From islands to platforms: Innovation pathways for district heating firms across Europe

Technologies such as district heating (DH), district cooling (DC) and heat pumps are essential for improving heating and cooling efficiency and supporting decarbonization goals. Although advancements such as next-generation DH promises lower temperatures and increased flexibility, these technologies are insufficient to reach such targets in isolation. While there is ongoing convergence between DH, heat pumps, and energy storage, the literature pays scant attention to how actors innovate by combining and integrating these technologies. Thus, there is a significant need for a greater understanding of the innovative efforts of DH firms. This study explains how seven European DH firms innovated to create and deliver value by changing their organizational, technological, and interfirm engagements. By analysing the cases through the lens of platform literature, our analysis reveals a shift away from traditional incumbent value systems and the emergence of new platform-based value systems that incorporate platform envelopment of gas and heat pumps into DH. The changes consist of three distinct innovation pathways. First, incumbent DH firms are improving traditional systems by refining customer interfaces and integrating digital services within their established firm boundaries. Second, smaller collaborative entrants engage with incumbents to form platform-based systems downstream of the incumbents. Third, larger disruptive entrants establish independent platforms with localized, network-connected heat pumps and storage, directly challenging incumbent value systems by offering alternative heating and cooling solutions. The study demonstrates that district heating is no island, but part of an interconnected and evolving ecosystem where innovation emerges through technological integration and inter-firm collaboration. • District heating (DH) firms innovate through diverse technological and interfirm engagements. • Incumbent DH firms refine customer interfaces and integrate digital services. • Small entrants engage with incumbents to form platform-based ecosystems. • Large entrants disrupt with platforms combining heating and cooling solutions.