# District heating and cooling networks: Unit economics

Why heat networks only pay where demand is dense

Source page: https://www.materialinsights.org/energy/e_district_heat_net/economics/

What this tab covers What it costs to move a unit of energy this way: capital and operating costs, tariffs, utilisation and how it compares with the alternatives.

Moving heat is expensive per kilometre because pipes must be insulated and buried in streets, so networks pay only where heat demand is dense. In a Swiss model distribution cost about 2.2 euro cents per kWh, mostly capital.

#### Key costs

| Measure | Value | Note |
|---|---|---|
| **Distribution cost, Swiss reference network** | 2.16 euro cents per kWh (about 21.6 EUR/MWh, calculated) EUR/MWh^[6](https://nachhaltigwirtschaften.at/resources/iea_pdf/reports/iea_bioenergy_task32_cost_analysis_district_heating.pdf) | DN 80, 30 years at 3% interest (5.1% annuity), 2014 |
| **Installed DN 80 pipe** | about 500 (open field) to 616 (streets) EUR per metre^[6](https://nachhaltigwirtschaften.at/resources/iea_pdf/reports/iea_bioenergy_task32_cost_analysis_district_heating.pdf) | Pipe is 61 to 75% of the total, 2014 |
| **Pipe material and works, excluding soil works** | 33 to 88 EUR per metre^[2](https://smart-cities-marketplace.ec.europa.eu/insights/solutions/distribution-technologies-ltdhhtdc) | Swedish District Heating Association, 25 to 54 mm pipes, 2013 |
| **Minimum heat density for Swiss support** | 1.3 at start, 2.0 after completion MWh per metre of pipe per year^[6](https://nachhaltigwirtschaften.at/resources/iea_pdf/reports/iea_bioenergy_task32_cost_analysis_district_heating.pdf) | Below this, distribution cost per kWh rises steeply |
| **Steam insulation saving example** | 45,620 USD per year^[7](https://www.energy.gov/sites/default/files/2014/05/f16/steam2_insulate.pdf) | 5,069 MMBtu a year lost, fuel at USD 8/MMBtu, 80% boiler efficiency, 90% saving (2012) |
| **European urban heating market (company estimate)** | about 60 (2023), expected 80 by 2030 billion EUR^[19](https://www.veolia.com/en/veolia-group/finance/press-releases/pr-veolia-ambitions-lead-european-district-heating-2030-and) | Veolia, November 2025 |

#### Where the money goes

| Item | Share or amount |
|---|---|
| **Capital cost of pipes and trench** | 62%^[6](https://nachhaltigwirtschaften.at/resources/iea_pdf/reports/iea_bioenergy_task32_cost_analysis_district_heating.pdf) |
| **Fuel to replace heat lost from pipes** | 24% (25% in the report abstract)^[6](https://nachhaltigwirtschaften.at/resources/iea_pdf/reports/iea_bioenergy_task32_cost_analysis_district_heating.pdf) |
| **Pumping electricity** | 14% (13% in the report abstract)^[6](https://nachhaltigwirtschaften.at/resources/iea_pdf/reports/iea_bioenergy_task32_cost_analysis_district_heating.pdf) |

Unlike electricity or gas, heat is almost never moved more than a few tens of kilometres, so a cost per 1,000 km is not meaningful: the alternative is not a longer pipe but a local heat source such as a building heat pump. A network wins when many buildings sit close together, when there is cheap waste heat nearby, and when the pipes run long enough (30 years or more) to pay back the trenching.

#### Sources

1. [Distribution technologies for low-temperature district heating (LTDH)](https://smart-cities-marketplace.ec.europa.eu/insights/solutions/distribution-technologies-ltdhhtdc) European Commission, Smart Cities Marketplace, 2019
2. [Sensitivity of System Design on Heat Distribution Cost in District Heating (Nussbaumer and Thalmann)](https://nachhaltigwirtschaften.at/resources/iea_pdf/reports/iea_bioenergy_task32_cost_analysis_district_heating.pdf) IEA Bioenergy Task 32 / Verenum, 2014
3. [Steam Tip Sheet 2: Insulate Steam Distribution and Condensate Return Lines](https://www.energy.gov/sites/default/files/2014/05/f16/steam2_insulate.pdf) US Department of Energy, 2012
4. [Veolia ambitions to lead European district heating by 2030 and launches new offer in urban energy (company data)](https://www.veolia.com/en/veolia-group/finance/press-releases/pr-veolia-ambitions-lead-european-district-heating-2030-and) Veolia, 2025

## Other sections

- [Summary](https://www.materialinsights.org/energy/e_district_heat_net/index.md)
- [Overview](https://www.materialinsights.org/energy/e_district_heat_net/overview/index.md)
- [Correlation](https://www.materialinsights.org/energy/e_district_heat_net/correlation/index.md)
- [How it works](https://www.materialinsights.org/energy/e_district_heat_net/explain/index.md)
- [Efficiency and losses](https://www.materialinsights.org/energy/e_district_heat_net/efficiency/index.md)
- [Technology advances](https://www.materialinsights.org/energy/e_district_heat_net/advances/index.md)
- [Value chain](https://www.materialinsights.org/energy/e_district_heat_net/valuechain/index.md)
- [Geopolitics and regulation](https://www.materialinsights.org/energy/e_district_heat_net/geopolitics/index.md)
- [Impact on the biosphere](https://www.materialinsights.org/energy/e_district_heat_net/biosphere/index.md)
- [Relationships](https://www.materialinsights.org/energy/e_district_heat_net/links/index.md)