Can a sustainable DH business model be decisive for future competitiveness?

This project focuses on business model innovation for district heating (DH), with a unique emphasis on incorporating social sustainability. While much research has concentrated on specific elements of the DH business model—such as pricing—numerous other components play a crucial role in the success of DH systems. This project aims to address a key gap by examining how the inclusion of social sustainability can strengthen the business models of DH companies, ensuring long-term competitiveness in a changing energy landscape.

This project is funded by IEA DHC

Beyond the price model: A holistic approach to district heating business models

Historically, the price model has been central to research on DH business models. However, it is just one of several critical components. On the customer side, elements such as customer value, segment targeting, relationships, and communication channels must also be considered. Similarly, on the heat supply side, key resources, operational activities, and strategic partnerships are fundamental to business success.

Recent studies have primarily focused on integrating new technologies and collaborating with emerging stakeholders. However, they have often overlooked how new values, particularly from low-temperature waste heat, are not fully captured in existing business models.

Many DH companies still apply outdated models, leading to reduced profitability and inefficient use of resources. This project seeks to fill this gap by offering a more comprehensive business model framework that capitalizes on both technological advancements and social value generation.

The challenge: Eroding profitability and missed opportunities

As competition from alternative heat suppliers grows, DH companies must explore new ways to capitalize on the values they generate. Current business models, particularly those that apply a high-temperature framework to low-temperature solutions, fail to harness the full potential of innovative technologies like low-temperature waste heat. This oversight erodes profitability and limits the ability of DH companies to compete effectively.

Moreover, traditional DH value chains have emphasized economic and environmental sustainability, often neglecting the social sustainability dimension. Social value creation—such as improving community well-being, promoting local economic growth, and reducing energy poverty—is fragmented at best.

The challenge addressed in this project is how to better integrate these social values into the DH value chain to create more holistic, future-proof business models.

The research: Social sustainability in district heating

This project aims to identify social values that can be generated in DH value chains and assess how their inclusion can transform existing business models. The research will focus on the case of District Heating in the Municipality of Burnaby in Vancouver, Canada, which is currently working on becoming more sustainable. The study will investigate how the value chain can be strengthened by integrating social sustainability to ensure long-term success.

Focusing on a new DH market like Canada is crucial. In mature markets—such as those in Denmark and Sweden—long-standing infrastructure investments can make it difficult to adjust business models without significant disruption. New markets, with fewer legacy constraints, offer a valuable opportunity to experiment with innovative approaches that incorporate both technological and social dimensions.

Methodology: Data collection and analysis

Data for the project will be collected through on-site interviews in Canada, focusing on the experiences and challenges faced by the City of Burnaby. By examining this case study, the research will identify how social values can be embedded into the DH value chain, providing insights that can be applied to both conventional DH markets in Denmark and Sweden and newer markets like Belgium and Canada.

Expected outcomes and deliverables

The project is structured around five work packages, each designed to achieve specific milestones and outputs. The key deliverables include:

• Final Report: A comprehensive report with an executive summary detailing the findings and recommendations.
• Peer-reviewed Publication: A scientific article contributing to the growing body of knowledge on DH business models.
• Podcast Series: A series of three podcasts highlighting key insights and discussions during the project’s lifetime.
• Final Event: An event to present the research outcomes and facilitate discussions among DH professionals.

Advancing district heating: Long-term competitiveness and innovation

From a research perspective, this project will push the boundaries of business model innovation in district heating, particularly by expanding the framework to include social sustainability. It will explore how DH companies can go beyond traditional economic and environmental metrics to create social value, enhancing community engagement, reducing inequality, and promoting sustainable development.

For practitioners, the insights generated from this research will offer actionable strategies for DH companies to remain competitive in a rapidly evolving market. By redefining value chains and adopting new business models that fully account for social sustainability, DH companies can position themselves as leaders in the transition to sustainable energy solutions.