In October 2023, Gradska Toplana, the district heating operator in Nis, Serbia, is set to develop a heat pump system utilizing water from the Nisava River for heating. The company also revealed plans to replace local fossil fuel-fired boilers with more sustainable alternatives.
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Solar District Heating Market
Solar District Heating Market Size, Share, Growth & Industry Analysis, By Component (Solar Collectors, Thermal Storage Systems, Heat Exchangers & Pumps, Other Accessories), By Application (Residential Heating, Commercial & Institutional), By System Type, By Heat Source Integration, and Regional Analysis, 2024-2031
Pages: 180 | Base Year: 2023 | Release: April 2025 | Author: Versha V.
Market Definition
The market encompasses the development, integration, and operation of centralized heating systems powered by solar thermal energy. Targeting residential, commercial, and industrial sectors, it aims to reduce reliance on fossil fuels and lower carbon emissions.
This market is driven by sustainability goals, energy efficiency policies, and advancements in solar thermal technologies, offering scalable, eco-friendly heating solutions for urban and rural energy infrastructure development. The report outlines the primary drivers of market growth, along with an in-depth analysis of emerging trends and evolving regulatory frameworks shaping the industry's trajectory.
Solar District Heating Market Overview
The global solar district heating market size was valued at USD 7.01 billion in 2023 and is projected to grow from USD 7.43 billion in 2024 to USD 11.82 billion by 2031, exhibiting a CAGR of 6.86% during the forecast period.
The market is growing steadily, driven by demand for low-carbon energy and technological advancements. Increased focus on sustainability and ESG goals is accelerating green financing, positioning solar heating as a strategic, long-term clean energy investment.
Major companies operating in the solar district heating industry are Aalborg CSP, Fortum, Göteborg Energi, Kelag International, Keppel Corporation Limited, Logstor, NRG Energy Inc., Ramboll's, RWE, SHINRYO CORPORATION, Statkraft, STEAG GmbH, Vattenfall Group., and Hafslund, Helen Ltd.
The market is expanding rapidly due to the increasing demand for clean energy solutions. This growth is fueled by advancements in solar technology and energy storage, which enhance the efficiency and scalability of renewable heating systems.
As countries focus on reducing carbon emissions and transitioning to sustainable energy sources, the demand for solar district heating and associated technologies continues to rise, driving investments and accelerating the adoption of eco-friendly infrastructure in urban areas.
- In November 2024, RWE and Peabody announced a strategic partnership to advance renewable energy projects by repurposing reclaimed mining land. RWE will leverage its expertise in clean energy, while Peabody’s land assets and reclamation capabilities, particularly in the Midwest, will support large-scale solar and energy storage projects. This collaboration underscores both companies' commitment to sustainable energy and environmental stewardship.
Key Highlights
- The solar district heating market size was recorded at USD 7.01 billion in 2023.
- The market is projected to grow at a CAGR of 6.86% from 2024 to 2031.
- Europe held a market share of 60.12% in 2023, with a valuation of USD 4.21 billion.
- The solar collectors segment garnered USD 2.46 billion in revenue in 2023.
- The residential heating segment is expected to reach USD 5.42 billion by 2031.
- The large-scale segment is anticipated to witness a CAGR of 7.00% during the forecast period.
- The hybrid systems segment is forecasted to have a market share of 7.43% in 2031.
- Asia Pacific is anticipated to grow at a CAGR of 7.72% during the forecast period.
Market Driver
Demand for low-carbon energy solutions
The growing demand for low-carbon energy solutions is significantly driving the expansion of the market. Governments and private sectors worldwide are increasing their efforts to reduce carbon emissions and meet climate targets. As a result, there is a rising preference for sustainable and energy-efficient alternatives to conventional heating systems.
Solar district heating offers a renewable, emission-free solution by harnessing solar thermal energy to provide large-scale heating for residential, commercial, and industrial applications.
- In November 2024, Wärtsilä’s study highlighted district heating as a flexible, low-carbon solution for decarbonizing energy systems. Technologies like Combined Heat and Power (CHP) engines and heat pumps can integrate renewable energy, reduce CO₂ emissions by 57% in Poland’s coal-dominated sector by 2032, and save USD 3.8 billion over the next decade. This aligns with the growing demand for affordable, scalable low-carbon energy solutions across Europe.
Market Challenge
Seasonal variability in solar energy supply
Seasonal variability in solar energy supply poses a significant challenge for the solar district heating market. Solar thermal energy generation depends on sunlight, which fluctuates throughout the year. In winter months or in regions with limited sunlight, energy production can be inconsistent, impacting the reliability of solar district heating systems.
To mitigate this, additional energy storage solutions or backup heating systems may be required, adding to the cost and complexity of implementation. This variability can limit the widespread adoption of solar district heating, particularly in areas with long winters or less predictable weather patterns.
To address this challenge, key players are developing advanced energy storage solutions such as thermal energy storage (TES) systems and phase-change materials (PCMs). Thermal energy storage systems store excess heat generated during sunny periods for later use.
Hybrid systems that combine solar thermal energy with other renewable sources, such as biomass, geothermal, or heat pumps, are being integrated to provide a more reliable and consistent heating supply.
Market Trend
Integration with Smart Technologies
The market is embracing smart technologies to boost efficiency and sustainability. AI-driven optimization, IoT-enabled thermal storage, and automated demand-response systems are advancing energy management. Smart heat pumps and digital control platforms facilitate seamless integration with renewable energy grids, reducing fossil fuel dependence.
This transition aligns with decarbonization objectives while optimizing operational costs. As utilities upgrade infrastructure, intelligent solar-thermal solutions are crucial in the transition to data-centric, low-carbon district heating networks, enhancing market competitiveness and scalability.
Solar District Heating Market Report Snapshot
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Segmentation |
Details |
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By Component |
Solar Collectors (Flat Plate Collectors, Evacuated Tube Collectors), Thermal Storage Systems (Short-Term Thermal Storage (STTS), Seasonal Thermal Energy Storage (STES)), Heat Exchangers & Pumps, Control Systems & Monitoring, Other Accessories |
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By Application |
Residential Heating, Commercial & Institutional, Industrial Heating |
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By System Type |
Small-scale (local community or single-building integration), Large-scale (city or multi-building grid networks) |
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By Heat Source Integration |
Solar Only Systems, Hybrid Systems |
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By Region |
North America: U.S., Canada, Mexico |
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Europe: France, UK, Spain, Germany, Italy, Russia, Rest of Europe | |
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Asia-Pacific: China, Japan, India, Australia, ASEAN, South Korea, Rest of Asia-Pacific | |
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Middle East & Africa: Turkey, U.A.E., Saudi Arabia, South Africa, Rest of Middle East & Africa | |
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South America: Brazil, Argentina, Rest of South America |
Market Segmentation
- By Component (Solar Collectors, Thermal Storage Systems, Heat Exchangers & Pumps, Control Systems & Monitoring, and Other Accessories): The solar collectors segment earned USD 2.46 billion in 2023 due to increasing adoption of high-efficiency solar thermal technologies and rising demand for sustainable heating solutions across residential, commercial, and industrial applications.
- By Application (Residential Heating, Commercial & Institutional, Industrial Heating): The residential heating segment held 50.12% of the market in 2023, due to growing consumer demand for cost-effective, energy-efficient heating solutions and supportive government incentives promoting the adoption of solar thermal systems in households.
- By System Type (Small-scale, Large-scale): The small-scale segment is projected to reach USD 3.63 billion by 2031, owing to increasing demand for decentralized energy solutions, ease of installation, and rising adoption of solar heating systems in residential and small commercial applications.
- By Heat Source Integration (Solar Only Systems, Hybrid Systems) The hybrid systems segment held 62.85% market in 2031, due to their enhanced reliability, ability to ensure continuous heat supply by integrating multiple energy sources, and growing preference for flexible, high-efficiency heating solutions in varying climatic conditions.
Solar District Heating Market Regional Analysis
Based on region, the global market has been classified into North America, Europe, Asia Pacific, Middle East & Africa, and South America.
Europe solar district heating market share stood at around 60.12% in 2023 in the global market, with a valuation of USD 4.21 billion. Europe’s dominance in the market is driven by strong regulatory frameworks, climate targets, and consistent government support .
The region benefits from a well-established district heating infrastructure, enabling seamless integration of solar thermal systems. Technological advancements and the presence of a mature manufacturing base in Europe further enhance competitiveness.
Additionally, high energy prices and a focus on energy security are accelerating the shift toward local, low-carbon heating solutions. Strategic public-private partnerships are boosting innovation, scalability, and long-term investment in renewable heating technologies.
- In April 2025, SolarPower Europe and the National Solar Energy Federation of India (NSEFI) signed a new MoU to enhance EU-India collaboration in solar manufacturing. The agreement focuses on diversifying supply chains, identifying business and financing opportunities, promoting knowledge exchange, and addressing regulatory challenges to facilitate market access and policy dialogue for joint solar manufacturing initiatives.
Asia-Pacific is poised for significant growth at a robust CAGR of 7.72% over the forecast period. A key factor driving market growth in Asia-Pacific is a strong governmental commitment to expanding renewable energy capacity, supported by long-term policy frameworks and national solar missions.
These initiatives promote solar adoption through mechanisms such as Renewable Purchase Obligations (RPOs), preferential tariffs, and grid integration strategies. By fostering technological innovation and ensuring financial viability, such policies are creating a conducive environment for large-scale solar deployment, accelerating the growth of solar district heating solutions across rapidly developing economies in the region.
- In February 2025, the Ministry of New and Renewable Energy's (MNRE) budget increased to USD 3.19 billion in the current fiscal year, a notable rise from previous allocations, with USD 2.91 billion dedicated to the solar sector. This surge in funding, particularly for solar energy, is expected to directly impact the solar district heating industry , driving the growth of solar thermal solutions. The increased investment will support the scaling of infrastructure, technological advancements, and integration with smart technologies, positioning solar district heating systems as a key component of India’s renewable energy strategy.
Regulatory Framework
- In the U.S., the market is regulated at both federal and state levels. The Federal Energy Regulatory Commission (FERC) oversees power markets, while the U.S. Department of Energy's Solar Energy Technologies Office (SETO) manages solar programs.
- In India, the Ministry of New and Renewable Energy (MNRE) and the Solar Energy Corporation of India (SECI) are key regulators in the market. MNRE focuses on renewable energy promotion, while SECI implements solar energy projects.
- The European Union establishes energy and climate policies through directives like the Renewable Energy Directive (RED II), promoting solar thermal in district heating. National authorities, such as Germany's BNetzA and Poland's URE, enforce these policies at the country level.
Competitive Landscape
The global market is characterized by a large number of participants, including both established corporations and rising organizations. Key players in the solar district heating market are actively employing strategic initiatives such as mergers, acquisitions, and new product launches to strengthen their market presence and drive growth.
These approaches aim to enhance technological capabilities, expand geographic reach, and diversify solution offerings. By investing in innovation and forming strategic alliances, market players are positioning themselves to meet the rising global demand for sustainable heating solutions, align with regulatory frameworks, and capitalize on emerging opportunities in the clean energy sector.
- In February 2024, Evonik and Uniper initiated the TORTE (Technical Options for Thermal Energy Recovery) project in Gelsenkirchen, designed to capture and utilize industrial waste heat from isophorone production for district heating. The project focuses on boosting energy efficiency and sustainability, with the goal of delivering heat to more than 1,000 households in the Ruhr region by the end of 2024.
List of Key Companies in Solar District Heating Market:
- Aalborg CSP
- Fortum
- Göteborg Energi
- Kelag International
- Keppel Corporation Limited
- Logstor
- NRG Energy, Inc.
- Ramboll's
- RWE
- SHINRYO CORPORATION
- Statkraft
- STEAG GmbH
- Vattenfall Group.
- Hafslund
- Helen Ltd.
Recent Developments
- In September 2024, RWE Renewables initiated four new solar projects in the UK, expanding its portfolio to 11 under construction. The projects will generate 200 MW of clean energy, powering 80,000 homes by 2026. RWE also launched the UK Solar Developers Charter, emphasizing environmental responsibility and community engagement, supporting its goal to boost renewable energy capacity by 2030.
- In June 2024, Aalborg CSP and Envafors expanded their partnership with a new 10 MW air-to-water heat pump project. The system will utilize renewable electricity, boosting green district heating in Slagelse and surrounding areas. As Denmark phases out coal and natural gas, the demand for large heat pumps in district heating continues to grow, solidifying electricity's role in sustainable energy production.
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, reinforcing its commitment to cleaner energy solutions and improving environmental performance
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