Are Thermal Energy Networks the Future of Urban Decarbonization?

Written by: Kéa Anderson

Edited by: Sunny Bell

Senior Division

As climate change brings increasingly hazardous temperature extremes to cities and urban areas around the world, the unsolved issue of sustainable air conditioning looms over those engineering green energy alternatives. Decarbonizing urban energy systems remains one of the most pressing challenges in the transition to a low-carbon future. Largely due to their reliance on fossil fuels for heating and cooling, buildings account for a substantial share of global greenhouse gas emissions. In this context, the emergence of thermal energy networks (TENs) provides a promising infrastructural solution, with the capacity to transform how cities produce, consume, and distribute thermal energy. By enabling the integration of renewable and waste heat sources into the energy distribution network, TENs may allow urban centers to accelerate away from fossil fuels while increasing resilience and adaptability to our changing climate.

Thermal energy networks are systems that distribute heating and cooling among multiple buildings through interconnected underground piping, thereby replacing the need for individual, building-level air conditioning systems (Gajudhur, 2024). These networks circulate heated or cooled fluids to transfer heat from centralized or distributed energy sources to end users, improving efficiency and enabling large-scale emissions reductions (International Renewable Energy Agency, 2020). Thermal energy networks typically fall into two categories: district heating and cooling (DHC) and networked geothermal systems. Traditional DHC systems rely on centralized plants that generate heat - historically from fossil fuels - and distribute it to buildings (Voswinkel et al., 2025). These systems operate at high temperatures, with fluids flowing in only one direction. By contrast, networked geothermal systems - often referred to as fifth-generation district heating and cooling (5GDHC) - operate at lower temperatures and use ground-source heat pumps connected through a shared loop rather than a centralized source (Gajudhur, 2024). In effect, this means that individual buildings can act both as energy consumers and producers, exchanging heating and cooling within this interconnected network. As a result, 5GDHC systems offer greater flexibility, efficiency, and compatibility with renewable energy sources, as several different sources can be integrated into this reciprocal networked grid (Boesten et al., 2019; Fairley, 2025).

District heating systems have existed in urban areas for nearly 150 years, expanding significantly in the 20th century and now supporting 10% of global building heating demand (Voswinkel et al., 2025). While these systems offered efficiency advantages over decentralized heating, their reliance on carbon-intensive fuels hindered any substantial environmental benefits. However, with recent climate policy, technological innovation, and increased availability of renewable energy sources, thermal energy networks are becoming a popular subject for low-carbon and renewable-based retrofitting (Voswinkel et al., 2025).

Modern district heating systems are uniquely positioned to integrate a diverse range of renewable energy sources. For example, these large-scale electric heat pumps can be powered by biomass, geothermal energy, or solar energy (Gajudhur, 2024). Because TENs aggregate energy demand across multiple buildings, they can function as a thermal “hub,” facilitating the integration of less consistent renewable sources such as wind and solar. This capability enhances grid flexibility by allowing excess renewable electricity to be converted into heat and stored for later use (Voswinkel et al., 2025). Furthermore, thermal energy networks possess the critical ability to capture and utilize waste heat. Cities and urban environments produce significant quantities of excess heat from a multitude of sources, including industrial facilities, wastewater systems, underground mine water reservoirs, and, with the increasing prevalence of artificial intelligence, data centers (Fairley, 2025). By redirecting this otherwise wasted thermal energy into district heating systems, TENs can improve overall energy efficiency while reducing excess emissions.

Promising examples of TENs facilitating sustainable urban heating and cooling are found in Europe. Denmark represents one of the most successful cases of district heating implementation worldwide. In Copenhagen, for instance, district heating systems supply the majority of building heat demand through integrated networks that combine waste heat, biomass, and renewable energy sources (Danish Board of District Heating, 2018). This success is largely attributed to the nation’s long-term policy planning, strong regulatory framework, and cooperative ownership structures for relevant infrastructure. Over time, Denmark has remarkably transitioned its DHC systems away from fossil fuels, demonstrating to the global community that large-scale decarbonization through thermal energy networks is possible. Additionally, the Netherlands has emerged as a co-leader in thermal energy systems, particularly in fifth generation district heating and cooling. The lower temperatures and multidirectional heat exchange these systems offer enable them to reduce overall energy demand and improve allocation efficiency (Boesten et al., 2019). Dutch projects often integrate geothermal energy, aquifer thermal energy storage, and advanced digital controls - innovations that position 5GDHC systems as a key component of future net-zero urban energy systems (Koutra et al., 2026). 

For Canadian cities, thermal energy networks present a significant opportunity to reduce greenhouse gas emissions, particularly in the natural-gas-dependent building sector, by replacing fossil fuel systems with both renewable energy and recovered heat sources (Gajudhur, 2024). Beyond environmental benefits, TENs can diversify supply sources and reduce dependence on centralized fossil fuel infrastructure. This offers enhanced energy resilience as well as economic advantages, including job creation in operations, system maintenance, and infrastructure construction (Gajudhur, 2024). The city of Vancouver provides a leading example of thermal energy network implementation in Canada through its district energy system operated by Creative Energy. Powered originally by natural gas, the system is currently undergoing a transition toward low-carbon energy sources, namely sewer heat recovery and electrification (Gajudhur, 2024). The momentum from Creative Energy demonstrates that Canada possesses the potential to retrofit existing DHC infrastructure to meet climate objectives and emissions reduction targets. Canada can learn from Denmark’s success that municipal leadership and long-term investment strategies are integral to this transition.

Thermal energy networks face several key challenges that hinder their large-scale adoption and renewable energy integration. High upfront capital costs, particularly in regions without existing infrastructure, present a significant hurdle (Koutra et al., 2026). Regulatory frameworks are often not well adapted to these forms of shared energy systems, creating a barrier of uncertainty for both developers and investors (Koutra et al., 2026). Furthermore, the need to coordinate multiple stakeholders - including utilities, municipalities, developers, and consumers - can complicate and slow TEN project development. That said, research by Voswinkel et al. (2025) indicates that supportive policy frameworks, long-term financing mechanisms, and integrated urban planning to prioritize energy infrastructure represent key conditions necessary for scaling thermal energy networks. Governments play a critical role in enabling this transition by establishing clear regulations, providing financial incentives, and fostering collaboration across sectors. Continued technological innovation will also be essential in improving system performance, reducing costs, and getting key stakeholders involved.

By enabling the efficient distribution of renewable and waste heat, thermal energy networks address a critical component of the urban decarbonization challenge: maintaining energy use while reducing energy emissions. Though significant barriers remain, international success demonstrates that TEN systems can be deployed with the right combination of policy support, technological innovation, and investment. As cities in Canada and around the world experience a growing need to address urban emissions and improve climate adaptation, a concerted focus on sustainable heating and cooling will be a necessity. Thermal energy networks are conveniently situated to play a central role in shaping a sustainable urban future.

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References

Boesten, S., Ivens, W., Dekker, S. C., & Eijdems, H. (2019). 5th generation district heating and cooling systems as a solution for renewable urban thermal energy supply. Advances in Geosciences, 49, 129–136. https://doi.org/10.5194/adgeo-49-129-2019

Danish Board of District Heating. (2018, December 2). District heating in Denmark. DBDH - the District Energy Go-To-Partner. https://dbdh.org/all-about-district-energy/district-heating-in-denmark/

Fairley, P. (2025). Geothermal networks let cities warm and cool as one. Nature, 648(8092), S16–S18. https://doi.org/10.1038/d41586-025-03932-6

Gajudhur, N. (2024, September 10). What’s the deal with thermal energy networks? Canadian Climate Institute. https://climateinstitute.ca/what-deal-thermal-energy-networks/

International Renewable Energy Agency. (2020). Renewable Energy Policies in a Time of Transition Heating and Cooling. https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2020/Nov/IRENA_IEA_REN21_Policies_Heating_Cooling_2020.pdf

Koutra, S., Harcouët-Menou, V., Dupont, N., Kaufmann, O., Becue, V., & Attia, S. (2026). Feasibility of Fifth-Generation district heating and cooling using mine water in Belgium: A Multi-Site Techno-Economic assessment. Sustainable Energy Technologies and Assessments, 86, 104853. https://doi.org/10.1016/j.seta.2026.104853

Voswinkel, F., Delmastro, C., Reidenbach, B., & Kvarnström, O. (2025, December 8). Opportunities for district heating in the changing energy landscape. International Energy Agency. https://www.iea.org/commentaries/opportunities-for-district-heating-in-the-changing-energy-landscape