District Heating Market Report 2026

The district heating market size has grown steadily in recent years. It will grow from $188.25 billion in 2025 to $196.89 billion in 2026 at a compound annual growth rate (CAGR) of 4.6%. The growth in the historic period can be attributed to expansion of urban infrastructure development, rising demand for centralized heating solutions, increasing focus on emission reduction, availability of combined heat and power plants, growth in residential and commercial heating demand.

The district heating market size is expected to see steady growth in the next few years. It will grow to $236.69 billion in 2030 at a compound annual growth rate (CAGR) of 4.7%. The growth in the forecast period can be attributed to increasing investments in renewable district heating, rising adoption of smart grid integration, expansion of geothermal and solar thermal projects, growing regulatory support for decarbonization, increasing retrofitting of aging heating networks. Major trends in the forecast period include expansion of low-carbon district heating networks, rising integration of renewable heat sources, growing deployment of smart heat metering systems, increasing use of waste heat recovery, enhanced focus on energy efficiency optimization.

Rising industrialization is anticipated to drive the growth of the district heating market in the coming years. Industrialization refers to the process by which an economy shifts from being primarily agricultural to one focused on manufacturing goods. Infrastructure development associated with industrialization increases the adoption of district heating components. For example, in September 2024, the International Federation of Robotics (IFR), a Germany-based non-profit organization, reported that industrial robot installations in the UK increased by 51%, reaching 3,830 units, while in the Americas, over 50,000 units were installed for the third consecutive year, totaling 55,389 units in 2023. Therefore, the rise in industrialization is driving the district heating market.

Key companies operating in the district heating market are concentrating on developing innovative solutions, such as low-carbon heat networks, to improve energy efficiency, reduce carbon emissions, and provide sustainable heating solutions to residential, commercial, and industrial customers. A low-carbon heat network is a system that distributes heat, typically as hot water or steam, from a centralized source to multiple buildings or facilities while minimizing carbon dioxide (CO₂) emissions compared to traditional heating systems. For instance, in November 2025, Veolia Environnement S.A., a France-based provider of water, waste, and energy management solutions, launched the “Ecothermal Grid” in the UK, a low-carbon heat network designed to deliver carbon-neutral heating and cooling using a combination of energy sources. The Ecothermal Grid incorporates AI-driven smart controls and energy storage technologies to optimize heat distribution, recover excess heat from industrial and data center operations, and provide reliable, flexible, and sustainable heating to urban areas. The initiative includes a £1bn project pipeline across locations such as Wiltshire, London, Bristol, Yorkshire, and Cambridgeshire, with applications ranging from residential complexes to large research campuses, supporting the UK government’s 2050 target of 20% heat demand from district heating networks.

In November 2024, Adven Oy AB, a Finland-based energy company, acquired Österlens Kraft Fjärrvärme AB for an undisclosed sum. Through this acquisition, it aims to strengthen its district heating operations in Simrishamn, Sweden, enhance operational efficiency, and leverage its expertise in fuel procurement and project management to support sustainable and competitive heat delivery. Österlens Kraft Fjärrvärme AB is a Sweden-based provider of district heating services with over 50 years of experience managing local heating networks.

Major companies operating in the district heating market are Engie SA, Veolia Environnement S.A., Fortum Oyj, Vattenfall AB, E.ON SE, Danfoss A/S, LOGSTOR A/S, Ørsted A/S, Statkraft AS, Wien Energie GmbH, Göteborg Energi AB, RWE AG, Helen Ltd., Vital Energi Utilities Ltd., Agder Energi AS, Eidsiva Bioenergi AS, STEAG GmbH, Alfa Laval AB, Ramboll Group A/S, FVB Energy Inc., Keppel Corporation Limited, Hafslund Eco AS.

Western Europe was the largest region in the district heating market in 2025. North America is expected to be the fastest-growing region in the district heating market share during the forecast period. The regions covered in the district heating market report are Asia-Pacific, South East Asia, Western Europe, Eastern Europe, North America, South America, Middle East, Africa. The countries covered in the district heating market report are Australia, Brazil, China, France, Germany, India, Indonesia, Japan, Taiwan, Russia, South Korea, UK, USA, Canada, Italy, Spain.

The district heating market consists of revenues earned by entities by providing services such as high-temperature district heating, medium-temperature, low-temperature district heating, and ultra-low-temperature district heating. The market value includes the value of related goods sold by the service provider or included within the service offering. The district heating market also includes sales of HVAC system thermostats, furnace burners, heat exchangers, blowers, and filter racks. Values in this market are ‘factory gate’ values, that is the value of goods sold by the manufacturers or creators of the goods, whether to other entities (including downstream manufacturers, wholesalers, distributors, and retailers) or directly to end customers. The value of goods in this market includes related services sold by the creators of the goods.

The market value is defined as the revenues that enterprises gain from the sale of goods and/or services within the specified market and geography through sales, grants, or donations in terms of the currency (in USD unless otherwise specified).

The revenues for a specified geography are consumption values that are revenues generated by organizations in the specified geography within the market, irrespective of where they are produced. It does not include revenues from resales along the supply chain, either further along the supply chain or as part of other products.

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