District Heating Market

Market Definition

District heating is a centralized system that supplies thermal energy in the form of hot water or steam through a network of insulated pipes. The market includes various segments based on heat source, plant type, and application.

The heat sources in this market include coal, natural gas, renewables, oil, and petroleum products. The plant types consist of boiler-based systems, combined heat and power (CHP) units, and other plant configurations. The applications cover residential, commercial, and industrial sectors.

District Heating Market Overview

The global district heating market size was valued at USD 194.43 billion in 2024 and is projected to grow from USD 202.73 billion in 2025 to USD 272.40 billion by 2032, exhibiting a CAGR of 4.30% during the forecast period.

The market is driven by the increasing demand for electricity-based district heat production as utilities adopt power-to-heat technologies to reduce reliance on fossil fuels. The market is also registering a growing shift toward carbon-free thermal energy solutions, with operators integrating renewables and waste heat sources into district heating networks.

Major companies operating in the district heating industry are Worcester Bosch, Statkraft, Siemens, Engie, CARRIER, SP Group, Danfoss, EDF Group, Fortum, Taikisha Ltd., Vital Energi Ltd., ALFA LAVAL, FVB Energy Inc., Kingspan Group, and Vattenfall.

Companies are deploying air-to-water heat pump-based district heating systems to reduce CO2 emissions and comply with climate targets. These systems use ambient air as a renewable heat source, enabling low-carbon heat generation without direct combustion.

This approach supports decarbonization of heating networks and helps utilities meet energy efficiency standards. This strategy is gaining traction, as it offers a practical and scalable solution for clean heat supply in both new and existing district heating networks.

• In August 2024, MAN Energy Solutions collaborated with Helen Oy to deliver a 33 MW air-to-water heat pump for Helsinki’s Patola heating plant. Touted as the world’s largest of its kind, the unit will operate with CO2 as a refrigerant and use ambient air to generate heat. Combined with two 50 MW electric boilers, the system will supply 200 GWh of heat annually and cut CO2 emissions by 56,000 tons, supporting the city’s carbon neutrality targets.

Key Highlights:

1. The district heating industry size was valued at USD 194.43 billion in 2024.
2. The market is projected to grow at a CAGR of 4.30% from 2025 to 2032.
3. Europe held a market share of 33.81% in 2024, with a valuation of USD 65.73 billion.
4. The coal segment garnered USD 51.00 billion in revenue in 2024.
5. The boiler segment is expected to reach USD 113.66 billion by 2032.
6. The residential segment is expected to reach USD 109.09 billion by 2032.
7. The market in Asia Pacific is anticipated to grow at a CAGR of 5.21% over the forecast period.

Market Driver

Growing Demand for Electricity-based District Heat Production

The district heating market is growing, due to the increasing demand for electricity-based district heat production. Governments and utilities are investing in electric boilers, large-scale heat pumps, and power-to-heat technologies ato replac fossil fuel systems. This approach supports decarbonization goals and enables efficient use of renewable electricity. 

Electricity-based district heating allows better integration with national power grids and improves load management. The rising focus on reducing dependence on coal and meeting emission targets is driving the large-scale adoption of electricity-powered heating systems in urban networks.

• In March 2024, Fortum announced the construction of a new electricity-based district heat production plant in Nuijala, Espoo. The facility will include an 800 MWh heat accumulator and a 50 MW electric boiler to support flexible, emissions-free heat generation.

Market Challenge

High Infrastructure Costs Limiting District Heating Network Expansion

A major challenge impacting the district heating market is the high cost of infrastructure development. Laying insulated pipelines, installing central heat generation units, and integrating control systems require significant capital investment. These costs often delay new projects, especially in regions with low population density or aging infrastructure. The financial burden restricts market growth as utilities face long payback periods and funding constraints.

Governments and municipalities are providing policy support and financial incentives. Companies are adopting modular system designs and phased implementation strategies to reduce upfront costs and improve project feasibility.

Market Trend

Growing Shift Toward Carbon-free Thermal Energy Solution

The district heating market is registering a shift toward carbon-free thermal energy solutions. Utilities and district energy providers are using renewable sources such as geothermal, solar thermal, and biomass to produce and supply heat. 

Many operators are recovering waste heat from industrial facilities, power plants, and data centers to reduce fuel use and emissions. These sources support compliance with national decarbonization targets and align with energy transition goals. This trend is driving changes in system design and guiding investments toward low emission and renewable energy-based technologies across district heating networks.

• In November 2024, Vicinity Energy launched eSteam, the first carbon-free thermal energy solution in the U.S. The company commissioned a 42 MW electric boiler at its Cambridge facility to deliver eSteam to customers starting this heating season.

District Heating Market Report Snapshot

Segmentation	Details
By Heat Source	Coal, Natural Gas, Renewable, Oil & Petroleum Products, Others
By Plant	Boiler, CHP, Others
By Application	Residential, Commercial, Industrial
By Region	North America: U.S., Canada, Mexico
	Europe: France, UK, Spain, Germany, Italy, Russia, Rest of Europe
	Asia-Pacific: China, Japan, India, Australia, ASEAN, South Korea, Rest of Asia-Pacific
	Middle East & Africa: Turkey, U.A.E., Saudi Arabia, South Africa, Rest of Middle East & Africa
	South America: Brazil, Argentina, Rest of South America

Market Segmentation:

• By Heat Source (Coal, Natural Gas, Renewable, Oil & Petroleum Products, and Others): The coal segment earned USD 51.00 billion in 2024, due to its continued use in legacy district heating systems with high installed capacity.
• By Plant (Boiler, CHP, and Others): The boiler segment held 42.17% share of the market in 2024, due to its lower capital requirement and operational simplicity.
• By Application (Residential, Commercial, and Industrial): The residential segment is projected to reach USD 109.09 billion by 2032, owing to the growing demand for efficient and centralized heating in multi-unit housing.

District Heating Market Regional Analysis

Based on region, the market has been classified into North America, Europe, Asia Pacific, Middle East & Africa, and South America.

Europe accounted for a market share of around 33.81% in 2024, with a valuation of USD 65.73 billion. This dominance is mainly attributed to collaborations between governments, utilities, and private sector participants. These partnerships focus on expanding and upgrading district heating networks to meet energy efficiency and climate goals.

Several countries in the region have implemented national strategies that promote clean heat solutions and long-term infrastructure investment. Collaborative projects support the integration of renewable energy and waste heat into centralized systems, which has strengthened Europe’s dominance in district heating deployment.

• In February 2024, Evonik and Uniper launched the TORTE project in Gelsenkirchen to supply sustainable district heating in Germany’s Ruhr region. The project will recover industrial waste heat from isophorone production at Evonik’s Herne site, using a large heat pump to feed up to 1.5 MW of heat into the local district heating network.

The market in Asia Pacific is poised to grow at a significant CAGR of 5.21% over the forecast period. The market growth is attributed to the rising demand for centralized heating in rapidly urbanizing cities. The region is witnessing large-scale construction of residential, commercial, and industrial complexes that require reliable and efficient heating solutions.

Governments are investing in district heating as a long-term strategy to manage energy consumption and reduce air pollution. Residential infrastructure is expanding, which makes the adoption of district heating systems a key part of sustainable urban development across the region.

Regulatory Frameworks

• In Europe, the Energy Efficiency Directive (2012/27/EU) regulates district heating by setting requirements for efficiency improvements and promoting the use of high-efficiency cogeneration and renewable energy sources.
• In Japan, the Heat Supply Business Act regulates district heating systems, requiring operators to obtain licenses and comply with technical standards to ensure safety and reliability.

Competitive Landscape

Key players in the district heating industry are focusing on geographic expansion and alignment with net zero emission targets to strengthen their market position. Companies are entering new markets through strategic partnerships, joint ventures, and acquisitions to extend their district heating operations across urban and industrial regions. They are investing in infrastructure development in areas with growing heat demand and limited centralized heating coverage.

Several operators are modernizing existing systems and integrating low-carbon technologies such as heat pumps, biomass, and waste heat recovery to meet long-term climate goals. These efforts are part of broader strategies to decarbonize heat supply and comply with regional regulatory frameworks.

• In February 2025, Calogena announced its expansion into Finland. The company plans to develop small nuclear reactors for district heating to support Finland’s net-zero objectives. Finland was selected, due to its advanced district heating infrastructure and nuclear collaboration with France. The new Helsinki hub will enable cooperation with municipalities and clients, strengthening Calogena’s presence in the Nordic region.

List of Key Companies in District Heating Market:

• Worcester Bosch
• Statkraft
• Siemens
• Engie
• CARRIER
• SP Group
• Danfoss
• EDF Group
• Fortum
• Taikisha Ltd.
• Vital Energi Ltd.
• ALFA LAVAL
• FVB Energy Inc.
• Kingspan Group
• Vattenfall

Recent Developments (Expansion)

• In October 2023, GE Vernova announced the commercial launch of the Naepo District Heating Plant in South Korea. Equipped with GE’s H-Class combined cycle technology, the plant supplies 500 MW of electricity and steam for district heating to more than 100,000 residents.