IEA (2022), The Future of Heat Pumps, IEA, Paris https://www.iea.org/reports/the-future-of-heat-pumps, License: CC BY 4.0
Heat pumps, powered by low‐emissions electricity, are the central technology in the global transition to secure and sustainable heating. Heat pumps currently available on the market are three‐to‐five times more energy efficient than natural gas boilers. They reduce households’ exposure to fossil fuel price spikes, which has been made all the more urgent by the ongoing global energy crisis. Over one‐sixth of global natural gas demand is for heating in buildings – in the European Union, this number is one‐third. Many heat pumps can provide cooling, too, which eliminates the need for a separate air conditioner for the 2.6 billion people who will live in regions requiring heating and cooling by 2050. Heating in buildings is responsible for 4 gigatonnes (Gt) of CO2 emissions annually – 10% of global emissions. Installing heat pumps instead of a fossil‐fuel‐based boilers significantly reduces greenhouse gas emissions in all major heating markets, even with the current electricity generation mix— an advantage that will increase further as electricity systems decarbonise.
Around 10% of space heating needs globally were met by heat pumps in 2021, but the pace of installation is growing rapidly. The share of heat pumps is comparable to that of fuel oil for heating and of other forms of electric heating but lower than the over 40% of heating reliant on gas heating and the 15% reliant on district heating. In some countries, heat pumps are already the largest source of heating. In Norway, 60% of buildings are equipped with heat pumps, with Sweden and Finland at over 40%, undercutting the argument that heat pumps are unsuitable for cold climates. Global sales grew by nearly 15% in 2021, double the average of the last decade. Growth in the European Union was around 35%, and is slated to accelerate further in light of the energy crisis, with sales in the first half of 2022 roughly double over the same period last year in Poland, the Netherlands, Italy and Austria. China continues to be the largest market for new sales, while North America has the largest number of homes with heat pumps today. Together, these regions, along with Japan and Korea, are also major manufacturing hubs, home to the industry’s largest players.
Government energy security concerns and climate commitments would make heat pumps become the primary means of decarbonising space and water heating. This report explores a scenario in which governments around the world meet all their announced energy and climate‐related commitments in full and on time. As the proven technology of choice to decarbonise heating, global capacity of heat pumps jumps from 1 000 GW in 2021 to nearly 2 600 GW by 2030 in this scenario, boosting their share of total heating needs in buildings from one‐tenth to nearly one‐fifth. As a result, natural gas demand falls by 80 billion cubic metres (bcm), heating oil drops by 1 million barrels per day, and coal declines by 55 million tonnes of coal equivalent. In aggregate, this means heat pumps account for nearly half of the global reductions in fossil fuel use for heating in buildings by 2030, with the remained coming from other efficiency measures. In a scenario consistent with the global climate target of 1.5 °C, heat pumps accelerate faster – their capacity nearly triples by 2030 and their share in heating reaches one‐quarter.
Heat pumps can also address heating needs in industry and district heating. Large heat pumps can provide heat up to 140‐160 oC today, with higher temperatures possible through innovation and improved designs. The most common industrial heat pumps today provide lower temperature heat. The paper, food and chemicals industries have the largest near‐ term opportunities, with nearly 30% of their combined heating needs able to be addressed by heat pumps. In Europe alone, 15 GW of heat pumps could be installed in 3 000 facilities in these three sectors, which have been hit hard by recent rises in natural gas prices.
The potential for heat pumps to cut dependence on natural gas for heating is particularly large in the European Union, where natural gas is the most used heating fuel and where gas prices have risen the most. In a scenario consistent with the EU’s climate ambitions, heat pump sales rise to 7 million by 2030 – up from 2 million in 2021 – helping achieve the REPowerEU objective of ending Russian gas imports well before 2030. This deployment reduces the consumption of natural gas by 7 bcm in 2025 and 21 bcm by 2030, an amount equivalent to almost 15% of EU pipeline imports from Russia in 2021.
The accelerated deployment of heat pumps inevitably increases global electricity demand, though energy efficiency and demand response measures can greatly reduce the impact on power systems. The share of electricity in heating for buildings and industry doubles between 2021 and 2030 to 16% if climate pledges are met. Over that same time, global electricity demand rises by one quarter, to which heat pumps contribute less than one tenth. For households that add a heat pump without improving efficiency in parallel, this can nearly triple their peak demand during winter. Improving a home’s efficiency rating by two grades (e.g. from D to B in European countries) can halve heating energy demand and reduce the size of the heat pump needed, saving consumers money and reducing the growth in peak demand by one‐third. Together with careful grid planning and demand‐side management, this moderates the need for distribution grid upgrades caused by electrifying heat and minimises the need for additional flexible generation capacity to 2030.
Over their lifetime, heat pumps can save consumers money and shield them from price shocks. The average household or business that uses a heat pump spends less on energy than those using a gas boiler. These savings offset the higher upfront costs for heat pumps in many markets today – in some, even without subsidies. The economic proposition of heat pumps improves in the context of today’s energy price spikes: household savings range from USD 300 per year in the United States to USD 900 in Europe. With appropriate support for poorer households to manage the upfront costs, heat pumps can meaningfully address energy poverty, with energy bill savings in low‐income households ranging between 2% and 6% of their household income after moving away from a natural gas boiler.
Switching to heat pumps cuts emissions of greenhouse gases and helps improve air quality. Accelerated deployment of heat pumps, in line with national climate targets, can reduce global CO2 emissions by half a gigatonne already by 2030. However, unintended leaks of F‐gas refrigerants – potent greenhouse gases – can decrease their positive climate impacts. With today’s refrigerants, heat pumps still reduce greenhouse gas emissions by at least 20% compared with a gas boiler, even when running on emissions‐intensive electricity. This reduction can be as large as 80% in countries with cleaner electricity. Global emissions of major air pollutants caused by combustion heating in buildings also drop, particularly from coal in China, while other hazards associated with heating by fuel combustion diminish.
The expansion of heat pump manufacturing and installations to meet rising demand would create more jobs. Global employment in heat pump supply nearly triples to over 1.3 million workers to 2030 in our scenario. Jobs in installation grow the most, with growth also in maintenance and manufacturing, providing numerous opportunities, especially for medium‐ skilled workers.
Accelerating the take‐up of heat pumps requires overcoming a number of barriers. Chief among them are the higher upfront cost of buying and installing the devices relative to other heating options; other non‐cost deterrents to consumer adoption; manufacturing constraints; and potential shortages of qualified installers. Concerted action by governments, in partnership with the heat pump industry, is needed to address these hurdles and achieve higher rates of deployment.
Despite long‐term savings, high upfront costs can deter consumers. The cost of purchasing and installing an air‐to‐air heat pump is typically between USD 3 000 and USD 6 000. However, even the cheapest air‐to‐water models, including modifications to the existing radiator systems, remain two to four times more costly than natural gas boilers in most major heating markets. Financial incentives are currently available in over 30 countries around the world – covering more than 70% of today’s heating demand. The subsidies in these countries make the cheapest heat pump options comparable to the cost of a new gas boiler for consumers. Additional incentives can target low‐income households (as in Poland) and/or high efficiency models (as in Canada). In some countries, the design of electricity tariffs and energy taxation put heat pumps at a disadvantage relative to fossil fuel boilers. Tariffs and taxes should instead be tilted in favour of cleaner and more efficient consumer choices.
A number of non‐cost barriers hold back consumer adoption of heat pumps today. These include lack of information, split incentives for building owners and tenants, and building regulations. Several governments have taken action to adjust building codes (such as in the Czech Republic), create “one‐stop shops” for consumers (such as in Ireland) and encourage alternative business models to address the split incentive – notably in North America, the United Kingdom and Germany – though stronger efforts are required. Particular attention needs to be paid to addressing barriers to the installation of heat pumps in multi‐family and commercial buildings, which account for a low share of sales today.
Shortages of qualified installers, already a bottleneck in many key heating markets, call for large‐scale worker reskilling. Global demand for full‐time installers quadruples by 2030 in our scenario. Incorporating heat pumps into existing certifications for heating technicians, plumbers and electrical engineers, who have similar skills, would help reduce training requirements. Financial incentives, such as those used across Europe, can also attract new workers to specialised training programmes.
Leading manufacturers have recently announced plans to invest more than USD 4 billion in expanding heat pump production capacity and related efforts, mostly in Europe. New heat pump installation in the next four years would be roughly equal to the number of heat pumps installed in the last decade. Several countries, notably the United States, are responding to supply chain vulnerabilities with incentives to build up domestic manufacturing capacity. Long‐term policy consistency and regulatory certainty, together with targeted action to strengthen supply chains, remain critical for manufacturers as they consider where to expand their operations. In particular, regulations on F‐gases must balance the need to limit refrigerant emissions with cost, safety, energy efficiency and supply chain considerations.
Accelerating deployment of heat pumps in line with national climate targets is well within reach but requires further efforts from policy makers and industry. The market growth in heat pumps needed this decade to hit national climate targets is not as steep as the expansion we have already seen in solar PV and electric vehicles, although there would need to be a further acceleration to get on track for the IEA’s Net Zero Emissions by 2050 Scenario. The additional upfront investment required is sizable, reaching USD 160 billion annually by 2030, but these incremental costs are outweighed by economy‐wide savings on fuel, especially if today’s high prices persist. Governments and industry have vital roles to play to address persistent market barriers and enable heat pumps to play their full part in addressing today’s most pressing issues – energy security, energy affordability, and rapid reductions in emissions.