Overcoming the Great Heat Pump Slump
Heat pump sales in Europe fell by 47% in the first half of 2024, with 765,000 units sold in the top markets compared to 1.44 million in the same period last year.
That’s more than just a slump, it’s a crash. But I digress 😫.
With the EU’s grandiose plans and fervent goal setting for a decarbonized future as well as the grandstanding of politicos and policymakers, you’d expect unit sales and adoption rates to be growing steadily.
If you read my posts, you’ll know that this isn’t the first time I’m pointing this out. It seems there’s something very, very wrong with the policies (or lack thereof) for the support of the adoption of heat pumps.
Yes, gas is cheaper than what it was, and electricity prices are higher. That’s one way of looking at it, and there’s certainly a lot of weight supporting that argument.
But if we want to achieve long-term goals, we need to use long-term policies. Policies that stand the test of time and volatility.
Gas isn’t going to be around forever. Experience tells us that when the gas prices will increase (compared to electricity), we are to expect a growth spurt. Waiting idle isn’t a plan of action.
The four reasons for the drop in heat pump adoption rates (in my opinion) are:
Let’s get to the bottom of these.
Kill Cheap Gas
Despite the EU’s commitment to phase out fossil fuel subsidies by 2025, they have actually surged to €120b to protect households and businesses from high energy costs. With only two months to go till 2025, somehow, I’m doubtful this measure will materialize.
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Could we instead perhaps kill two birds with one stone? With a proper subsidy programme for the adoption of heat pumps European households and businesses could vastly benefit from energy security and lower heating costs.
Fix the Subsidies
The high upfront cost of heat pump installations is due to three reasons. High unit costs due to limited sales, the limited availability of experienced installers and the reality that heat pump manufacturing is not cheap. Most of these costs can be reduced with greater sales volumes, something the industry has invested in.
There’s only so much that can be done to reduce the cost of a heat pump. Subsidies that have been handed out to enable fossil fuel use for decades should be redirected to renewable heating solutions.
Subsidizing electricity costs for heating is one option, but it doesn’t address the adoption barrier of the high purchase cost.
The current subsidies are mostly myopic in their design. A big bold subsidy programme should eliminate the main barrier for heat pump adoption – the upfront costs.
This doesn’t have to mean handouts. No-interest long-term financing for the purchase and installation of a heat pump is a great option that democratizes access to the energy efficiency heat pumps offer.
Subsidies should also take renewable energy generation into account where possible. The more heat pumps installed are powered by renewables, the greater the environmental impact these heat pumps will have.
Enhance the installer pool
The negative buzz surrounding some poor installations is (although localized and perhaps a bit exaggerated) the result of teething problems. As the installer pool grows, many inexperienced installers make mistakes that get a lot of attention as early adopters share their disappointment in their experience.
Many initiatives for advanced technical training have sprouted up to address this, and this is a step in the right direction. To attract talent and investment into technical excellence though, a profession must be profitable and in demand. This means that heat pumps must keep growing their market share steadily and not turn away talent by introducing volatility.
The industry as a whole, installers, manufacturers and the entire supply chain have taken every measure possible to alleviate these issues. Now it’s about time policymakers did the same.