Europe District Heating Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022-2027)

Market Overview

The Europe District heating market is estimated to register a CAGR of 5.73% for the forecast period, 2022-2027. The introduction of new technologies like machine learning, IoT services, and smart meters have helped in optimizing the heating cycles according to the varying demands in Europe.

• District heating provides thermal heating to households and commercial buildings through hot water or steam. The hot water is transported using a distributive channel of highly insulated pipes to transfer efficiently without much heat loss. The process was earlier known to involve extensive use of coal and biogas but is aggressively adopting renewable energy sources like solar energy, geothermal energy, etc. Although, in the middle of rigorous efforts to increase greener energy sources, a major share of the district heating solutions worldwide continues to rely on fossil fuels.
• According to IEA, about 8% to 35% of the electricity or heat sources used for district heating globally have helped reduce carbon emissions by more than one-third under the initiatives for the Net Zero Emissions by 2050 goals. The global average carbon intensity of district heating is majorly affected by China, Europe, and Russia. IEA also reported that the use of fossil fuels for district heating accounts for natural gas (40%), coal (45%), and oil (3.5%). Although around 8.5% of heat consumption is supplied by district heating, some European countries consume a significant portion of the heat, like about 45% in Denmark and Sweden.
• Europe is looking forward to transitioning gradually from conventional energy sources to renewable resources for district heating on a mass level. According to Euroheat and Power, the fuel mixture mostly comprises around 26% natural gas and 30% coal. Research conducted by Heat Roadmap Europe also reported unexplored energy sources like waste heat from heavy industries like petrochemical sites or steel plants that could help countries save on natural gas and other energy resources for better utilization.
• District heating projects are long-term investments for companies and shareholders. Newer alternatives like new wind farm projects, individual heat pumps, or solar heating solutions are available as awareness among the European population grows. The policymakers are bothered by the lesser time these projects take to set up. Although, district heating in Europe remains the primary preference of the majority of users. Legislative support from the governments is crucial in encouraging investors’ confidence in the projects.
• According to a paper published in ScienceDirect’s Sustainable Cities and Society Journal Vol 82, household heating increased by 8% during the partial lockdown and about 13% during the full lockdowns in the COVID-19 pandemic. The research was conducted among 451 buildings in Canton, Geneva, Switzerland. Organizations like IEA helped district heating plants and companies arrange the required resources for smoother functioning. Companies like Statkraft in Europe contributed to ensuring the safety and stability of plants’ operations during the pandemic.

Scope of the Report

District heating provides heat to households and commercial buildings by supplying hot water through a distributive channel of insulated pipes. The resources used for heating are shifting from fossil fuels like coal and natural gas to renewable sources of energy like solar energy and geothermal energy. The Europe district heating market is segmented by End Users (Residential, Commercial, and Industrial) and countries (Germany, France, Poland, Scandinavian Countries, Czech Republic, and Austria).

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Key Market Trends

Residential Usage Set to Drive the Market

• The residential consumption from the district heat systems accounts for a major share in Europe. This leads to many carbon emissions, which hamper the countries in their zero-emission goals of 2050. Hence, governments are actively forming regulations to efficiently manage district heat among residents. For instance, according to the Energy Efficiency Directive (EED) stated by European Commission in 2021, all municipalities above 50,000 inhabitants would be requested to prepare plans for local heating and cooling systems.
• According to European Commission, Buildings account for 40% of Europe's energy consumption. Various functions like cooling, heating, and domestic hot water form 80% of the energy consumed by the citizens. This indicates the total energy requirement for district heating systems for households and buildings, demanding better energy management. Hence, the European region is open to companies developing greener solutions for space heating and other district heating-related services.
• The European Commission also indicates that more than 30 million building units consume excessive energy. This excess consumption accounts for nearly 2.5 times more than average buildings, which drives up households' energy bills. It highlights the high energy requirements for families in Europe, but it also makes room for energy-efficient district heating solutions. Companies are introducing individual heating solutions using renewable energy resources.
• As the electricity prices hike, households rely on natural gas to fuel their heating systems daily. Natural gas is another fossil fuel that can be preserved and put to better use. Introducing heating systems fueled by renewable energy resources like solar energy, geothermal energy, and others will help manage the energy expenses effectively and contribute actively to reducing the CO2 emission footprint for 2050 environmental goals in Europe.

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