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Glossary · Energy industry & energy transition

District heating

district heating heat heat network sector coupling Waste heat heat pump combined heat and power storage exergy

District heating is the supply of buildings, neighbourhoods or businesses with heat via a pipe network, that is, via a heat network. The heat is generated in one or more plants. It is transported through insulated pipes and, within the building, is passed on via a heat interface unit to the heating system, to domestic hot water preparation or to commercial processes. District heating is therefore neither a fuel nor a specific generation technology. It is an infrastructure that distributes heat.

Technically, a district heating system usually consists of a flow and a return. In the flow, hot water travels to the consumers; in some older or industrial networks, steam is used instead. The interface unit in the building contains a heat exchanger, the controls and the heat meter. The cooled water flows back to the generation plant via the return. Billing is based on the quantity of heat supplied in kilowatt hours (kWh) or megawatt hours (MWh). The connected load is the highest heat output that a building can draw at times of high demand. It is stated in kilowatts (kW) and is important for the design of the network and for tariffs. A kilowatt is a unit of power, a kilowatt hour a quantity of energy. The two units should not be confused.

District heating is often equated with local heating. Technically, the two terms are not sharply separated. They differ mainly in size, extent and organisation. Local heating tends to mean smaller networks for a neighbourhood, a housing estate or a few buildings. District heating means larger networks with long pipelines, several generators and many customers. Both are heat networks. The German Heat Planning Act (Wärmeplanungsgesetz) ties its obligations to the term heat network and does not distinguish between local and district heating. The term district heating also says nothing about whether the heat is fossil or renewable, efficient or expensive.

Heat sources, temperature level and exergy

A district heating network can integrate many different heat sources. Traditionally, the heat comes from heating plants, waste incineration plants or combined heat and power plants, which generate electricity and heat together. In older systems, natural gas, coal or waste is often burned for this purpose. New or converted networks additionally use industrial waste heat, large-scale heat pumps, geothermal energy, solar thermal energy, biomass, electrode boilers and heat storage.

How climate-friendly district heating is does not depend on the pipe network. What matters are the mix of heat generators, the network losses and the temperature level. A network fed predominantly by fossil boilers is not automatically more climate-friendly than a heating system in an individual building. If, on the other hand, a network uses unavoidable waste heat, geothermal energy or large-scale heat pumps powered by renewable electricity, it can avoid many emissions. An assessment requires the specific key figures of the network. These include the CO₂ emission factor per kilowatt hour of heat, the primary energy factor, the share of renewable energy and unavoidable waste heat, and the planned path to decarbonisation. The vague term “Fernwärmefaktor” (district heating factor) is not sufficient for this, as depending on the context it can mean either the primary energy factor or the emission factor.

The temperature level determines which sources can be used and how high the losses are. Older networks often operate with high flow temperatures, because old buildings with small radiators or industrial customers need high temperatures. High temperatures make heat delivery within the building easier. However, they increase losses in the pipes and make it harder to integrate many renewable sources. Lower temperatures are better suited to large-scale heat pumps, solar thermal energy, waste heat and geothermal energy. Buildings, interface units and heating systems must then also work reliably with less heat in the flow. A low return temperature is just as important. The more the water cools down in the building, the more heat each cubic metre of water transports and the more efficiently heat pumps, flue gas condensation and storage work.

The concept of exergy makes this relationship more precise. Exergy is the portion of an energy that can be converted into work or other high-grade forms of energy. Space heating usually needs only a low temperature level. If it is nevertheless obtained from very high-grade energy, supply and demand do not match in exergetic terms. This is the case, for example, with electricity in a resistance heater, which is almost lossless in energetic terms but wasteful in exergetic terms, or with fossil combustion at very high flame temperatures. District heating can reduce this mismatch if it uses low-temperature sources and delivers heat at the appropriate level. But it can also lock in the mismatch permanently if a network requires high temperatures from fossil sources.

Why district heating matters in the energy system

District heating pools the heat demand of many buildings in one place. This makes sources usable that a single building can hardly tap. Examples are waste heat from a plant, heat from wastewater, river water or data centres, deep geothermal energy and large seasonal storage facilities. They usually only pay off when many customers are nearby. In densely built-up cities, a heat network can therefore achieve something that many individual heating decisions can hardly achieve: it collects heat sources, distributes the heat and links them to demand that is easy to plan.

District heating is becoming more important for the electricity system because heat is increasingly generated with electricity. A large-scale heat pump can obtain several kilowatt hours of heat from one kilowatt hour of electricity. How many depends mainly on the temperature lift, that is, the difference between the temperature of the heat source and the temperature in the network. An electrode boiler converts electricity into heat at roughly a one-to-one ratio. It is worthwhile mainly when electricity is very cheap for a short time or when the electricity grid needs to be relieved. Heat storage separates generation and consumption in time. In this way, a district heating system can offer flexibility to the electricity market without every household having to control its own heating.

This flexibility is limited, however. It depends on storage volume, network temperatures, heat demand, the weather, operating rules and market prices. A large hot water store can bridge several hours to a few days. A seasonal heat store can shift heat from summer to winter, but requires land, high investment and suitable temperatures. A heat pump in the network can respond to electricity prices as long as the supply of the buildings remains secure. Operation thus results from three things: the obligation to supply, the technical limits and the economic signals.

Legal framework in Germany (as of November 2026)

Since 2024, the Heat Planning Act (WPG) has prescribed minimum shares for existing heat networks. From 1 January 2030, the annual net heat generation of every heat network must come at least 30 percent from renewable energy, unavoidable waste heat or a mix of both. From 1 January 2040, the minimum is 80 percent. In justified individual cases, the competent state authority can extend these deadlines to the end of 2034 and the end of 2044 respectively. This requires, among other things, a roadmap for the expansion and decarbonisation of the network. Further exceptions apply, for example, to networks that supply almost exclusively process heat for commerce and industry, and to certain networks with subsidised combined heat and power. The Länder may prescribe higher shares. If a network permanently fails to meet the requirements, customers have the right under certain conditions to disconnect in order to supply themselves from renewable sources. Rules on a mandatory connection and use requirement remain unaffected.

For new heat networks, the WPG requires at least 65 percent of heat from renewable energy or unavoidable waste heat. Nationwide, the share in heat networks is to reach an average of 50 percent from 2030. These values apply to Germany and refer to the annual net heat generation of a network, not to individual hours or individual customers.

The contractual relationship between district heating suppliers and customers has so far been governed mainly by the Ordinance on General Terms for the Supply of District Heating (AVBFernwärmeV). It has applied essentially unchanged since 1980. It prescribes how price adjustment clauses must be designed, but does not set the level of prices. Several attempts at reform have failed so far. In August 2026, the Federal Government adopted key points for a heat network package. Under these, the AVBFernwärmeV and the Ordinance on Consumption Recording and Billing (FFVAV) are to be revised and merged in a new Heat Network Act. As of November 2026, this act has not yet been passed. The current rules therefore remain authoritative for the time being.

Price, connection and local market power

District heating is an infrastructure with strong local particularities. Customers who are connected usually cannot switch provider as freely as they can with an electricity supplier, because a network generally has only one supplier. Once customers have opted for district heating, they are practically locked in. In many places there is also a municipal obligation to connect and to use the service. Network operators, suppliers, municipalities and sometimes housing companies determine the conditions more strongly than in standardised energy supplies. This creates a field of tension: on the one side are long-term planning certainty and investment, on the other the restricted freedom of choice of customers. Price transparency and consumer protection are therefore central topics of the ongoing reform.

The costs are structured differently from those of many individual heating systems. District heating requires high initial investment in pipelines, generation plants, storage and interface units. Many tariffs therefore consist of a base or capacity charge for the connected load held available and a usage charge for the quantity of heat supplied. If too much connected load has been ordered, this can raise costs permanently, even when consumption falls. Under the AVBFernwärmeV, customers can so far adjust the agreed capacity once a year without special conditions. In July 2026, the Bundestag called for this right to be changed as part of the reform. Building renovation, hydraulic balancing and lower return temperatures therefore reduce not only consumption. They also influence how the network is designed and how economical it is.

It is often said that waste heat is free. In some processes the heat does arise anyway. But using it costs money: for capturing it, heat exchangers, pipes, pumps, raising it to network temperature, backup plants and contractual safeguards. In addition, waste heat does not always arise when buildings need it. A factory can change its operations, a data centre can grow or relocate, a process can become more efficient and supply less waste heat. Planning must take such dependencies into account, otherwise a cheap source becomes a supply risk.

The term “unavoidable waste heat” also requires care. Heat is only unavoidable if it arises as a by-product of a process that cannot reasonably be avoided or made more efficient. The WPG ties the crediting towards its quotas to such statutory definitions. If the use of waste heat keeps an inefficient process economically alive, this can delay its conversion. If, on the other hand, residual heat from a process that is necessary anyway is used, the heat network improves the overall balance. Whether waste heat is assessed as good or bad therefore depends on where one draws the boundaries of the analysis.

District heating and heat pumps in individual buildings

District heating and heat pumps in individual buildings are not simple opposites. Both can be part of a climate-neutral heat supply, but they fulfil different tasks. In densely built-up districts with little space, high heat demand per area and usable large sources, district heating often has advantages. In areas of single-family homes, in rural areas or in well-renovated buildings, individual heat pumps are often cheaper and quicker to implement. Municipal heat planning is meant to clarify exactly this spatially: where does a network pay off, where individual supply, and where do mixed solutions fit? According to the Federal Government, by August 2026 around two thirds of the roughly 10,700 towns and municipalities had begun or completed their heat planning. An amendment to the WPG is intended to simplify the procedure, especially for small municipalities.

It is a fallacy to see district heating as a convenient substitute for building efficiency. A heat network also benefits from falling heat demand, low return temperatures and suitable heating surfaces. Unrenovated buildings increase the peak load in winter, force higher network temperatures and make larger generation plants and pipelines necessary. Building efficiency and district heating therefore do not automatically compete. Together they determine how large, how hot, how expensive and how renewable a network can be operated.

Conversely, district heating is sometimes portrayed as technically outdated because it has pipeline losses and requires central infrastructure. This criticism overlooks what the network serves spatially. Pipeline losses are real and must be limited. But they must be weighed against the heat sources that can be tapped, the storage options and the many individual plants saved. A poorly utilised network with high temperatures and fossil generation is problematic. A dense network with low temperatures, clean generation and low return temperatures, on the other hand, can offer a very robust heat supply.

Security of supply and transformation

District heating must supply enough heat at all times, especially on cold days with a high heating load. Heat networks therefore need plants for reserve and peak load. These run rarely but are crucial for security of supply. In many networks, gas or oil boilers have so far taken on this role. The conversion to climate-neutral district heating therefore concerns not only the quantity of heat over the year but also the few hours with very high demand. For these hours, storage, additional generators, flexible modes of operation or climate-neutral fuels are needed, where these are available and affordable. Because the WPG quotas are based on annual generation, fossil peak boilers can contribute a limited share until 2040. By 2045, however, heat networks are to be climate-neutral.

The conversion of existing networks is also organisationally demanding. Pipelines last a very long time, and generation plants are paid off over many years. Tariffs must enable investment and at the same time protect customers from unreasonable prices. Municipalities need data on heat demand, buildings, possible sources and the costs of network expansion. Operators need planning certainty, but must not be tempted by unclear rules to operate fossil plants longer than necessary. Conflicts arise where technical possibilities, market rules and political responsibilities diverge.

Above all, district heating shows a coordination task in the electricity and heat system. Individual heating systems can be replaced quickly, but they do not tap urban heat sources and do not create shared storage. Heat networks can integrate such sources. To do so, they need long-term planning, many connections in a small area, transparent prices and reliable paths to decarbonisation. The term district heating therefore says nothing about the quality of the supply. It describes an infrastructure whose benefit arises from the interplay of source, network, building, controls and local governance.

Sources

Related glossary entries

Edited by eCMS on 11.11.2026 19:47

© 2026 Erik Schmidt. All rights reserved. Quotations with a link to the source are welcome.