Factors driving the march of the heat pump

Recent trends, such as the push for the decarbonisation and electrification of heat, economic and geopolitical factors, and government support through regulation and incentives mean that the market for heat pumps is accelerating, with expected growth of more than 15 percent per annum until 2030. While penetration has been increasing in residential applications for some years, heat pumps are also demonstrating their ability to shake up low-to-medium temperature heating and cooling in multi-residential, commercial and industrial applications.

Heat pumps climatic superpower are their high efficiency

Heat pumps’ real climate superpower is they are more efficient than other renewable or conventional heating and cooling technologies, including low emission hydrogen and biomass boilers. Heat pumps today can reach 300% to 400% efficiency or even higher, meaning they’re putting out three to four units of heat for every unit of electrical input. For a resistive electric space heater, the theoretical maximum would be 100% efficiency (i.e one unit of heat output for one unit of electrical input), and the best models today reach around 95% efficiency. By comparison, one unit of electricity used by an electrolyser to produce hydrogen, which is then combusted, results in 0.6-0.8 units of heat. For biomass, one unit of electricity produces around 0.9 units of heat.

The gulf in efficiency between heat pumps and other heating sources comes down to how they work. Electric resistive, hydrogen or biomass heaters work by transforming energy from the form of electricity into another form, heat. Heat pumps, on the other hand, aren’t turning electricity into heat—they’re using electricity to gather heat and move it around. It’s a subtle difference, but it basically means that a heat pump can return significantly more heat using the same amount of electricity.

How do heat pumps work?

At a high level, a heat pump gathers heat from one place and puts it in another place. This concept is not a new idea – it was invented in the 1850’s and has been used in residential buildings since the 1960’s. This basic heat transfer is the core advantage of heat pumps in that it has a multi-purpose capability in both heating and cooling applications. Either taking heat out of an indoor area (i.e.) cooling and transferring it outdoors or taking heat from the outdoor area and transferring it indoors (i.e. heating). A reverse cycle air conditioner/heater is the most obvious embodiment of this multi-functional capability.

The hero in a heat pump is the refrigerant: a fluid that moves in a circuit, soaking up and releasing heat as it goes. Electricity powers the system, pushing the refrigerant around the cycle. As the refrigerant moves through the heat pump, it’s compressed and expanded, switching between liquid and gas forms to allow it to gather and release heat at different points in the cycle. While it may seem counterintuitive to collect heat from outside and transfer it inside, even if its colder outside than inside, the inherently low boiling point of the refrigerant (-25 degrees) can be exploited through the pressure applied in compression that subsequently increases the refrigerant’s boiling point and releases the contained heat energy through a heat exchanger.

The refrigerant, compressor, heat exchanger and system controls are the key drives of efficiency and technology advancement is increasing across all components. Improvement is being driven by the changing nature of refrigerants, compressors that can get higher pressure with less power, variable speed controls that allow heat pumps to ramp their power up and down, and bigger and better heat exchanger that can move heat around more effectively. These improvements are key to improving economics, increasing heating and cooling temperature ranges and thereby broadening their application areas.

Existing penetration rates are high in residential applications

The penetration rate of heat pumps in residential applications is already well underway with global growth rates around 15%, albeit much higher in Europe at around 35%. Europe is currently on track for some 45 million residential heat pumps by 2030. In several regions, heat pumps already have high market share, especially in Nordic countries and in France. In other countries such as in the USA, Japan, Australia, heat pumps also represent a larger share of the heating market since they are fulfilling demands for cooling (reverse cycle air conditioners).

In Australia, fans and reverse cycle air conditioners represent some 50% of the overall heating/cooling appliances while representing less than 15% of overall domestic energy consumption. With the remaining 50% of largely gas fuelled appliances generating 85% of the energy demand and emissions, the growth potential in heat pumps remains immense. This growth is being underpinned by government regulation and incentives as part of the drive to meet Australia’s aggressive emission reduction targets.

Constraints to penetration in the residential sector include higher upfront costs compared to other alternatives (even though has lower life-cycle costs), the existing electricity generating mix (high fossil fuel %), and differential taxes and subsidies on different fuels. Beyond economic regions, constraints are largely around size and space restrictions that can make retrofitting heat pumps in existing building stock more challenging.

Heat pumps playing an increasing role in commercial and multi-residential buildings

In the building sector, electrification of heating and cooling at scale has been challenging because of the high cost and complexity of converting a wide variety of current heating and cooling systems (steam, hot water, forced air, to name a few). However, momentum to electrify building heat is accelerating, as investors, tenants, and regulators in many markets press for decarbonisation. This shifting demand environment, an evolving policy landscape, falling costs and technological improvement of heat pumps in certain markets, have all given heat pumps momentum as a decarbonisation lever in buildings.

However, a one-size-fits-all solution doesn’t yet exist, as full electrification might not be suitable for a subset of building types or energy delivery systems. Operational viability and installation costs vary widely across different types of buildings, due to factors such as age, size, and the current heat distribution systems and approaches.

Further extensions in low to moderate temperature industrial applications

For the global industrial sector to meet decarbonisation targets, it needs to address its heating-related fuel consumption and emissions. The industrial sector accounts for one-third of global CO2 emissions; out of those emissions, about two-thirds are used for heating. Consequently, industrial heating accounts for more than 20 percent of total global CO2 emissions.

Despite exhibiting similar economic and emissions advantages as in residential, the penetration of heat pumps in the industrial sector is much lower at circa 5%. This is likely to change particularly in the low-to-medium (<200 degrees) temperature industrial applications that share both heating and cooling demands. The most likely early adoption areas include the food and beverages, pulp and paper, and chemical sectors. In areas of the world (Russia, China, and Europe) where district heating remains prevalent, this application represents an obvious early penetration potential for further developing and exploiting heat pumps in industrial applications.

Today, most investments in industrial heat pump installations go toward smaller and medium-size applications (up to five MWth) and temperatures from 80°C to 100°C. However, large-scale industrial heat pumps (more than five MWth) with temperatures higher than 100°C are expected to become increasingly important in the future. District heating is also expected to remain an important segment for industrial heat pumps, at more than a third of the market in 2030. To capture these opportunities, the often-bespoke nature of solutions mean that strong collaboration between manufacturers and engineers is required to deliver efficient and cost effective solutions.

Heat pumps crowding out the addressable market for alternatives.

The implications of this march of high-efficient heat pumps to meet heating and cooling applications across all sectors is crowding out the addressable market for alternative approaches – such as the much talked about use of hydrogen or biomass for heating.