Modern district heating cuts emissions and waste across Europe

The green transition of district heating is underway

District heating systems produce heat in a central location and distribute it through insulated pipes to buildings. Many of Europe's approximately 19,000 networks were built decades ago and have traditionally relied on fossil fuels. Ageing networks cause heat loss, unreliable supply and high costs for households. Across Europe, these systems are being modernised to improve energy efficiency, cut emissions and strengthen energy security.

Heating and cooling account for almost half of the EU's total energy demand. According to Eurostat, 10.6% of the EU's population struggled to keep their homes warm in 2023 — six million more than the previous year. The DHC Market Outlook 2025 estimates that more than €1.16 trillion must be invested in district heating infrastructure by 2050, according to an assessment by Aalborg University.

EIB's billion-euro investments in district heating

Modernising district heating requires significant capital. Over the past two years, the European Investment Bank has approved financing worth well over €2 billion to modernise district heating in France, Germany, Latvia, Lithuania, Poland and Ukraine. [EIB Advisory](<https://www.eib.org/en/products/advisory-services/index)) is also supporting district heating projects in at least 10 countries and has been working on this transition since 2007.

Through the [JASPERS](<https://www.eib.org/en/products/advisory-services/jaspers/index)) and [TARGET](<https://www.eib.org/en/products/advisory-services/target/index)) facilities, EIB Advisory provides free technical assistance to national, regional and local authorities — from project documentation to investment preparation and technical expertise.

Slovenia: From coal to renewable heat

In the Slovenian towns of Velenje and Šoštanj, thousands of residents rely on heat from a nearby coal-fired power plant. Ageing infrastructure means a significant share of that heat never reaches homes.

Adnan Glotić, who joined [Komunalno podjetje Velenje](<https://www.kp-velenje.si/)) (KPV) — the company operating the district heating distribution system in the Šaleška Valley — after 15 years in Slovenia's energy sector, knows the challenge from both sides, as a professional and a household customer.

"I am basically dependent on the heat that comes from the coal power plant right now," he says.

Glotić lives in a 1959 apartment building that has never undergone energy renovation. The resulting losses are remarkable:

"If we buy 300 units of heat, we sell only 200. Around one-third is lost in the distribution system," he explains.

The transformation of the Šaleška Valley District Heating System — Slovenia's second-largest network — covers three areas:

• Renovating critical sections of the network and heat transfer stations
• Improving the energy efficiency of buildings
• Replacing coal-fired heat with cleaner, renewable sources

The advisory work started in 2022 and is expected to conclude in 2026. Modernising critical network sections and heat transfer stations is expected to cut emissions by around 6,000 tonnes of CO₂ every year from this measure alone.

Norbotten, Sweden: Heat in the Arctic

In Norbotten County, in Sweden's Arctic north, reliable district heating is more than a matter of comfort. Winter temperatures remain well below freezing for months, making heating critical for homes, schools and public services.

The region decarbonised its heating sector earlier than much of Europe. From the 1980s onwards, municipalities replaced oil-fired boilers with district heating systems fuelled mainly by forest biomass.

"We almost eliminated fossil greenhouse-gas emissions from that sector, which helped Sweden become a leader in reducing emissions," says Isabella Katsimenis, senior international project developer at the North Sweden Energy Agency.

Today, growing demand for biomass from other sectors and new European regulations are increasing pressure on that resource. Through the TARGET facility, EIB Advisory is helping local authorities identify new sources of clean heat, including lakes, rivers, geothermal energy and industrial waste heat.

"There is so much heat across Europe that is being wasted. We need to help municipalities and decision-makers understand what heat is available and how they can recover it before it's too late," Katsimenis says.

The European market landscape

The [DHC Market Outlook 2025](<https://api.euroheat.org/uploads/Market_Outlook_2025_f4b28fcf89.pdf)), published by Euroheat & Power, documents the sector's state across 28 countries based on 2023 data:

In Germany, district heating supplied 6.4 million households in 2023, with 31,200 new buildings connected. France recorded 2,200 additional connections (6% annual growth). In Germany, the leading heating solutions for new buildings are individual heat pumps (55.9%), district heating (26.6%) and natural gas boilers (10.3%).

Energy sources in transition

The 2023 fuel mix marks a notable shift towards renewable and waste heat sources:

• Bioenergy represents 34.7% of total supply. In Sweden, it accounts for nearly two-thirds of heat supply.
• Large heat pumps are experiencing a breakthrough: in Germany, over 50 projects are in planning, construction or operation with a total thermal capacity of 900 MW. A Prognos study projects 6 GW by 2030 and 23 GW by 2045.
• Geothermal energy supplied 2% of district heat in 2023, with 80% based in Iceland and France. In Germany, geothermal is forecast to reach 18 TWh/year by 2045.
• Solar thermal accounted for 932 GWh (0.2%), with growing shares in Poland, Denmark and Germany.
• CHP (combined heat and power) covers 15–86% of district heat production on the largest markets.

Concrete projects illustrate the trend: RheinEnergie in Cologne announced an investment in large-scale river water heat pumps with 150 MW capacity, set to supply around 50,000 households from 2027. In Helsinki, Helen closed its last coal-fired plant in May 2025 and is constructing a new facility in Patola with a large air-to-water heat pump and two electric boilers delivering a combined 100 MW. In Szeged, Hungary, SZETAV is implementing Europe's largest geothermal district heating overhaul: 30 km of new pipelines, five drilling zones at 1,700–2,000 metres depth, and 90°C hot water. The project is expected to cut gas use by 68% and CO₂ emissions by 65%.

District cooling is growing

2024 was Europe's hottest year on record. District cooling sales rose by 10% over the past five years, and the customer base in the two largest markets (Sweden and France) grew by 27%. In 2023, district cooling amounted to 3.1 TWh, and over 200 networks exist with more than 1,300 km of pipes. In Sweden, sales are expected to increase by approximately 50% by 2030, while Paris' network (operated by ENGIE) is set to triple in length by 2042.

Stockholm's district cooling system, established in 1994, is one of the largest in Europe: 250 km of pipes, over 700 buildings, a 50,000 m³ underground storage facility, and a synergy where heat pumps transfer energy to the heating network at up to 140 GWh per year. The system reduces electricity use for cooling by up to 66%.

Thermal energy storage as a game changer

Long-term thermal energy storage is gaining recognition as a key player in fully decarbonising district heating and cooling networks:

• Above-ground steel tanks up to 50,000 m³ handle daily peak shifting
• Pit thermal storage up to 200,000 m³ at up to 80°C ensures seasonal balance
• Reinforced concrete tanks partially below grade (up to 12,000 m³ at 95°C)
• Underground aquifer storage at around 30°C (Dutch model)
• Compact solutions: phase change materials (PCM), sorption materials and thermochemical materials targeting 200 kWh/m³ versus today's ~60 kWh/m³

Policy context and outlook

The [European Commission](<https://commission.europa.eu)) has announced a revised Heating and Cooling Strategy for spring 2026, following up on the Action Plan for Affordable Energy and the Clean Industrial Deal. Transposition of the Fit-for-55 package — including RED III, EED, EPBD and the EU ETS — is due for completion by 2025.

Based on national climate objectives, over 8.5 million new households are expected to be connected to district heating networks by 2030. In Germany, 100,000 buildings per year are needed to achieve climate neutrality by 2045, versus the current rate of 25,000–35,000. In France, the target is 250,000 new connections per year, while the current trend points to around 100,000. The Dutch government has revised its 2030 target down from 500,000 to 150,000 households due to regulatory uncertainty.

Key future trends include:

• Efficiency upgrades of existing networks
• Integration of renewable energy and industrial waste heat
• Thermal energy storage and seasonal storage
• Power-to-heat technology and integration of heat and electricity systems
• Growth in district cooling
• New urban sources: data centres, metro stations, wastewater (potential of 150 TWh/year)
• Increased local energy production to reduce external dependence

"We have moved from a mandate focused on preparing for full decarbonisation by 2050 to one centred on delivering it, effectively and efficiently. Clean heating and cooling represent a crucial lever in driving the transition," says MEP Sigrid Friis in the report's foreword.

Dr. Brian Motherway, Head of the Office of Energy Efficiency and Inclusive Transitions at the International Energy Agency, underlines the need for continued strong policy support:

"Continued strong policy support is essential to scale up clean district heating and cooling networks, as it can create regulatory stability and attract investment."