by Linda Bertelsen
Perspectives on key digitalization challenges within the district heating and cooling sector
In November 2023, the final report from the IEA DHC project Digitalisation of District Heating and Cooling (DHC) was published [1]. The project aimed to promote the opportunities of integrating digital processes into different parts of DHC systems and end-user heating installations. The consortium behind the project included key research institutions, universities, and digital solution providers in the DHC.
The report identified seven key challenges for developing digital solutions within the DHC sector.  To overcome these challenges and ensure viable scale-up of digital solutions, it is vital to have a deep fundamental understanding of the interaction between the various system components. Without understanding the physical nature of DHC systems, there is a real risk that a digital solution will become a local solution with minimal scaling potential and an inherent risk of the solution provider abandoning the solution.
There is no doubt that the modern advancement of digital solutions is the driver of a new evolutional paradigm of the DHC concept, and we will see increased application and development of digital solutions across the thermal supply chain in the years and decades to come.
In this article, the author provides his perspectives on these challenges and how solution providers can address them.

By Oddgeir Gudmundsson, Director, Climate Solutions, Danfoss A/S

Published in Hot Cool, edition no. 3/2024 | ISSN 0904 9681 |


With the increasing focus on decarbonizing our societies, exploring synergies between the energy sectors is essential, as taking advantage of synergies will increase both the speed and the cost of decarbonization. As temperature requirements of building thermal demands are low, they have the potential to play a crucial role in decarbonizing the energy system.

To realize the potential, it is vital that buildings’ thermal demands and generation can be decoupled over an extended period. The solution is district heating and cooling (DHC), which enables the decoupling and cost-effective utilization of local renewable energy sources. However, for DHC to be part of the future, there are five prerequisites, we need DH to be:

  • robust yet flexible
  • reliable and secure, yet open and supportive to other sectors
  • green yet sustainable
  • local, yet acting global
  • widespread, yet affordable

To live up to these expectations, embracing and fully integrating digital solutions into the DHC concept is essential. Already today, digitalization is having a profound impact on the DHC concept, where its interactions include:

  • the overall energy system
  • the thermal plants
  • the distribution system
  • the end-user substations
  • the building technical installations
  • engagement with end-users

Tying all these interaction points together offers a unique opportunity to achieve an end-to-end optimization solution for realizing the most sustainable and cost-effective operation, benefiting the end-users and society. To realize the full potential of digitalization, numerous challenges, with varying complexities, must be overcome.

Challenge 1: Heterogeneity of DHC systems

One of the many interesting aspects of the DHC sector is its local uniqueness and operation. The uniqueness of each system originates from the varying local conditions due to climate, geographical features, network layouts, available energy sources, building standards, building utilization, and substation designs. Further, existing systems can be decades old and at varying modernization stages. On top of that, most systems are locally operated under the direction of the local government or community. All these factors lead to a complex and fragmented market.

Digitalization solution providers need to recognize and accept that while the fundamental purpose of all DHC systems is the same – to fulfill heating or cooling demands – they have different needs. The obvious solution is a modular approach, where the key elements of the supply system are addressed in specific modules, which can be linked to unlock optimization potential across the supply chain.

Challenge 2: Lack of standards for DHC

The challenge revolves around the absence of standards in the digitalization of DHC. This comes from the fact that the sector has historically been decentralized, often initiated by enthusiastic local champions. While the local nature of DHC is a source of strength, it introduces the risk of ad-hoc, non-standardized solutions, including applied units, data communication standards, and local terminology for components.

Recognizing the pivotal role of standardized vocabulary and data protocols in accelerating digitalization within DHC, the sector has established a digitalization standardization group within the DHC+ research platform, an initiative strongly supported by Danfoss.

In this pursuit, the importance of data semantics and ontology cannot be overstated. The semantic understanding of data ensures that information is not only standardized in format but also in meaning. Establishing a shared ontology enables a common understanding of terms and relationships, facilitating interoperability and consistent interpretation of data across diverse systems. This semantic clarity is essential for overcoming the sector’s fragmented history challenges.

To bolster this initiative, Danfoss is actively supporting the sector. Until a standardized protocol is established, the focus is on providing robust support, including features like automatic unit conversion, which is crucial for averting data errors.

Challenge 3: Vendor lock-in and interoperability

The historical fragmentation and absence of standardized digitalization practices in DHC have led to the prevalence of “built-to-order” solutions. Unfortunately, the localized nature of these designs tends to hinder interoperability with third-party solutions, as they often employ proprietary data standards and storage methods, resulting in a state of vendor lock-in.

Breaking free from vendor lock-in is crucial to fostering collaboration and enabling solutions from various vendors to work together seamlessly. Danfoss recognizes this imperative and is actively developing a modular-based offering through the Leanheat™ platform. However, the journey doesn’t stop there. Localized DHC systems often necessitate tailor-made add-ons to meet unique needs. 

Therefore, the goal is to create an ecosystem where diverse modules addressing specific local requirements seamlessly integrate into the broader Leanheat™ platform, promoting adaptability and scalability in DHC digitalization. By enabling integration with third-party solutions, a flexible yet tailormade solution can be offered to DHC utilities.

By advancing towards modular, interoperable solutions, we pave the way for a more collaborative and future-proof DHC landscape, where innovation thrives and local needs are met through a harmonized digital framework.

Challenge 4: Need for robust and resilient control architectures

DHC is a robust, reliable, and resilient energy infrastructure, a fact extensively discussed in [2]. As the sector embraces digitalization, it is crucial that these features are maintained by developing solutions by developing resilient solutions resilient against risks posed by cyberwarfare, cyberterrorism, and cybercriminal activities. To mitigate risks, it is imperative that digital solutions are not only built on robust and resilient architectures but also incorporate fallback options to address worst-case scenarios.

At Danfoss, our approach to developing solutions is rooted in decades of experience and knowledge garnered through active involvement in the DHC sector. Leveraging the extensive knowledge of components, applications, and the overall supply system, we are uniquely positioned to design control infrastructures with resilience and local fallback redundancy at their core. By prioritizing the development of digital solutions that anticipate and address potential threats, we contribute to ensuring the continued dependability and resilience of DHC systems in the face of an evolving digital landscape.

Software solutions with robust and resilient control architectures, in combination with on-site controllers, offer a comprehensive range of functionalities, including monitoring, setting management, and optimization solutions. When applicable, these features should be orchestrated through secure cloud platforms and effectively communicated to local controllers. This ensures a cohesive and integrated system under normal conditions and unexpected disruptions.

Challenge 5: GDPR compliance

GDPR aims to ensure the protection of natural persons from the exploitation of their personally identifiable data. Under GDPR, valid use of personally identifiable data is specified for a) fulfilling legal contracts, b) fulfilling legal obligations, or c) performing a catalog case. While a) and b) are self-explanatory, c) covers specified and regulated data usage cases.

The dataset catalog offers a comprehensive description and intelligent tagging of the data allowed to be collected, as well as precise definitions for the lawful use of the information. Data collection and processing are also allowed for non-regulated data usage once revocable consent from the owner is granted.

In [3], it was argued that the public advantage from data reading and processing in DHC systems, which can be used to achieve energy efficiency and climate benefits, is strong enough to fall under the umbrella of lawful data processing, as described in Paragraph 1 of Article 6 of the GDPR.

The EU has developed a data regulation called the Data Act to ensure a fair relationship between users and data holders. The Data Act came into force on January 11, 2024, and becomes applicable on September 12, 2025. As the Data Act covers both personal and non-personal data, it is a complementary regulation to the GDPR.

The Data Act aims to facilitate data sharing and ensure a sustainable environment for the future development of data-driven solutions by imposing an obligation on data holders to make data available to users and third parties of the user’s choice. The Data Act does not differentiate between business and consumer users regarding the right to share data. Further, the Data Act adapts rules of contract law and prevents the exploitation of contractual imbalances that hinder fair access to and use of data.

The Data Act further requires manufacturers of connected products and related services to ensure that data transmitted out of the product and collected is always easily and securely accessible to a user, free of charge, and in a comprehensive, structured, commonly used, and machine-readable format.

This new regulation will stimulate the future growth of digitalization solutions and has the potential to unlock new and, so far, practically unattainable benefits. The Data Act data sharing requirements on data holders when the use of data is beneficial for the public interest can be interpreted in the context of ensuring energy security and mitigating climate change.

Challenge 6: Safety and security of IT systems

With increasing threats from cyberwarfare, cyberterrorism, and cybercriminal activities, software development teams need to be vigilant and able to react quickly to emerging threats, particularly in critical infrastructures like DHC systems.

There is no doubt that security is an integral part of the development lifecycle of digital solutions. Security measures need to be considered and implemented at every stage, including architecture, coding, testing, deployment, and during the operational phase.

During the operational phase, it is vital that the solution provider’s security operation team monitor, detect, investigate, and respond to security incidents and threats in real-time. The security operation teams play a crucial role in ensuring the overall security posture of digital solutions, which is vital in today’s fast-evolving cybersecurity landscape.

One important aspect of ensuring the high safety and security of IT systems involves making resources available for maintaining them. In that respect, standardized and cloud-based solutions developed and supported by strong companies have greater access to resources to maintain their systems’ security and integrity.

Challenge 7: Lack of reference datasets and benchmarks

Given the considerable system-to-system variations outlined earlier, creating a broadly representative dataset for the sector is challenging. However, due to the high costs of IT system changes, utilities should consider reference datasets and benchmarks as crucial parameters when selecting future digitalization systems. Creating a suitable reference dataset is being considered in the upcoming 3-year IEA Annex TS9 project: “Digitalization of District Heating and Cooling: Improving Efficiency and Performance Through Data Integration.”

It’s a tough game, but DH can do it.

As an infrastructure, DHC is, from a physical point of view, a future-proof solution. The 7 challenges have been addressed above, yet five prerequisites were also added – 1) robust, yet flexible; 2) reliable and secure, yet open and supportive to other sectors; 3) green, yet sustainable; 4) local, yet acting global and 5) widespread, yet affordable.

The infrastructure is robust and reliable; the only requirement for thermal sources is their temperature level. The challenge is on the operational side, which traditionally relies on inflexible rule-based control logic. However, as the DHC sector embraces renewable and waste heat sources, which are often fluctuating and small-scale, the complexity of the operation can quickly become unmanageable for the traditional rule-based approach. By adopting digital solutions, the complexities can be controlled, enabling greater system flexibility and opening the infrastructure for alternative energy sources, such as waste heat from other sectors.

Further, multi-source DHC systems with effective digital tools supporting the operation can take advantage of synergies between connected sources and by that minimize the capacity requirement of each individual energy source, leading to much lower installed capacity compared to decarbonization via electrification on a building level and by that minimize the environmental and economic footprint, which is the hallmark of any sustainable energy transformation.

Considering the outsized impact the energy sector has on global warming, contributing to 75% of greenhouse gas emissions, it is fundamental that capable local energy infrastructures fulfilling local demands, like DHC, act globally and adopt end-to-end digital solutions for enabling continuously optimized thermal generation and distribution. This is the key enabler for expanding the reach of existing schemes and building new DHC systems capable of supplying affordable green energy to fulfill building thermal demands in urban areas.


Due to the general complexity of DHC systems, various digital solutions target different aspects of the system. Depending on the aspects being addressed, different challenges may arise. Some challenges are generic, such as challenges 4 and 6, while others are more human or historically related, like challenges 1 and 2. Additionally, there are challenges associated with the evolving legal environment, as described in challenge 5.

Challenges 3 and 7 relate to the inherent risk of lock-in when choosing complex solutions for critical infrastructure systems. Once integrated and necessary for system operation, switching between digital solutions can become a practical nightmare scenario, perhaps requiring an operational shutdown for days, if not weeks, while changing the software system. This embedded nature poses the risk of vendor lock-in, which will hamper the development of digital solutions and must, therefore, be avoided.

At Danfoss, we acknowledge the existence of these challenges and work diligently to address them in our solutions. We further foresee that cooperation with other solutions benefits the long-term growth of the DHC digital solution business.


The Danish Energy Authority (EUDP) supported the participation of the Danish consortium in the IEA DHC project Digitalisation of District Heating and Cooling.


[1] Schmidt, Dietrich (ed.), et al. (2023). Guidebook for the Digitalisation of District Heating: Transforming Heat Networks for a Sustainable Future, Final Report of DHC Annex TS4. ISBN 3-89999-096-X, AGFW Project Company, Frankfurt am Main, Germany. 
[2] Oddgeir Gudmundsson, Jan Eric Thorsen and Anders Dyrelund. District Energy – The Resilient Energy Infrastructure, Energy Master Planning for Resilient Public Communities, October 2020.
[3] Digitalisation in District Heating and Cooling systems, Euroheat & Power, May 2023.

For further information, please contact: Oddgeir Gudmundsson, og@danfoss.com

“Perspectives on key digitalization challenges within the district heating and cooling sector” was published in Hot Cool, edition no. 3/2024. You can download the article here:
Perspectives on key digitalization challenges within the district heating and cooling sector

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Oddgeir Gudmundsson
Perspectives on key digitalization challenges within the district heating and cooling sector