The heat market of the future – identifying and seizing the potential


​Decarbonisation is a trendy topic that has become a fixed element of the media landscape. Now it’s time to focus on the heat market and to exploit the existing potential. Cities, municipalities and rural districts are all faced with the challenge of developing new supply structures and alternatives that are future-proof, efficient and CO2-neutral. The transition from fossil fuels helps convert billions worth of energy imports into added value on a local level and reduces the carbon footprint at the same time. With the current annual market volume of approximately EUR 90 billion and in the light of the upcoming transformation, the heat market offers the opportunity for sustainable and profitable investments. Municipalities, utilities and investors are called upon to set the course for sustainable projects in the nearest future and reap profits in the long term.


Heat market transition stagnates – nationally and internationally

Energy transition is on everyone’s lips, but it has so far mostly been electricity transition. With a share of 57% in final energy consumption, however, the heat market is the most energy-intensive sector in Germany (see Illustration 1) and thus also the largest CO2 emitter. By contrast, the share of renewable energy sources in heat generation has only been about 10% for many years now. (BMWi (2018). Energiedaten: Gesamtausgabe. Accessed on 04/01/2019) Today, heat generation in Germany is dominated by decentralised natural gas-fired boilers. (BDEW (2019). Accessed on 01/04/2019). What's more, the required fossil fuels have to be imported. Energy imports are currently to the tune of over EUR 50 billion a year. The current developments and the risk of failing to achieve the pursued targets clearly show the urgent need for action. Furthermore, if Germany fails to achieve the EU climate targets, the Federal Republic might face multi-billion penalties. (Agora Energiewende (2018). Steuerzahlern drohen Milliardenlasten, weil Deutschland seine Klimaschutzziele verfehlt. Accessed on 01/04/2019). With this in mind, it should be noted that Germany has huge decarbonisation and savings potential, but what is missing is a strategic approach specifically tailored to the special requirements of the heat market.




Illustration 1: 2,542 TWh – final energy consumption in Germany in 2016 by sector



Heat-specific degree of urbanisation – methodology and areas of application

In response to the specific requirements of the heat market, the heat-specific degree of urbanisation indicator has been developed to compare heat flux density (which defines how much heat per square metre is required) in relation to forms of settlement. This indicator can be used to categorise and uniformly illustrate the heating, cooling and hot water requirements. The use of this methodology helps identify densely populated areas, intermediate density areas and thinly populated areas. Densely populated areas are characterised by high heat flux density and are particularly found in urban agglomerations. Thinly populated areas are normally found in small settlement types, but also in the suburbs of larger cities. In terms of the requirement for heat per square metre, intermediate density areas are between densely and thinly populated areas. These different degrees of urbanisation can often overlap as shown in Illustration 2.



Illustration 2: Heat-specific degree of urbanisation depending on heat flux density and type of settlement



“Die Wärmezielscheibe”

As can be seen, each degree of urbanisation has a prominent share in the diagram. Based on these results and guided by the intention of developing an intuitive tool, “Die Wärmezielscheibe” has been created. Illustration 3 presents the “Die Wärmezielscheibe”, with targets both for today and for 2050. “Die Wärmezielscheibe” reflects the significance of the different degrees of urbanisation and shows that not only are densely populated areas located in the centres of German cities and in urban agglomerations, but also that they should be the main area of focus of an efficient, cost-effective and easily implementable decarbonisation strategy at all levels of action. Already today, the share of required heat in densely populated areas is over 28%. By 2050, it is expected that this share will increase to 42% due to various structural and socio-economic effects. The symbol of a shooting target, with the ultimate aim in the middle of it, shows the increasing prioritisation of heat and symbolises pressure to act, both at the political level and in terms of supply management strategies.


 Illustration 3: ”Die Wärmezielscheibe” today and target scenario 2050



Allocation of technologies

Prioritisation alone is not enough to achieve decarbonisation. This rather requires selecting and implementing the appropriate technologies. Because the heat market is heterogeneous, the various available technologies cannot be used as a universal solution. The currently prevailing political approach of openness to technologies, under which the segmentation of the market in terms of technologies is left to market trends and forces, disregards both the ecological and also the structural effects on the heat market.

To be able to evaluate the role of technologies on the heat market, not only economic parameters relevant for decision-making, such as investment costs and operating costs, but also other specific aspects, such as the required installation surface area, local availability of fuel and CO2 emissions should be analysed.  Moreover, not only the generation but also the distribution of heat through transmission lines of district heating networks, as well as the storage of thermal energy throughout the day or throughout a longer period, are essential for the optimal technology mix.



Illustration 4: A strategy proposed to spread generation technologies across the various heat-specific degrees of urbanisation


The heat-specific degree of urbanisation indicator helps allocate technologies in qualitative terms (see also Illustration 4): Due to the low availability of space in densely populated areas, it is essential to pursue the greatest possible heat output per area in order to cover the high heat requirement. The best suitable technologies (deep geothermal, power-to-heat, industrial waste heat and thermal waste processing) require a solution with appropriate transmission lines to distribute heat. An expansion of the district heating network is therefore indispensable in densely populated areas. In thinly populated areas, on the other hand, the use of decentralised, facility-related heating technologies is preferable. As opposed to densely populated areas, technologies such as solar thermal energy and near-surface geothermal energy combined with heat pumps can be used on available space. The greatest variety of possible technologies can be found in intermediate density areas. Where possible, systems should be preferably connected to the existing district heating infrastructure; in individual cases, local heating and district heating solutions with solar thermal, large-scale heat pumps, industrial waste heat and large-scale heat storage tanks are possible.


It is important to underline that, on the one hand, every available technology should make a significant contribution to heat energy transition, and, on the other hand, the relevant technology should be used within the appropriate heat-specific degree of urbanisation. This is because large market volumes are available in all areas: in 2020, densely populated areas are expected to generate EUR 22 billion worth of revenue, intermediate density areas EUR 27 billion, and thinly populated areas EUR 42 billion.


Outlook: Europe-wide expansion of the methodology

The heat market transformation is the key task of our generation. “Die Wärmezielscheibe” serves as guidance for decision makers from the world of business and (energy) politics in Germany. But decarbonisation is the core issue not only in Germany but in all of Europe. This transition is also highly important from the economic point of view as energy imports, currently worth over EUR 50 billion a year, are expected to be replaced with regional sources of energy.

The method of the heat-specific degree of urbanisation applied in the concept paper can be easily expanded into other countries. Initial qualitative assumptions are already being prepared, but fully fledged solutions should be prepared independently on a local level. Considering the legal and political framework, country-specific graphs can be developed, technologies allocated, and prioritisation strategies formulated. Thus, the results will not only serve as guidance for decision makers and investors on a national level but they can also be used by the EU for formulating targets.



“Die Wärmezielscheibe”

The heat market is considered as the market of the future for renewable energy. The concept paper “Die Wärmezielscheibe” presents a solution approach for a successful implementation of the heat energy transition. The presented methodology enables segmentation of the heat market and offers decision makers from the world of business, supply management and politics the opportunity for developing efficient action plans and prioritisation strategies and reaping the economic potential.

The concept paper “Die Wärmezielscheibe” discusses the status quo, the possible developments and technologies of the heat market into 2050 and aims to formulate findings and actionable recommendations for the transformation phase of next 30 years for decision makers from the world of politics, the private sector and the supply management sector. For that, the paper firstly focuses on today’s heat market and discusses its characteristics and then presents the potential and opportunities arising from the most significant technologies of the future. It also introduces in detail the heat-specific degree of urbanisation indicator developed and used for the analysis and presents an outlook for the use of this methodology outside Germany.



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