Heating accounts for almost 20% of energy use in industry and buildings globally, and about one-quarter of energy-sector emissions. China’s buildings and industry sectors account for about one-third of global heat consumption and therefore have a major influence on global trends. Heat consumption in buildings has grown faster in China than in any other country over the past decade, making China the second-largest market for space and water heating in buildings today, just behind the United States, with an energy demand for both these uses of around 12 EJ. This trend shows no sign of slowing down as uptake of heating equipment in China continues to increase. In Chinese industries, heat consumption grew by 13% between 2010 and 2022, reaching 38 EJ. Nearly 20% is accounted for by low- and medium-temperature heat, below 200 °C, which is the most suitable range for heat pump applications. Consumption of heat below 200 °C grew by 7% over the same period, and its share in overall demand will increase as China shifts to higher value-added industries.

Today, heating provision in China is heavily reliant on coal. The direct use of coal for heat supply accounts for around half of final energy use for heating in buildings and industry. If coal used in district heating and to generate electricity for heating in buildings and industry is included, heat provision is responsible for 40% of national CO₂ emissions and coal use in China. However, this share has fallen by more than 5% over the past decade, thanks to policies to improve air quality, reduce CO₂ emissions and maximise energy efficiency. 

Heat pump sales are seeing unprecedented momentum worldwide. Global heat pump sales have increased by almost 30% since 2020, although there was a 3% decline in 2023. China – currently the world's largest market for heat pumps for buildings – accounts for more than one-quarter of global sales, and in 2023 China was the only major market where heat pump sales grew, by a robust 12%. Heat pumps that are already on the market in China offer one of the most efficient options for decarbonising heat in district heating networks, buildings and industry. Heat pumps accounted for 8% of heating equipment sales for buildings in China in 2022, and they are already the norm in new and existing buildings in some areas of central and southern China, where they are used for heating and cooling. The use of heat pumps for domestic hot water production is emerging, primarily in urban areas and commercial buildings, but the water heating market is still dominated by conventional electric heaters and gas boilers. Heat pumps consume on average three to five times less energy than electric heaters or fossil fuel-based solutions, though use in industry and district heating is still uncommon, in part due to low awareness and upfront costs.

Purchasing a heat pump typically pays off in the long run compared with other solutions, but high upfront costs remain a barrier. In China, air-to-air heat pumps are already the most cost-competitive heating option over their lifetime in some colder climates, and in cities with hot summers and cold winters, where they meet both heating and cooling needs. Air-to-water heat pumps, meanwhile, offer lifetime savings when compared to electric heaters, which cost less upfront but have low efficiencies. In contrast, air-to-water heat pumps are more expensive than gas boilers and only offer savings over their lifetime in areas with a competitive electricity-to-gas price ratio. The upfront costs for industrial heat pumps are over six times higher than for gas boilers, but over their lifetimes they are already far cheaper than gas and electric boilers, and nearly cost-competitive with coal boilers, thanks to their high efficiency.  

Decentralised heat pumps installed in Chinese buildings currently account for one-quarter of the global installed capacity. The combined capacity is more than 250 GW, covering around 4% of heating needs in buildings. In the Announced Pledges Scenario (APS), which takes into account China’s carbon neutrality target, this capacity reaches 1 400 GW by 2050, meeting 25% of heating needs. About 100 GW of heat pumps would need to be installed in buildings every year until 2050 to meet the ambition of the APS, equivalent to the capacity deployed in the United States, China and the European Union combined over 2022. 

The greatest potential for decentralised heat pumps in buildings is in rural China and in urban areas in southern and central regions, although growth is also expected in new buildings in northern urban China. In the APS, heat pump capacity in these areas is projected to more than double by 2030 and increase fivefold by 2050. In areas with a temperate climate, or hot summers and cold winters, the share of reversible air-to-air heat pumps is expected to grow with increased uptake of heating equipment. The market for air-to-water heat pumps is also expected to grow, particularly in new buildings in northern China, where more stringent building energy codes favour heat pump uptake. In rural areas, sales of air-to-water heat pumps increase seven-fold by 2050 in the APS, and air-to-air units designed for space heating see even larger growth. Increased awareness of heat pump technologies and their applications, together with skilled installation, will be required to ensure efficient operation.

Across all industrial sectors, the greatest potential for heat pumps is to meet demand for heat at temperatures lower than 200 °C. Use of low- and medium-temperature heat is widespread in light industries, in pulp and paper production, and in the chemical sector. Today, such sectors represent over a third of industrial heat consumption in China, but they account for more than three-quarters of heat consumption below 200 °C. A potential 175-280 GW – enough to cover about 15% of current heat demand in such industries – could theoretically be supplied by heat pumps already today. In the APS, about 1.5 GW of heat pumps are installed in light industries every year between 2025 and 2050 to supply about 20% of heat demand in 2050. However, today there is a limited focus on heat pumps in industry decarbonisation plans, and a difficulty in standardising them, as they need to be tailored to specific industrial processes, which results in a more limited scope to reduce equipment costs. Further support to develop advanced heat pump designs for industrial applications at lower costs will be important in this regard..

Heat pumps applied to district heating networks provide opportunities to further decarbonise heat. Some large-scale heat pumps have already been deployed in district heating networks in urban areas in northern China, though networks still rely on coal for more than 80% of heat production. Heat pumps can increase the overall efficiency of the system by reducing network return temperatures, as well as providing opportunities to avoid curtailment of variable renewables when coupled with thermal energy storage. North urban China is reliant on district heating, and large-scale heat pumps are attracting interest as a solution for decarbonisation, in line with expansion and modernisation plans.

Heat pumps also provide opportunities to recover waste heat. China has systematically promoted waste heat recovery in industrial sectors like cement, and has other waste heat resources with temperatures below 50 °C which could be exploited by integrating large-scale heat pumps in district heating systems and industrial clusters. Nearly 20 EJ of waste heat from thermal power plants, industries, data centres and wastewater plants will be available by 2050, two thirds of which would be suitable for heat pump integration – corresponding to a heat pump capacity of 650 GW, 20 times the potential within light industries. Currently, small industrial players find it particularly challenging to develop an economic case for implementing waste heat recovery strategies and effectively co-ordinating with other thermal users and producers to identify opportunities to connect to common district heating networks. Government action to overcome these barriers will be key to exploit further the waste heat recovery potential. 

Decentralised heat pumps account for around 30% of direct emissions reductions for heating in buildings in China in the APS to 2050. Direct emissions for heating in buildings are reduced to 70 Mt CO₂ in 2050, down from 290 Mt CO₂ in 2022, thanks to greater efforts on electrification and energy efficiency. A switch to heat pumps and phase-out of coal and traditional biomass for heating could also substantially reduce local air pollutants, cutting PM_2.5 emissions from residential heating by nearly 80% by 2030. In light industries, direct emissions from heating are reduced from over 110 Mt CO₂ today to less than 10 Mt CO₂ in 2050 in the APS. Electrification accounts for two-thirds of emissions reductions for heating in light industries by 2050, of which one-third results from heat pumps.

Annual emissions from a heat pump installed in China are on average already more than 30% lower today than those from a gas boiler when taking into account both direct and indirect emissions. In the APS, indirect emissions from power generation decrease by over 40% by 2030, mainly due to the increased deployment of solar, wind and nuclear power. By the same year, annual emissions from heat pumps are nearly 60% lower than a gas boiler. While increased deployment of heat pumps inevitably increases electricity demand, their peak load impact is two times smaller than that of electric appliances in buildings in the APS in 2030. 

China is the largest manufacturer of decentralised heat pumps for buildings and could quickly ramp up production to support further growth. China is a global leader for heat pump technology innovation and manufacturing, and produced around 35% of all heat pumps sold worldwide in 2022. More than 300 000 people are currently employed in China’s heat pump sector, and numbers are set to double by 2050 in the APS. This is likely to create a need for vocational training and upskilling of practitioners such as heat pump installers.

In the APS, investment needs in industry and buildings continue to rise to accelerate the deployment of heat pumps. In buildings, annual investments need to triple to USD 30 billion (CNY 200 billion) in 2030 and to almost quadruple by 2050, equivalent to investments in wind power in the European Union and the United States combined in 2022. In the light industry sector, scaling up large-scale heat pump capacity to 30 GW in the APS by 2050 would require around USD 20 billion (CNY 140 billion). For comparison, Chinese light industries spent an equivalent amount on natural gas for heating in 2022.