This article was published by the International Energy Agency on March 31, 2023.
At current growth rates, heat pumps would nearly double their share of heating in buildings by 2030
Global sales of heat pumps(1) grew by 11 per cent in 2022, according to the latest IEA analysis, marking a second year of double-digit growth for the central technology in the world’s transition to secure and sustainable heating.
Increased policy support and incentives for heat pumps in light of high natural gas prices and efforts to reduce greenhouse gas emissions were key drivers behind the strong uptake. In Europe, heat pumps enjoyed a record year, with sales growing by nearly 40 per cent. In particular, sales of air-to-water models, which are compatible with typical radiators and underfloor heating systems, jumped by almost 50 per cent in Europe. In the United States, heat pump purchases exceeded those of gas furnaces. However, in China, the world’s largest heat pump market, sales remained stable amidst a general slowdown of the economy.
Globally, heat pumps, when used as a main heating device, cover around 10 per cent of heating needs in buildings today. This corresponds to over 100 million households, meaning that one in ten homes that require substantial heating are served by heat pumps today. However, many more households use heat pumps only part of the winter or as a supplementary source of heating in regions where they are mainly used for cooling buildings.
To align with all existing national energy and climate pledges worldwide, heat pumps will have to meet nearly 20 per cent of global heating needs in buildings by 2030. The world is almost on track to reach this milestone if new installations continue to grow at a similar rate globally as they did the last two years. However, sales need to expand by well over 15 per cent per year this decade if the world is to achieve net zero emissions by 2050.
Installations of heat pumps remain concentrated in new buildings and existing single-family homes. Multi-storey apartment buildings and commercial spaces will need to be a priority area if solid growth is to continue. Energy efficiency retrofits also need to accelerate to ensure that new heat pumps installed in existing buildings are as efficient as possible and not oversized. This will lower upfront and operating costs for consumers and reduce strains on power systems, especially if combined with smart controls for flexible operation.
Heat pumps sales surged to a new record in Europe
Across Europe, nearly 3 million heat pumps were sold in 2022, an increase of almost 40 per cent compared with the previous year. Russia’s invasion of Ukraine fuelled this trend as natural gas and electricity prices rose significantly, encouraging consumers to switch to heat pumps, which are far more efficient than conventional heating technologies. Last year, the European Commission also announced its plans to double the deployment rate of heat pumps, as initially proposed in the IEA’s 10-Point Plan to Reduce the European Union’s Reliance on Russian Natural Gas. Most EU countries provide financial incentives that make this target achievable. An accelerated rollout of heat pumps would also contribute significantly to the bloc’s wider de-carbonisation goals and improve air quality where coal and oil boilers are replaced. Some more nascent markets such as Poland and Czechia doubled in size last year, though Italy, France and Germany accounted for almost half of all sales in Europe. In the Nordics, where heat pumps are a long-established heating solution, nearly five times as many units were sold per household than in the rest of Europe.
In terms of new sales, the Nordic and Baltic countries have the highest share of air-to-air units, which account for around 50 per cent to 80 per cent of installations. Similarly, purchases of such units are also high in Southern Europe. In Germany and Poland, air-to-water heat pumps are the technology of choice. Hybrid systems, which combine heat pumps with gas boilers, are popular in Italy for instance, where they accounted for more than 40 per cent of sales in the air-to-water segment in 2022. Ground- and water-source heat pumps are the most efficient models – and the most expensive. The need for drilling works and additional space mean that they account for less than 10 per cent of European sales today.
In France, heat pumps outsold fossil fuel boilers in buildings for the first time in 2022, coinciding with the first year of a national ban on gas boilers in new buildings. While demand for fossil fuel boilers is declining in other major European countries, they still have a higher market share than heat pumps. In Germany and Italy, for example, there were twice as many fossil fuel boilers sold than heat pumps in 2022. At the same time, there are proposals to phase out the most polluting technologies and fuels. Plans by the German government suggest that new heating systems must be largely based on renewables from 2024 onwards. Across Europe, seventeen countries have implemented or announced bans on installations of boilers that run exclusively on some form of fossil fuel.
Asia and North America are the heavyweights of the global heat pumps market
North America has the largest capacity of heat pumps installed today used for heating buildings. In the United States, heat pumps overtook gas furnace sales in 2022 after years of almost equal growth. Most residential units in the country are air-to-air models in ducted air systems. These are larger than those typically used in Asia, where there is often one unit for each room. Though most heat pumps are still installed in single family homes in the United States, the number of apartments using heat pumps as their primary heating technology more than doubled between 2015 and 2020. In recent years, manufacturers have developed specialized heat pumps that work efficiently in cold climates to accelerate their deployment in these US regions, where less than 5 per cent of households heated their homes with this technology in 2020.
There were more heat pump units sold in China in 2022 than in any other country despite a slowdown in sales growth. In Northern China, district heating remains the most common heating solution in cities, but many of these households also have heat pumps installed for space cooling and providing additional heating from time to time. In Southern China, where winters are milder, air-to-air reversible units are a widespread solution for space heating, though sales were largely stagnant in recent years. Air-to-water heat pumps mainly used for space heating are a small segment of the Chinese market, but they saw growth of over 20 per cent in 2022. Sales of air-sourced heat pump water heaters remained relatively stable at more than 1 million units sold. Around 40 per cent of heat pumps worldwide are manufactured in China, making the country the largest producer and exporter of this technology, with most of its exports going to Europe.
In Japan and Korea, sales of air-to-air heat pumps were largely stable in 2022 as most units sold were to replace existing installations, which are typically a third less efficient than new models. More than 90 per cent of homes in Japan are already equipped with heat pumps for space heating and cooling. However, two out of three households still use other appliances such as kerosene or electric heaters for additional heat when needed. Demand for heat pumps to provide hot water is growing rapidly in Japan, with more than 8.5 million units sold since the introduction of the EcoCute models in the early 2000s. In Korea, geothermal and water-source heat pumps are expanding market segments driven by financial incentives.
In Australia and New Zealand, air-to-air heat pumps are already the most common source of heating, with market penetration increasing in regions with colder climates thanks to improved efficiencies.
Heat pumps are still largely absent from heating markets in Central Asia and some parts of Eastern Europe, where upfront costs remain a major barrier and many homes are connected to district heating networks. However, large-scale heat pumps are an effective option to decarbonise these networks, which remain heavily dependent on fossil fuels today.
Financial incentives are a key driver for the growth of heat pump deployment
Heat pump sales have been boosted by financial incentives that are currently available in over 30 countries around the world. Collectively, these countries make up more than 70 per cent of global heating demand for buildings. Many of these support schemes were introduced or strengthened in 2022. Since the beginning of this year, subsidy levels were increased in the United States, Poland, Ireland and Austria, laying the foundations for sustained heat pump deployment.
Financial incentives available today make the purchase of the cheapest heat pump models comparable to that of a new gas boiler for consumers in most major markets. Some countries offer higher subsidies for low income households, the introduction of high efficiency models or for units operating with natural refrigerants which adds to the economic case for heat pumps. However, the design of electricity tariffs and energy taxation still put heat pumps at a disadvantage relative to fossil fuel boilers in some countries. Tariffs and taxes should instead be tilted in favour of cleaner and more efficient consumer choices. Addressing other barriers such as a shortage of installers and restrictions or practical constraints for new installations becomes even more pressing as upfront costs come down.
Continued growth in heat pump deployment also requires secure and resilient supply chains. Companies with headquarters in Japan accounted for almost 40 per cent of the global market, and those in China about 30 per cent. The five largest global manufacturers have their headquarters in Asia Pacific. However, around half of the production capacity of manufacturers headquartered in that region is located elsewhere. Supply chains today are stretched, particularly for chips and other key components. Manufacturers had already announced more than EUR 4 billion in expanded heat pump production capacity and related efforts as of November 2022. Expanding production capacity by 2030 to the level outlined for that year in the IEA’s pathway to net zero emissions by 2050 would require additional investments of USD 15 billion globally. Further manufacturing announcements are expected, driven by new incentives for consumers. This is underpinned by direct support for manufacturers through the Defense Production Act in the United States and the upcoming Net Zero Industry Act and European Sovereignty Fund in the EU.
Better data is important for accelerating the deployment of heat pumps worldwide
More granular reporting of heat pump deployment by technology, capacity and building type will be crucial to ensure informed policy decisions are taken to accelerate the uptake of heat pumps. Stronger international collaboration could facilitate the exchange of data collection, best practices and the harmonization of reporting. This is particularly the case for air-to-air units, which are often used exclusively for space cooling or in parallel with other heating equipment.
Market data is even more scarce on large-scale heat pumps for industry and district heating. These two segments have a critical role to play in the decarbonization of heat by providing a key solution for low-temperature processes in a range of industries and by complementing the direct electrification of heat in buildings.
The IEA will continue to publish an annual update on global heat pump sales and deployment. New analysis on developments in heat pump technology and global supply chains will also be covered in our flagship publication series.
Additional contributions to this commentary were provided by Conor Gask, Hyeji Kim, Toru Muta, Arthur Rogé, Ryota Taniguchi, Talya Vatman, Daniel Wetzel and Biqing Yang. The European Heat Pump Association, the Chinese Heat Pump Association, Assoclima and Assotermica provided valuable data.
- Heat pumps included in this analysis are electric units used as primary device for space and/or water heating in buildings and excludes to the extent possible air-air reversible heat pumps units bought primarily for space cooling.