Some two-thirds of the energy used to heat buildings worldwide still relies on fossil fuels — usually in the form of a gas boiler.
Reducing this reliance is a crucial part of the path to net zero. And one key technology for achieving this is the heat pump.
Best understood as operating like a fridge in reverse, the technology is not new, but it is now being rapidly rolled out.
How does it work?
Heat pumps draw warmth from the outside air or ground to heat buildings. They run on electricity, which can be generated from low carbon sources, and so have the potential to tackle one of the world’s biggest challenges: decarbonising heating. Heating buildings accounts for about 10 per cent of global carbon dioxide emissions, with about 60 per cent of room and water heating worldwide still supplied by fossil fuels, according to the International Energy Agency.
Heat pumps work by using refrigerant gases, typically found in fridges and air conditioners, to transfer heat.
What are the pros and cons?
Heat pumps have two main advantages: they run on electricity, which increasingly comes from renewable sources; and they are highly efficient. Typically, they can produce 3-5 units of heat for every unit of electricity used to run the pump, and can work even when it is very cold outside.
But, in most major markets, they are currently more expensive to buy and install than gas-fired boilers. Air-to-water heat pumps — the type that can be hooked up to radiators — are at their most efficient when their output is at a lower temperature than gas boilers. This can mean bigger radiators or better home insulation must also be installed.
They will also add to peak time electricity demand, potentially requiring upgrades to the electricity cable networks in some areas. And the refrigerant gases contribute to global warming if they leak — although experts say that, when it comes to heat pumps, this issue is outweighed by the fossil fuels they displace.
Will it save the planet?
Heat pumps are increasingly viewed as key to decarbonisation goals, with the IEA estimating that 875mn households would need to have them by 2050 to be in line with hitting net zero targets (alongside a ramp-up of clean electricity).
Alternative low-carbon heating methods are being considered but some, such as those that use hydrogen, are less efficient and more expensive.
Aside from some supply chain bottlenecks, a key factor stopping further heat pump production and deployment currently is demand. That has been limited by the equipment’s upfront costs as well as households’ unfamiliarity with the technology. In the UK and some other markets, electricity is also significantly more expensive than gas, which raises running costs. Many governments are now offering subsidies to boost heat-pump uptake.
Has it arrived yet?
Heat pumps are a mature technology and they have been used around the world for decades. Nonetheless, manufacturers are working on improving their efficiency, cutting costs, making them easier to install in people’s homes, enabling water to be heated to higher temperatures, and using more environmentally friendly refrigerants.
Work is also being done to understand the extent to which heat pumps can run outside peak electricity demand hours without affecting the household’s comfort.
Installation processes are also being improved, too. “There is plenty of room for innovation just making sure installers are operating at a very high standard,” says Jan Rosenow, principal at the Regulatory Assistance Project non-governmental organisation.
An estimated 200mn heat pumps have now been installed globally, and they are particularly popular in Nordic countries. Air-to-air heat pumps, which can be used for both air conditioning and heating, are also “the norm” in some parts of China, according to the IEA.
Globally, sales grew by 11 per cent in 2022, helped by increased demand in Europe as households responded to the surge in gas prices triggered by Russia’s full-scale invasion of Ukraine. But heat pump sales then dipped by 3 per cent in 2023. As of early 2023, they supplied about 10 per cent of all global heating, the IEA says.
Who are the winners and losers?
Boiler manufacturers risk losing out from any mass switch to heat pumps. However, many are switching to making heat pumps as well.
Gas pipeline owners have potentially more to lose, as fewer households stay hooked up to their network. Many are pushing for hydrogen to be used instead, or for hybrid systems that involve heat pumps alongside fossil fuel boilers. But gas pipelines falling out of use also raises the prospect of higher bills for those households that remain on the network, as well as questions over who will pay the gas decommissioning costs.
Conversely, a shift to heat pumps would boost use of the electricity networks. National Grid, the UK-based FTSE 100 company, agreed in 2021 to pay £7.8bn for Western Power Distribution, the UK’s largest electricity distribution company, in a bet on the “electrification” of the energy system.
Who is investing in it?
Government backing and the scale of the potential future market means heat pumps are attracting investment from several sources, including traditional heat pump and boiler makers which are expanding or setting up new production lines.
At the end of 2023, the European Heat Pump Association counted nearly €7bn worth of investment set for heat pump manufacturing and research in Europe over the next three years.
For example, Bosch has announced plans for a new €225mn factory in Poland, to open at the end of 2027, part of a total €1bn investment in European heat pump production capacity this decade. In 2021, the Canadian infrastructure giant Brookfield bought a majority stake in German heat pump installer Thermondo and then, in 2023, bought UK-based home repair company Homeserve. Also that year, UK financial services giant Legal and General invested £70mn alongside Octopus Energy in ground source heat pump company, Kensa.
