DISTRICT HEATING: EUROPE’S WAY TO SECURITY AND COMPETITIVENESS

Europe is in trouble. American tariffs, dependence on Russian gas, and Chinese competition are putting pressure on the continent. But there is a way out. District heating can help Europe regain control of its energy supply and improve its competitiveness.

By Magnus Skovrind Pedersen, CEO of Think Tank Brundtland, and Lasse Skou Lindstad, analyst at Think Tank Brundtland.

Published in Hot Cool, edition no. 4/2025 | ISSN 0904 9681 |

Energy Dependence: A Major Weakness

Europe’s deep reliance on foreign energy has long been a strategic vulnerability — one that now threatens both its prosperity and geopolitical standing. For years, Russian gas kept homes warm and industries running.

Since the Russian war in Ukraine began, Europe has spent more on Russian fossil fuels than it has on providing economic, military, and humanitarian aid to Ukraine. And even after increased sanctions, around a fifth of Europe’s gas still comes from Russia [1]. This enduring reliance not only undermines Europe’s security. It actively bankrolls the very aggression it seeks to oppose.

Russian Gas Dependence

Since the beginning of the Russian war in Ukraine, the European Union member states have spent €139 billion on providing military, economic, and humanitarian aid to Ukraine. In comparison, those countries spent €207 billion on fossil fuels from Russia in the same period.

Figure: Billions of euros spent by the European Union members on aid to Ukraine and on importing Russian fossil fuels in the period from 24 February 2022 to 2 April 2025.
Source: Think Tank Brundtland 2025 based on Russia Fossil Tracker [2] and The European Council [3].

To reduce reliance on Russia, Europe has turned to the U.S. for liquefied natural gas (LNG). But this isn’t a durable solution. LNG exports can be restricted, and prices can spike overnight. Energy is a political weapon, and Europe is in the crosshairs.
This dependence isn’t a short-term issue. It’s a structural weakness. Any crisis—political, economic, or logistical—can send energy prices soaring. That makes it harder for households and businesses to plan ahead. It also means Europe’s energy supply is often dictated by forces outside its control. And when energy prices rise, the price of everything else does, too.

The Economic Cost of Energy Dependence

It’s not just about politics. It’s about money. When gas prices spiked after Russia’s invasion of Ukraine, everything became more expensive. Households paid more for heating. Electricity prices jumped because gas often sets the price on the electricity market.

Inflation took off. Studies show that rising energy costs played a big role in the price hikes of recent years [4]. This is because energy is a systematically significant input to the rest of the economy. Every business uses energy. When energy costs more, so does everything else.

Europe’s industries took a hit. Car manufacturing and energy-intensive sectors saw their costs skyrocket. Volkswagen and other giants struggled. Some had to lay off thousands of workers.

This isn’t just bad for companies. It slows down the whole economy. Higher costs mean fewer exports, weaker investment, and sluggish growth. Countries like Germany, which rely on heavy industry, have been hit particularly hard.

District Heating: A Way Forward

We need to address Europe’s dependence on foreign energy, which is currently undermining our security and competitiveness. Seventy-five percent of Europe’s heating comes from fossil fuels, a large share of which is imported [5]. In this case, district heating can be part of the solution. It can do so in two ways: By facilitating a way to heat our homes without the use of fossil fuels and by allowing for greater flexibility and diversity in our energy production.

Firstly, district heating helps Europe ditch gas and other imported fossil fuels for heating. Instead, we can use our own supply of renewable energy, such as geothermal, wind, and solar, to warm our homes.

In the past years, several leading scientists at the EU-supported research project Heat Roadmap Europe have estimated that excess heat from industries, data centers, and other sources could meet a large share of Europe’s heating needs [6]. However, to use this heat, we need widespread district heating systems.

Right now, most of this surplus heat goes to waste. That’s a giant missed opportunity. With proper infrastructure, it could be captured and distributed. This would slash fossil fuel use and make heating cheaper and more stable.

Second, district heating makes the entire energy system more resilient. It can switch between different heat sources depending on what’s available. When the supply of one heating source diminishes, it is possible to switch to another, making the entire system less dependent on any single energy source.

If gas and electricity are expensive, district heating can increase its use of biomass or waste combustion instead. When electricity prices drop, heat pumps can be used to store heat in thermal batteries for future use.

This flexibility is crucial. It stabilizes energy prices. It keeps inflation in check. It cuts costs for households and businesses. And it provides stability in an increasingly uncertain world.

A Business Opportunity for Europe

District heating isn’t just about keeping our homes warm. It’s also about keeping our economies competitive, not just by lowering energy bills but also by developing our exports of heating and cooling solutions.

Compared to the United States and China, Europe has been losing ground in key industries like the tech sector. However, when it comes to thermal technology and district heating solutions, it is still the world leader. This is what patent data from the European Commission regarding different technologies show.

Relatedness density index based on patent data for the EU, the USA and China from 2015-2020. It shows which countries have a relative advantage within selected technologies.
Source: Think Tank Brundtland 2025 based on the European Commission 2023 [7].

This competitive advantage within district heating technology can be built upon in the upcoming years. Expanding district heating at home creates a competitive head start. It builds expertise, technological know-how, and energy systems, which in turn can later be exported. Furthermore, a strong district heating network in Europe can become a global showcase, which itself can be a way to promote the exports of heating solutions to the rest of the world.

Demand for district heating technology will grow as more countries look for ways to reduce their fossil fuel dependence. Europe is well-positioned to meet that demand.

This won’t happen on its own. It takes political will, investment, and planning.

The European Commission will present a new Heating and Cooling Strategy in 2026. The focus will be on expanding district heating, electrifying heat production, and reusing more excess heat. If done right, this could give Europe the competitive edge it desperately needs.

The industry is also taking action to meet the global demand for expanded heating and cooling networks across Europe and the world. Key global actors and stakeholders will convene this year at the District Heating Summit & Site Visits 2025 on 29-30 October in Odense, Denmark. Here, decision-makers, industry leaders, and innovators will chart the course for more resilient energy systems to meet the challenges of a warming and unstable world.

Ownership matters

If we want to expand district heating in order to promote our security, decarbonization, and economic well- being, then we need more than just the political will to invest. We also need to think about ownership. Public or cooperative ownership of district heating has several important aspects that can aid in promoting the district heating sector.

Firstly, it allows the district heating companies to take a long-term perspective rather than satisfying investors looking for short-term gains. This is especially important in regard to district heating because it often involves investments with a very long time horizon, where patient owners are needed.

Secondly, it allows companies to have a wider range of goals and priorities, such as enhancing security and reliability and supporting the green transition.

And thirdly, public and cooperatively owned heating utilities support private suppliers and strengthen exports. This is done through several channels, such as by creating stable demand through procurement of heating components, making long-term investments in new technologies as well as by sharing knowledge with and providing test facilities to private companies.

What Happens If We Do Nothing?

If Europe fails to invest in district heating, the problems won’t go away. Energy dependence will continue. Fossil fuel imports will remain high. Industries will struggle with unpredictable costs. Inflation will remain a threat.

Without district heating, Europe will also miss out on a major economic opportunity. Other countries will develop and export the heating and cooling technology of the future instead. European businesses will be left playing catch-up.

And from a climate perspective, the stakes are even higher. Heating and cooling accounts for around half of Europe’s energy use. If it remains fossil fuel-based, meeting climate targets will be much harder. District heating offers a clear path to decarbonizing large parts of the sector.

The Path to a Stronger Europe

District heating can make Europe more independent, stable, and competitive.

It cuts reliance on foreign fossil fuels. It keeps energy prices under control. It strengthens our industry and creates new export opportunities.

This won’t happen overnight. It requires investment, planning, and public commitment. It demands that we think carefully about how to structure ownership democratically to benefit the public. But the alternative – continued dependence on expensive, unstable energy – is much worse.

Europe has a choice: Keep relying on imported energy or take charge of its own future. District heating offers a way to regain control. Now is the time to act.

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