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Addressing Europe's Energy Crisis:

The Power of Heat Pumps

Europe’s buildings need to decarbonise, and fast.

 

Greenhouse gas emissions from buildings must fall by 60% by 2030 compared to 2022 to be in line with EU targets. But they are only set to reach an 11% reduction by then.

 

Why is the building sector so far off track? It is mainly because of fossil fuel boilers used to heat homes and domestic water. There are still 90 million such boilers across Europe.

 

There is a clean alternative! This is the heat pump, which takes a renewable source of energy from outdoors – the air or water – and efficiently turns it into heat for indoors with only a small amount of additional electricity. Heat pumps can also use waste heat from industrial processes or cooling and turn it into warmth for buildings.

 

Heat pump sales had been growing steadily for several years. Then came 2022, and following Russia’s invasion of Ukraine, the EU set ambitious targets for heat pumps in order to speed up the move away from gas.

 

According to the targets, Europe should add 60 million more heat pumps by 2030, on top of the 20 million already installed today.

 

New research from Cambridge Econometrics finds doing this would lead to a drop in gas demand from buildings of 40% between 2022 and 2030, as well as 46% lower CO2 emissions.

 

This, in turn, would shrink Europe’s energy import bills by €60 billion, and household heating bills by 20% by 2030, the research shows. This would increase a household’s disposable income by an average of 2% or more.

 

What’s more, annual Gross Domestic Product (GDP) would go up by 2.5%, the study found, and 3 million net jobs would be created.

 

It would be good for your health too. This is because heat pumps do not produce harmful emissions, unlike burning fossil fuels and biomass. REPowerEU’s 60 million more heat pumps would slash nitrous oxides (NOx) from household heating by almost 40% by 2030 compared to 2022.

 

The multitude of benefits from more heat pumps is clear. Now, heat pump sales are breaking records. There were 3 million heat pumps installed last year in Europe – sales growth of 39% - making a total of 20 million now warming and cooling European homes altogether.

 

However, so far, this simply is not fast enough to pull ahead of fossil fuel boilers. A new heat pump is installed about every ten seconds in Europe, but a new fossil boiler is installed every eight seconds.

 

It is crucial to avoid being locked into the fossil fuel boiler era. That would have negative consequences for health, climate, energy bills, and the EU would not meet its energy targets.

 

The European Commission has taken several recent steps to help. It identified heat pumps are a key net zero European industry in its recent plan to boost such sectors. However, this plan did not contain much detail in terms of subsector targets or intermediary goals.

 

The plan, called the ‘Net-Zero Industry Act’, sets a heat pump target of 31 GW of manufacturing capacity by 2030. This is far lower than EHPA foresees. Even a conservative growth scenario would lead to 47 GW by 2030 – more than 50% higher. This is starting from the estimated 21.95 GW of European-made heat pumps installed in Europe in 2022.

 

It also sets a goal for the EU to domestically produce at least 40% of the technology it needs to achieve its climate and energy targets by 2030. Again, this 40% is far lower than EHPA foresees for heat pumps. Today, 60% of heat pumps sold in Europe are manufactured in Europe – and given the sector’s record-breaking sales, EHPA believes this level can be maintained or even extended with the right mix of support measures. The 40% manufacturing target the Act refers to for all the technologies identified is therefore, once again, too low for the heat pump sector.

 

 

How a heat pump works.

IMAGE: European Heat Pump Association / Doug Dawson

Another significant recent announcement from the European Commission was that it will publish a heat pump action plan before the end of 2023. This follows months of advocacy and communications from the heat pump sector.

 

The action plan is due to have several parts. They will include communication outreach to citizens, business and small industries, along with EU laws to help bring an end to gas boilers, and actions to make financing more accessible.

 

Part of the action plan is to be an ‘accelerator’ or partnership between the European Commission, Member States and the heat pump sector itself. The European Heat Pump Association (EHPA) has already been working on this with the European Climate Foundation and a range of EU officials, NGOs, think tanks and heat pump manufacturers to identify barriers and how to address them.

 

The final ‘accelerator’ document will be presented to the European Commission in early June. While it is not yet finalised, some barriers and actions have been clearly identified by participants.

 

The barriers include costs. Even though a heat pump is around 30% cheaper than a fossil fuel boiler over its lifetime, the upfront costs are much higher in most markets. The affordability of heat pumps can be improved by reducing taxes and levies on heat pumps, heat pump installation and electricity.

 

Another missing piece is the need for better, clearer information. Comparing heat pump options, choosing an installer, obtaining approvals and qualifying for relevant subsidies can be complex and time‐consuming for consumers.

 

There is also a lack of installers and other skilled workers. This will only increase as heat pump sales continue to go up. EHPA has calculated that REPowerEU’s heat pump roll-out targets mean we need a minimum of 500,000 skilled full-time equivalent employees by 2030 in Europe, up from around 120,000 today. Countries should be encouraged to introduce financial incentives targeted towards installers, making it a no-brainer for installers to get training.

 

The supply chain is another bottleneck. Manufacturers have announced plans to invest billions of euros in expanding heat pump production capacity, but supply chain issues are adding to manufacturing costs and threaten those growth plans. European production capacity can be increased by developing an EU industrial strategy for heat pumps and heat pump components.

 

Finally, the power system. Heat pumps can provide flexibility because they can use electricity when there is more of it and it is cheaper. For this to happen properly, the flexibility offered by these additional heat pumps should be taken into account when making investments in the power sector and distribution and smart grids. Consumer-facing action, such as incentives for using heat pumps at non-peak times, would also make a big difference.

 

To ensure a smoother path for heat pump growth overall, laws which clearly set a direction of travel are important. Investors and manufacturers then feel confident in the market and more willing to go further. For example, ending the sale of fossil fuel boilers from 2029 as proposed by the European Commission, and mentioned above, would send a clear, long-term message of the way the wind is blowing.

 

The Commission’s proposal and vote by the European Parliament to hugely speed up the end of fluorinated gases – an essential part of heat pumps – could do the opposite, jeopardising the goals the EU seeks to reach. The heat pump sector has been gradually moving away from F-gases, due to their impact on global warming, and has been replacing them with refrigerants with low global warming potential and non-fluorinated alternatives. Yet ramping up the timeline for phasing out F-gases at the same time as ramping up the targets for heat pumps under REPowerEU is incompatible. Instead, the EU needs to allow manufacturers and the whole sector time to adapt rather than slow down heat pump growth and force consumers back to fossil fuels.

 

The positive impacts of heat pumps are many, and the sector can help citizens move to secure, clean heating. But it needs the obstacles to be addressed so that we can achieve clean, affordable heating for all, helping fight climate change and benefitting all European citizens.