Flexibilities in District Heating: Description of possible flexibility potentials

The increasing decarbonisation of district heating is leading to greater sector coupling between the electricity and heating sectors. This in turn increases the influence of volatile electricity prices on the cost of heat production in district heating, thereby increasing the economic advantages of flexible district heating operation. This series of articles therefore deals with the various types of flexibility in district heating and their respective limitations. Furthermore, the flexibilities described are critically examined in light of the real obstacles facing the district heating industry through interviews. This series of articles is aimed at municipal utilities and district heating suppliers who want to gain an overview of the flexibility potential in district heating, as well as anyone interested in district heating supply.

The heating sector as the sleeping giant of the energy transition

In order to achieve the goal to limit global warming set in the Paris Climate Agreement, greenhouse gas emissions must be reduced in all areas. At around one third (32.3%, as of 2023), space heating and hot water provision account for a significant proportion of final energy consumption in Germany. However, only around 17.7% of this third is generated from renewable energies. [1] The heating sector is therefore lagging behind the targets set for the energy transition and is also referred to as the sleeping giant of the energy transition. A rapid transition to new, climate-friendly technologies and a reduction in final energy consumption are necessary in order to leverage this crucial lever for reducing greenhouse gas emissions.

District and local heating networks are considered to have great potential for implementing the heating transition, as they can efficiently provide heat from renewable energies and waste heat. In 2020, 69% of the heat supplied in German heating networks was based on the combustion of fossil fuels, a figure that must be significantly reduced in order to achieve a greenhouse gas-neutral heat supply. [2]

Advantages of district heating in heat supply

District heating networks can demonstrate their advantages over decentralised heat suppliers, especially in densely built-up areas. The high heat line densities (the amount of heat required per metre of heating network) in cities reduce the ratio between heat losses during heat transport and the amount of heat supplied. This reduces the proportion of losses per kWh of heat consumed – a decisive factor for the economic efficiency of heating networks. In addition, decentralised heat generators in cities often have the problem that they require much more space than centralised solutions, which gives heating networks an advantage over fossil fuel heating systems. In the event of decarbonisation of the heat supply, the decentralised alternative to heating networks would in most cases be a heat pump or a biomass boiler. In the case of air/water heat pumps, heat pumps must maintain a certain distance from neighbouring properties due to the noise emissions of the outdoor unit, which means that installation in densely built-up areas is not always possible. If groundwater or near-surface geothermal energy is used as the heat source, sufficient space must also be available for drilling. In contrast, heating networks can make more efficient use of regional sources and have a wider choice of potential heat sources, as they are not limited to a single site when making their selection. In addition, various heat sources, such as deep geothermal energy, only become economically viable once a certain heat demand is reached.

However, decarbonisation also requires new heat sources to be tapped in district heating. Many renewable heat sources cannot be fed directly into a heating network due to their temperature level and therefore require additional equipment to raise the temperature. Large heat pumps can be used for this purpose, which are an efficient and, when powered by renewable electricity, carbon-neutral way of raising the temperature. The use of large heat pumps will increase the share of so-called power-to-heat (PtH) plants – which link the electricity sector with the heating sector – in future district heating. Alongside heat pumps as sector coupling technology, combined heat and power plants which are already in widespread use today and electric boilers also belong to this category.

Opportunities in sector coupling

Although the increasing use of sector coupling technologies in district and local heating supply means new consumers for the electricity system, it also offers new opportunities for both the electricity and heating sectors.

Balancing electricity peaks and troughs

Similar to electricity storage systems, heating networks can respond to changes in electricity prices through their electricity-linked heat generators, absorbing excess electricity production during peaks and reducing their electricity consumption during troughs or increasing their own electricity production through CHP plants. In larger heating networks with several different types of heat generators, electricity-producing and electricity-consuming plants, it is already possible to benefit from adjusting electricity production to electricity peaks and troughs without decoupling heat production from heat demand. With an installed capacity of approximately 50 GW, heating networks already offer great potential for responding to volatile electricity production. [3]

Lower heat production costs through the use of flexibilities in sector coupling

The increasing electrification of heat generation as part of the decarbonisation of heating networks is leading to a rise in the share of electricity procurement costs in heat production costs. Electricity prices, which are significantly more volatile than gas or biomass prices, make it all the more important to adjust heat generation by the various heat producers to the price of electricity. Plants that were previously heat demand-driven are increasingly becoming electricity price-driven. This implies that either the heat demand is also adjusted to the electricity price, commonly known as ‘demand side management’, or that heat production is decoupled from heat demand in terms of time. For the economic operation of heating networks, it is therefore very important to leverage existing potential for flexibility in district heating supply.

Flexibilities in district heating

In terms of potential flexibilities, the entire district heating system can be divided into four areas: producers, storage, heating network and consumers. Not all of these areas offer the same potential for flexibility, and each area has different limitations on the use of flexibility, which is why it is worth taking a differentiated view of the areas.

Heat generators

When considering sector coupling between the electricity and heat sectors, heat generators can be divided into three categories: Electricity-producing, Electricity-consuming and electricity-independent heat generators. Electricity-producing heat generators are also referred to as CHP plants and include block-type thermal power stations and gas turbines with heat extraction. Electricity-consuming plants, also known as PtH plants, include all types of electric heat pumps and electric boilers. All other plants that are not connected to the electricity grid, except for operating power, are referred to as electricity-independent plants and mainly include boilers powered by gas, oil or biomass.

Electricity-consuming systems

Heat pump

Today’s standard heat pumps use mechanical pressure increase of the heat transfer medium (refrigerant) to absorb heat at low temperatures and low pressure and release heat at high temperatures and high pressure. This thermodynamic process makes it possible to convert previously unused heat energy at a low temperature level into usable heat at a comparatively low energy cost. In most cases, the mechanical energy is provided by electric compressors, which creates a link to the electricity sector. If the freely available environmental or waste heat from the heat source is excluded from the efficiency calculation, most large heat pumps achieve a coefficient of performance (COP) of well over 3. This corresponds to a heat supply of three kWh at the desired temperature level with an electrical energy requirement of one kWh. This high COP and the resulting comparatively low operating costs are offset by high investment costs due to the complex system technology. Furthermore, the service life of heat pumps is highly dependent on the number of start-up and shutdown cycles, so the number of shutdowns of the heat pump should be kept to a minimum. This, together with the minimal partial load of the heat pump, leads to a restriction in flexibility.

Electric boiler

Compared to heat pumps, electric boilers are very simple systems that can be further divided into electric boilers and electrode boilers. Electric boilers heat the heat transfer medium via an electrical resistance, similar to a kettle. In contrast, in an electrode boiler, two electrodes are immersed in the heat transfer medium and subjected to different electrical potentials, causing an electric current to flow through the heat transfer medium and heat it up. The simple mode of operation is reflected in a significantly lower investment and, compared to heat pumps, a significantly lower efficiency. Electric boilers are therefore particularly well suited for heat production when electricity prices are negative and as peak load boilers. In many cases, electric boilers are offered as negative control reserves due to their fast response time.

Industrial waste heat

Industrial waste heat from processes powered by electrical energy represents another sector coupling between the electricity and heating sectors. A price-driven reduction in electricity consumption in industrial processes, or an interruption of the process, also results in a reduction in the waste heat supplied to the heating network. The reduction in waste heat supply can mean that other electricity-consuming systems, such as PtH systems, have to step in, which in turn reduces the effect of load reduction for the electricity grid. In the best case scenario, heat from a CHP plant or a thermal energy storage facility can be used. The district heating supplier has no influence on the provision of this flexibility, except through the terms of the contract. This type of flexibility is therefore also referred to as indirect flexibility.

Electricity-generating plants

CHP plants

CHP plants use combustion processes to simultaneously produce heat and electricity, either through combustion in piston engines or through the expansion of the working fluid in gas and/or steam turbines. In contrast to electricity-consuming plants, CHP plants are most economical to operate when electricity prices are high. However, when electricity prices are very low or negative, the heat production of the plant is more expensive than with a conventional boiler.

Electricity-independent plants

Boilers

Boilers have no connection to the electricity sector except for the supply of operating power and therefore do not allow for economically viable flexibility if there are no other generators in the grid. Boilers can be designed for various fuels, such as natural gas, heating oil or biomass. In combination with electricity-consuming and electricity-producing systems, however, the systems can enable flexibility by switching the heat generator in operation.

Heat network

The heat network connects heat generators and consumers and consists of a pipe network filled with treated water. The water serves as a heat transfer medium for transporting heat between generators and consumers. Depending on the temperatures and size of the heat network, thermal energy is always stored in the network. The heating network can therefore also be used to store heat. In the study District Heat Network as a short-term energy storage by Kouhia et al., a cost-optimised variation in the flow temperature in a heating network resulted in a reduction in heat production costs of approximately 2% – without additional investment in new equipment. [4] However, an increase in heat network temperatures is always accompanied by increased heat losses, and heat pumps in particular have a lower COP at higher flow temperatures. The actual benefit of cost-optimised variation of heating network temperatures is therefore highly dependent on the generator park and the pipe network. Compared to the operation of thermal energy storage tanks, the influence of variable network temperatures on network and generator operation is significantly greater.

Heat consumers

Consumers can contribute to making district heating supply more flexible by shifting their heat demand (demand side management) on the basis of external incentives. Compared to other flexibility options, the use of flexibility on the consumption side has the additional advantage of reducing peak loads in the heating network. This alleviates bottlenecks in heavily used sections of the pipe network, which can open up new connection opportunities in these sections. It also reduces the energy requirements of the network pumps. However, according to Section 5 of the AVBFernwärmeV (German District Heating Supply Ordinance), district heating suppliers are not permitted to reduce the heat supply to a consumer on their own authority for economic reasons. The reduction must therefore always be initiated by the consumer themselves. In order for a consumer to adjust their heat consumption to the needs of the district heating supplier, two conditions must be met: firstly, there must be an incentive, usually of a financial nature, to reduce heat consumption, and secondly, the consumer must have the potential to reduce their heat demand without significant losses in production or comfort, e.g. through decentralised thermal energy storage or the building mass.

At present, there is a lack of financial incentives for adjusting heat consumption from district heating networks in most European countries.

The potential for reducing heat demand depends heavily on local conditions. For example, decentralised storage systems at individual consumers’ premises can enable a reduction in heat consumption without compromising consumer comfort. Another option is to utilise the thermal mass of the buildings being supplied. The heated building mass (walls, floors, roof) acts as a thermal energy storage unit, counteracting the cooling of the interior spaces over short periods of time. A major advantage of this method is that it does not require additional investment in storage facilities.

The application of demand side management in the supply of process heat to industry is questionable because, unless a suitable decentralised thermal energy storage is available, it involves direct intervention in the industrial process, which can lead to a reduction in product quality on the one hand and production losses on the other. The advantages of demand side management are offset by direct economic costs, which must be evaluated individually for each industrial process and each industry.

Thermal energy storage

The main purpose of installing thermal energy storage systems in heating networks is to decouple heat generation from heat consumption over time. Thermal energy storage systems thus enable greater flexibility in heat supply than would be possible through the variable operation of generation plants. Thermal energy storage tanks are also much less complicated to implement than load adjustment for consumers. In addition to the advantage of better utilisation of electricity prices, thermal energy storage tanks also contribute to maintaining pressure in the heating network and can absorb peak loads that would otherwise require the operation of less economical peak load power plants. Thermal energy storage systems can be divided into different categories based on the storage medium, storage duration and pressure. A closer look at the different thermal energy storage systems will be taken in the next article in this series.

More Information

• WARAN – Integration and grid-serving usage of heat
• Towards a common digital infrastructure for the electricity and heat sectors – Use Cases from the Project WARAN

Literature

[1] Energieverbrauch für fossile und erneuerbare Wärme. In https://www.umweltbundesamt.de/daten/energie/energieverbrauch-fuer-fossile-erneuerbare-waerme. (accessed on 25.11.2025); Dessau-Roßlau: Umweltbundesamt, 2025.

[2] AGFW (2023): AGFW-Hauptbericht 2023, https://www.agfw.de/zahlen-und-statistiken/agfw-hauptbericht/ (accessed on 25.11.2025)

[3] Agora Energiewende, Prognos, GEF (2024): Wärmenetze – klimaneutral, wirtschaftlich und bezahlbar. Wie kann ein zukunftssicherer Business Case aussehen?, https://www.agora-energiewende.de/fileadmin/Projekte/2023/2023-18_DE_Business_Case_Waermenetze/A-EW_335_Businesscase_Waermenetze_WEB.pdf (accessed on 25.11.2025)

[4] Kouhia, M.; Laukkanen, T.; Holmberg, H.; Ahtila, P. (2019): District heat network as a short-term energy storage, Energy, Vol. 177, S. 293–303, https://doi.org/10.1016/j.energy.2019.04.082 (accessed on 25.11.2025)