District Heating Network Design: Phases, Funding, and Software Support at a Glance

Estimated reading time: 20 minutes

The heat transition is in full swing, and district heating networks play a key role in it. Anyone planning or desiging a district heating network is faced with a complex task: technical design, economic viability analysis, funding, permits, and stakeholder management all interconnect. Whether it is a new-build neighborhood, municipal heat planning, or an energy-efficient district refurbishment – planning a district heating network is more economically attractive and ecologically effective than the sum of many individual solutions.
This article shows which factors are decisive for the success of district heating network planning projects, how the individual planning phases unfold, and what concrete added value specialized software tools can provide.

Why are more and more district heating networks being designed?

District heating network design or planning is today a central instrument for achieving national climate targets. To replace heat generated by fossil fuels, the expansion of thermal networks – fed by waste heat and renewable energies – is being driven forward across Europe. These networks distribute heat or cooling at various temperature levels and enable an efficient, sector-coupled energy supply.

United Kingdom

In the UK, heat networks currently supply around 3 % of the country’s heat, with the government projecting growth to about 20 % by 2050. The framework was significantly strengthened in 2026: on 27 January 2026, Ofgem assumed its role as the regulator for heat networks, and in the same month the government published its response to the consultation on Heat Network Zoning under the Energy Act 2023. Zoning designates geographic areas in which district heat networks are expected to deliver the lowest-cost low-carbon solution; within these zones, certain new developments and existing communal heating systems may be required to connect. Funding is provided through the Heat Network Efficiency Scheme (HNES) and the Green Heat Network Fund, with an estimated investment volume of more than £80 billion required to deliver the zoned rollout.

Scandinavia

Scandinavia is regarded as a global pioneer in district heating. In Denmark, district heating already covers around 60 % of space heating in urban areas; Copenhagen alone supplies roughly one million inhabitants via an interconnected network. Denmark, Sweden and Finland have all set targets to fully decarbonize their district heating networks between 2030 and 2040. Denmark aims to source nearly one-third of district heat from heat pumps by 2030 and has committed to a net-zero target for 2045. In all Scandinavian countries (and in the Baltics and Iceland), more than 50 % of district heat already comes from renewable sources – primarily biomass, geothermal energy, large-scale heat pumps, and increasingly the use of waste heat from data centers.

The Netherlands

The Netherlands adopted the Collective Heat Act (Wet collectieve warmte, Wcw) on 9 December 2025, with full entry into force planned for 1 January 2027. The act is intended to drive the phase-out of natural gas, which currently still heats the majority of the country’s 7.5 million homes and 1 million other buildings. The Dutch government plans to scale up new connections from around 15,000 per year today to between 80,000 and 100,000 per year, with the ambition to more than double the number of connections to renewable heat networks to a total of 1.5 million by 2030. A central feature of the Wcw is that heat companies must in future be at least 50 % publicly owned (e.g., by municipalities or provinces), which fundamentally changes the role of municipalities and public utility companies in network planning and operation.

Germany

In Germany, the Heat Planning Act (WPG, in force since 2024) obliges all municipalities to draw up binding municipal heat plans. Large cities with more than 100,000 inhabitants must submit such a plan by 30 June 2026, smaller municipalities by 30 June 2028. District heating networks are a central instrument in these plans.

Switzerland

In 2017, the Swiss population approved the Energy Strategy 2050. In addition to expanding renewable electricity generation, this strategy calls for a significant increase in energy efficiency and a reduction in CO₂ emissions. In 2019, the Federal Council adopted the net-zero target for 2050, yet around two-thirds of all Swiss buildings are still heated with fossil fuels – heating oil or natural gas. Spatial energy planning and the expansion of district heating networks are central measures on the way to this goal.

Austria

With the Renewable Energy Expansion Act (EAG) and the Heat and Cooling Strategy, Austria is pursuing the goal of converting district heating supply to renewable energy sources. The expansion of heat networks – particularly those based on biomass, geothermal energy, waste heat, and heat pumps – is supported by national funding programs.

Characteristics of local and large-scale district heating networks

Local and large-scale district heating networks are central elements of an efficient and sustainable energy supply for buildings, neighborhoods, and cities. District heating networks serve the line-bound distribution of heat, but differ primarily in their spatial extent, supply structure, and organizational integration.

Local district heating networks

A local district heating network generally refers to a heat network at the local or neighborhood level that supplies several buildings via shared infrastructure. Heat generation takes place in close proximity to consumers – typically through heat pumps, biomass plants, solar thermal systems, waste heat, or other renewable energy sources. Local district heating networks can operate at different temperature levels: from classic high-temperature systems through low-temperature networks to cold or ambient networks with temperatures close to ambient. The operating form can be municipal, cooperative, or private.

Large-scale district heating networks

Large-scale district heating networks supply larger areas, such as city districts or entire cities. Heat generation typically takes place centrally or in a network of several generation plants. The heat is then distributed through a widely branched pipeline network. Large-scale district heating networks are characterized by high connection density, longer transport distances, and optimized operational management. They are generally operated by municipal or regional utility companies.

Classification of thermal networks by flow temperature

Thermal networks can be classified into three categories according to their temperature level:

Temperature Level	Terminology	Characteristics
Above 60 °C	High-temperature network	Space heating and domestic hot water possible directly
Below 60 °C	Low-temperature network	From >30 °C space heating directly; domestic hot water and cooling via heat pump
Below 25 °C	Cold district heating network / ambient loop network	Space heating, domestic hot water, and cooling exclusively via decentralized heat pumps

Phases of planning and implementing district heating networks

The following overview illustrates the desgin and implementation process using the example of Germany and Switzerland, whose regulatory frameworks (HOAI, BEW, VFS) are particularly well documented and broadly applicable. The general logic of the five phases also applies in other countries, even if national funding programs and service-phase systems are structured differently.
In simplified and summarized form, the planning and implementation of a district heating network proceeds along five consecutive core phases. This approach corresponds to the District Heating/Cooling Guide of the Swiss District Heating Association (VFS, version 1.3, 2022), which is authoritative in Switzerland, as well as the German AGFW practical guides and the HOAI service phase system.

The district heating network design begins with the preliminary study, in which heat demand, potential heat sources, and initial costs are roughly estimated. In Germany, it forms the basis for the BAFA/BEW funding application (HOAI service phases 1–2); in Switzerland, it is part of spatial energy planning (VFS: preliminary project). In the subsequent concept phase, at least two supply concepts are developed and compared on the basis of energy efficiency, CO₂ emissions, and economic viability – hourly simulations are standard here (DE: HOAI service phase 3, BEW Module 1; CH: VFS preliminary project). The preferred target concept is then fully concretized in the detailed planning phase: system design, network design, and control concept (DE: HOAI service phase 5, BEW Module 2; CH: VFS execution project). This is followed by permitting and construction with building permits, tenders, and construction realization – in Germany, the BEW Module 2 application must mandatorily be submitted before the start of the project (DE: HOAI service phases 4, 6–7; CH: VFS realization). The conclusion is commissioning and optimization with control optimization and accompanying monitoring, until the system achieves the planned efficiency and emission targets in real operation (DE: HOAI service phases 8–9, BEW monitoring; CH: VFS commissioning).

Role allocation in the planning and design of district heating networks

Planning a district heating network requires clear role allocation between the client and planning participants. Relevant actors typically include: the building owner and project ownership, the location municipality, the canton or federal state, operating companies (e.g., contractors), heat customers, fuel and energy suppliers, and consulting engineering offices. In addition, indirect participants such as residents, homeowners, tenants’ organizations, and trade associations must be included.

The client

The client – for example, a municipality, an energy supplier, a public utility company, or an investor – defines the strategic objectives of the project with regard to supply security, economic viability, climate protection, and expansion prospects. The client secures financing, coordinates funding, and involves relevant stakeholders.

The planning consultancy

The planning consultancy takes over the technical engineering work, which includes among other things heat demand analysis, the development and evaluation of supply concepts, hydraulic calculations, the design of generation plants and network infrastructure, and the preparation of permit documents. To evaluate complex energy systems, system simulation models are increasingly being used. With these, load profiles, temperature spreads, operating strategies, and system variants can be modeled realistically.

Contractor and operator

As a rule, a contractor takes on the functions of building owner, project developer, investor, and operator in one – often with the support of an external planning consultancy. The remaining heat networks, on the other hand, are often in the hands of locally anchored operators such as municipalities, municipal utilities, or private investors. These bring in external partners for project development and operation.

Rolle der Stadtwerke

Municipal and public utility companies play an increasingly important role in the planning and operation of district heating networks. As local energy suppliers, they have existing network infrastructure, customer access, and regulatory know-how. They play an important role in strategic network planning, in variant comparison for expansion scenarios, and in optimizing the operation of existing networks.

District heating network desgin – increasing effectiveness with software tools

Today, the planning of district heating networks is significantly supported by specialized software tools. The following overview shows by way of example which planning steps and tasks are covered or supported by simulation tools in which phases:

In municipal heat planning and preliminary studies, a combination of GIS-supported analysis and planning tools is often used. You can find an overview of these tools in our article on software solutions for municipal heat planning.

Energy sources for thermal networks

When planning district heating networks, the selection of the right energy sources is a decisive success factor. Depending on the location, temperature level, and available resources, different heat sources come into consideration. The following overview shows the most common sources of thermal networks.

Renewable heat sources

Heat pumps that use environmental heat – e.g., from air, ground, groundwater, lakes, or rivers – are among the most important pillars of the heat transition. They are particularly suitable for low-temperature and cold networks, as they already operate efficiently at low source temperatures. Borehole heat exchangers and ground collectors enable a base-load-capable supply and are ideal sources for ambient loop network concepts.
Solar thermal systems can support district heating networks seasonally, particularly in combination with a seasonal thermal energy storage (for example, a pit thermal energy storage or an aquifer thermal energy storage). In combination with hybrid solar panels (PVT collectors), the simultaneous generation of electricity and heat can be optimized.

Biomass and biogas

Especially in rural regions with their own wood resources, wood chips, pellets, and log wood offer a cost-effective and base-load-capable heat supply. Biogas CHP units additionally enable combined heat and power (CHP) and thus the coupled generation of electricity and heat. The CO₂ balance depends on transport distance and wood origin.

Waste heat

Considerable potential is offered by industrial and commercial waste heat, waste heat from data centers, waste heat from refrigeration plants, and waste heat from wastewater treatment and waste incineration plants (WIP). The integration of waste heat into thermal networks is regulatory promoted in many countries, for example through the Energy Efficiency Act (EnEfG) in Germany.

Fossil and hybrid sources as a transitional solution

In the transitional phase of the heat transition, natural gas CHP units, heating oil boilers, and fossil peak-load boilers continue to play a role, particularly as a system for covering peak loads or as a redundant system. A consistent decarbonization strategy should, however, provide for a gradual phase-out of fossil fuels, which is modeled in the system simulation.

Practical examples: District heating network design with software

Planning a district heating network: How variant comparison works

In the simulation software, a base system is first modeled with all relevant components such as heat pumps, pipes, storage tanks, transfer stations, and load profiles of the connected buildings. Subsequently, variants are created through targeted parameter changes. The heat source, system size, temperature level, storage volume, or operating strategy can be varied. The simulation software calculates all variants on an identical basis hourly over a reference year.
The most important key figures are directly compared per variant and documented in meaningful reports. This structured comparison creates planning certainty and forms the basis for transparent and reliable decisions.
The following practical examples illustrate the use of dynamic simulation in different planning phases and through different actor constellations.

Energy concept Grünheide: Connection to large-scale district heating or operation of a local district heating network?

As part of the development of a large-scale https://www.velasolaris.com/en/district-heating-desgin-gruenheide/, dynamic simulation was used for sizing and variant comparison. The project combines municipal heat planning with neighborhood development and exemplifies how simulation software can accelerate decision-making between different energy sources and network concepts.

Example BAFA-funded district heating network: Education and sports campus Bürstadt, Hesse

For a BAFA-funded heat network project, the planning consultancy relied on simulation-based planning. The software-based documentation enabled a smooth funding application as well as the proof of the required energy savings. This example shows how simulation software, when desgining district heating networks, serves as a bridge between technical planning and regulatory requirements.

Sustainable urban development – Überseeinsel Bremen

In the urban development project “Überseeinsel” in Bremen, simulation software was used in the integrated planning of a low-temperature district heating network. In the software, the control strategy for the various heat sources and generators – including the river Weser, an ice storage, a CHP unit, and a peak-load boiler – was planned and modeled. The district heating network supplies an urban mixed-use area with residential, commercial, and service buildings. With the help of dynamic system simulation, necessary planning adjustments could be identified early to ensure the energy demand for sustainable urban development. The feasibility analysis was successfully completed.

District heating network design: The added value of variant comparison through simulation

District heating network design is one of the most demanding tasks in energy planning. The consequences of faulty sizing or insufficient variant analysis can be considerable: investment costs that are too high, poor energy efficiency in operation, or failed funding applications. Specialized system simulation tools such as Polysun measurably reduce these risks and at the same time create the basis for sound decisions by all parties involved.
The software supports the entire planning process for district heating networks and provides reliable, hourly-resolved evidence. This applies to demand analyses, concept comparisons, detailed sizing, and funding documentation. In combination with structured variant comparison, Polysun enables a planning quality that goes far beyond static rough calculations. This applies both to cold district heating networks and to high-temperature networks.
The ability to compare different system variants quickly and consistently is one of the greatest practical advantages of system simulation in the district heating network design. Subsequently, the preferred supply variant is elaborated and detail-planned.

Why variant comparison is decisive

In the concept and detailed planning phases, the planning consultancy must select from a multitude of technically possible system combinations those that are energetically efficient, economically viable, and ecologically convincing. Without simulation tools, this comparison is either too coarse (static rough calculation) or too laborious (manual iteration). Simulation software such as Polysun, on the other hand, enables a systematic, hourly comparison of multiple variants based on a uniform model.

What simulation software concretely delivers in variant comparison

With the help of simulation software, the following core functionalities are available at the start of the project:

• Hourly simulation over the entire annual load profile
• Comparison of heat sources (heat pump, solar thermal, biomass, waste heat, CHP unit, etc.)
• Analysis of temperature levels and their impact on COP and efficiency
• Sizing and comparison of different storage technologies (buffer tank, seasonal storage)
• Simultaneous calculation of CO₂ emissions, energy consumption, and share of renewable energy coverage
• Economic comparison of individual variants, levelized cost of heat
• Sensitivity analyses: e.g., impact of energy price developments, connection rates, or changed load profiles, climate warming

Added value for all parties involved in district heating network desgin

The added value of integrated planning with variant elaboration and system simulation goes beyond the technical comparison and addresses the concrete needs of all project participants.

Actor	Concrete added value
Planning consultancy	Faster, consistent comparison of multiple system variants; reduced manual effort in iteration; transparent, documented decision basis
Client / investor	Clear comparison of investment costs and returns; risk minimization through sensitivity analyses; sound basis for investment decisions
Authorities / funding bodies	Simulation-based evidence for funding applications (BEG, KfW, BAFA, KEV); auditable documentation of CO₂ savings and energy efficiency
Public utility companies / operators	Optimization of the operating strategy before construction; identification of weaknesses in load management; preparation for dynamic tariff and market conditions
Municipalities	Transparent decision basis for political committees; proof of target achievement according to the Heat Planning Act (DE) or Energy Strategy 2050 (CH)

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