation and digitalization have made low-temperature renewable energy sources, including low-temperature geothermal, solar thermal, and waste heat sources, more readily available. In many areas, these sources are widely accessible. They are not compatible with the current district energy infrastructure and building stock; thus, they remain mainly untapped. And so, a sizable portion of the market is currently taken by renewables.
Per the application, the segments are Residential and Commercial & Industrial.
The commercial & industrial section is forecasted to proliferate at a CAGR of 2.17% and have the most significant market holdings. Due to the increasing adoption of sustainable construction practices mandated by regulatory organizations, district heating in the commercial sector may experience significant advantages. Therefore, increasing investments in constructing new businesses would spur market expansion. The market adoption of commercial district heating would also be further boosted by technology developments in combined heat and power systems to improve energy sustainability and reduce heat losses and emissions. Over the forecast period, the commercial and industrial segment would have an opportunity because of rapid urbanization, industrialization, and rising worldwide energy demand.
The residential section will hold the second-largest share. In industrialized nations, district heating is commonly utilized. It offers several benefits over individual building equipment, including increased safety and dependability, lower emissions, and greater fuel flexibility, especially when using alternative fuels like waste or biomass. District heating is widely used in single-family homes, multi-family homes, high-rise structures, and mega townships. District heating and cooling network technology can reduce residential buildings' primary energy consumption and local emissions.
The region-wise segmentation of the global district heating market includes North America, Asia Pacific, Europe, and the Rest of the world.
The Asia Pacific and Europe will likely hold the most significant market shares.
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The Asia Pacific is expected to command the district heating market while growing at a CAGR of 2.83%. Some of the main variables influencing the district heating market growth in the region are elements like the rise in disposable income, increased concern over CO2 emissions, and high heating and cooling system demand. Models from the Organization for Economic Cooperation and Development (OECD) predict that by 2060, the income per person in China and India might have increased by seven times.
Additionally, the governments in the Asia-Pacific area are working with local businesses to strengthen the domestic market. For instance, one of the vital heating companies in China is the Beijing District Heating Group. Additionally, the business provided heating solutions to the central Beijing government, the army, large businesses, institutes, and the general public. It also has a massive number of projects in other provinces.
Europe is estimated to have a share of USD 21.91 billion, growing at a CAGR of 0.4%. Germany's market for district heating and cooling is among the biggest ones in the region. District heating is employed more frequently in Germany's eastern regions than its western ones due to pre-1990 laws. District heating provides the majority of the space heating in individual German homes. Manufacturing enterprises typically employ district heating and cooling for industrial operations instead of individual heating and cooling units, which makes industry heating demand more reliant on economic trends.
Along with space heating, energy use for other heating and cooling processes also plays a part in the commerce, trade, and services sector. Germans believe that district heating and cooling systems are crucial for lowering primary energy use and enhancing supply security. The district heating market is expanding as a result of these causes.