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The Heat Network Market size is forecast to increase by USD 23.39 billion, at a CAGR of 4.4% between 2023 and 2028. The market is witnessing significant growth due to the global energy transition towards sustainable and efficient energy solutions. Regulatory changes and Government initiatives, such as the European Union's renewable energy directive, are driving the adoption of renewable sources, including biomass and waste heat, for heat production. Centralized Heating systems are gaining popularity due to their Energy Efficiency and ability to reduce carbon emissions. Power generation from renewable energy sources is increasingly being integrated with Heat Networks, leading to the densification of energy production. The market faces challenges, including irregularities in the pricing of heat networks, which hinder the market's growth. Despite these challenges, the market is expected to continue its growth trajectory, driven by the increasing demand for sustainable and cost-effective heating solutions.
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The market research report provides comprehensive data (region-wise segment analysis), with forecasts and estimates in "USD billion" for the period 2024-2028, as well as historical data from 2018 - 2022 for the following segments.
The hot water heat network segment is estimated to witness significant growth during the forecast period. The adoption of renewable energy sources for heating applications is gaining momentum as cities seek sustainable alternatives to traditional heating systems. In this regard, the hot water heat network segment is experiencing significant growth. For instance, the city council of Plymouth, UK, is planning the initial phase of a district heating system, which will distribute heat from a central source to various consumers via underground pipes carrying hot water.
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The hot water heat network segment was valued at USD 50.31 billion in 2018. This approach eliminates the need for individual gas boilers or electric heaters in each building, resulting in a more efficient city-wide central heating system. In September 2024, plans for the first phase of this project, estimated to cost up to USD 60 million, were presented to the cabinet. The aim is to connect major buildings in the city center and waterfront to the central heating system, reducing carbon emissions and enhancing energy efficiency through advanced control systems, data analytics, and application insights.
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Europe is estimated to contribute 59% to the growth of the global market during the forecast period. Technavio's analysts have elaborately explained the regional trends and drivers that shape the market during the forecast period. The European market is witnessing notable expansion due to forward-thinking initiatives and collaborative projects. An illustrative instance is NTT's plan to link its data center campus in Frankfurt, Germany, to a local district heating network, announced in June 2024. Mainova, the local utility, will utilize excess heat from the NTT Data center to heat approximately 600 residences in Hattersheim am Main. This project underscores the potential of repurposing data center waste heat for residential heating, thereby improving energy efficiency and sustainability. The NTT Data center will supply nearly the entire heating demand for the network, while the existing gas-powered combined heat and power plant remains in place for peak loads and backup. Advanced control systems and data analytics will optimize energy usage in both the data center and the heating network, ensuring application insights for both sectors. Renewable energy adoption in heat networks is a growing trend, with industrial, commercial, and residential sectors increasingly turning to this carbon-efficient solution.
Companies are implementing various strategies, such as strategic alliances, partnerships, mergers and acquisitions, geographical expansion, and product/service launches, to enhance their presence in the market.
Alfa Laval AB - The company offers heat network that is dependable and environmentally beneficial. This heating distribution technique allows customers to connect into a range of heating sources, including renewable or recycled energy.
Technavio provides the ranking index for the top 20 companies along with insights on the market positioning of:
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Market structure |
Fragmented |
YoY growth 2023-2024 |
3.0 |
The market is witnessing significant growth due to the increasing focus on energy efficiency, reducing greenhouse gas emissions, and improving air quality. District heating systems, including those powered by renewable energy sources, are becoming increasingly popular as they offer cost savings on energy bills and contribute to climate change goals. Renewable energy sources such as geothermal and solar thermal are being integrated into heat networks to reduce reliance on traditional fossil fuel-based heat generation sources. Smart heat networks, which utilize sensors and controls to optimize energy usage and distribution, are also gaining traction. Waste heat from power generation can be utilized in heating networks, further increasing their efficiency. Renewable sources, including biomass and biogas, are being densified for use in centralized heating systems. Heat production from renewable sources is expected to increase, reducing carbon emissions and contributing to the overall decarbonization of the energy sector. The integration of renewable energy into heating networks is a key trend in the market, as countries strive to meet their climate change goals and reduce energy costs for consumers. Our researchers analyzed the data with 2023 as the base year, along with the key drivers, trends, and challenges. A holistic analysis of drivers will help companies refine their marketing strategies to gain a competitive advantage.
Regulatory changes are notably driving market growth. The market is experiencing significant growth due to the increasing regulatory push towards energy efficiency, reduced greenhouse gas emissions, and improved air quality. The UK Government's upcoming legislative changes, set to be introduced by 2025, are a key driver in this expansion. These regulations will establish price protections and performance standards for district heating systems, providing consumers with similar protections to those for gas and electricity.
This legislative initiative is part of a broader effort to ensure fair treatment and reliable service for heat network customers, particularly those considered vulnerable. The integration of renewable energy sources, such as geothermal and solar thermal, into smart heat networks further enhances their appeal. Regulatory compliance and the adoption of advanced technologies are expected to continue shaping the market landscape. Thus, such factors are driving the growth of the market during the forecast period.
Government initiatives is the key trend in the market. The market is witnessing substantial growth due to increasing government initiatives focused on energy efficiency and sustainability. For instance, the Heat Network Efficiency Scheme (HNES) of the UK Government has been instrumental in providing financial support to enhance the performance of heat networks in England and Wales. As of October 2024, the sixth round of HNES funding has allocated an additional USD 2.7 million to 33 heat networks, benefiting approximately 1,945 residents by optimizing their heating and cooling systems.
This funding extension continues the scheme's positive impact, which has already improved energy efficiency for over 41,000 residents connected to 192 heat networks. The integration of renewable energy sources, such as geothermal and solar thermal, into district heating systems, as well as the implementation of smart heat networks with sensors, further contributes to reducing greenhouse gas emissions, improving air quality, and decreasing energy costs. Thus, such trends will shape the growth of the market during the forecast period.
Irregularities in pricing of heat networks is the major challenge that affects the growth of the market. The market is experiencing challenges due to pricing irregularities, which can negatively impact consumer confidence and market expansion. A notable instance occurred in Amsterdam in March 2024, when local housing associations temporarily halted new connections to heat networks. This decision was prompted by concerns over Vattenfall's failure to adhere to agreed-upon pricing structures. In early 2024, Vattenfall increased the fixed costs for district heating by over 30%, leading to a significant increase in annual heat consumption costs for households, approximating USD 800. This substantial tariff hike has raised affordability concerns among residents, who are now finding it challenging to manage their living expenses.
Energy efficiency, greenhouse gas emissions, air quality, and energy costs are crucial considerations in the implementation of district heating systems. Integration of renewable energy sources, such as geothermal and solar thermal, in heat networks, along with the adoption of smart heat networks and sensors, can enhance energy efficiency and reduce greenhouse gas emissions. However, ensuring pricing transparency and stability is essential to maintain consumer trust and encourage widespread adoption of these systems. Hence, the above factors will impede the growth of the market during the forecast period.
The market forecasting report includes the adoption lifecycle of the market research and growth, covering from the innovator's stage to the laggard's stage. It focuses on adoption rates in different regions based on penetration. Furthermore, the report also includes key purchase criteria and drivers of price sensitivity to help companies evaluate and develop their market growth analysis strategies.
Customer Landscape
Heat networks have gained significant attention in the energy sector due to their potential to improve energy efficiency, reduce greenhouse gas emissions, and enhance air quality. District heating systems, including community heating and microgrids, are increasingly being adopted as energy-efficient solutions for residential, commercial, and industrial applications. These systems can be configured as open or closed loops, utilizing various heat sources such as renewable energy, geothermal, solar thermal, waste heat from industries, and fossil fuels. Advanced control systems, sensors, and data analytics play a crucial role in optimizing heat network performance and integrating renewable energy sources.
Renewable energy adoption in heat networks is on the rise, with sources like biomass, solar thermal, and waste heat recovery gaining popularity. The transition to renewable energy is driven by climate change goals, energy cost savings, and energy security concerns. Heat networks can also contribute to carbon emission reduction by replacing traditional boiler plants with more efficient and cleaner heating solutions. The integration of renewable energy sources and energy management systems can further enhance the environmental benefits of heat networks while ensuring energy security and improving air quality.
Market Scope |
|
Report Coverage |
Details |
Page number |
201 |
Base year |
2023 |
Historic period |
2018-2022 |
Forecast period |
2024-2028 |
Growth momentum & CAGR |
Accelerate at a CAGR of 4.4% |
Market Growth 2024-2028 |
USD 23.39 billion |
Regional analysis |
Europe, APAC, North America, South America, and Middle East and Africa |
Performing market contribution |
Europe at 59% |
Key countries |
Denmark, Russia, China, Sweden, Germany, Poland, Japan, UK, US, and South Korea |
Competitive landscape |
Leading Companies, Market Positioning of Companies, Competitive Strategies, and Industry Risks |
Key companies profiled |
Alfa Laval AB, BRUGG Rohrsystem AG, Danfoss AS, E.ON UK Plc, ENGIE SA, Fortum Oyj, FVB Energy Inc, Helen Ltd., LOGSTOR Denmark Holding ApS, Ramboll Group AS, REHAU Ltd., Rendesco Ltd, Statkraft AS, STEAG GmbH, Thermaflex, Uniper SE, Uponor Corp., Vattenfall UK, Veolia Environnement SA, and Viessmann Werke GmbH and Co. KG |
Market dynamics |
Parent market analysis, market growth inducers and obstacles, fast-growing and slow-growing segment analysis, AI impact on market trends, COVID-19 impact and recovery analysis and future consumer dynamics, market condition analysis for the market forecast period |
Customization purview |
If our market report has not included the data that you are looking for, you can reach out to our analysts and get segments customized. |
1 Executive Summary
2 Technavio Analysis
3 Market Landscape
4 Market Sizing
5 Historic Market Size
6 Qualitative Analysis
7 Five Forces Analysis
8 Market Segmentation by Type
9 Market Segmentation by End-user
10 Customer Landscape
11 Geographic Landscape
12 Drivers, Challenges, and Opportunity/Restraints
13 Competitive Landscape
14 Competitive Analysis
15 Appendix
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