According to the IEA International Energy Agency survey statistics: In 2019, nearly 20 million households purchased heat pumps. Heat pump growth is evident in all major heating markets including North America, Europe and North Asia!

Although heat pumps have become the most common technology in newly built homes in many countries, they only meet 5% of global building heating needs. As SDS calls for a threefold increase in the share of heat pumps by 2030, further policy support and innovation is required to reduce upfront procurement and installation costs, remove market barriers for retrofits, and improve energy performance and refrigerant alternatives.

Proportion of households purchasing heat pump heating and hot water production in selected regions in the context of sustainable development 2010-2030

Heat pumps are widely used in newly built houses

As in the past, heat pumps currently meet only a small fraction of residential heating needs (about 5% in 2019), while traditional electricity technologies based on fossil fuels accounted for three-quarters of global energy sales in 2019.

Heat pumps have the highest market share of all heating technologies in many countries. For example, in the United States, the share of heat pump sales in new construction is over 40% in single-family homes and close to 50% in new multi-family homes.

The EU market is expanding rapidly, with around 1.3 million households purchasing a heat pump in 2018 (an average annual increase of 12% since 2015). France, Italy and Spain account for half of all sales in the EU, while Sweden, Estonia, Finland and Norway have the highest penetration rates, selling more than 25 heat pumps per 1,000 households per year.

However, we still need to make progress on a global scale to increase the utilization of heat pump equipment in existing buildings.

Heat pump technology is becoming more and more popular

air source heat pumps have exploded in popularity in recent years and now dominate building sales worldwide. In the US, for example, annual shipments expanded from 2.3 million units in 2015 to 3.1 million units in 2019.

Several factors have contributed to the popularity of air source heat pumps, mainly including: policy development, upgraded building standards to make heat pumps in new buildings more competitive, and growing demand for air conditioning.

Sales of heat pump water heaters (used in sanitary hot water production) have more than tripled since 2010, mainly due to purchases in China. In 2017, northern China's coal-to-electricity plan, which calls for replacing coal-fired boilers with air-source heat pumps and providing subsidies, helped heat pumps boost sales to 1.3 million units. (Editor's note of "Heat Pump Market": According to the industry online statistical survey, China's air source heat pump shipments in 2019 were 15.79 billion yuan)

Japan was the second largest market, although sales fell slightly from 5.76 million in 2010 to 480,000 in 2018.

In Europe, heat pump sales are low but rising sharply, as 155,000 heat pump water heaters were sold in 2018, up from around 30,000 in 2010.

Ground source heat pumps are rarely used in the world, with annual sales of about 400,000 units. More than half of those were installed in the U.S., where shipments and installations have more than doubled since 2010, in part because the 30% federal tax credit was available between 2008-16 and 2018-21.

Sweden and Germany are the two main European markets, with 20,000 to 30,000 heat pumps sold in each country each year. In fact, Sweden has the highest per capita installation rate in the world.

Heat pump seasonal performance steadily improves

For most space heating applications, the typical seasonal coefficient of performance (a measure of annual average energy performance, COP) for heat pumps has steadily increased since 2010 to nearly 4 today.

It is common for heat pumps to achieve a COP of 4.5 or higher, especially in relatively mild climates such as the Mediterranean region and south-central China. Conversely, in extreme cold climates such as northern Canada, low outdoor temperatures reduce the energy performance of currently available technologies to an average of around 3-3.5 in winter.

The transition from non-inverter to inverter technology in recent decades has improved efficiency. Today, inverter technology avoids most of the energy losses associated with non-inverter technology stopping and starting, while also reducing compressor temperature rise.

Regulations, standards and labelling, and technological advancements drive improvements across the globe. For example, the average seasonal coefficient of performance of heat pumps sold in the U.S. increased by 13 percent in 2006 and 8 percent in 2015, after the minimum energy efficiency standards were raised twice.

In addition to further improvements in the vapour compression cycle (e.g. through next-generation components), increasing the heat pump seasonal COP to 4.5-5.5 by 2030 will require system-oriented solutions (to optimize energy use throughout the building) and Use refrigerants with very low or zero global warming potential.

2018 Heat Pump Readiness Index Relative to Regional Demand

Compared to gas-fired condensing boilers, heat pumps can meet 90% of global heating needs with a lower carbon footprint.

While electric heat pumps still currently account for no more than 5% of global building heating, in the long run they could provide more than 90% of global building heating with lower CO2 emissions. Even taking into account the upstream carbon intensity of electricity, heat pumps have lower CO2 emissions than condensing gas boiler technology (which typically operates at 92-95% efficiency).

Since 2010, relying on the continuous improvement of heat pump energy performance and clean power generation, the potential coverage rate of heat pumps has achieved a significant increase of 50%!

Policy to accelerate heat pump application since 2015

In China, subsidies under the Air Pollution Prevention and Control Action Plan help reduce up-front installation and equipment costs. China's Ministry of Environmental Protection introduced air source heat pump subsidies in various Chinese provinces in February 2017 (eg, RMB 24,000 to RMB 29,000 per household in Beijing, Tianjin and Shanxi). Japan has a similar program through its energy conservation program.

Other plans specifically target ground source heat pumps. In Beijing and across the United States, 30% of the initial investment cost is borne by the state. To help achieve the target of 700 million meters of ground source heat pump deployment, China has proposed supplementary subsidies (35 yuan/meter to 70 yuan/meter) for other fields, such as Jilin, Chongqing and Nanjing.

The United States requires products to indicate a seasonal coefficient of performance for heating and a minimum energy efficiency standard for heat pumps. This performance-based incentive system can indirectly improve future performance by encouraging the use of heat pumps in combination with photovoltaics in self-consumption mode. Therefore, the heat pump will directly consume the locally produced green electricity, reducing the net electricity consumption of the public grid.

In addition to the mandatory standards, the European Space Heating Performance Label pairs the use of heat pumps (at least A+ class) with fossil fuel boilers (up to A class) on the same scale, allowing direct comparison of their performance.

In addition, in China and the EU, the energy used by heat pumps is classified as renewable heat, which allows for other incentives such as tax rebates.

Canada is considering mandating an efficiency factor greater than 1 for energy performance of all heating technologies (equivalent to 100% equipment efficiency) by 2030, which would effectively ban all conventional coal-fired, oil-fired and gas-fired boilers.

Reduce barriers to adoption in larger markets, especially for refurbishment

The global share of residential heat supplied by heat pumps must triple by 2030. Therefore, policies need to address barriers of choice, including high up-front purchase prices, operating costs and the legacy of existing building stock.

In many markets, the potential savings in heat pump installation costs relative to energy bills (for example, when switching from gas boilers to electric heat pumps) often mean that heat pumps may only be slightly cheaper in 10 to 12 years, even if they are higher energy performance.

Since 2015, subsidies have proven effective in offsetting the upfront costs of heat pumps and kickstarting market development, accelerating their adoption in new buildings. Removing this financial support could significantly hinder the adoption of heat pumps, especially ground source heat pumps.

Refurbishment and heating replacement could also be part of a policy framework, as accelerated deployment in new buildings alone will not be enough to triple residential sales by 2030. Deploying retrofit packages involving building shell elements and equipment upgrades will also reduce heat pump installation costs, which can account for around 30% of the total investment cost of an air source heat pump and 65-85% of the total investment cost of a ground source pump.

Heat pump deployment should also anticipate power system modifications required to meet SDS. For example, the option to connect to on-site solar photovoltaic panels and participate in demand response markets will make heat pumps more attractive.

Rethinking energy pricing to close the gap between electricity and gas prices

To triple the share of residential heat supplied by global heat pumps, policies need to address adverse energy prices. High electricity prices and higher upfront costs remain major barriers in most markets, in part due to fossil fuel subsidies and electricity taxes. Global electricity prices (measured in dollars per kilowatt-hour) are roughly twice the price of natural gas, and in some markets can be three times or more higher.

Closing the gap between electricity and natural gas prices will accelerate already expanding market segments (such as air source heat pumps for new buildings) and facilitate the deployment of new buildings (such as existing buildings).

Likewise, large heat pumps are commercially available but face market design hurdles. A tax on electricity used for electric heating applications would facilitate their use.

Improve energy performance standards and labels

Given the diversity of current testing procedures and definitions, harmonizing definitions related to heat pump performance would make global benchmarking less challenging. The current definitions vary by region, and for traditional heating technologies such as natural gas boilers, they are more consistent. However, even when harmonized, heat pump performance definitions should continue to reflect a variety of heat sources, heat sinks, operating environments and climatic conditions.

Energy performance definitions can also be integrated into minimum performance requirements. For example, the European Union introduced the Seasonal Composite Coefficient of Performance (SCOP) in its 2009 Ecodesign legislation. It expresses energy efficiency in the form of primary energy, and since 2017, only air source heat pump water heaters and ground source heat pumps that exceed the minimum energy efficiency of 115-125% (equivalent to an SCOP of 2.875 to 3.125) are allowed to be sold. For air source heat pump heating equipment, the EU minimum SCOP is 3.8.

Therefore, standards and labels should continue to demonstrate the superiority of heat pump performance relative to gas boiler performance. For example: EU energy labelling regulations set the "A" label for energy performance to a minimum primary energy to final energy ratio of 0.92, which applies to condensing boiler technology. Better performing products, such as heat pumps, are marked A+ to A+++. Other policy signals, such as the expected carbon intensity of heating equipment, will also encourage greater adoption of heat pumps.