District heating: Centralised or decentralised planning? __

District heating: Centralised or decentralised planning?
3. September 2025 6 min.

The heating transition is under great pressure: heating networks must be built faster, CO₂ emissions must fall, and supply costs must remain stable. But how should heat be provided – centrally via large infrastructures, or decentrally with solutions close to the district? Both approaches are justified. The right choice depends on the project context: urban or rural, new construction or existing buildings, high or low connection density. International strategies – such as those of the EU Commission, the IEA, and the IPCC – emphasise that it is not a question of either-or, but rather a flexible toolbox for a climate-friendly heat supply.

Three developments make the topic particularly relevant:

  • Climate targets: With a share of over 40%, heat is the largest final energy consumption sector worldwide. Without a change in heat supply, climate targets cannot be met.
  • Cost risks: Energy prices, grid fees, and operating costs are increasing. Many projects require planning with future-proofing in mind.
  • Planning pressure: Cities, utilities, and developers are under time pressure. Heat solutions must work in the shortest possible time.

This blog explains what centralised and decentralised heating mean – and what the implications are technically, economically, and for planning.

Centralised and decentralised heat supply: What is the difference?

Central district heating is based on the principle that energy is generated in large plants and distributed via a supra-regional network. Typical examples include combined heat and power (CHP) plants, large heat pumps, or geothermal plants. The heat generated is transported at up to 130 °C through insulated pipelines – using the so-called supply-and-return principle. Control is centralised, and the system only becomes economical with a high connection density.

Decentralised systems, on the other hand, produce heat where it is needed – for example through heat pumps, CHP units, biomass, or solar thermal energy directly on the building or within the neighbourhood. Pipeline lengths are shorter, temperatures are lower (usually between 35 °C and 70 °C), and energy losses are reduced. Responsibility for planning, operation, and maintenance also lies locally.

The boundaries are fluid. Small local heating networks with pipeline lengths of just a few hundred metres are often considered decentralised, even if they are structurally similar to centralised systems. The difference lies less in definition and more in function: grid size, generation structure, flexibility, and scalability.

 

Technology at a glance: How the systems work

Central district heating 

Central systems rely on large generation units with high output – from CHP plants to large-scale heat pumps. The heat generated is transported over long distances through insulated pipelines. This can result in heat losses of up to 15%, depending on pipe length and insulation. The control system is centralised, and operation is efficient – but it depends on stable demand and a high connection density.

Decentralised district heating 

Decentralised systems consist of many small heat generators: heat pumps, solar thermal systems, pellet boilers, or combined heat and power plants. They have a modular structure, are flexibly scalable, and offer advantages in planning speed, security of supply, and integration of renewable energy sources. The short pipeline lengths not only reduce losses but also lower requirements for temperature resistance and materials. 

Piping systems: technical requirements in comparison 

Central heating networks place high demands on materials, insulation, and compressive strength. In decentralised networks, modular installation, rapid assembly, and high energy efficiency are crucial. Plastic piping systems – made of polypropylene (PP), for example – offer advantages here: they are corrosion-resistant, easy to install, and particularly suitable for medium temperature ranges.

Practical examples of decentralised and centralised solutions 

Decentralised heating network in the IW³ Wilhelmsburg project

The Hamburg real-world laboratory IW³ (“Integrated Heat Transition Wilhelmsburg”) is an example of an innovative decentralised supply concept. Around 50,000 people in the Wilhelmsburg district are supplied by an intelligent heating system.

  • Technology mix: The system combines geothermal energy, solar thermal energy, waste heat, and large-scale heat pumps – all close to the district and demand-driven.
  • Sector coupling: Electricity, heat, and mobility are integrated to leverage synergies.
  • Digitalisation: A networked monitoring and control system dynamically adapts generation and distribution to demand.
  • Social integration: Residents are actively involved through cooperative models.
  • Goal: Complete fossil-free operation – scalable to other urban districts.

Central district heating in Veksø
In Veksø, north of Copenhagen, around 400 houses will be connected to a new district heating network. The pipe system spans a total of 15 kilometres and is crucial for the project’s efficiency.

  • Energy sources: The district heating plant supplies the housing estate via pre-insulated PP pipes of the aquatherm energy blue type. The high insulation performance minimises heat loss and reduces the energy requirement of the combined heat and power plant.
  • Efficiency & sustainability: Compared to metallic pipes, the system offers higher flow rates, corrosion resistance, and a better environmental footprint. The project supports Denmark’s strategy to significantly increase the share of district heating.
  • Integration into the heating transition: Already, 64% of Danish households are connected to a district heating network. The Veksoe project helps to further increase this figure and advance decarbonisation of the heating sector.

District heating expansion in Gateshead 

The city of Gateshead in the northeast of England expanded its existing district heating network by 1.3 kilometres in 2018. The aim was a cost-efficient implementation with minimal disruption to residents and traffic.

  • Technical implementation: The extension uses the pre-insulated PP-R system aquatherm energy instead of steel pipes. Its lower weight, easier handling, and faster welding times enabled quick installation with reduced material and labour.
  • Cost advantages: These properties save around €460 per metre of installation costs compared to steel. Additional savings result from better thermal efficiency and lower operating costs.
  • Energy efficiency: Gateshead’s energy centre feeds heat from two 2 MW CHP plants and utilises up to 85% of the waste heat generated. Connecting other buildings via the new line increases utilisation and efficiency of the overall system.

Centralised or decentralised district heating: Advantages and disadvantages in direct comparison

The choice of system depends heavily on structural, economic, and technical conditions. Both approaches have specific strengths and weaknesses:

 Economical

  • Central: Profitable with a high connection density – typically from 20–30 buildings per line kilometre.
  • Decentralised: Cost advantages for individual buildings, low density, or when grid expansion is uneconomical.

 

Technical

  • Central: Complex infrastructure, high redundancy requirements, and higher heat losses with increasing pipe length.
  • Decentralised: Shorter distribution distances, lower temperatures, and lower losses. Individual control is possible.

 

Ecological

  • Central: Ideal for large-scale integration of renewable energies such as geothermal energy or heat recovery from wastewater.
  • Decentralised: Particularly suitable for photovoltaics, solar thermal energy, and biogenic heat at the building level.

 

Operational

  • Central: Centrally controlled, lower maintenance effort per user, but large-scale effects in the event of malfunctions.
  • Decentralised: Autonomous system, higher maintenance costs, but less susceptible to failures at the grid level.

 

Strategic

  • Central: Long-term infrastructure decision requiring a high level of planning.
  • Decentralised: Flexibly adaptable, modularly implementable, and faster to implement.


The most important criteria at a glance

Criterion  Central district heating  Decentralised heat supply 

Investment 

High (grid & central generation) 

Lower (modular, building-integrated)  

Operating costs

Cheap with high occupancy  

Depending on system type and maintenance requirements

Energy losses 

Increase with cable length

Low due to short distribution

Flexibility 

Low – grid-connected  

High – scalable, open to different technologies  

Planning complexity 

High – long-term infrastructure r 

Medium – object-related optimisation possible  

Grid dependency 

Complete 

 None – self-sufficient systems possible  

Scalability 

Economical from approx. 30 connections/km  

 Individual buildings to district solutions  

Maintenance 

Centrally organised  

 Decentralised, higher effort per building  

Integration of renewables 

Large-scale (geothermal energy, waste heat)  

 Small-scale (PV, solar thermal energy, biomass)  

Typical suitability 

Dense urban districts, municipal facilities, new buildings 

Rural areas, existing buildings, projects that can be implemented quickly  

 

When does centralised or decentralised district heating make sense?

It is not the system that decides, but the context. The choice between centralised and decentralised district heating depends heavily on the location, building structure, and objectives of the project.

Central district heating

A central heat supply makes sense if many buildings can be supplied within a short distance – for example, in urban districts with a high connection density. Even in new development areas, where the heating network and generation are planned together from the outset, a central system shows its efficiency advantages. Municipal properties such as schools, swimming pools, or hospitals benefit from a stable, centrally controlled supply. Central solutions are also suitable for industrial areas if usable waste heat sources are available. In such cases, a central system provides high overall efficiency, integrated infrastructure, and reduced planning effort per building.

Decentralised district heating

Decentralised systems, on the other hand, are particularly suitable for existing buildings where a grid connection is not technically or economically feasible. They are also advantageous in rural regions, where the line costs per connection would be disproportionately high. Decentralised concepts can be implemented more quickly – for example, in short-term projects where constructing a network would take too long. They are ideal for self-sufficient concepts such as plus-energy houses or KfW 40 buildings, where the supply is planned directly at the building. Decentralised systems offer high scalability, short implementation time, and flexible integration of renewable energies.

Current developments for efficiency and decarbonisation 

Hybrid solutions

The future is not about either-or. Increasingly, projects are relying on hybrid systems that combine centralised and decentralised generation. Example: dynamically distributed district heating networks, in which parts of the network are temporarily separated from the central network and supplied locally, e.g., via large heat pumps or seasonal storage systems..

Smart grids and digitalisation

Digital control systems make it possible to regulate flow temperatures, consumption peaks, and energy flows in real time according to demand. This reduces losses, increases efficiency, and facilitates the integration of fluctuating sources.  

Integration of renewable energies

Solar thermal energy, industrial waste heat, geothermal energy, and biomass are increasingly incorporated into heating projects. Particularly in Scandinavia and Eastern Europe, current projects demonstrate that economic decarbonisation is possible, provided that grid infrastructure is modernised. 

Investment needs and climate targets

The conversion of existing grids to CO₂-neutral generation requires significant investment. Studies predict a double-digit billion-euro sum for Germany alone by 2030 – a feat that requires long-term planning security. 

 

Conclusion: The choice of district heating solution depends on the project

Centralised or decentralised district heating? There is no universal answer – it always depends on the project context. The denser the development, the more economically a central heating network can operate. Conversely, the more individual and flexible the requirements, the more a decentralised system shows its advantages.

Key factors include connection density, building type, availability of renewable energies, project timeframe, and economic viability. In many cases, hybrid approaches are the most sustainable option, combining security of supply with flexibility.

aquatherm as a partner for centralised and decentralised heating networks 

Whether it’s a district heating network, a local heating system, or a hybrid concept, choosing the right piping system is crucial for efficiency, durability, and investment security. aquatherm offers modular, corrosion-resistant plastic piping systems made of PP that can be flexibly integrated into both central and decentralised structures. At medium operating temperatures, they excel with:

  • High energy efficiency: thanks to low thermal conductivity
  • Fast, safe installation: thanks to simple connection technology
  • Durability and low maintenance: due to corrosion resistance and low incrustation
  • Flexibility in installation: ideal for renovations and complex network structures

 

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