Heat pumps – a robust future despite current growing pains
Blue Star points to the long-term opportunities for heat manufacturers, despite recent bumps in the road for this sector.
The past two years have brought into sharp focus the political and environmental threat of the EU's past reliance on fossil fuels. After the invasion of Ukraine, wholesale gas prices rose steeply, and consumers and businesses alike felt the financial pain of rising costs.
Equally, the long-term impact of climate change was seen across the whole continent, from dangerous and widespread flooding in Germany to hazardous heat waves in Spain and Portugal - highlighting the need for urgent carbon reduction strategies.
The switch to renewable electricity is, therefore, vital for a secure future for the EU, and a critical element of that process is the adoption of low-carbon, energy-efficient heating technologies. Energy use for heating and cooling makes up around half of the EU's total gross final energy consumption, so deploying energy-efficient systems such as heat pumps is vital.
The opportunities for manufacturers in the electric heating market are clear - heat pumps are the future for space heating and hot water. Yet the road to decarbonised electric heat has been bumpy, leaving manufacturers facing risk as demand for products such as heat pumps fluctuates.
Fortunately, the EU has already begun the transition to low-carbon electricity generation. In 2024, almost half the EU's member states generated more electricity from wind and solar than fossil fuels in the first six months of 2024. The same period also showed a 17% drop in fossil-fuel-generated electricity compared to the previous year.
As a result, HVAC manufacturers can see strong market indicators that they should be developing low-carbon heating products such as heat pumps to tap into the opportunities of this market.
For example, figures from Eurostat show that in 2023 (the latest data available), 26% of energy used in heating and cooling across the EU was from renewable electricity, more than doubling over the past decade. Eurostat also highlights that heat pumps have played a significant role in achieving this growth.
Across the EU, countries have introduced incentives for heat pump growth or are establishing strategies. For example, Germany's Federal Funding Programme for Energy Efficient Buildings (BEG) supports replacing old fossil fuel heating systems with renewable-energy-based systems.
France is targeting the installation of 1 million heat pumps per year by the end of 2027, with air/water heat pumps installed as a substitute for gas or oil boilers. A national centre of expertise on heat pump technology is also planned to educate building professionals about heat pumps. Outside the EU, the UK government recently raised its heat pump grant to £7,500 for residential installations. The target is 600,000 installations per year by 2028.
However, despite these programmes, the low-carbon electric heating market is not rising in a straight line. The risk of investing in new product design and delivery is a barrier for manufacturers who may be tempted to make the most of the coming electric heating revolution.
For instance, the war in Ukraine and resulting gas shortages galvanised many EU nations into action, spurring support for heat pumps in commercial and residential buildings. This movement saw a lift in sales across the continent, building on a solid ten years of slow but steady growth. However, the trend was quickly reversed in the first six months of 2024 as heat pump sales fell by 47% compared to the same period in 2023.
One of the challenges for the heat pump market is that it is impacted by external factors, which manufacturers in the sector have little control over. The European Heat Pump Association (EHPA) has highlighted that cost-effective electricity is key to strong heat pump take-up in Europe. But in most countries, governments subsidise gas, avoiding carbon taxes and keeping it at an artificially low price relative to electricity.
This is reflected in heat pump sales figures. There is little gas used for heating in Finland, Norway or Sweden where heat pump use is widespread.
Another macro factor impacting the heat pump market is taxation. Again, the EHPA recently pointed out that only six member EU states have set a lower VAT rate on heat pumps than on fossil fuel boilers.
Both issues are in the control of politicians, although manufacturer groups and associations are lobbying hard for change. In the meantime, however, HVAC manufacturers who have yet to enter the market must balance the potential opportunity of the inevitable switch away from fossil fuels, against the current risk factors in the market.
One approach is to partner with an engineering design and manufacturing specialist who can reduce the risks of new product development and the costs of setting up manufacturing facilities.
Blue Star recognises the challenges in this market and the vital role that manufacturers will have in delivering heat pump technologies in the future We support clients with our unique Custom Design and Manufacturing (CDM) process. Our engineering teams bring their expertise to match your market requirements to develop products unique to you – and the markets you serve.
HVAC manufacturers have never had such an opportune moment to launch into the low-carbon heating market, but we are operating in uncertain times. Blue Star can smooth the bumps in the road as you move ahead, adding our know-how in this field to yours and creating a bridge into the future of heating while reducing the risk of change.
If you would like to learn more about what Blue Star can do to help grow your business, meet our team at stand E38, Hall 12.0 at ISH 2025.
