District Heating

District heating & cooling market valuation to surpass a mammoth $400 billion by 2024, rising adoption of CHP-based systems to expedite the industry growth

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The global district heating and cooling (DHC) market is poised to witness an accelerated growth in the consequent years, primarily owing to growing environmental concerns. Driven by the urgent need to curb carbon emissions, global and regional governments have enforced suitable regulatory measures that have further upheld this industry. As per estimates, the global DHC market was valued at approximately over $200 billion in 2017 and is anticipated to double its remuneration by 2024, given that emerging economies are increasingly investing in the development of various commercial and residential establishments that have a centralized heating and cooling system.

Sweden District Heating & Cooling Market Size, by Application, 2017 & 2024 (USD Million)

Sweden District Heating & Cooling Market Size, by Application, 2017 & 2024 (USD Million)

An outcome of economies of scale, the centralized system of DHC is often extremely cost-efficient when compared to the conventional de-centralized systems. However, an obstacle in the growth of this vertical would be the initial investment required for planning and establishing a distribution infrastructure for the installation of a DHC system. The system’s cost-effectiveness also depends on whether there exists a pre-established distribution infrastructure which could be employed to deliver the DHC services. In case of an existing network, centralized generation costs 40% less than a de-centralized capacity.

Unveiling global DHC market trends with respect to the different energy sources deployed

District heating & cooling market size from combined heat and power (CHP) market is slated to grow by approximately 6% over 2018-2024. According to the International District Energy Association, traditional power plants are extremely inefficient when it comes to generating power as they only extract and convert only about 35%-40% of the energy from the fuel to generate electricity and the remaining 60%-65% of energy is turned into heat which is then released into a local waterbody or into the atmosphere through a smokestack. The association deems this extreme inefficiency to be a massive problem. However, this obstacle also provides a massive opportunity for CHP plants to effectively harvest the immense heat byproduct to produce steam, to heat or to chill water and then effectively cool or heat the surrounding residential or commercial complexes through a DHC network.

According to the association, CHP plants witness fuel efficiencies of around 75%-80% on a regular basis. Additionally, they significantly boost operating efficiencies while decreasing the carbon footprints, thereby providing a massive scope for the expansion of DHC industry from the CHP energy source. The rapid shift from traditional power generation plants to CHP plants is thus slated to augment CHP-based DHC market.

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While CHP has garnered commendable traction, DHC industry players have also been tapping the solar energy source rather prominently. As more and more developed and developing economies turn to renewable sources of energy to fulfil their annual energy needs, it is anticipated that the global DHC market will also experience substantial momentum with the adoption of solar power as an energy source. According to a report by the International Energy Agency the only factor that would limit the development of SHC is the scarcity of viable rooftops and ground space that would house the solar collectors at a location that is accessible to the DHC network. However, even with this constraint, it is being speculated that most of the nations across the globe will come to adopt solar power as an energy source to fuel DHC systems across residential, commercial, and industrial establishments.

According to a 2017 report on SHC by the International Solar Energy Society, over 30 GWth of new solar thermal capacity was authorized in 2017 alone, boosting the global capacity to over 470 GWth. Global Market Insights, Inc., claims that the overall DHC market share from solar power was pegged at $4 billion in 2017, primarily driven by the low operating costs, environmental viability, and ease of installation. Solar power is likely to be majorly adopted across developed as well as developing nations, especially across Europe. Indeed, the European Commission has targeted a deployment of SDH systems across Denmark, Italy, Czech Republic, and Germany, with plans to extend a capacity of 8 GWth by 2020.

Although the global DHC market entertains the deployment of fossil fuels like gas and coal to power the centralized DHC hub, there is a significant untapped potential to upgrade the systems to enable them to employ renewable energy sources like solar, solid bio-fuels, different geothermal technologies, low ambient temperatures and waterbodies. The availability of these cost-competitive clean energy sources makes DHC becomes an extremely worthwhile, cost-effective, and viable service, the rising adoption of which would impel DHC market trends. According to Global Market Insights, Inc., the overall DHC market is expected to exceed an annual energy consumption of 19,000 PJ by 2024.

Author NameAkshay Kedari

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Europe district heating market to observe substantial gains over 2018-2024, stringent energy sustainability protocols to drive the regional demand

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Touted as offering one of the most reliable and eco-friendly heat delivery methods, the district heating market allows the flexibility to tap into multiple sources for generating heat, including renewable energy, and supply it to residences as well as commercial spaces. Government mandates across all the regions are indicative of the efforts to reduce the use of energy sources which emanate high ratios of green house gases and adopt alternatives with low CO2 emissions. The district heating industry segment has evolved to supply heating that is more efficient as compared to traditional systems and more pocket-friendly than having individual boilers. Further, the worldwide upsurge in energy demand alongside the massive urbanization and industrial development being observed will stimulate the expansion of district heating market.

Denmark District Heating Market Size, By Source, 2017 & 2024 (USD Billion)

Denmark District Heating Market Size, By Source, 2017 & 2024 (USD Billion)

With the potential to achieve considerable reduction in energy wastage and bills for consumers, the district heating market reached an estimated valuation of over USD 180 billion in 2017. The facility to incorporate diverse energy sources into a centralized heat generation and distribution network has presented vast opportunities for governments to decarbonize heat sources in the long run. Such a network can be supplied with surplus energy from power plants, industrial processes, waste management facilities, geothermal sources and gas-based or biogas fueled CHP units. Consequently, a large quantity of valuable energy will not be lost without cause and can be used to generate heat for utilization in homes and businesses. Even unused energy obtained from sustainable sources like wind or solar installations can now be routed to a district heating facility. In addition, not being dependent on a solitary heat source will ensure substantial reliability and service continuity, a key factor in the impulsion of the district heating market.

To outline the present scenario of the district heating industry, U.K. is a prominent region having a magnitude of facilities set up to supply cost-effective, environment-friendly and quick heating services. As per records, there are more than 17,000 heat networks in the U.K., with approx. 91% located in England and 6% in Scotland. Governments in the U.K. are ramping up efforts to encourage the district heating market, with a latest example being the Glenrothes Energy Network in the Glenrothes town of Scotland.

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Providing further details regarding the Glenrothes Energy Network project, it is a GBP 24 million (USD 31.72 million) community heating scheme being developed with the collaboration of Fife council, RWE and the Scottish government. The Fife Council had revealed its target to reduce carbon emissions by 42% by 2020, and the new heat network will help in attaining that mark. The energy center will be using heat sourced from RWE’s biomass CHP plant in Markinch, for supplying low-carbon heating to commercial establishments and households in the area. It is slated to lower utility bills, avoid fuel poverty and contribute towards climate change. The plant is fueled by wood waste and generates up to 53MW electricity along with heat. The Glenrothes Energy Network represents the lucrative prospects of CHP based district heating market, which is expected to grow with a rate of over 4% over 2018-2024.

Moving to the district heating industry in Europe, Denmark is a leading contributor to renewable energy development and district heating processes. The country had introduced the Heating Supply Act under which substitution of traditional heating systems with new district heating systems was made obligatory for upcoming buildings. It was reported that over 63% residential population used district heating in 2017. Elaborating Denmark’s accomplishments in the field, the Smørum Kraftvarme power plant in Smørum gave a contract to Aalborg CSP in 2017, to build an 8MW solar field spanning an area of 11,312m2 and capable of producing 5,568MWh of heat annually. The solar plant will undercut carbon emissions by at least 1,100 tons per year and give a significant boost to the district heating capabilities of Denmark, which already has multiple heat networks across its kingdom. Several government aided schemes to propagate the importance of a centralized heating system in other parts of Europe are certain to bolster the Europe district heating market share in the coming years.

To summarize, the characteristics that give the district heating industry a distinctive advantage are economies of scale, harness of waste energy, low cost operations and the capacity to reach a large number of consumers. The competitive landscape of the district heating market consists of eminent players like RWE AG, Fortum, NRG Energy, Dong energy, Hafslund, among others that offer comprehensive heating solutions for communities and businesses.

Author NamePankaj Singh