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

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

The District Heating Market is expected to grow at 1.66% over the forecast period (2022-2027). District energy is a quick-growing industry globally, supported by the aggressive climate objectives set by the global economies. Based on initial assessments, these district heating and cooling companies have been recognized as operations that could produce more extraordinary growth and value potential with an alternative holding structure. By including electrically powered heat pumps in the district heating supply, higher renewable energy levels can be used for thermal purposes, generating integration and balance between energy systems. With a burgeoning wind turbine capacity globally, big heat pumps will play a meaningful role in the sustained global green energy development as well as in the hunt to phase out fossil fuels by 2050.

Key Highlights

• District heating provides a method of delivering thermal energy to buildings (homes and commercial space) in the form of hot water through a distribution network of highly insulated pipelines. Whereas the potential for increased use of industrial district heating is limited. This is so because conversions of industrial processes to district heating involve varying heat loads amongst types of industries and processes.
• However, the conversion to district heating serves as an 11% reduction in the use of electricity, a 40% reduction in the use of fossil fuels, along with total energy end-use saving of 6% among industries.
• By converting the industrial processes, it has led to a potential reduction of global carbon dioxide emissions by 112,000 tons per year. However, the residential and commercial markets are expected to hold a significant share of the market.
• Currently, approximately 60 million EU citizens are served by district heating, with an additional 140 million people living in cities with at least one district heating system. According to reports by the EU and the IEA, DH currently meets around 11-12% of the EU's heat demand via 6,000 district heating and cooling networks.
• With Machine Learning, the idea is to predict heat loads from customer data and operational data along with weather forecasts, national holidays, weekdays, etc., to optimize and plan the heat production, thereby lowering heat loss and handling peak loads. The potential is extended to use intelligent algorithms in fault detection, such as to identify leakages, inefficient heating systems, or errors stemming from failure related to single components.
• In October 2019, the smart district heating service of Tampere Power Utility was developed by Enermax Oy to balance peak district heating outputs, optimize heating in buildings, and reduce heating costs. The deployment was able to cut down energy consumption by 5% to 10%.
• In response to the challenges of the COVID-19 pandemic, International District Energy Association (IDEA) has convened a Working Group to help its members and other affected individuals to get essential resources and information required to help and navigate this unprecedented event. However, most of the district heating projects are on hold due to the scarcity of workforce and countrywide lockdown. Moreover, European companies like Statkraft are carefully prioritizing resources to safeguard the plants' safe and stable district heating operation.

Key Market TrendsNatural Gas-powered District Heating Systems to Hold the Largest Market Share

• As the trend towards power generation has shifted away from fossil fuels, principally considering the environmental determinants, natural gas has gradually taken a healthy percent of market share in the district heating market worldwide. The numerous benefits of natural gas, like cheaper costs and fewer carbon emissions with exceptional efficiency, have encouraged the growth of this segment. Also, growing exploration activities in each region for natural gas is another determinant of the growing selection of these systems.
• The non-conventional sources of energy like solar and wind have also got pace in recent years. There has been a transformation toward solar energy in several countries. But as the district heat network helps a considerable number of people and renewables, being a new player in the field, have a weak market share as opposed to natural gas.
• In terms of established and installed capacity, the district heat generated using natural gas is higher than the district heat produced utilizing renewables. But the revenue produced by applying renewables is leading as compared to natural gas due to the massive cost of renewables. This trend is set to stay with the share for the renewables to grow at a steady rate.
• Novi Sad Heating Plant in Serbia consumes around one million MWh of heat energy a year, with the costs of natural gas as a primary fuel at about EUR 40 million. The overall measured production system efficiency is 96%, while the distribution system’s efficiency is somewhat over 90%.
• In August 2021, Cummins installed a trigeneration system in Australia’s Royal Children’s Hospital, wherein the natural gas generators provide electricity, heating, and cooling, whereas the diesel generators provide critical standby power. The trigeneration system supplies baseload power, heating, and cooling via an absorption chiller.

Asia Pacific Holds a Significant Share in the District Heating Market

• Factors such as the increase in rising disposable income, growing concern for CO2 emission, and high consumption of heating and cooling systems are some of the major factors driving the studied market growth in China. According to the Organization for Economic Cooperation and Development (OECD) models, India and China may witness a seven-fold increase in income per capita by 2060.
• The governments in the Asia-Pacific region are also collaborating with a local company, which is further boosting the domestic market. For instance, in China, the Beijing District Heating Group is one of the significant heating enterprises in China. The company also deployed its heating solutions for the central Beijing government and army, embassies in China, large enterprises and institutions, and the public and owns numerous projects in other provinces.
• The country is investing in various projects which are further expanding the studied market scope. For instance, the Xiong`an New Area pilot zone, a national key project in China, has a total area of 1,770km2. The New Area is targeting to build a clean and environmentally friendly heating system to scientific utilizing the geothermal resources, co-ordinate the natural gas, electricity, geothermal, biomass, and other energy modes.
• Japan has long been a major importer and consumer of energy and a significant investor in energy technology development. Faced with geographical challenges, the local government has revised its energy policy in recent years to focus on further diversifying its energy mix and curbing carbon emissions. Building on these plans, Japan has outlined ambitious goals to cut greenhouse gas emissions by 26% between 2013 and 2030.
• At present, Japan is required to respond to social issues, such as low carbonization, strengthening of cities and blocks, and revitalization of local economies. The country’s heat supply business was liberalized by the revision of the Heat Supply Business Law in 2016. According to a low-carbon simulation calculation of CO2 emissions, it is possible to reduce the efficiency of equipment in Japan by 2030 by 43% or more compared to 2013 in the large city model and 46% or more in the local city model.

Competitive Landscape

The District Heating Market is moderately competitive in nature and consists of a significant number of global and regional players. These players are focusing on expanding their customer base across the globe. These vendors are focusing on the research and development investment in introducing new solutions, strategic alliances, and other organic & inorganic growth strategies to earn a competitive edge over the forecast period.

• March 2021 - Vattenfall Wàƒ¤rme Berlin AG and Siemens Energy have signed an agreement to demonstrate and trial a new large-scale, high-temperature heat pump in Berlin. In the Qwark, they will test the use of this new technology for the first time at Berlin's Potsdamer Platz to generate green district heating using waste heat and electricity from renewables and feed it into Berlin's district heating network.
• December 2021 - Vattenfall and Cloud & Heat Technologies collaborated to supply fossil-free, reliable high-speed computing capacity through a cooperative sustainable data center pilot project. The data center is located outside of Stockholm and is equipped with high-end servers for AI and high-performance computing applications. It is designed to provide high performance, security, and direct utilization of excess heat in the nearby district heating plant process for maximum sustainability.

Additional Benefits:

• The market estimate (ME) sheet in Excel format
• 3 months of analyst support

Companies

Vattenfall AB
SP Group
Danfoss Group
Engie
NRG Energy, Inc.
Statkraft AS
Logstor A/S
Shinryo Corporation
Vital Energi Ltd.
Göteborg Energi
Alfa Laval AB
Ramboll Group A/S
Keppel Corporation Limited
FVB Energy