District heating and cooling networks are central to many cities' net-zero plans. At Energy Solutions, we've analyzed fuel-mix transitions in over 150 urban heat networks across Europe and Asia. This report summarises how fuel mixes are shifting away from coal and gas toward waste heat, renewables, and large heat pumps, and what this means for tariffs, retrofit strategies, and connection policies for buildings.
District heating systems vary widely, from legacy steam networks to modern low-temperature fourth-generation systems. Many older networks still rely heavily on high-temperature fossil boilers and combined heat and power (CHP) plants, which complicates a rapid shift to low-carbon supply.
| Archetype | Typical Supply Temperature | Main Heat Sources | Decarbonisation Potential |
|---|---|---|---|
| Legacy steam network | 180–220 °C | Coal or gas CHP, industrial waste heat. | Challenging; may require fundamental redesign or staged transition. |
| Conventional hot water | 80–120 °C | Gas boilers, gas CHP, some biomass. | Medium; can integrate large heat pumps and waste heat as buildings are upgraded. |
| Low-temperature network | 50–70 °C | Large heat pumps, geothermal, data center heat, solar thermal. | High; compatible with a broad range of low-carbon sources. |
Source: Energy Solutions synthesis of national heat strategy documents and utility disclosures.
The shift away from fossil fuels is proceeding along several tracks: biomass and biogas, large heat pumps connected to rivers or seas, waste incineration with energy recovery, industrial waste heat, and deep geothermal. The optimal mix depends on local resources, regulatory constraints, and public acceptance.
| Option | Typical Role | Key Advantages | Key Challenges |
|---|---|---|---|
| Large heat pumps | Base load for low-temperature networks. | High efficiency, flexibility, potential to align with renewable electricity. | Requires suitable heat source and grid capacity. |
| Biomass and biogas | Dispatchable heat and CHP. | Firm capacity, can reuse existing boiler assets. | Feedstock constraints, air quality, sustainability concerns. |
| Industrial waste heat | Base load where industry is nearby. | Very low marginal cost and emissions. | Location-specific, contractual and reliability questions. |
| Deep geothermal | Long-term base load. | Stable output, small surface footprint. | Exploration risk, upfront capital intensity. |
Source: Energy Solutions analysis; costs normalised to a representative European city.
Even the cleanest district heating plant cannot deliver low-carbon heat to poorly insulated buildings at high flow temperatures. Network decarbonisation is therefore inseparable from building retrofits: envelope improvements, radiator upgrades, and in-building controls.
Fourth-generation networks are designed around lower temperatures, which improve efficiency and enable greater integration of heat pumps and waste heat. However, they require careful planning of building connection standards and staged retrofit programmes.
A European city granted a long-term concession to a private utility to expand and decarbonise its heat network, subject to strict carbon and tariff performance targets.
A Nordic municipality used a publicly owned utility to drive heat network expansion, combined with building codes requiring connection for certain new developments.
For customers, the key questions are straightforward: how do tariffs compare to individual boilers or heat pumps, and how stable are they over time? For utilities and cities, the focus is on recovering capital while keeping prices predictable and competitive.
| Option | LCOH Range (€/MWh) | Notes |
|---|---|---|
| Gas boiler (individual) | 55–80 | Highly exposed to fuel price volatility and carbon costs. |
| Building-level heat pump | 50–85 | Strongly dependent on electricity prices and building efficiency. |
| Modern low-carbon district heating | 45–75 | Economies of scale and diversified supply can stabilise costs. |
Source: Energy Solutions tariff scenarios for a representative multi-family building.
By 2030, many national and city-level scenarios envisage district heating playing a larger role in urban decarbonisation, particularly for dense neighbourhoods and legacy building stock where individual retrofits are complex.
Source: Energy Solutions scenarios for selected European and Asian cities.
Not necessarily. The answer depends on the current and future fuel mix of the network, electricity carbon intensity, and how both systems evolve over time. Transparent carbon reporting is essential.
Well-planned projects can limit disruption to a few days per building, but internal piping and radiator upgrades can still be intrusive. Communication and staged works are critical.
Both public and private models can succeed, but clarity on roles, risk allocation, and long-term performance incentives tends to matter more than ownership alone.
Robust scenario analysis, pilot zones that can scale, and alignment between heat planning and building policies reduce the risk of stranded assets or oversizing.