Europe's Heat Pump race

The European Heat Pump race, who's in pole position?

Germany is taking bold steps in the fight against climate change. One of the significant contributors to carbon emissions is home heating, which is why Germany introduced a new rebate scheme in January 2023 to encourage homeowners to decarbonise their heating systems. Currently, about half of the 41 million homes in Germany use gas heating, and another quarter use oil heating. The scheme offers up to a 40% rebate on the cost of buying and installing a heat pump, which is a significant incentive for homeowners.

Heat pumps are environmentally friendly and energy-efficient, making them an excellent alternative to traditional heating systems. They work by using energy from the air, water, or ground to provide both heating and cooling. Heat pumps can function even in extreme temperatures and are known to reduce energy bills significantly once installed. In Germany, every new heating system installed from 2024 must run on 65% renewable energy, making the switch to heat pumps even more appealing for homeowners.

The subsidy scheme in Germany is one of several heat pump subsidies across Europe. While some homeowners have been hesitant to switch due to the higher initial cost, the rebate scheme is making it easier for them to invest in heating system upgrades. Heat pump sales were already on the rise before the scheme, but the surge in demand caught manufacturers off guard, leaving some homeowners waiting up to 10 months before they could have their new heat pumps installed by trained technicians, who are also in short supply.

Manufacturers like Viessmann are scaling up production to meet the shortfall and investing heavily in training installers, providing educational materials for would-be buyers, and helping customers navigate the complex subsidy application process.

One issue with heat pumps is that they work better in well-insulated houses, which are more suitable for generating water at lower temperatures for the central heating system. For poorly insulated homes, heat pumps would be difficult to use and unlikely to save homeowners much money. As a result, countries like Norway, Sweden, and Finland, with the best insulation, have the highest heat pump penetration, with Germany and the UK lagging behind.

Despite the challenges, the German Heat Pump Association is working with housing providers to decarbonise their buildings to ensure they remain attractive to tenants in the future. Tenants who want to take matters into their hands may soon access smaller-scale heat pump solutions for heating and cooling individual rooms. US start-up Gradient plans to enter the European market in 2023 and is developing small, affordable, self-install heat pumps that fit over window sills and replace existing air conditioning units.

The long-term vision is to build a holistic low-carbon, low-cost energy system where heat pumps, high-quality insulation, solar energy, rerouted waste heat, other renewables, and smart technology work together to provide a circular system of heating and cooling, charging cars, and meeting other energy needs for homeowners and their wider community. Heat pumps are an excellent step towards that goal, and homeowners can take solace in the fact that they work and reduce energy bills.