Europe needs €144–300 billion by 2030 to scale district heating (DH) and meet climate goals, but current deployment is “not on track”, according to IEA. This report reveals why: a financial viability gap is a barrier to investments, despite DH’s potential to cut emissions, improve energy security, and lower costs. Scaling DH requires policymakers to derisk or take the lead, investors to adjust thresholds, and operators to innovate.

The FinDH Project (IEA DHC Annex XIV Project 03 - Financial frameworks’ impact on district heating) provides a foundational study for understanding finance’s role in DH deployment. We do so through interviews with 38 experts in DH and finance, literature studies, energy system modelling of financial impacts on DH deployment in a case city, and GIS analysis of the wider European implications. This improved understanding of DH in financial terms, i.e. as an asset/asset class, bridges the investor and DH sector communities.

The foundational question for the study is how to understand DH as an asset – or even an asset class. We find that DH is an attractive – but somewhat overlooked – sub-asset class of (sustainable) infrastructure:

• High upfront costs and investment volumes: Requires long-term capital (e.g., pension funds, municipal bonds)

• Two classes - Greenfield and brownfield: New projects are riskier, while established systems can offer stable, inflation-linked returns

• Complex: Variation in technologies, regulation and availability of energy sources.

Investors will benefit from both looking at the “forest” (standardised) and the “trees” (customised) in DH financing: standardized tools and frameworks help assess DH risk-return profiles at volume, while a customised approach is useful in approaching DH projects in the highly heterogenous sector.