District heating plays an important but not problem-free role in the context of the heating transition. In terms of cost-effectiveness and sustainability, it lies between heat pumps and gas heating systems, but has specific challenges.

Around 15 percent of households in Germany and numerous industrial companies are connected to the district heating network. Alongside heat pumps, district heating is set to play a central role in climate-friendly heating. The predominantly municipal network operators are required by law to submit plans over the next few years on how they intend to replace oil, coal and gas with climate-neutral energy. District heating is usually generated in combined heat and power plants, where the waste heat from electricity production is used to heat residential areas.

Efficiency and environmental balance

District heating is based on centralized heat generation, which distributes heat to building connections via a network. The environmental balance depends heavily on the energy source used:  

• Sustainable district heating from large heat pumps, geothermal energy or industrial waste heat is climate-friendly and can be economical in the long term.  
• District heating from fossil power plants (coal, gas, waste incineration) remains problematic, as CO₂ emissions are high.  

While heat pumps with renewable electricity offer an almost emission-free heating solution, district heating can only be sustainable if it is no longer supplied from fossil sources. It still has a long way to go. In 2023, the share of renewable energies was still around 20 percent. By 2030, half of the heat is to be generated in a climate-neutral way.
 

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Infrastructure and expansion of district heating

The network infrastructure and connection to the district heating network cannot be implemented for the whole of Germany, as the district heating network does not cover the whole of Germany. Particularly in rural areas or in regions with a low population density, the infrastructure for district heating is often not sufficiently developed or not economically viable to implement.

The construction of a district heating network requires considerable investment in infrastructure, including the laying of pipelines over long distances and possibly the construction of heating centers to generate and distribute the heat. In addition, construction is technically challenging, especially in urban areas with densely built-up streets and underground infrastructure such as gas, water and electricity pipes. This can lead to higher construction costs, longer construction times and corresponding acceptance problems in the neighborhood.

The planning and approval of district heating networks can also be time-consuming and cost-intensive, as various official approvals have to be obtained and extensive planning work is required to determine the network structure and the routes of the pipes.

Last but not least, Germany's geography and topography also play a major role in the availability and feasibility of district heating networks. In areas with difficult terrain or geographical obstacles such as mountains or rivers, the construction of district heating pipelines can be technically challenging and costly.

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Cost-effectiveness of district heating

Where available, district heating can be an alternative to heat pumps for households. However, customers are generally subject to a monopoly and are practically unable to switch providers. In this context, the Federal Cartel Office has been investigating potentially unlawful price increases by some district heating providers since 2023. Consumer advocates also criticize the lack of transparency of prices, which can vary greatly depending on the municipality. The high energy prices in 2022 and 2023 are now also partially impacting customers. The price for district heating is made up of two main components, a basic price and a working price. The basic price covers all costs that arise regardless of actual consumption. This includes expenses for the generation and transportation of district heating as well as personnel costs for the operation and maintenance of the network infrastructure.

In the private sector, the costs for district heating over 20 years amount to over 50,000 euros according to current calculations, while a heat pump with photovoltaics can be significantly cheaper (approx. 37,550 euros).  The cost-effectiveness of a district heating connection depends on various factors, including the investment costs for constructing the pipes and the availability of heat sources. In some areas, the high investment costs and low demand for district heating can make profitable implementation unlikely. Other aspects are:

• District heating tariffs are often fixed and increase with energy prices.
• Heat pumps benefit from self-generated electricity (e.g. PV) and have low operating costs.
• Network charges for district heating can rise as infrastructure measures are expensive.

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Technical applicability for large apartment buildings

District heating can be particularly useful in densely populated areas with existing infrastructure. However:

• The expansion of district heating networks is expensive and takes a long time.  
• Not every building can be efficiently connected to district heating - heat pumps offer a flexible solution here.  
• Heat pumps enable decentralized energy supply, independent of external networks and price developments.  

In regions where efficient heating systems are already widespread, switching to district heating can be less attractive from an economic point of view, especially if the existing systems have not yet reached the end of their service life.
 

Where does district heating stand in direct comparison?

The advantage: In well-developed grids with sustainable energy sources, district heating is a sensible option.  

The disadvantage: High grid costs, long conversion periods to renewable energies and increasing price risks.  

Conclusion: In general, district heating plays an important role in municipal heating planning with a network of over 30,000 kilometers in the German energy system. District heating is currently being converted to renewable sources in many cities, but this process is cost-intensive, will not be feasible everywhere in the short term and is itself still facing the challenge of switching. Further conversion and expansion of the infrastructure would be really expensive: Prognos 2024 estimated in a report that a total of 43.5 billion euros would have to be invested by 2030. In contrast, the use of decentralized solutions such as heat pumps would be much cheaper. Compared to district heating, heat pumps offer the advantage of self-supply, lower long-term costs and greater efficiency. In cities with renewable district heating, however, they can be a good alternative - as long as the energy mix is climate-neutral. Overall, connecting to the district heating network and expanding this network involves considerable costs and challenges, which means that it is not feasible for the whole of Germany and can be expensive.
 

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