Rapid rollout, doubling of investment needed for successful use of district heating – report

To supply a sufficient number of homes with district heating, Germany needs to rapidly expand networks, ensure better profitability and double its annual investments in the technology, a report by think tank Agora Energiewende found. The report outlines how climate-neutral heating networks can be economical and affordable.

Looking at the current conditions, the report found that a secure investment framework is important as suppliers face financing needs that far exceed their investment activity until now. It also called for district heating prices to be kept at comparable levels to decentralised systems, especially because district heating is largely used in rented households, many of them with lower incomes.

Investments should double to five billion euros annually in order to supply a third of all homes with district heating by 2045. The current regulatory and funding framework, however, does not make such investments economically viable for district heating companies, the report found. Furthermore, lower electricity costs and more consistent funding are crucial levers for enabling climate-neutral district heating.

District heating is expected to play a key role in the heating transition, particularly in cities and metropolitan areas. While it has traditionally centred around a consolidated market with little growth, characterised by central, large, fossil-fuelled power plants, in the future, several producers of renewable heat will interact flexibly, depending on the electricity supply from wind and solar, and will also include local sources, such as geothermal energy, said Agora.

District heating already supplies more than a third of homes in Germany’s three largest cities, Berlin, Hamburg, and Munich. The government is aiming to connect 100,000 buildings to district heating annually.