District heating and cooling enables the efficient integration of large-scale renewable energy sources like biomass, geothermal energy or solar thermal, and the use of various forms of excess heat and free cooling. It therefore provides the strongest leverage, at the local level, to achieve decarbonisation. It can also provide flexibility on the electricity market via power-to-heat (PtH) solutions with either direct electric heating or large-scale heat pumps. Because of their various advantages, DHC systems appear in many respects as a potential backbone for coherent local energy transition strategies, mainly due to the fact that they enable local authorities and other local stakeholders to combine a variety of energy efficiency and decarbonisation leverages within an overall multi-energy system, in connection with city planning.

European DH networks still rely mainly on fossil fuels, with natural gas and coal as predominant energy sources. Coal is mostly used in Poland, Slovenia, Slovakia, Germany and Romania. The oil DH consumption is almost phased out (with some exceptions such as Estonia) and represents an insignificant amount in the supply mix. Other European countries are paving the way towards a decarbonised DHC sector. Biofuels are a predominant DH heat source in the Scandinavian countries and Austria and have a substantial share in the Baltic countries and Slovenia, while excess heat and heat pumps are mostly used in Finland and Sweden.