The Futureof Heat Pumps

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Foreword
Today, many of the ways we heat buildings around the world – such as homes, offices,
schools and factories – still rely largely on fossil fuels, particularly natural gas. It has long beenclear that this leads to large amounts of greenhouse gas emissions – and the current global
energy crisis is a sharp reminder of the urgency of moving to more affordable, reliable andcleaner ways of heating buildings.
In this context, heat pumps, which can efficiently provide heating to buildings and industry,
are the key technology to make heating more secure and sustainable. They are quickly
becoming more cost competitive, drawing interest from a growing number of governments,
businesses and consumers across the globe. Until now, though, there has not been acomprehensive global study of the state of play of heat pumps – and their future role in ourenergy systems. This World Energy Outlook special report aims to fill that gap.
Our in‐depth analysis finds that policy plans announced so far by governments globally point
to a large expansion of the use of heat pumps, which will have a clear impact on the use ofgas, oil and coal for heating. Heat pumps have the potential to reduce global carbon dioxide
emissions by at least 500 million tonnes in 2030. For Europe, they are a vital tool to cut
reliance on Russian gas, since they can lower Europe’s largest source of gas demand – heatingin buildings – by at least 21 billion cubic metres in 2030.
However, this special report shows there are key bottlenecks that need addressing to ramp
up heat pumps’ production and deployment. Government support is essential to help
consumers overcome upfront costs and tap into the savings heat pumps provide. This is anurgent priority to shield low‐income households from the energy crisis. There is also a lackof workers to install heat pumps, with electricians, technicians and construction workers
already among the jobs that companies in Europe and the United States are struggling to fill.

I would like to thank the European Bank for Reconstruction and Development for its
collaboration on this report – and also the over 120 high‐level representatives fromgovernments, industry and academia around the world who took part in the excellent heatpump workshop we held in October at IEA headquarters in Paris, sharing valuable
perspective and insights. I am also very grateful to the IEA team who worked quickly toassemble this timely and comprehensive report, under the outstanding leadership of mycolleague Laura Cozzi. I am confident it will help inform decision‐makers around the world inthis urgent moment on how to clear the way for heat pumps to play their critical role inaddressing the energy and climate crises.
Dr Fatih Birol
Executive Director
International Energy Agency
Foreword

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The growing role of heat pumps also requires policy makers to pay careful attention to theelectricity security implications. Combining heat pump deployment with energy efficiency
retrofits of buildings can reduce these risks, and leveraging smart controls can turn heatpumps into a grid asset, when employed alongside appropriate planning for electricity grids.

Acknowledgements
This study was prepared by the World Energy Outlook team in the Directorate of
Sustainability, Technology and Outlooks in co‐operation with other directorates and officesof the International Energy Agency (IEA). The study was designed and directed by
Laura Cozzi, Chief Energy Modeller and Head of Division for Energy Demand Outlook.
Yannick Monschauer co‐ordinated the project and was the lead author. Daniel Wetzel
provided co‐ordination and authoring support. Stéphanie Bouckaert oversaw themodelling development.
Other principal IEA authors of the report include: Justina Bodláková (labour and supply
chains), François Briens (costs), Olivia Chen (employment), Daniel Crow (climate andimplications), Davide D’Ambrosio (data science), Víctor García Tapia (outlook),
Timothy Goodson (outlook and investments), Pauline Henriot (demand flexibility),
Bruno Idini (costs and report production), Hyeji Kim (affordability and costs), Arthur Rogé(policies and EU focus), Fabian Voswinkel (industry, F‐gases and non‐cost barriers).
Marina Dos Santos provided essential support.
Chiara Delmastro and Rafael Martínez‐Gordón led the modelling and provided essential
contributions, along with the Energy Technology and Policy team.
Other valuable contributions were made by Ashley Acker, Ana Alcalde Báscones, Oskaras
Alšauskas, Caleigh Andrews, Elisa Asmelash, Yasmine Arsalane, Vittoria Chen, Julie Dallard,
Nouhoun Diarra, Michael Drtil, Will Hall, Ilkka Hannula, Paul Hugues, Martin Husek, Martin
Küppers, Kazuhiro Kurumi, Toru Muta, Aloys Nghiem, Max Schönfisch, Carlo Starace,
Monica Troilo, Gianluca Tonolo and Anthony Vautrin.
Trevor Morgan carried editorial responsibility. Erin Crum was the copy‐editor.
Valuable comments and feedback were provided by other senior management andnumerous other colleagues within the IEA. In particular, Keisuke Sadamori, Dan Dorner, Tim
Gould, Paolo Frankl, Timur Gül, Brian Motherway and Araceli Fernandez Pales.
Thanks go to the IEA’s Communications and Digital Office for their help in producing thereport and website materials, particularly to Jad Mouawad, Curtis Brainard, Hortense deRoffignac, Astrid Dumond, Tanya Dyhin, Grace Gordon, Jethro Mullen, Isabelle
Nonain‐Semelin, Julie Puech, Robert Stone, Clara Vallois, Gregory Viscusi, Lucile Wall,
Therese Walsh and Wonjik Yang. IEA’s Office of the Legal Counsel, Office of Management
and Administration, and Energy Data Centre provided assistance throughout the
preparation of the report.
External contributions were provided by the European Bank for Reconstruction andDevelopment (Nigel Jollands, Greg Gebrail, Lyza Rossi), the IEA Technology Collaboration
Programme on Heat Pumping Technologies (Caroline Haglund Stignor, Monica Axell, Metkel
Yebiyo, Stephan Renz, Morgan Willis, Benjamin Zühlsdorf, Christoph Reichl) and DavidWilkinson (independent consultant).

Acknowledgements

5

The work could not have been achieved without the support and input provided by theEuropean Bank for Reconstruction and Development, European Heat Pump Association,
Siemens Energy, Viessmann and the IEA Clean Energy Transition Programme.
A consultation workshop was held at IEA headquarters in Paris at the beginning of October
2022 with 120 high‐level representatives from governments, major manufacturers andacademia in which participants offered valuable insights, feedback and data for thisanalysis. We are grateful for their input.
Many senior government officials and international experts provided input and reviewed
preliminary drafts of the report. Their comments and suggestions were of great value. They
include:Dries Acke

SolarPowerEurope

Daniele Maria Agostini

Enel

Monica Axell

Research Institute of Sweden, Heat Pump Centre

Marion Bakker

Netherlands Enterprise Agency

Marco Baresi

Turboden

Pascal Barthe

Ministry for Energy Transition (France)

Aurélie Beauvais

Euroheat & Power

Veerle Beelaerts

European Heating Industry (EHI)

Stefano Bellò

Assoclima

Antonio Bouza

US Department of Energy

Susanne Buscher
Tomas Caha

Federal Ministry for Economic Affairs and Climate Action(Germany)
Sako CZ

Emmanuel Chabut

EDF

Alberto Coronas

Universitat Rovira i Virgili (Spain)

Marco Dall'Ombra

Assoclima

Bianca De Farias Letti

Climate Change Committee (UK)

Raymond Decorvet

MAN Energy Solutions

Stefano Demattè

AristonNaoko Doi

Institute Of Energy Economics, Japan

John Dulac

Saint‐Gobain

Thomas Fleckl

Austrian Institute of Technology

Duncan Gibb

Regulatory Assistance Project

Monique Goyens

BEUC

Joan Groizard

Institute for the Diversification and Saving of Energy (Spain)

Benjamin Haas

Engie

6

World Energy Outlook | Special ReportCaroline Hagelund Stignor

Research Institute of Sweden, Heat Pump Centre

Christian Hüttl

Siemens Energy

Taku Inamura

Ministry of the Economy, Trade and Industry (Japan)

Nicolas Jensen

Bosch

Andrej Jentsch

IEA DHC TCP

Nigel Jollands

European Bank for Reconstruction and Development

Arno Kaschl

European Commission (DG Climate Action)

Paul Kenny
Stephan Kolb

Department of Communications, Climate Action &Environment (Ireland)
Viessmann

Sanjeev Kumar

EGEC

Pawel Lachman

Port PC

Rebecca Lamas

European University InstituteFrancisco Laverón Simavilla

Iberdrola

Dong Li

Haier Group

Christian MaaßSilvia Madeddu

Federal Ministry for Economic Affairs and Climate Action(Germany)
Schneider Electric

Josephine Maguire

Sustainable Energy Authority of Ireland

Tom Marsik

National Renewable Energy Laboratory

Nick Meeten

Applied Energy

Vincent Minier

Schneider Electric

Masashige Morishita

Ministry of the Economy, Trade and Industry (Japan)

Thomas Nowak

European Heat Pump Association

Karl Ochsner sen.

Ochsner Heat Pumps

Zhonghe Pang

Chinese Academy of Sciences

Alan Pears

RMIT University (Australia)

Eloi Piel

Euroheat & Power

Maurizio Pieve
Reinhard Radermacher

Italian Agency for New Technologies, Energy & Sustainable
Economic Development
University of Maryland (US)Stephan Renz

IEA HPT TCP

Rowena Rodrigues

GlenDimplex

Hugo Sancho

Ministry for Energy Transition (France)

Bans Sanli

Permanent Delegation of Türkiye to the OECD

Wolf‐Peter Schill

German Institute for Economic Research

Acknowledgements

7Andreas Scholz

Data Ahead

Peter Schossig

Fraunhofer Institute for Solar Energy Systems

Jas Singh

World Bank Group

Shintaro Tabuchi

Agency for Natural Resources and Energy, JapanTom van Ierland

European Commission (DG Climate Action)

Jozefien Vanbecelaere

European Heat Pump Association

Uta WeißAgora EnergiewendeMark Winskel

UK Energy Research Centre, University of Edinburgh

Miki Yamanaka

DaikinKristian Yde Agerbo

Lun

Benjamin Zühlsdorf

Danish Technological Institute, Energy and Climate

The work reflects the views of the IEA Secretariat but does not necessarily reflect those ofindividual IEA member countries or of any particular funder, supporter or collaborator.
None of the IEA or any funder, supporter or collaborator that contributed to this workmakes any representation or warranty, express or implied, in respect of the report’s
contents (including its completeness or accuracy) and shall not be responsible for any useof, or reliance on, the work.
This document and any map included herein are without prejudice to the status of orsovereignty over any territory, to the delimitation of international frontiers and boundaries
and to the name of any territory, city or area.

Comments and questions are welcome and should be addressed to:Laura Cozzi
Directorate of Sustainability, Technology and Outlooks
International Energy Agency
9, rue de la Fédération
75739 Paris Cedex 15
FranceE‐mail: weo@iea.org
More information about the World Energy Outlook is available at www.iea.org/weo.

8World Energy Outlook | Special ReportTable of Contents
Foreword ................................................................................................................................. 3
Acknowledgements ................................................................................................................. 5
Executive summary ............................................................................................................... 11
Introduction .......................................................................................................................... 15
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Outlook for deploying heat pumps

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1.1 Introduction................................................................................................... 18
1.2 Heating needs ................................................................................................ 21
1.3 Heat pumps in buildings ................................................................................ 25
1.4 Industrial heat pumps ................................................................................... 36
1.5 Heat pumps for district heating..................................................................... 41
2

Implications of accelerated heat pump deployment45

2.1 Introduction................................................................................................... 46
2.2 Energy security .............................................................................................. 46
2.3 Electricity systems and demand flexibility .................................................... 48
2.4 Energy affordability ....................................................................................... 52
2.5 Public health and environment ..................................................................... 54
2.6 Job creation ................................................................................................... 59
3

Barriers and solutions

63

3.1 Introduction................................................................................................... 64
3.2 Cost barriers .................................................................................................. 65
3.3 Non-cost hurdles to consumer adoption ...................................................... 74
3.4 Manufacturing constraints ............................................................................ 78
3.5 Shortages of skilled installers ........................................................................ 80

Annexes
Annex A. Technology costs and financial support schemes .................................................. 87
Annex B. Definitions .............................................................................................................. 93

Table of Contents

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Annex C. References ........................................................................................................... 101

Executive Summary
Heat pumps are a proven way to provide secure and sustainable heating
Heat pumps, powered by low‐emissions electricity, are the central technology in the global
transition to secure and sustainable heating. Heat pumps currently available on the market
are three‐to‐five times more energy efficient than natural gas boilers. They reduce
households’ exposure to fossil fuel price spikes, which has been made all the more urgent by
the ongoing global energy crisis. Over one‐sixth of global natural gas demand is for heatingin buildings – in the European Union, this number is one‐third. Many heat pumps can provide
cooling, too, which eliminates the need for a separate air conditioner for the 2.6 billion
people who will live in regions requiring heating and cooling by 2050. Heating in buildings is
responsible for 4 gigatonnes (Gt) of CO2 emissions annually – 10% of global emissions.
Installing heat pumps instead of a fossil‐fuel‐based boilers significantly reduces greenhousegas emissions in all major heating markets, even with the current electricity generation mix—an advantage that will increase further as electricity systems decarbonise.

Government energy security concerns and climate commitments would make heat pumps
become the primary means of decarbonising space and water heating. This report explores
a scenario in which governments around the world meet all their announced energy andclimate‐related commitments in full and on time. As the proven technology of choice todecarbonise heating, global capacity of heat pumps jumps from 1 000 GW in 2021 to nearly
2 600 GW by 2030 in this scenario, boosting their share of total heating needs in buildings
from one‐tenth to nearly one‐fifth. As a result, natural gas demand falls by 80 billion cubic
metres (bcm), heating oil drops by 1 million barrels per day, and coal declines by 55 million
tonnes of coal equivalent. In aggregate, this means heat pumps account for nearly half of the
global reductions in fossil fuel use for heating in buildings by 2030, with the remained comingfrom other efficiency measures. In a scenario consistent with the global climate target of
1.5 °C, heat pumps accelerate faster – their capacity nearly triples by 2030 and their share inheating reaches one‐quarter.

Executive Summary

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Around 10% of space heating needs globally were met by heat pumps in 2021, but the paceof installation is growing rapidly. The share of heat pumps is comparable to that of fuel oil
for heating and of other forms of electric heating but lower than the over 40% of heating
reliant on gas heating and the 15% reliant on district heating. In some countries, heat pumps
are already the largest source of heating. In Norway, 60% of buildings are equipped with heatpumps, with Sweden and Finland at over 40%, undercutting the argument that heat pumps
are unsuitable for cold climates. Global sales grew by nearly 15% in 2021, double the averageof the last decade. Growth in the European Union was around 35%, and is slated to accelerate
further in light of the energy crisis, with sales in the first half of 2022 roughly double over thesame period last year in Poland, the Netherlands, Italy and Austria. China continues to be thelargest market for new sales, while North America has the largest number of homes withheat pumps today. Together, these regions, along with Japan and Korea, are also major
manufacturing hubs, home to the industry’s largest players.

Heat pumps can also address heating needs in industry and district heating. Large heatpumps can provide heat up to 140‐160 oC today, with higher temperatures possible throughinnovation and improved designs. The most common industrial heat pumps today provide
lower temperature heat. The paper, food and chemicals industries have the largest near‐term opportunities, with nearly 30% of their combined heating needs able to be addressedby heat pumps. In Europe alone, 15 GW of heat pumps could be installed in 3 000 facilities
in these three sectors, which have been hit hard by recent rises in natural gas prices.

Heat pumps contribute to cutting gas imports quickly, especially in Europe
The potential for heat pumps to cut dependence on natural gas for heating is particularly
large in the European Union, where natural gas is the most used heating fuel and wheregas prices have risen the most. In a scenario consistent with the EU’s climate ambitions, heatpump sales rise to 7 million by 2030 – up from 2 million in 2021 – helping achieve the
REPowerEU objective of ending Russian gas imports well before 2030. This deployment
reduces the consumption of natural gas by 7 bcm in 2025 and 21 bcm by 2030, an amountequivalent to almost 15% of EU pipeline imports from Russia in 2021.

Retrofitting buildings in parallel reduces the strain on the power sector
The accelerated deployment of heat pumps inevitably increases global electricity demand,though energy efficiency and demand response measures can greatly reduce the impact
on power systems. The share of electricity in heating for buildings and industry doubles
between 2021 and 2030 to 16% if climate pledges are met. Over that same time, global
electricity demand rises by one quarter, to which heat pumps contribute less than one tenth.
For households that add a heat pump without improving efficiency in parallel, this can nearly
triple their peak demand during winter. Improving a home’s efficiency rating by two grades(e.g. from D to B in European countries) can halve heating energy demand and reduce thesize of the heat pump needed, saving consumers money and reducing the growth in peakdemand by one‐third. Together with careful grid planning and demand‐side management,
this moderates the need for distribution grid upgrades caused by electrifying heat andminimises the need for additional flexible generation capacity to 2030.

Over their lifetime, heat pumps can save consumers money and shield them from priceshocks. The average household or business that uses a heat pump spends less on energy
than those using a gas boiler. These savings offset the higher upfront costs for heat pumps
in many markets today – in some, even without subsidies. The economic proposition of heatpumps improves in the context of today’s energy price spikes: household savings range from
USD 300 per year in the United States to USD 900 in Europe. With appropriate support forpoorer households to manage the upfront costs, heat pumps can meaningfully addressenergy poverty, with energy bill savings in low‐income households ranging between 2% and
6% of their household income after moving away from a natural gas boiler.
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The accelerated deployment of heat pumps brings a range of benefits

Switching to heat pumps cuts emissions of greenhouse gases and helps improve air quality.
Accelerated deployment of heat pumps, in line with national climate targets, can reduce
global CO2 emissions by half a gigatonne already by 2030. However, unintended leaks of F‐gas
refrigerants – potent greenhouse gases – can decrease their positive climate impacts. With
today’s refrigerants, heat pumps still reduce greenhouse gas emissions by at least 20%
compared with a gas boiler, even when running on emissions‐intensive electricity. This
reduction can be as large as 80% in countries with cleaner electricity. Global emissions ofmajor air pollutants caused by combustion heating in buildings also drop, particularly fromcoal in China, while other hazards associated with heating by fuel combustion diminish.
The expansion of heat pump manufacturing and installations to meet rising demand would
create more jobs. Global employment in heat pump supply nearly triples to over 1.3 million
workers to 2030 in our scenario. Jobs in installation grow the most, with growth also inmaintenance and manufacturing, providing numerous opportunities, especially for medium‐skilled workers.

Concerted action is needed to overcome barriers to faster adoption
Accelerating the take‐up of heat pumps requires overcoming a number of barriers. Chiefamong them are the higher upfront cost of buying and installing the devices relative to otherheating options; other non‐cost deterrents to consumer adoption; manufacturing
constraints; and potential shortages of qualified installers. Concerted action by governments,
in partnership with the heat pump industry, is needed to address these hurdles and achieve
higher rates of deployment.

A number of non‐cost barriers hold back consumer adoption of heat pumps today. These
include lack of information, split incentives for building owners and tenants, and building
regulations. Several governments have taken action to adjust building codes (such as in the
Czech Republic), create “one‐stop shops” for consumers (such as in Ireland) and encouragealternative business models to address the split incentive – notably in North America, theUnited Kingdom and Germany – though stronger efforts are required. Particular attention
needs to be paid to addressing barriers to the installation of heat pumps in multi‐family andcommercial buildings, which account for a low share of sales today.
Executive Summary

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Despite long‐term savings, high upfront costs can deter consumers. The cost of purchasing
and installing an air‐to‐air heat pump is typically between USD 3 000 and USD 6 000.
However, even the cheapest air‐to‐water models, including modifications to the existingradiator systems, remain two to four times more costly than natural gas boilers in most major
heating markets. Financial incentives are currently available in over 30 countries around theworld – covering more than 70% of today’s heating demand. The subsidies in these countries
make the cheapest heat pump options comparable to the cost of a new gas boiler for
consumers. Additional incentives can target low‐income households (as in Poland) and/or
high efficiency models (as in Canada). In some countries, the design of electricity tariffs andenergy taxation put heat pumps at a disadvantage relative to fossil fuel boilers. Tariffs andtaxes should instead be tilted in favour of cleaner and more efficient consumer choices.

Shortages of qualified installers, already a bottleneck in many key heating markets, call forlarge‐scale worker reskilling. Global demand for full‐time installers quadruples by 2030 in
our scenario. Incorporating heat pumps into existing certifications for heating technicians,
plumbers and electrical engineers, who have similar skills, would help reduce training
requirements. Financial incentives, such as those used across Europe, can also attract newworkers to specialised training programmes.

Governments need to work with industry to lower supply‐side hurdles
Leading manufacturers have recently announced plans to invest more than USD 4 billion in
expanding heat pump production capacity and related efforts, mostly in Europe. New heatpump installation in the next four years would be roughly equal to the number of heat pumps
installed in the last decade. Several countries, notably the United States, are responding to
supply chain vulnerabilities with incentives to build up domestic manufacturing capacity.
Long‐term policy consistency and regulatory certainty, together with targeted action tostrengthen supply chains, remain critical for manufacturers as they consider where to expand
their operations. In particular, regulations on F‐gases must balance the need to limit
refrigerant emissions with cost, safety, energy efficiency and supply chain considerations.

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Accelerating deployment of heat pumps in line with national climate targets is well withinreach but requires further efforts from policy makers and industry. The market growth inheat pumps needed this decade to hit national climate targets is not as steep as the
expansion we have already seen in solar PV and electric vehicles, although there would need
to be a further acceleration to get on track for the IEA’s Net Zero Emissions by 2050 Scenario.
The additional upfront investment required is sizable, reaching USD 160 billion annually by2030, but these incremental costs are outweighed by economy‐wide savings on fuel,especially if today’s high prices persist. Governments and industry have vital roles to play toaddress persistent market barriers and enable heat pumps to play their full part in addressing
today’s most pressing issues – energy security, energy affordability, and rapid reductions inemissions.

Introduction
The Russian Federation’s invasion of Ukraine and its subsequent decision to slash deliveriesof natural gas to Europe have plunged the world into the biggest energy crisis since the1970s. While Europe is at the epicentre, surging energy prices are hitting households andcompanies around the world, giving additional reason for governments to step up urgent
efforts to reduce reliance on fossil fuels as the effects of the global climate crisis become
ever more apparent.
This report assesses the role that heat pumps could play in addressing both energy security
and climate imperatives, focusing on the concrete steps needed to accelerate theirdeployment over the rest of the current decade. Heat pumps can reduce the European
Union’s reliance on Russian fossil fuels by replacing gas‐ and oil‐fired boilers.1 In the longer
term, they are set to play the leading role in decarbonising the provision of heat as part ofefforts to achieve net zero emissions of carbon dioxide by 2050. Heat pumps can be installedin buildings and district heating networks to provide both heating and cooling, and in industry
to provide low‐ and medium‐temperature heat. As they are very energy efficient, they canlower energy bills for both households and businesses. To the extent they are powered by
low‐emissions electricity, their use results in far less greenhouse gas emissions than standard
heating equipment today.
While heat pumps can be designed to provide both heating and cooling (known as reversible
heat pumps), this report focuses on heating. Special focus is given to the implications of heatpump deployment in Europe for that region’s gas demand in light of the European Union’s
policy objective, adopted in March 2022, of eliminating Russian imports of natural gas wellbefore 2030.

Chapter 1 starts by explaining what a heat pump is and how it works, and then describes
the outlook for heating needs to 2050, highlighting the differences in the current andfuture energy mixes and the evolution of the building stock between regions. It goes on
to describe the detailed global and regional projections of the uptake of heat pumps inbuildings, industry and district heating, focusing on the period to 2030, and theimplications for energy demand, emissions and investment needs.



Chapter 2 sets out in more detail the implications of accelerating the deployment of heatpumps for energy security, electricity systems and demand flexibility, energy
affordability, public health, the environment, and job creation.



Chapter 3 assesses the principal potential hurdles to the deployment of heat pumps,
including the upfront cost of installing them, other market barriers, manufacturing andother supply chain constraints, and shortages of skilled workers, as well as the main
policy options for addressing them.

1

See IEA’s 10‐point plan to reduce reliance on Russia’s gas imports, iea.li/gas‐reliance

Introduction

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The report is structured as follows:Chapter 1
Outlook for deploying heat pumps
Mercury rising?
S U M M A R Y
 Reducing fossil fuel use in heating is essential to simultaneously address pressing
energy security risks, protect households and businesses from volatile energy prices,
and achieve climate objectives. Nearly half of global buildings‐related energy use goesto heating, where natural gas is the dominant source today, consuming 760 bcm
annually. The share is higher in the European Union, where gas heating in buildings
consumes more than the power sector. Together with other fossil fuels, heating
directly and indirectly emitted over 4 Gt CO2 in 2021 – 10% of global energy‐related
CO2 emissions.

 Heat pumps are the primary means of decarbonising space and water heating inbuildings. Heat pumps installed in buildings have a combined capacity of more than
1 000 GW today. Capacity is set to grow to 2 600 GW by 2030 in the Announced
Pledges Scenario, in which national climate and energy security targets are assumed
to be met. This would boost their share of total heating needs in buildings from almost
10% in 2021 to one fifth. Many of these pumps are reversible, i.e. they can provide
cooling, too. By 2050, 2.6 billion people will be living in areas with substantial coolingand heating needs.

 Heat pumps contribute almost half of global reductions in fossil fuel use for heatingin buildings in 2030 in the APS. Heat pumps help decrease natural gas demand by
more than 80 bcm and heating oil demand by 1 mb/d, while coal use falls to negligible
levels. Heat pumps contribute around 9% of the increase in electricity demand to2030, adding only modestly to system‐wide peak loads in the winter. This could beabsorbed without new generation capacity in most regions, though careful gridplanning would be needed to ensure network stability, especially in distribution grids.

 The European Union sees a sharp decline in natural gas thanks to heat pumps in the
APS in an effort to meet objectives in REPowerEU. Annual installations of heat pumps
across the European Union reach nearly 7 million in 2030 – up from just 2 million in
2021. This rapid growth reduces gas consumption by 7 bcm in 2025 and 21 bcm in2030, roughly equal to 15% of EU imports from Russia in 2021.
fifth of natural gas consumption today. They can be used for low‐temperature process
heat below 100 °C in a range of sectors today, but technologies are commerciallyavailable for processes up to 150 °C, with higher temperatures technically achievable.
Nearly 40% of industrial heating demand in 2030 is at temperatures suitable for heatpumps. District heating networks can also be repurposed to use large‐scale heatpumps. Several European countries have targets to decarbonise their heating
networks by 2040.
Chapter 1 | Outlook for deploying heat pumps

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 Heat pumps also reduce fossil fuel demand in industry, which accounts for roughly a1.1

Introduction

This chapter assesses the outlook for heat pump installations and their impact on the energy
mix for heating in buildings and industry, drawing on the projections of the system‐wideenergy scenarios depicted in the latest edition of the World Energy Outlook (WEO), releasedin October 2022 (IEA, 2022a). Emphasis is given here to the Announced Pledges Scenario(APS), which assumes that governments around the world meet all announced energy‐ andclimate‐related commitments in full and on time. This is contrasted throughout the reportwith the Stated Policies Scenario (STEPS), which describes how the global energy system
would evolve under the policies already in place today, provided they are backed by concrete
implementation plans. These comparisons are intended to highlight where additional efforts
are required to accelerate heat pump deployment. In some cases, the APS projections arealso compared with the Net Zero Emissions by 2050 (NZE) Scenario, which represents apathway to reduce energy emissions to zero on a net basis by 2050 in order to stabilise global
average temperatures at 1.5 °C above pre‐industrial levels. More detail about the scenarios
and the projections can be found in WEO 2022.
A heat pump uses technology similar to that found in a refrigerator or an air conditioner. It
extracts heat1 from a source, such as the surrounding air, geothermal energy stored in the
ground, or nearby sources of water or waste heat from a factory. It then amplifies andtransfers the heat to where it is needed (Figure 1.1). Because most of the heat is transferredrather than generated, heat pumps are far more efficient than conventional heating
technologies such as boilers or electric heaters and can be cheaper to run. The output ofenergy in the form of heat is normally several times greater than that required to power theheat pump, normally in the form of electricity. For example, the coefficient of performance(COP) for a typical household heat pump is around four, i.e. the energy output is four times
greater than the electrical energy used to run it. This makes current models 3‐5 times moreenergy efficient than gas boilers. Heat pumps can be combined with other heating systems,commonly gas, in hybrid configurations.

1

Physically, heat energy is present whenever the temperature is above absolute zero (at 0 Kelvin or ‐273 °C).

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The heat pump itself consists of a compressor, which moves a refrigerant through arefrigeration cycle, and a heat exchanger, which extracts heat from the source. The heat isthen passed on to a heat sink through another heat exchanger. In buildings, the heat isdelivered using either forced air or hydronic systems such as radiators or under‐floor heating.
Heat pumps can be connected to a tank to produce sanitary hot water or provide flexibility
in hydronic systems. Many of the heat pumps can also provide space cooling in summer in
addition to meeting space heating needs in winter. In industry, heat pumps are used todeliver hot air, water or steam, or to directly heat materials. Large‐scale heat pumps incommercial or industrial applications or in district heating networks require higher input
temperatures than in residential applications, which can be sourced from the waste heat ofindustrial processes, data centres or wastewater.

Figure 1.1 ⊳How a heat pump works

1

IEA. CC BY 4.0.

A typical residential heat pump needs just one unit of electricity input to provide
four units of heat output; the cycle can be reversed to provide cooling services

Chapter 1 | Outlook for deploying heat pumps

19

IEA. CC BY 4.4.

Notes: The auxiliary energy source can also be another fuel such as natural gas, but most heat pumps today
are powered by electricity.

The efficiency of a heat pump depends critically on the source of the heat. In winter, theground and external water sources typically remain warmer than the ambient air, so ground‐source and water‐source heat pumps consume less electricity than air‐source ones, yielding
a higher COP. This is particularly the case in cold climates where defrosting the outsidecomponents of air‐source heat pumps can consume additional energy. However, ground‐source heat pumps are more expensive to install, as they require an underground heatexchanger – a deep vertical borehole or a large network of pipes buried at least one metre
below the surface of the ground. Connecting a water‐source heat pump to a nearby river,groundwater or wastewater can also be costly.
For these reasons, ground‐ and water‐source heat pumps are generally less common thanair‐source pumps. Worldwide, almost 85% of all heat pumps sold for buildings worldwide are
air‐source, as they require the least effort to be installed. Many of these are air‐to‐air units,
while in heating‐dominated regions air‐to‐water (or hydronic) units are growing inprevalence. In Europe, air‐source hydronic systems are more common than in other regions
and account for nearly half of all units sold. Ground‐source heat pumps and hybrid heatpumps that combine a heat pump with another heating source, like a gas boiler, are a small
portion of global sales today, but make up a substantial share of the market in somecountries. In Sweden, the leading market for ground‐source heat pumps, every fourth houseis equipped with such a model. The market for ground‐source heat pumps is also growing
steadily in the People’s Republic of China (hereafter, “China”), where they often replace coal‐based heating systems, helping to reduce carbon dioxide (CO2) emissions and improve air
quality.

Heat pump technology is mature and their production and installation can, in principle, be
scaled up quickly. But there are a number of hurdles to expanding their deployment,
including the relatively high cost of installing them and various supply chain constraints suchas shortages of skilled workers. Concerted efforts are needed to reduce market andregulatory barriers and bolster supply chains, reflected in the recent proliferation of new
government policies and roadmaps to encourage the uptake of heat pumps, notably theEuropean Union (EU) REPowerEU Plan and the United States (US) Inflation Reduction Act,
both of which were adopted in 2022.
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Single‐family homes and apartments can use a single or multiple small units, or, in multi‐family and commercial buildings, a centralised unit to provide heating and cooling to multiple
units. In Asia, individual air‐to‐air units are common in multifamily housing, however
restrictions in multifamily housing, notably in Europe, make heat pumps less common
outside single‐family homes. Centralised heat pumps can provide heat to entire multifamily
and commercial buildings, but make up a small share of total heat pump capacity installed
today. In Europe, for example, only 10% of units sold in 2021 were larger, centralised units
for multifamily housing (EHPA, 2022). Commercial buildings are particularly well‐suited forcentralised heat pumps as they often have substantial year‐round cooling needs, such as for
hospitals, food refrigeration in supermarkets or large server rooms in offices, in addition to
space heating needs. Commercial systems can achieve high efficiencies and minimiseelectricity consumption by utilising the waste heat from cooling to meet heating needs.

1.2

Heating needs

Heating currently represents a sizeable share of global energy consumption and a major
source of CO2 emissions. Global energy demand for space and water heating amounted to
62 exajoules (EJ) in 2021, accounting for around half of energy consumption in buildings anddirectly emitting 2.5 gigatonnes (Gt) of CO2 – roughly 80% of direct buildings emissions. This
moves up to 4 Gt of CO2 when considering indirect emissions from electricity and district
heating.
Figure 1.2 ⊳1Household space heating in selected countries/regions, 2021
Energy mix
Natural gas
Oil
CoalElectricity
District heat
Modern bioenergy

China
Japan and Korea
European Union
North America
25%

50%

75%

100%

Space heating intensity and degree days
1 000

2 000

3 000

4 000
Heating intensity
HDD (Top axis)

China
Japan and Korea
European Union
North America
10

20

30
40
GJ/household
IEA. CC BY 4.0.

Natural gas is the leading form of energy for space heating in buildings,
meeting around 45% of space heating energy demand globally

The level of energy demand varies substantially by household within and across countries
and regions, mainly according to climate, household size, living space, the degree to whichbuildings are well‐insulated, and the type and quality of heating equipment (Figure 1.2).
Around 70% of total heating needs are for space heating and the rest for hot water. Theenergy mix for heating also varies. Natural gas is the leading form of energy for heating inbuildings, meeting 42% of heating energy demand globally. One sixth of global natural gas
demand is for heating in buildings—in the European Union this number moves up to one
Chapter 1 | Outlook for deploying heat pumps

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IEA. CC BY 4.4.

Notes: GJ = gigajoules; HDD = heating degree day. HDDs are a standardised measure of heating needs
permitting comparisons across regions. They measure how cold a given location is by comparing actual
temperatures with a standard base temperature. For this analysis, a base temperature of 18 °C is assumed,
while the impact of humidity is also taken into account.

third. Oil follows next with 15%, then electricity at 15%, and district heating – concentrated
in China, Northern and Eastern Europe, and Central Asia – at 11%. The direct use of biomass
and coal make up the difference. The fuel mix for heating differs substantially across major
heating regions, though gas dominates everywhere except East Asia.
Figure 1.3 ⊳Buildings space heating and water heating service demand byregion and sector in the STEPS and APS, 2021 and 2030

EJ

Advanced economies

EMDE

40

Water heating
Services

30

Residential

20

Space heating
Services
Residential

10

2021

STEPS
APS
2030

2021

STEPS
APS
2030
IEA. CC BY 4.0.

Building envelope improvements curb demand for heating services in advanced
economies, while an expanding building stock boosts demand in emerging economies

Note: EMDE = emerging market and developing economies.

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The majority of the world’s population that needs space heating already has access, making
the outlook for heating demand relatively predictable. At present, nearly 40% of the global
population lives in regions that experience ambient temperatures which would require spaceheating at least part of the year. The number of people in these regions, mainly in thenorthern hemisphere, is expected to remain broadly stable over the coming decades. But
rising prosperity is likely to push up overall heating needs, especially in emerging market anddeveloping economies, as people move into new, larger dwellings and increase their use ofheating services, especially hot water, though efficiency gains are likely to offset some of thisgrowth. Increased economic activity will also push up heating needs in commercial buildings.
Overall heating demand in buildings in emerging economies increases significantly between
2021 and 2030 in both the STEPS and the APS, driven mainly by hot water (Figure 1.3). By
contrast, heating demand in advanced economies is broadly stable in the STEPS as efficiency
improvements balance out a growing number of single‐person households, while greater
efforts to increase buildings efficiency, notably by improving building envelopes, reduce
space heating demand modestly in the APS.

Chapter 1 | Outlook for deploying heat pumps

Figure 1.4 ⊳Heating and cooling needs by region in the STEPS, 2021 and 2050

IEA. CC BY 4.0.

Regions where heating is needed see little growth in population to 2050, whereas it grows by a quarter in regions with cooling needs

23

Notes: Heating and cooling refer to areas where HDDs calculated with base temperature 18 °C HDD (18 °C) are greater or equal than 1 000 (°C days) and cooling degreedays (CDDs) calculated with base temperature 10 °C CDD (10 °C) are greater or equal than 1 000 (°C days). For further information on the indicator see IEA (2020a) andfor further information on HDDs and CDDs see IEA (2022b).

IEA. CC BY 4.4.

1

In the long term, overall energy use for heating in the regions that have significant spaceheating needs is expected to decline due to climate change (though this will be offset to somedegree by increased cooling needs in those and other regions). Conversely, nearly everyone
globally will face heatwaves that pose a public health risk by 2050, driving greater use of air
conditioning in most regions (also see Section 5.7 on space cooling in WEO 2022). Heatpumps can provide both heating and cooling, and so could become the preferred choice fornew buildings and heating retrofits in regions that require both at different times of the year.
The number of people living in regions which require both heating and cooling needs is set
to grow by around 3% to 2.6 billion people by 2050 in the STEPS (Figure 1.4). In most regions
requiring heating, the majority of buildings built today will still be in use in 2050 (Figure 1.5).
This means that reducing fossil fuel use in heating will call for efficiency retrofits andswitching to low‐carbon heating technologies. Strong building codes that ensure newbuildings are zero‐carbon‐ready are also needed to decarbonise heating.

Million households

Figure 1.5 ⊳Household additions by decade in selected countries/regions,2021-2050

150

100%

120

80%

90

60%

60

40%

30

20%

2021‐302031‐40

North America

European
Union

China

2041‐50
Share of existingbuildings in 2050
(right axis)

Japan and
Korea
IEA. CC BY 4.0.

Three-quarters of the buildings stock in 2050 is already standing today in North America
and the EU, which together account for more than 40% of current global heating needs

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Note: Projected demolition rates in China are assumed lower than current ones.

1.3

Heat pumps in buildings

1.3.1

Global prospects

1

Global heat pump sales in 2021 were up 13% on 2020 levels, with growth fastest at around
35% in the European Union (Figure 1.6). Despite rising sales in recent years, heat pumps still
met merely around 10% of global heating needs in buildings in 2021. Heat pumps inresidential and non‐residential buildings today account for more than 1 000 gigawatts (GW)of capacity,2 nearly half of which is installed in North America. Many units are used in mild‐
to‐warm climates, where they are used primarily for cooling yet still represent the primaryheating source (for a few months of the year). However, the penetration of heat pumps today
is highest in the coldest parts of Europe, meeting 60% of total buildings heating needs in
Norway and over 40% in Sweden and Finland thanks to long‐standing policy support(Rosenow et al., 2022).
Figure 1.6 ⊳Annual growth in sales of heat pumps in buildings in selected
regions, 2021

40%

30%

20%

10%

European
Union

North
AmericaJapan and
Korea

China

World
IEA. CC BY 4.0.

North America has the most heat pumps installed and China the largest market,
but the European Union is the fastest-growing market today
Sources: IEA analysis based on AHRI (2022), Chinabaogao (2022), EHPA (2021), JRAIA (2022).

A large increase in heat pump policies and incentives, notably in the US Inflation Reduction
Act, is set to accelerate their deployment, as shown in the STEPS.
Heat pumps are measured by their wattage of output capacity to facilitate cross‐comparison across regions.
The average capacity of the heat pump stock varies greatly across regions. Regions such as North America andEurope have larger heat pumps (5 kW to 10 kW) on average, while in Asia they are often smaller (3 kW to5 kW). Based on this, a global average equivalent for heat pump capacity for single dwellings or rooms could
be considered around 5 kW. The sizing also depends on the building stock and the climate. Centralised units
in multifamily buildings have capacities of more than 20 kW, and those in large commercial buildings can havecapacities beyond 100 kW.

Chapter 1 | Outlook for deploying heat pumps

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IEA. CC BY 4.4.

2

In the STEPS, global capacity of heat pumps in buildings increases to more than 2 100 GW by2030, meeting 14% of global buildings heating needs (Figure 1.7). Policy support for heatpumps is available in many major heating regions. Subsidies are available in regions that now
cover more than 70% of global space heating demand in residential buildings.3 Additionally,
minimum energy performance standards for existing buildings and building energy codes for
new buildings have been introduced in several countries, while fossil fuel boiler bans are now
in force on the national level in various countries, including Denmark, France, theNetherlands and Norway as well as on the subnational level in the United States and Canada,
among others.

GW

Figure 1.7 ⊳Heat pump capacity in buildings by country/region andscenario, 2021 and 2030

3 000

30%

2 500

25%

2 000

20%

1 500

15%

1 000

10%

500

5%

Rest of world
Japan and Korea
China
North America
Europe

2021

2030
STEPS

Share of heat pumps
in global heating
demand (right axis)

2030
APS
IEA. CC BY 4.0.

Around 20% of heating needs are met by heat pumps in 2030 in the APS,
with China, North America and Europe remaining the leading markets

Increased policy support for heat pumps is needed to achieve national climate and energy
security objectives. In the APS, which assumes those objectives are met, heat pump capacity
grows to nearly 2 600 GW by 2030, meeting almost 20% of the sector’s heating needs. For
instance, to fulfil the REPowerEU objective of ending natural gas imports from the RussianFederation (hereafter, “Russia”) well before 2030, the number of heat pumps in theEuropean Union must nearly triple to reach around 45 million in the APS.

3

These include mainly national‐level policies, except for Japan and China, where subnational policies cover a
substantial share of national heating demand.

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Heat pumps play a major role in reducing fossil fuel use in buildings to 2030 in the APS. Theirdirect use for space and water heating falls by 29% between 2021 and 2030 globally(compared with 16% in the STEPS), almost half of which is due to heat pumps (Figure 1.8).

The remaining reductions in fuel use come from improvements to energy efficiency ofbuildings, particularly building envelopes, including the adoption of automated home
controls and building management systems for non‐residential buildings. Gas accounts forthe biggest share of the total fossil energy savings, its use dropping by over 160 billion cubic
metres (bcm), or 21%, by 2030 (the fall is just 50 bcm in the STEPS), around half due to heatpumps. The European Union contributes the biggest gas savings in both scenarios. Russia’s
decision to cut gas flows into Europe and the consequent surge in prices are prompting
governments to urgently reinforce policies encouraging a shift away from natural gas andother fossil fuels. Other major gas importers with ambitious 2030 climate targets also seelarge falls in gas use in buildings, in large part due to greater use of heat pumps.
Global energy consumption for space and water heating inbuildings in the APS, 2021-2030

EJ

Consumption by fuel80

Change, 2021‐2030
2

Fuels
Other
Other renewables
Modern bioenergy
District heat
Electricity
Natural gas
Oil
Coal
ChangesHeat pumps
Other shifts

60

40

20

2021

2030

EJ

Figure 1.8 ⊳

1

0

‐2

‐4

Naturalgas

Oil

Coal Electricity‐6

IEA. CC BY 4.0.

Heat pumps contribute over half of the 29% decrease in demand for fossil fuels in space
and water heating in the APS by 2030, reducing natural gas demand the mostThe faster deployment of heat pumps in the APS drives up global electricity demand, but thisis far outweighed by the savings in fossil fuels due to their much greater efficiency. Electricity
Chapter 1 | Outlook for deploying heat pumps

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IEA. CC BY 4.0.

Heat pumps also displace large amounts of oil and coal for heating in buildings in the two
scenarios. Oil‐based heating systems, which are currently found mainly in regions where
there is no natural gas distribution, continue their rapid decline in the APS, falling from 15%
of global heating demand in 2021 to around 11% in 2030 – a slightly faster fall than in the
STEPS. Heat pumps are the main contributor to these declines. Coal heating in households isnearly eliminated by 2030 in the APS, led by strong targets and campaigns in China to
improve air quality, with heat pumps replacing most coal use, notably in peri‐urban and rural
areas.

use in heat pumps doubles and climbs by over 500 terawatt‐hours (TWh), contributing
around 9% of the total increases in electricity demand over 2021‐2030. In most regions,existing generation capacity is sufficient to meet this increase in demand, though additional
investment to upgrade networks, notably distribution systems, will be needed in somecountries. The increased electricity demand from heat pumps does not lead to a rise in fossil
fuel demand in the power sector in that scenario, as the assumed achievement ofdecarbonisation targets leads to a fall of nearly one‐fifth of fossil fuel use in the power sector
by 2030. This decline is fastest in Group of Seven (G7) countries and the European Union.
Hydrogen plays a negligible role in the space and water heating fuel mix in the APS by 2030.
A key reason is that when accounting for the energy losses associated with hydrogen
conversion, transport and use, hydrogen technologies for use in buildings are much lessefficient than heat pumps and other available options (IEA, 2022c).
The switching away from fossil fuels to electric heat pumps contributes substantially todecarbonising heating in buildings. CO2 emissions associated with space and water heatingworldwide, including indirect emissions from power generation, decline by over 1.2 Gt, ormore than a quarter, by 2030 in the APS (Figure 1.9). Heat pumps account for around
500 million tonnes (Mt), or nearly 40%, of this reduction, roughly equivalent to Canada’s
emissions in 2021. Advanced economies, mainly the European Union and the United States,
account for nearly three quarters of the decline in heating‐related emissions thanks to heatpumps. Progressive increases in renewable electricity generation increase the emissions
savings from heat pumps over time.
Global CO2 emissions from space and water heating in buildingsin the APS, 2021-2030

Figure 1.9 ⊳Reduction by lever, 2021‐30

Gt CO₂CO₂ emissions
4
Waste
3

Coal
Oil

2

Natural gas
1

Energyefficiency
53%

Fuel switch toheat pumps
39%

Electricity anddistrict heat
2021

2030
APS

Other fuelswitch 8%
IEA. CC BY 4.0.

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Heat pumps reduce global CO2 emissions by 500 Mt by 2030 in the APS, around 40%
of total direct and indirect emissions reductions in space and water heating in buildings

The rate of deployment of heat pumps in the APS implies a huge increase in spending on theequipment and its installation by owners of residential and commercial buildings. Global
investment triples by 2030 to USD 350 billion in real 2021 dollars (Figure 1.10). This is roughly
equal to that invested in solar photovoltaic (PV) and wind power globally in 2021. The
premium for investing in a heat pump over buying a conventional heating option such as acondensing gas boiler is around USD 160 billion in 2030, much of which is already covered bypolicy incentives already available in the leading markets today (and taken into account in
the STEPS). However, these incremental costs are outweighed by the economy‐wide savings
on fuel, especially should the global energy crisis continue (Chapter 3).

1

Figure 1.10 ⊳ Global investments for heat pumps in buildings by scenario, 2021

USD billion (2021)

and 2030
400

Heat pumps

300

Required investment ingas boilers if no heatpumps installed

200

100

2021

STEPS

APS
2030
IEA. CC BY 4.0.

Heat pump investment triples to USD 350 billion in 2030 in the APS, USD 160 billion morethan what would be needed if all new heating systems were gas boilers instead

Chapter 1 | Outlook for deploying heat pumps

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In addition, heat pump related research, development and demonstration (RD&D)
investments need to be stepped up to meet research and innovation needs (Box 1.1). Public
spending on heat pump and chiller research as reported to the IEA is around USD 30 million
per year, nearly four times higher than in 2010. Global investment in heat pump start‐ups
and scale‐ups increased nearly sixfold between 2016 and 2021 (European Commission,
2022a). Patent counts for heat pumps, a measure of technology innovation, have more thandoubled in 2015‐19 compared with 2005‐09, with China and Japan accounting for half of all
inventions (Figure 1.11).

Number of patents

Figure 1.11 ⊳ Patent counts for heat pump technologies by country, 1990-2019
800

Japan
China
Germany

600

Korea
United States
400

FranceRest of world

200

1990‐94

1995‐99

2000‐04

2005‐09

2010‐142015‐19
IEA. CC BY 4.0.

The number of patents for heat pump technologies has risen drastically,
led by China and Japan who accounted for more than half of the new patents since 2010
Source: IEA analysis based on PATSTAT data.

Box 1.1 ⊳RD&D for the next generation of heat pumps

The IEA’s Heat Pumping Technologies Technology Collaboration Programme (HPT TCP)
and the Innovation Community on Affordable Heating and Cooling of Buildings (a Mission
Innovation initiative) are key forums for advancing RD&D collaboration on heat pumps.
The HPT TCP is exploring potential improvements for system and resource efficiency by
optimising the use of heat pumps for both heating and cooling purposes, including incommercial applications with simultaneous needs. One aspect being looked at is the dual
ability of a heat pump when operated in a very low‐temperature thermal grid on a districtor city level to be used as a heat sink and source simultaneously. Air conditioners result
in large amounts of waste heat that could be recovered to produce domestic hot waterin well‐designed systems.

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Over the last decades, heat pump performance has improved significantly e.g. in termsof efficiency and noise. For example, COPs have increased by more than 70% since theearly 1990s for air‐to‐water heat pumps in Switzerland (Swiss Office of Energy, 2020).
However, additional research and innovation could yield further benefits. RD&D efforts
are currently focused on smart and flexible features, reduced noise, higher efficiencies,
more compact design, improved ease of installation, and lower environmental footprints
associated with the materials and refrigerants used. Sharing progress under key RD&D
programmes run by governments and industry could help accelerate the deployment ofinnovative technologies worldwide, lowering costs and emissions.

Long‐term RD&D efforts have made heat pumps a viable option even in cold climates.
However, to efficiently apply the technology in very cold climates, the next generation ofheat pumps will need to be more efficient over a larger temperature range. Progress isalso needed in adapting heat pumps for the most difficult conditions for carrying out
building retrofits, such as where insulation is tricky and where the heating system
requires high temperatures. To achieve this, continuous research on component
development and system design is necessary. The US Department of Energy recently
launched the Residential Cold Climate Heat Pump Technology Challenge to accelerate thedeployment of technologies in very cold climates (US DOE, 2022). Optimised heat pumpsolutions differentiated by climate needs could also bring down equipment costs.

1

Stepping up research on technologies that are still far from market introduction is alsoneeded to pave the way for leapfrogging in the development of more efficient and cost‐effective heating solutions. They include non‐traditional compression technologies forheat pumps such as solid‐state (e.g. magnetocaloric, thermoelectric and elastocaloric)
and gaseous (e.g. Brayton and Stirling cycles) ones. Early results for elastocaloric‐based
cooling systems are particularly promising.
Note: This box was prepared in collaboration with Caroline Haglund Stignor, Monica Axell and Metkel
Yebiyo of the RISE Heat Pump Centre and Stephan Renz, Chairman of the HPT TCP.

Achieving the APS level of deployment would further require strengthening policy support,
including bigger financial incentives and restrictions on the installation of fossil fuel boilers
in existing and new buildings (see Chapter 3). In the NZE Scenario, a key measure to support
even faster deployment of heat pumps than in the APS is the prohibition of the sale of new
fossil fuel boilers from 2025 (see Box 1.2).
Box 1.2 ⊳Heat pump deployment in the NZE Scenario

The recent introduction of ambitious policies in several countries, notably the US Inflation
Reduction Act, REPowerEU and Green Transformation (GX) in Japan, are already boosting
the uptake of heat pumps and sending strong market signals to manufacturers andinstallers. These are almost sufficient to get the world on track for 2030, but additional
policy efforts would be needed to achieve the continued acceleration in deployment
required to be on track for the NZE Scenario beyond 2030, notably in emerging
economies. In the NZE Scenario, deployment is boosted by bigger reductions in heatpump costs to end users through innovation and subsidies, higher carbon penalties, anda ban of new fossil fuel boiler sales by 2025.
Chapter 1 | Outlook for deploying heat pumps

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IEA. CC BY 4.4.

In the NZE Scenario, in which the world achieves the goal of net zero emissions of CO2 by
mid‐century, the capacity of heat pumps installed worldwide nearly triples by 2030 andthen doubles again by 2050 (Figure 1.12). This implies that at least 24% of global heatingneeds will be met by heat pumps in 2030, almost three times more than today’s share.
By 2050, this share reaches 52%.

Figure 1.12 ⊳ Global heat pump capacity and coverage of heating needs

GW

in the APS and NZE Scenario, 2021-2050
6 000

60%

4 000

40%

Share of heat pumps inbuildings energy use forheating (right axis):
2021
APS

2 000

20%

2021

2030
NZE

NZE

2050
NZE
IEA. CC BY 4.0

Global heat pump capacity nearly triples by 2030 in the NZE Scenario and then doubles
again by 2050, with stronger policies than those already planned needed beyond 2030

1.3.2

Focus on the European Union

Lowering natural gas use in buildings, in large part through the replacement of gas boilers
with heat pumps, is a vital part of REPowerEU. In 2021, EU gas use in buildings amounted to
150 bcm – the largest single use of gas in the European Union, ahead of the power sector –and contributed 11% of the Union’s total energy‐related CO2 emissions. Heat pump sales are
already growing rapidly, jumping by 35% to around 2 million in 2021, fuelled by strong policy
support in the leading markets, including France, Italy and Poland (Figure 1.13). In somecases, heat pumps are also replacing coal and oil boilers, as well as inefficient electric
resistance heaters. In Poland, for example, a combination of clean energy subsidies andregional‐level bans for coal boilers, motivated by air quality concerns, helped to boost sales
by two‐thirds in 2021 (Morawiecka and Rosenow, 2022). In Italy, a more than 60% surge insales was driven by the Superbonus – a Covid‐19 recovery measure that provides a tax credit
worth up to 110% of the cost of building renovations aimed at improving energy efficiency.
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Russia’s invasion of Ukraine and subsequent disruption to imports of Russian gas have driven
Europe into a major energy crisis with far‐reaching economic and social consequences. In
response, the European Commission released in May 2022 the REPowerEU Plan, which aims
to rapidly phase out EU imports of fossil fuels from Russia, with the import of gas ending wellbefore 2030 – a goal that is fully achieved in the APS. REPowerEU sets out a number ofmeasures to diversify the suppliers of gas, as well as to accelerate energy efficiency
improvements and switching to clean fuels. These measures reinforce those that werealready included the EU Fit for 55 package that was announced in 2021 – a set of proposals
to revise and update EU legislation aimed at reducing net greenhouse gas (GHG) emissions
by at least 55% by 2030 (relative to 1990).

Figure 1.13 ⊳ Heat pump sales and growth in the European Union and selected

European
Union

1Netherlands

20%

Denmark

150

Poland40%

Finland300

Sweden60%

Estonia0.5450Germany

1.080%France

1.5

600

Italy

2.0

Thousand heat pumps

Million heat pumps

member countries, 2021

Percent growth 2020‐2021 (right axis)
IEA. CC BY 4.0.

Heat pump sales across the European Union grew by around 35% to 2 million in 2021,
fuelled by strong policy support in countries including France, Italy and Poland
Sources: IEA analysis based on EHPA (2022); PORT PC (2022).

Table 1.1 ⊳Selected European policy targets for heat pump deployment

CountryYear

European Union

2030

Belgium

2030

Final energy consumption by heat pumps to increase fivefold over 2018

France2023

Reach 2.7 million to 2.9 million total heat pumps installed

Germany2024
2030

Install 500 000 heat pumps per year
Reach a heat pump stock of 6 million

Target30 million additional heat pumps installed compared with 2022

Hungary

2030

Final energy consumption by heat pumps to increase sixfold over 2020

Italy

2030

Final energy consumption by heat pumps to increase twofold over 2017

Poland2030

Final energy consumption by heat pumps to increase threefold over 2020

Spain

2030

Final energy consumption by heat pumps to increase sixfold over 2020

United Kingdom

2028

600 000 annual heat pump installations

A number of EU countries have recently strengthened their policy support for heat pumps,
putting the Union on course for another record year of installations in 2022. Sales in Poland
doubled in the first half of the year, with similar trends being reported in the Netherlands,
Italy and Austria, and strong growth in Finland and Germany (Mathiesen et al., 2022). Several
EU countries, as well as the United Kingdom, have announced ambitious deployment targets
Chapter 1 | Outlook for deploying heat pumps

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IEA. CC BY 4.4.

Sources: European Commission (2022b); France, Ministry of Ecological Transition (2022); Clean Energy Wire
(2022); GOV.UK (2020); Government of Italy (2019); Government of Spain (2019); Toleikyte and Carlsson(2021).

in recent years (Table 1.1). The REPowerEU plan aims to reinforce and build upon thesecurrent policies and market trends, targeting a doubling in the current deployment rate ofindividual heat pumps leading to the installation of 30 million new units between 2022 and2030. The plan also targets an acceleration in the deployment of large‐scale heat pumps bydeveloping and modernising district and communal heating and by integrating them into
new projects exploiting industrial heat.
EU heat pump sales reach 4 million units by 2025 and nearly 7 million by 2030 in the APS,
which takes account of the targets described above. This results in a reduction in the
consumption of gas for heating in buildings by 7 bcm in 2025 and 21 bcm by 2030, roughly
equal to 15% of Russian imports today (Figure 1.14). Heat pumps contribute roughly one‐
third of the total reduction in gas use in buildings for heating between now and 2030, withenergy efficiency retrofits making up most of the rest. An average of 2.5‐3% of the existingbuilding stock are retrofitted each year in that scenario, the majority of them involving the
installation of heat pumps. New building energy codes across all EU member states also
support the adoption of heat pumps.
Figure 1.14 ⊳ EU heat pump installations and stock and related cumulative
natural gas savings in the APS, 2021-2030

25

10

50

8

40

6

30

4

20

10

2

10

5

2021

2025

2030

New buildings
Existing buildingsbcm

Natural gas savings
from heat pumps

Million units

Million units

Annual heat pumpinstallations

20

Stock (right axis)
15

2025

2030
IEA. CC BY 4.0.

New heat pump installations cut the consumption of gas by 7 bcm in 2025

New policy measures are needed to ensure that the EU and national targets are met. Policies
that provide incentives for comprehensive retrofits, including heat pumps, are a cornerstoneof many countries’ energy efficiency packages today, including measures included in the EU
Renovation Wave initiative, launched in 2020, which aims to double the energy renovation
rate of the housing stock. To further incentivise heat pump deployment, nine European
countries have announced or implemented national bans on gas and oil boilers, while four
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and 21 bcm by 2030 in the APS, roughly equal to 15% of Russian imports todayothers have announced bans for oil boilers only. Some of these bans cover installations onlyin new buildings while others also cover replacements in existing buildings. Current andannounced fossil fuel boiler bans in the EU will require roughly 16 million households toswitch to alternative heating options by 2030, 10 million of which would be gas boilers, saving
7.5 bcm of natural gas. If all of new heating systems were heat pumps, this would make up
around half of heat pump shifts to 2030 in the APS. If all EU countries were to implement aban on new fossil fuel boiler installations starting in 2025, this would require 48 million
households to switch to alternative heating options by 2030. Even if only 60% of thesehouseholds shifted to heat pumps, this would be equal to heat pump shifts in the APS(Figure 1.15). In addition, bans provide a clear and stable long‐term vision to manufacturers.

1

Figure 1.15 ⊳ Impact of implemented and announced gas boiler bans in Europe

Million households

and remaining heating demand gap with the APS, 2021-50

200

Households using gas boilers
FranceAustria, Ireland, Luxembourg
Germany
United Kingdom
Netherlands
United Kingdom

Germany
United Kingdom
FranceOther Europe

100

APS trajectory
Installation bans
All buildings
New buildings

2021

2030

2040

2050

Additional residential savings required in the APS
Natural gas
savings

2030
2050
15

30

45

60 bcmIEA. CC BY 4.0.

To achieve the natural gas savings in 2050 in the APS, all countries with net zero by 2050
targets need to ban new fossil fuel boiler installations in all building types by 2030

Despite a strong manufacturing base in Europe, imports of heat pumps and components
from Asia have increased over the last few years. To limit import dependency, the European
Commission plans to ramp up domestic production by facilitating access to finance where
needed. REPowerEU also aims to strengthen European heat pump supply chains and make
Chapter 1 | Outlook for deploying heat pumps

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Note: Gas boiler installation bans were also introduced in Denmark for new buildings in 2013, in Norway for
all buildings in 2017 and in the Netherlands for new buildings in 2018. In some cases, such as Germany, bansare not explicit, but rather rely on renewable energy share obligations which cannot be met by gas boilers.

them more sustainable by enhancing the regulatory framework, ensuring life‐cycle
sustainability and supporting innovation. It also proposes to establish a large‐scale skills
partnership under the EU Pact for Skills to train and reskill people to work in the heat pumpindustry (see Chapter 3).

1.4

Industrial heat pumps

There is considerable potential for electric heat pumps to provide process heat for industry.
Because of the complexity of industrial processes, heat pumps generally need to be tailoredto specific applications. In contrast to those used in buildings, industrial heat pumps typically
rely on higher input temperatures, as the required output temperatures are also significantly
higher. Today, industrial heat pumps are mainly used for low‐temperature processes below
100 °C, notably in the paper, food and chemicals industries (Table 1.2). However, output
temperatures of up to 150 °C can already be achieved if waste heat of about 100 °C isavailable as input. For temperatures between 150 °C and 200 °C, heat pumps need special
refrigerants and compressors, for which technologies are still in an early prototype stage.
Industrial heat pump technology readiness by temperature range

Table 1.2 ⊳Temperature range

Technology readiness level (TRL)

Example process<80 °CTRL 11: Proof of market stability

Paper: De‐inking
Food: Concentration
Chemical: Bio‐reactions

80 °C to 100 °C

TRL 10: Commercial and competitive, but large‐
scale deployment not yet achieved

Paper: Bleaching
Food: Pasteurisation
Chemical: Boiling

100 °C to 140 °C

TRL 8‐9: First‐of‐a‐kind commercial applications
in relevant environment

Paper: Drying
Food: Evaporation
Chemical: Concentration

140 °C to 160 °C

TRL 6‐7: Pre‐commercial demonstration

Paper: Pulp boiling
Food: Drying
Chemical: Distillation
Various industries:
Steam production

160 °C to 200 °C

TRL 8‐9: First‐of‐a‐kind commercial applications
for small‐scale MVR systems and heattransformers
TRL 4‐5: Early to large prototype

Various industries:
High‐temperature steam
production

TRL 4: Early prototype

Various industries:
High‐temperature processes>200 °C

Readiness level:

TRL 1 to 5

TRL 6 to 7

TRL 8 to 11

Sources: Representation using the IEA extended TRLs (IEA, 2020b) based on Maruf et al. (2022).

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Notes: MVR = mechanical vapour recompression. TRLs can vary for specific processes or different heat pumpcapacities.

Industrial heat pumps can be very efficient, with a COP of more than three, when thetemperature lift, i.e. the difference between the input and output temperatures, is in the
30‐50 °C range. For higher temperature lifts, the COP is generally lower, though a heat pump
can be configured in a way that limits the loss of efficiency, such as by incorporatingintermediate heat exchangers or cascaded cycles (whereby the pump operates as two single‐
stage cycles coupled together by a cascade heat exchanger). However, the costs of such heatpump systems are usually significantly higher.

1

There is growing interest in the use of steam with mechanical vapour recompression (MVR)
equipment in a similar way to heat pumps (that is, using electricity to upgrade heat to ahigher temperature). When operating in a closed loop, as in a common heat pump, water
can act as the refrigerant in the cycle. Its physical properties allow it to deliver higher target
temperatures than other refrigerant fluids without constraints due to environmental or fire
hazards. In an open‐cycle configuration, high temperature steam can be produced fromlower pressure steam or condensate. As steam is one of the preferred heat carriers inindustry, the technology is well‐suited to meet industrial heating needs.
Public funding can help accelerate the development and commercialisation of solutions,which could open the way for new applications such as surface treatment of metals in theautomotive industry or drying and washing in the textiles sector. The EU Innovation Fund is
supporting demonstration projects, including for industrial applications, while the Horizon
Europe programme is funding research and innovation projects in this field.
At temperatures above 200 °C, direct electrification of industrial processes is generally
preferable over heat pumps at present (Madeddu et al., 2020). A number of suchtechnologies are being developed or are already in use. For example, BASF, SABIC and Linde
have recently started construction of a pilot‐scale steam cracker that uses electricity insteadof fossil fuels to provide the necessary reaction heat of around 850 °C to break thehydrocarbon feedstock into valuable base materials for the chemical industry (BASF, 2022).
Nonetheless, innovation could lead to higher‐temperature heat pumps becoming viable.
Hydrogen combustion is yet another option to provide low‐emissions heat for industry.
While the greatest potential for hydrogen is in high‐temperature applications where heatpumps cannot operate and direct electrification is difficult, hydrogen could technically also
replace natural gas in boilers for lower‐temperature heat and steam. However, comparedwith heat pumps or direct electrification, hydrogen‐based heat suffers from low overall
efficiency due to losses incurred in the production of low‐emission hydrogen via electrolysis
and associated high cost (for technology cost comparisons, see Figure 1.18).

Chapter 1 | Outlook for deploying heat pumps

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Heat pumps, among other clean energy technologies, can play an important role indecarbonising industrial heat production, particularly for low‐temperature processes andquickly reducing fossil fuel demand. Process heat requirements continue to increase acrossall temperature ranges over this decade in the APS, while the share of heat demand fromprocesses below 200 °C remains just below 40% (Figure 1.16).

Figure 1.16 ⊳ Global industrial process heat demand by temperature in the

EJ

APS, 2021 and 2030

80

2021
2030

60

40

20

Below 60 °C

60‐100 °C

100‐200 °C

200‐400°C

Above 400 °C
IEA. CC BY 4.0.

Heat pumps can play an important role in decarbonising industrial heat production,
particularly for low-temperature processes

The potential for industrial heat pumps varies by sector (Marina et al., 2021). In the paperindustry, around 65% of process heat needs across all temperature ranges can, in principle,
be met by industrial heat pumps, but substantial system changes may be required. In thefood industry, around 40% of all processes can be covered by heat pumps, mainly where
temperatures of up to 150 °C are needed, due to the limited availability of high‐temperature
waste heat. While around two‐thirds of heat demand below this threshold could be met byheat pumps based on current waste heat availability, the potential would be higher if
additional heat sources from neighbouring industrial facilities were tapped or if processes
were modified to run on lower temperatures, for example by employing hot water insteadof steam. In the chemical industry, where most processes require very high temperatures,
heat pumps can cover only around a quarter of process heat demand. However, low‐temperature processes in that sector benefit from substantial amounts of waste heat fromother processes on the same site. Of the combined heating needs from these threeindustries, around 30% could be addressed by today’s heat pump technologies. Natural gas
for low‐temperature heating in these industries consumed 60 bcm globally in 2021. In Europe
alone, heat pumps with a combined capacity of 15 GW could be implemented in almost
3 000 installations across these three industrial sectors (Figure 1.17).

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The design and technical specifications of industrial heat pumps often differ substantiallyfrom residential ones. In addition to the higher output temperatures needed, warm
industrial wastewater or heated air flows are typically available in industrial facilities toprovide the required heat sources to generate sufficiently high temperatures. However,requirements for refrigerants4 are different as they need to provide higher temperatures andare employed at larger quantities, leading to increased challenges in terms of environmental
or fire hazards. In addition, industrial heat pumps often operate at higher pressures,
requiring thicker piping, while compressors need to be able to operate at higher
temperatures.

1

Figure 1.17 ⊳ Industrial gas and process heat demand by temperature level
and heat pump replacement potential in Europe, 2019

10

20

500

1 000

bcm
30

Chemical industry
Paper industry
Food industry>200 °C Heat pump not feasible≤200 °C Part replaceable by heat pump

1 500
Process heat (PJ)
≤200 °C Part not replaceable by heat pump
Industry gas demand (top axis)
IEA. CC BY 4.0.

The food and paper industries are prime candidates for deploying industrial heat pumps
on a large scale, helping to reduce energy use, gas demand and emissions
Notes: PJ = petajoules. Europe = European Union and the United Kingdom.
Sources: IEA analysis based on European Commission (2016) and Marina et al. (2021). Feasibility based on
TRLs from Table 1.2.

Switching to a heat pump in an industrial process requires specialised planning, design,
manufacturing and installation. Requirements can vary between facilities running similar
processes within the same industry. Industrial heat pumps are often designed for specificprocesses and temperature configurations, limiting opportunities to mass produce, which
pushes up design and manufacturing costs. There are also differences in costs and feasibility
between installing heat pumps for new processes and retrofitting existing processes withheat pumps, which can be much more complex. New projects can benefit from co‐operation
with heat pump manufacturers to establish standard temperature settings for industrial heatpumps in specific processes and industrial subsectors (e.g. inlet temperatures andtemperature lift ranges), which can bring down costs by streamlining equipment
While residential heat pumps mainly use hydrofluorocarbons (HFCs) such as R134a or R32 or, increasingly,hydrocarbons, such as propane, or carbon dioxide, industrial heat pumps mostly rely on hydrofluoro‐olefins(HFOs), ammonia, isobutane or cyclopentane as refrigerants. Water can furthermore be used as a refrigerant
for high‐temperature steam processes. Refrigerants are discussed in detail in Chapter 2.

Chapter 1 | Outlook for deploying heat pumps

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4manufacturing and installation. Some industries have specific operational requirements. For
example, refrigerants used in heat pumps in the food industry face stricter requirements forcontact with the product and may need an additional heat cycle to guarantee food safety.
As in the buildings sector, costs remain a major barrier to the adoption of heat pumps. The
cost of the equipment, installation and related process changes are often high but lessdecisive in industry than operating costs. In addition, current electricity market designs andtax structures often favour natural gas over electricity use in industry in many jurisdictions.
However, recent strong gas price increases that have exceeded electricity price hikes havestrengthened the business case for heat pumps. While in countries such as Germany, where
electricity taxes and levies have been relatively high and gas boilers used to be on average
more competitive than heat pumps until 2020 (Figure 1.18), rising gas prices in late 2021
made heat pumps more favourable, and continued price hikes since Russia’s invasion of
Ukraine are increasing that effect. Furthermore, the reform of electricity pricing in Germany
in 2022 decreased taxes and levies significantly, enabling a sustained growth path forindustrial heat pumps. In Finland, the energy cost environment had already been morefavourable for heat pumps in recent years, thanks to a cut in the electricity tax for industry
to the EU minimum level of EUR 0.50 per megawatt‐hour (MWh), aiming to discourage theuse of fossil fuels.
Figure 1.18 ⊳ Average levelised cost of production of industrial heat inGermany and Finland

Germany

Gas boiler
Heat pump
Electric boiler
Electrolyser‐H₂ boiler

Finland2016‐2020

Gas boiler
Heat pump
Electric boiler
Electrolyser‐H₂ boiler
50

2021

100 150 200 250
USD/MWh

Capital cost

Operating cost

50

100 150 200 250
USD/MWh

Taxes and levies
IEA. CC BY 4.0.

Recent gas price increases and tax changes have made heat pumps

Notes: Capital cost is very low relative to the overall cost. The bar is sometimes not discernible in the figure.
Operating cost includes energy and distribution charges and CO2 prices for gas boilers. Electrolyser‐H2 boiler
capital cost includes estimations for on‐site hydrogen production; Operating cost considers electricity prices
and the power‐to‐heat efficiency of hydrogen.

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the cheapest solution for producing industrial heat in Germany and FinlandA number of countries have introduced policies to lower upfront cost and information
barriers to industrial heat pumps. In Germany, for example, subsidies in the federal funding
programme for energy and resource efficiency in commercial enterprises can cover up to
55% of the initial cost of the heat pump up to a ceiling of EUR 15 million per project. Other
European countries have implemented similar schemes or provide support for industrial heatpumps as part of energy efficiency obligation schemes. In Brazil, the PotencializEE
programme offers training for industrial energy efficiency experts to help facilities identify
clean and efficient technologies such as heat pumps. Additional incentives are needed tomake more waste heat available across factory boundaries. Thermal storage could further
enable the usage of a larger part of waste heat. Stronger industrial efficiency targets andfunding for audits, technology development and the deployment of first‐of‐a‐kindcommercial units are key to maximise the potential for heat pumps. Lastly, a range ofindustrial heating systems, in particular in emerging and developing economies, can befurther optimised by integrating waste heat even without the use of additional energy inputs
and heat pumps.

1.5

1Heat pumps for district heating

Individual heat pumps may not be the preferred heating option in buildings in certain
settings, such as in densely populated urban areas, or in industry due to technical, economicor other constraints. In these cases, or to exploit existing heat sources more efficiently,
district heating can be a viable solution. Large heat pumps can be used to provide district
heat to buildings, commercial premises and industrial sites, by expanding existing networks
or by developing new ones. In the European Union, for example, 60 million people are
currently supplied by district heat and 80 million more people live in cities that have an
existing network (Euroheat & Power, 2022).

District heating systems using heat pumps to recover the heat from wastewater have existed
since the 1980s. More recent projects use or plan to use waste heat from data centres, metro
tunnels, industrial facilities or electrolysers. Hammarbyverket in Stockholm, built in 1986, isthe world’s largest heat pump district heating system and a vital part of the city’s overall heat
network (HPT TCP, 2018). In 2006, a large‐scale combined heating and cooling plant was also
built underneath Katri Vala Park in Helsinki (Helen Ltd, 2020). It uses wastewater heat for
Chapter 1 | Outlook for deploying heat pumps

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The decarbonisation potential of district heating is largely untapped at present, with fossil
fuels still supplying around 90% of district heat globally and even higher shares in the twolargest markets, China and Russia. In Europe, which accounts for 20% of global district heatproduction, carbon intensity is more than one‐third below the global average, thoughrenewables still account for only a quarter of heat supply and heat pumps for a mere 1%.
Four European countries (Austria, Denmark, Finland and Sweden) currently have targets todecarbonise their district heating networks between 2030 and 2040 and Denmark is set toprovide nearly a third of the district heat supply with heat pumps by 2030 (Euroheat & Power,
2022; Energistyrelsen, 2022).

district heating and hot water, as well as cool seawater for district cooling simultaneously.
Wastewater heat recycling projects have been successfully implemented in other European
countries as well as in Australia, Canada, China, Japan and the United States.
Other heat pump technologies for district heating networks are emerging. A novel large‐scaleheat pump to feed waste heat from a cooling plant for offices in Berlin into the city’s district
heating network was recently completed by Siemens Energy and Vattenfall Wärme Berlin AG
and is set to start operating at the end of 2022. It has a thermal capacity of up to 8 megawatts(MW) and can supply hot water to around 30 000 households in summer and heat and hot
water to 3 000 households in winter. The EU‐funded HEATLEAP project aims to demonstrate
the benefits of waste heat recovery from energy‐intensive industries for district heating
networks with large heat pumps with a COP of up to eight (HEATLEAP, 2022).
The potential for exploiting wastewater for district heating remains largely untapped(Wastewater Heat Online, 2022). Warm water from bathrooms and kitchens carries asubstantial amount of thermal energy that can be captured and recycled back to households
using high‐temperature heat pumps and district heating networks. A recent analysis showsthat almost 4 000 wastewater treatment plants in Europe are in close proximity to existing
networks (European Commission, 2020). These plants combined could deliver 175 TWh ofheat per year, equal to around a fifth of current district heat supplies in Europe. Using
wastewater network heat mapping can further make heat sources in city sewage systems
available.
Partnerships and innovative business models involving private and public entities, such as
special‐purpose vehicles, can effectively drive network transformation. However, district
heating projects typically rely on public financial support. In France, for example, a heat fundof more than EUR 500 million per year has proved instrumental in driving the uptake of clean
district heating. The German government has recently launched a EUR 3 billion funding
scheme, which follows a systemic approach by supporting feasibility studies andtransformation plans as well as subsidising both capital costs and operating costs ofdecarbonised district heating networks (BMWK, 2022). There is also a crucial role for cities
and communities to engage in heat planning to identify sources suitable to replace individual
fossil fuel heating with renewable and waste heat sources. District heating zone policies, suchas those adopted in Estonia, can allow cities to mandate that buildings within certain areas
connect to district heating networks beyond a specified heat consumption threshold.

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Around 40% of the heat generated globally in district heating plants goes to the industrial
sector, which affects a network’s ability to reduce distribution temperatures, as industrial
users often require high‐temperature heat. However, using heat pumps to increase
temperatures at local substations can offer solutions in some cases. China leads industrial
district heat use, accounting for about 55% of the global total in 2021, up from around 35%
in 2010. By contrast, Russia’s share fell to less than 25%, down from more than 35% in 2010.

Box 1.3 ⊳Heat pumps for district heating in Sarajevo

The district heating system in Sarajevo, the capital and largest city in Bosnia andHerzegovina, uses natural gas or heavy fuel oil, while homes not served by district heating
are primarily heated using firewood or coal. As a consequence, heating is the main
contributor to the city’s poor air quality, with oxides of sulphur and nitrogen andparticulate matter regularly exceeding safe levels during winter months.

1

To reduce the city’s reliance on fossil fuels, the European Bank for Reconstruction andDevelopment (EBRD) is working with city authorities to introduce large‐scale centralised
water‐source heat pumps. Two proposed projects are currently under discussion.
A EUR 25 million project involves the construction of an 18 MW heat pump plant utilisingtreated wastewater at an average year‐round temperature of 10 °C from a nearby
wastewater treatment plant. The second project, which would cost around
EUR 21 million, involves the construction of a 21 MW heat pump plant utilising citydrinking water at an average year‐round temperature of 12 °C. The share of heat pump‐based generation in Sarajevo’s district heating network will reach nearly 40% if bothprojects are implemented. Final investment decisions are expected to be made in thefirst quarter of 2023.

Chapter 1 | Outlook for deploying heat pumps

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In addition to air quality improvements and CO2 emissions reductions of up to
16 kilotonnes per year, the projects would also help address concerns about the cost andsecurity of natural gas supplies triggered by the current energy crisis. In the longer term,
there is even more potential for heat pump‐based district heating in Sarajevo. A second
phase project based on the full heating potential of the city’s wastewater could provide
18 MW of additional capacity.

Chapter 2
Implications of accelerated heat pump deployment
Fuels switching it up
S U M M A R Y
 The global energy crisis is driving a renewed focus on energy security. Electric heatpumps can reduce reliance on imported fossil fuels. The deployment of heat pumps
in the APS reduces global gas demand in buildings by 80 bcm by 2030 compared with
2021, with the European Union accounting for 21 bcm. Oil imports for heating are also
reduced significantly, especially in Japan and Korea. However, new risks emerge for
ensuring critical heating services remain available in power outages.

 The accelerated deployment of electric heat pumps contributes to a rapid increase indemand for electricity, especially in buildings, in the APS, with the share of electricity
in the fuel mix for heating in buildings and industry globally doubling over 2021‐2030
to 16% and boosting total electricity use by 24%. Meeting this increase in demand
would call for a substantial increase in investment in the power sector in upgrading
customer connections, distribution grids, generating capacity and flexibility. Heatpumps equipped with smart technology play an important role in more than doubling
EU demand‐side flexibility between 2021 and 2030, their share of total flexibility
resources jumping from 8% in 2021 to around 12% in 2030.

 On average, households with a heat pump spend less on energy than those using a
gas boiler and are less vulnerable to price shocks, especially in systems that rely
mainly on renewables. In 2021, households that switched from a gas boiler to a heatpump enjoyed sizeable savings on their energy bills. In low‐income households, thesesavings can be a substantial share of income, between 2‐6% in key heating markets.
Electricity tariffs and fuel taxes need to be reformed to ensure they do not deter
consumers from opting for a heat pump.

 Switching to heat pumps helps reduce GHG emissions and improve air quality. In the
APS, it yields a 15‐40% reduction in emissions of major air pollutants caused byheating in buildings over 2021‐30 and reduces other hazards associated with heatingby fuel combustion. With today’s refrigerants, heat pumps reduce greenhouse gas
emissions by at least 20% compared with a gas boiler when running on emissions‐
intensive electricity, and by up to 80% in countries with cleaner electricity. By
switching away from F‐gas refrigerants, this range shifts to 30‐90%. Regulations on
F‐gas refrigerants, which have large global warming potentials, must balance efforts
to contain their emissions with cost, safety, energy efficiency and supply chain
considerations to maximise net emissions reductions.
over 2021‐30 in the APS, with a third of the new jobs in China, 20% in Europe and 15%
in North America, where installation and manufacturing capacity is set to expand
fastest. Most new jobs are in installation. This calls for a massive drive to recruit andtrain new workers.
Chapter 2 | Implications of accelerated heat pump deployment

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 Global employment in heat pump supply nearly triples to over 1.3 million workers

2.1

Introduction

Accelerating the deployment of heat pumps would have far‐reaching implications for the
global energy sector, with important knock‐on effects for economic activity and theenvironment – beyond the climate benefits. It would reduce the use of fossil fuels forheating, limiting vulnerability to supply disruptions, helping to reduce the import bills of net
importing countries and freeing up fuels for export in the case of producer countries. But
more heat pumps would raise demand for electricity, necessitating grid upgrades and a needfor more flexibility in operating power systems to ensure security of supply, especially during
the winter. The high upfront cost of installing a heat pump also affects energy affordability
for poorer households. The impact of switching to heat pumps on the environment andhuman health, while overwhelmingly positive in most cases, is not without risk: fluorinatedgases (F‐gases) used in the refrigeration cycles of many models are potent greenhouse gases(GHGs). Correct handling can reduce their impact, and substitute refrigerants can replace
them, though both solutions carry additional costs and challenges. And ramping up
production of heat pumps would create new opportunities for economic growth and job
creation, though it would require workers to be trained in their manufacture, installation,
maintenance and certification. This section explores these implications in turn, highlighting
the opportunities for policy makers to balance different priorities.

2.2

Energy security

Russia’s invasion of Ukraine has brought fears about energy security to the fore once again,
particularly in Europe, where the very real risk of gas supply shortfalls to Europe over the
winter threaten to leave millions without sufficient access to heating, with obvious harmful
consequences for comfort and health. Heat pumps, coupled with building energy efficiency
improvements, can reduce reliance on imported fossil fuels used for heating. The
European Union, Japan and Korea rely heavily on imported fuels to run boilers in buildings,
as well as to generate electricity and district heat for heating buildings. In 2021, over 50% ofenergy use for heating in the European Union relied directly or indirectly on fuel imports,
with gas making up the largest share by far. In Japan and Korea, import reliance approached90%, with oil and gas dominating imports (Figure 2.1). China also relies on fuel imports forheating buildings, though to a lesser degree. In the APS, import reliance drops in theEuropean Union and the other countries, largely thanks to the impact of the installation ofheat pumps on gas and oil demand.
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The production of heat for buildings and industry is dominated today by fossil fuels, many ofwhich are imported, leaving countries vulnerable to supply disruptions. Space and water
heating in buildings alone directly accounts for one‐fifth of global gas demand, and morethan one‐third of gas use in the European Union, making heating for buildings the largest
single use of natural gas in the European Union. When the role gas plays in producing
electricity and district heat is taken into account, the share of heating in buildings in theEuropean Union is even bigger, at over 40%. Heating is also the largest end‐use sector for gas
in the United States and several other countries, mainly in the northern hemisphere.

Figure 2.1 ⊳Share of heating in buildings met by imported fossil fuels by fuelin selected regions/countries in the APS

European Union

Japan and Korea

China

100%

Oil
Coal

80%

2

Natural gas

60%
40%
20%

2021

2030

2021

2030

2021

2030
IEA. CC BY 4.0.

Reliance on fuel imports drops sharply in the European Union, Japan and Korea
in the APS, largely thanks to the impact of heat pumps on gas and oil demand
Note: fossil fuels used to generate electricity used for heating and to produce heat for district heating are
included.

Switching to heat pumps does not come without other energy security concerns. Increased
use of electricity for heating increases exposure to power outages, which can pose a serious
public health concern in cold climates. Moreover, power outages are more likely to occur
during periods of inclement weather when the need for heating is most acute. Nonetheless,prolonged major blackouts are rare in most countries with heating needs. Backup heating
solutions or emergency rendezvous points within communities that require uninterruptible
heating supply, as well as the wider deployment of distributed energy resources, coupledwith batteries and thermal energy storage, can help ameliorate these risks by reducing
pressure on electricity distribution networks at times of peak heating demand. Hybrid heatpumps coupled with fossil fuel boilers could also reduce the impact of electricity outages, inparticular in cold climates, though they would hamper full decarbonisation of buildings.

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The IEA 10‐Point plan to reduce the European Union’s reliance on Russian natural gas,released in March 2022, highlights measures that could cut gas demand and alleviate
potential shortages (IEA, 2022a). Curbing gas use for heating is central to this plan and to thePlaying My Part initiative developed by the IEA in co‐operation with the European
Commission (IEA, 2022b). Immediate action to accelerate heat pump deployment and phaseout the installation of gas boilers are critical measures. In the APS, ramping up the installationof heat pumps reduces gas demand in the buildings sector by 80 bcm globally by 2030
compared with today, including 21 bcm in the European Union (Figure 2.2).

bcm

Figure 2.2 ⊳Reduction in natural gas demand in buildings associated withheat pump deployment in selected regions/countries in the APS,
2021-30

30

6%Reduction

20

4%

As share of net gas
imports in 2021
(right axis)

102%

North America

European
Union

China

Japan and
Korea
IEA. CC BY 4.0.

The reductions in gas demand brought about by greater deployment of heat pumps
in the APS reduce gas imports in the net importing countries, especially in the EU

2.3

Electricity systems and demand flexibility

The accelerated deployment of electric heat pumps contributes to a modest increase indemand for electricity, especially in buildings, in the APS. Electricity's share in total final
energy consumption worldwide rises from 20% in 2021 to 24% by 2030. In advanced
economies, it jumps from 22% to over 27%. The share of electricity in the fuel mix for heatingin buildings and industry globally doubles over 2021‐2030 to 16%. In major heating regions
this adds little to electricity demand, roughly 1.5%‐2.5% over 2021 levels by 2030, however,peak demand could grow substantially. This could call for a substantial increase in investmentin the power sector. For households adding a heat pump, this can nearly triple their peakdemand during the winter time. However improving a home’s efficiency rating by two grades(e.g. from D to B in Denmark) can half the heating energy demand and reduce the size of theheat pump needed, saving consumers money and reducing their peak demand by one third.

Upgrading the connection to the consumer, who typically bears the cost. In many cases,
installing a heat pump requires an increase in capacity, by upgrading the connection.

Upgrading low‐voltage distribution grids in areas where the widespread uptake of heatpumps, alongside other end‐use technologies such as electric vehicles (EVs), significantly
boosts load.



Adding generation capacity or flexibility resources to ensure resource adequacy during
the heating season. Region‐specific assessments need to be done to determine theadditional flexible generation capacity required to meet increased demand from heat48

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These investments would take several forms:

pumps. For example, RTE, the French transmission system operator, found that in a
scenario where energy efficiency retrofit targets were hit, new capacity needs out to2035 were unneeded. However, if only minimal buildings efficiency retrofits were tooccur, RTE found that new capacity would be required.
Investment needs related to connections to buildings vary across regions. In the
United States, connections are often already sized for air conditioners and can usuallyaccommodate the addition of a heat pump. By contrast, in Italy, the typical household
currently subscribes to just 3 kW of capacity with a single‐phase meter with a maximum
capacity of 6 kW. The installation of a heat pump could easily result in peak demand
exceeding this level, requiring households to pay for an upgraded connection. The cost of
upgrading customer connections needs to be taken into consideration by policy makers
when deciding on financial support for installing a heat pump.

2

The need to upgrade distribution systems also varies widely. In France, electric resistanceheating is commonplace, and so customer connections and the distribution grid weredeveloped accordingly. However, in countries such as Germany, where heating has
traditionally been provided mainly by fossil fuel boilers, distribution grids have generally not
been built to accommodate widespread electric heating in residential buildings. In regions
where electric heating is currently limited, the deployment of heat pumps alongside the rapid
adoption of EVs could increase peak demand substantially, heightening the need to upgrade
distribution grids.
Other approaches to distribution system management, including deploying distributed
renewables alongside batteries, would ameliorate the need to upgrade feeder lines. In the
APS, global distributed solar PV capacity more than triples between 2021 and 2030. The needto physically reinforce grids can also be reduced through load management on the demandside (Box 2.1). Digitalisation of low‐voltage distribution lines can also help manage
congestion and increase monitoring and remote control of grid assets, which could reducethe cost of upgrades by targeting them at points on the grid where they are needed. In
particular, the replacement of older transformers with new ones incorporating voltage
regulation technologies can lower costs.
Using demand-side flexibility of heat pumps for grid stability

Viessmann, a German heat pump manufacturer, and the German electricity transmission
system operators (TSOs), TenneT and 50Hertz, recently launched a pilot project todemonstrate the value of demand‐side flexibility that can be provided by hydronic heatpumps in dealing with the variability of renewable electricity generation and ensuring
grid stability. Viessmann aggregates the flexibility potential of the heat pumps ofcustomers who have agreed to join the scheme and offers the resulting energy volume
to the grid operators via the Equigy crowd balancing platform – a data exchange to enable
aggregators of small loads to participate in electricity balancing markets – to reduce load
at peak periods. If a TSO accepts an offer for a certain grid node, the heat output and,
therefore, the electricity use of the aggregated heat pump units is lowered by turning
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Box 2.1 ⊳them off or down at specific periods. In order to maintain indoor temperatures, heat isstored in a hot water buffer tank. The thermal inertia of the hydronic heating system andthe building itself (especially if well‐insulated) also limits the impact on temperatures ofswitching off the heat pump, which usually takes several hours. Customers are
remunerated according to their contribution to lowering load.
The target of the pilot project is to include 100 heat pumps. For future projects, the fleetof units would need to be much bigger for them to deliver significant grid stabilisation
services. Barriers to wider adoption would need to be removed, notably complex
certification standards and inadequate remuneration for demand‐side flexibility fromresidential consumers in markets for system balancing and ancillary services.

Increased use of electricity for heating can contribute to more pronounced hourly andseasonal variations in electricity demand, especially during cold snaps, which can lead tomore pronounced spikes in demand. Yet there is considerable potential for heat pumps tobe used flexibly so as to mitigate their impact on overall electricity demand during peak
periods in the winter. In the APS, heat pumps account for around 15% of residential
electricity consumption across the European Union during the winter in 2030, and up to 70%
of demand for those households using a heat pump for space and water heating. Heat pumps
play an important role in more than tripling EU demand‐side flexibility between 2021 and
2030, with their share of total flexibility resources jumping from 9% in 2021 to around 12%
in 2030 (Figure 2.3). Buildings with solar PV will have an added incentive to shift their loads,
to maximise self‐consumption during the daytime.

There is also a need for market‐based incentives to encourage the owners of heat pumps tooffer flexibility services to the grid, via either a lower electricity tariff or separate payments
by the grid operator. Changes in market design can ensure that heat pump flexibility isadequately valued by aggregators or suppliers, and that the value is passed on to consumers
in the form of lower bills (IEA, 2021a). Policy makers can promote energy provider models
that enable controllability, while establishing guardrails for consumer privacy and choice.

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Unlocking the potential for heat pumps to contribute to system flexibility requires the
adoption of digital technologies. Automation is needed to harness heat pump flexibility, sothat they can be switched on and off remotely. This flexibility requires communications andcontrol features to be built into units. Minimum energy performance standards could requireappliances to include a basic level of controllability. Most heat pumps sold today alreadyallow to connect a control device to the unit, thus enabling demand response features.
However, many manufacturers use proprietary systems, which can limit interoperability.
Regulations obliging manufacturers to ensure heat pumps can receive and send data toenable not only monitoring, but also remote control of the devices, could be a first step
towards the widespread adoption of smart controls. Buildings also need to be better
connected and more automated to receive signals from the grid about when flexibility isneeded and better manage their energy consumption (IEA, 2021b).

Demand response potential from heat pumps and other building
electricity uses at times of highest flexibility needs and share in
total demand-side flexibility in the European Union in the APS

60

15%

GW

Figure 2.3 ⊳Buildings other2

Heat pumps
40

10%

20

5%

2021

Heat pump share in total
demand flexibility (right axis)

2030
IEA. CC BY 4.0.

Heat pumps emerge as a major demand-side flexibility resource in the APS, with thethermal inertia of buildings and heating systems allowing electricity use to be cut at peak
Note: Buildings other includes refrigeration and appliances.

To maximise the potential of hydronic heat pumps to contribute to power system flexibility
without affecting thermal comfort for end users, some adjustments to heating systems –including the storage of hot water or the installation of backup non‐electric means of heating
during periods when the heat pump is switched off – as well as improvements to thermal
insulation of buildings are also needed. In well‐insulated buildings, switching off a heat pumpfor several hours can have little impact on indoor temperatures. The benefits of more
efficient building envelopes for system flexibility are demonstrated by the work of the IEA
Energy in Buildings and Communities Programme (IEA, 2019). Yet most buildings, even inadvanced economies, are poorly insulated, limiting the potential for heat pumps to play arole in demand‐side flexibility. For example, in Japan, air‐to‐water heat pumps for residentialbuildings that optimise their use by exploiting real‐time weather forecasts to generate aprofile of the likely availability of rooftop solar PV generation became available for purchasein 2022. For now, harnessing flexibility from heat pumps remains a niche solution, despite anumber of pilot projects (Table 2.1).

Chapter 2 | Implications of accelerated heat pump deployment

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Hybrid heat pumps are another option to increase flexibility. For example, the Dutch
government has proposed making hybrid heat pumps the default option in new buildings to
help manage grid congestion (Netherlands Enterprise Agency, 2022).

Table 2.1 ⊳Pilot projects on exploiting the flexibility potential of heat pumps

Country

Project name

Description

Switzerland

Generalized Operational FLEXibility
for Integrating Renewables in theDistribution Grid

 5.5% increase in self‐consumption

 0‐5% peak demand reduction

Denmark

EcoGrid EU

 270 households with heat pumps provided
up to 167 kW peak shaving (five‐minutetime span)

United Kingdom

Crowdflex

 Time‐of‐use tariffs application reduced daily
evening peak by an average of 12% forhouseholds without EV

Netherlands

Power‐to‐Heat for Renewable Energy  During the flexibility events of an hour, heat
Integration: Technologies, Modelingpumps provided 2.5 kW flexibility capacity
Approaches, and Flexibility Potentials

2.4

Energy affordability

Higher energy prices are a major cause of the build‐up of inflationary pressures, which are
driving down household spending power and living standards in many parts of the world.
Households spent on average around 7% of their income on energy in 2021, around one‐halfof which is for energy consumed inside the house. In heating regions, heat often represents
the majority of total household utility bills. This can be even higher for poor households,
which typically pay a far higher share of their income on energy, while receiving fewer energy
services.
Household energy bills around the world have increased sharply – in some cases doubling.
Governments around the world have responded to rising prices by introducing support
measures, including caps on household energy bills (e.g. France and the United Kingdom),
direct cash transfers (e.g. Germany) and long‐term supply contracts securing gas demand(e.g. China and Korea). In total, governments worldwide have allocated roughly
USD 550 billion to cushion consumers and businesses from high energy prices as of
September 2022, with more under consideration at the time of publication.

Despite the potential cost savings on offer from switching to a heat pump, many consumers
are not financially able to replace their existing heating system, especially during the current
crisis, due to the large upfront installation cost. Reducing this cost will be key to scaling up
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Switching to heat pumps can help reduce household energy bills. In 2021, households thatswitched from a gas boiler to a heat pump enjoyed sizeable savings on their energy bills,
ranging from USD 180 in the United States to almost USD 300 in Europe on average. Thesesavings are much greater under today’s price spikes, ranging from USD 300 per year in the
United States to USD 900 in Europe. The savings were generally biggest in net gas‐importing
countries, especially in countries such as China with low residential electricity prices. As ashare of total income, the savings were biggest for poor households, ranging from 2% to 6%
of income (Figure 2.4).

the deployment of heat pumps (see Chapter 3). Poor households are least able to financethis cost and more likely to choose the cheapest replacement option when their heating
system needs to be replaced, carrying the risk of locking them into expensive gas heating. In
addition, gas heating costs could rise over time if investments in the gas network areincreasingly recovered by a dwindling number of consumers as the clean energy transition
progresses. Some governments offer targeted subsidies for energy efficiency retrofits andheat pumps for less well‐off households to address these barriers. At present, a total of
12 countries, mostly in Europe, have such policies, covering roughly one‐third of global
heating demand.
Figure 2.4 ⊳Energy bill savings for households switching to a heat pump froma gas boiler in selected regions/countries, 2021

United States

USD (2021)2

Europe

Korea

China

400

8%

300

6%

200

4%

100

2%

Low Avg

Low Avg

Low Avg

Savings
Share ofhouseholdincome(right axis)

Low Avg
IEA. CC BY 4.0.

Households switching from a gas boiler to a heat pump enjoyed big savings ontheir energy bills, with poor households saving most as share of their total income
Notes: Low = low‐income households; Avg = average‐income households. Savings are based on operating costs
and exclude upfront costs. The analysis is based on average electricity and gas prices across regions/countries
and an average household demand for space heating and hot water in representative cities in respective
regions/countries (Detroit, Stockholm, Seoul, Beijing).

Electricity tariffs and fuel taxes need to be carefully designed to ensure they do notdiscourage consumers from installing a heat pump (see Chapter 3). Some electricity tariffs
today are designed to promote energy efficiency by charging higher rates or adding charges
Chapter 2 | Implications of accelerated heat pump deployment

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Poor households could see smaller savings and longer payback periods from switching to aheat pump than richer ones. This is because poorer households typically live in smaller units
and use their heating less frequently to keep the cost down. However, poorer families also
typically live in less efficient housing units, which increases the potential savings and shortens
the payback period; low‐income housing is typically less efficient than the average housing
stock. In any case, poor households generally require upfront financial support to be able tobenefit from retrofits and/or switching to heat pumps.

for households consuming higher levels of electricity than the average, but this can penalise
those who choose to switch to electric heat pumps. Some utilities offer specially meteredelectricity or special rates for consumers with electric heating and EVs, to avoid
disincentivising these purchases. Time‐of‐use rates can also help reduce heat pump
operating costs compared with flat tariffs, if coupled with smart controls to optimise heating.
This also contributes to improving grid reliability and flexibility. Both energy taxes and carbon
pricing schemes need to be designed so as not to penalise low‐emissions electricity overfossil fuel use.

2.5

Public health and environment

2.5.1

Air pollution

The widespread adoption of heat pump technology could contribute to improving air quality
and public health. Space and water heating in buildings based on coal, oil and biomass
contributes to both household and ambient air pollution. In 2021, over 19 000 people diedprematurely every day from breathing polluted air, the majority in emerging market anddeveloping economies (IEA, 2022c).

Mt

Figure 2.5 ⊳Emissions of major air pollutants from fuel combustion for space
and water heating in buildings in the APS

3

15%

2

10%

1

5%

2021

2030
SO2

2021

2030
NOX

2021
2030
PM2.5

Share of total emissions (right axis)
IEA. CC BY 4.0.

The electrification of space heating and water heating in the APS underpins a big
reduction in emissions of all major air pollutants from buildings between 2021 and 2030

Around one‐eighth of the emissions of fine particulate matter air pollution (PM2.5) are causedby combustion activities for space and water heating in buildings, mainly the use of fuelwood
and coal in heating stoves and boilers. Though a less significant contributor to overall
emissions, heat services in buildings also cause emissions of nitrogen oxides (NOx), mainly
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Sources: IIASA (2022) and IEA.

from gas boilers, and sulphur dioxide (SO2), mainly from the use of coal in heating stoves andboilers and oil in boilers. In the APS, emissions of all major air pollutants from space andwater heating in buildings fall between 2021 and 2030, by 15‐40%, largely due to thedeployment of heat pumps (Figure 2.5).
In addition, a large‐scale switch to heat pumps can prevent other risks associated with fossil
fuel combustion. For example, poorly serviced heating stoves and gas boilers can emit carbon
monoxide, which is estimated to kill around 40 000 people each year, and there are also
associated hazards due to explosions and fire risk (IHME, 2022).

2.5.2

2

F‐gases

There is a potential catch in the environmental case for heat pumps. The principal attractionof heat pumps over other heating technologies is their potential for reducing GHG emissions,especially when the electricity needed to power them is generated from low‐emissions
energy sources. However, the more widespread use of heat pumps carries the risk ofemissions of F‐gases, used as refrigerants in the heat pump unit. Emissions of these gases,
which are powerful GHGs, threaten to offset part of the climate benefits from switching awayfrom fossil fuels for heating.
The main types of F‐gases used today in heat pumps, refrigerators and other cooling devices
are HFCs, which account for over 85% of global F‐gas production (UNEP, 2017). They were
widely adopted as substitutes for ozone‐depleting substances that have been mostly phased
out under the Montreal Protocol – a landmark multilateral environmental agreement onphasing out chemicals that damage the stratospheric ozone layer adopted in 1987. F‐gases
make up about 2.4% of global GHG emissions (IPCC, 2022). Emissions could grow rapidly inthe coming years with the increased uptake of heat pumps and air conditioners if no further
action is taken to control their use. Intergovernmental Panel on Climate Change (IPCC)
scenarios compatible with a 1.5 °C rise in global temperature imply reductions in F‐gas
emissions of about 75% between 2021 and 2030. Due to their short atmospheric lifetimes
and high global warming potential (GWP),1 immediate action to cut F‐gas emissions could
have a rapid impact on global temperature increase and avoid technology lock‐in.
In 2016, the Kigali Amendment to the Montreal Protocol called for a phase‐down of F‐gas
production and consumption by 80‐85%, to be reached in advanced economies by 2036 andin developing and emerging economies by 2047 to tackle the climate impacts of F‐gas
emissions. As of October 2022, parties representing over 80% of global GHG emissions havesigned the amendment. The European Union implements its phase‐down path mainly using
the F‐Gas Regulation, for which the European Commission has presented a revision proposal
in April 2022. It proposes a ban of refrigerants with GWP over 150 for all self‐contained andsmaller split heat pump and air‐conditioning systems.
The GWP makes it possible to compare different GHGs in terms of their climate impacts. It is defined as theheat absorbed by a given GHG expressed as a multiple of the heat that would be absorbed by the same massof CO2. To account for different lifetimes of gases in the atmosphere, the most common metric is the
100‐year GWP, which corresponds to the heat absorbed over a 100‐year period from the time of emission.
Unless otherwise stated, this report uses the 100‐year GWP.

Chapter 2 | Implications of accelerated heat pump deployment

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1

Table 2.2 ⊳Common refrigerants and alternatives for residential heat pumps

Category

Refrigerant

Conventional HFC R‐410a
R‐134aHydrocarbon (HC) R‐290
R‐1270R‐600
R‐691(Propane)(Propene)(Butane)(Pentane)

GWP

Flammability

TFA yield

2 088
1 430

Non‐flammable (A1)

0%
7‐20%

≤3

Higher flammability (A3)0%

Lower‐GWP HFC

R‐32

675

Lower flammability (A2L)

0%

HFC/HFO blend

R‐454B

490

Lower flammability (A2L)

30%

HFO

R‐1234yf
R‐1234ze

4<1

Lower flammability (A2L)

100%
<10%

CO2

R‐744 (Carbon dioxide)1

Non‐flammable (A1)0%

Notes: GWP values originate from the IPCC Fourth Assessment Report (AR4). They have expressed
uncertainties of over 30%. Threshold values in policy have largely been based on that iteration. In themeantime, some values have been updated in IPCC AR5 and AR6. The TFA yield is the percentage of emitted
refrigerant that decomposes to trifluoroacetic acid (TFA) in the atmosphere, an environmental and humanhealth hazard with a very long lifetime. Higher percentages are more harmful.
Source: UBA (2021).

2

IEC‐60335‐2‐40 on particular requirements for electrical heat pumps, air conditioners and dehumidifiers (IEC,2022).

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F‐gas emissions occur during production of the gases, manufacturing of the refrigeration
cycle (such as in a heat pump) and leaks during the use of the product and its
decommissioning. Emissions from heat pumps can be reduced by regular maintenance andby proper decommissioning and recycling where appropriate (Daikin, 2022). However,effective systems for handling obsolete devices may not be in place globally. Current in‐field
best practice could reduce F‐gas emissions from heat pumps worldwide by one‐third, butthese estimates vary widely by region and heat pump model. Additionally, alternativerefrigerants could be used such as F‐gases with lower GWPs as well as hydrocarbons, HFOs
or CO2, which have much lower GWPs but can be technically complex or more expensive(Table 2.2). For example, the use of propane as a refrigerant is restricted under EU building
regulations due to its higher flammability. While the installation of monobloc hydronic units,
where the refrigerant cycle is entirely located outdoors, gets around this problem, split
systems are also an important option to make heat pumps usable in the majority of buildings.
A revised International Electrotechnical Commission (IEC) norm2 was released in May 2022
that is in the process of formal harmonisation in the European Union, but can already be
adopted by manufacturers according to EU legislation. It allows for charges of flammable
refrigerant sufficient for smaller split systems with indoor refrigerant cycles when the systemmeets additional safety requirements. For larger systems, the proposed F‐gas regulation stillallows HFC refrigerants with GWP below 750. To ensure safe handling of flammable
refrigerant also during installation and decommissioning and to minimise accidents
worldwide, the United Nations Environment Programme (UNEP) has set up a RefrigerantDriving License programme that facilitates best practice knowledge exchange and training
on safe handling of refrigerants between advanced economies and emerging and developing
economies (UNEP, 2018).
Technological innovation is needed to reduce refrigerant loads and their associatedenvironmental and safety risks. For example, a research project in Germany has successfully
tested the prototype of a heat pump with only 10 grammes of propane refrigerant perkilowatt capacity at a COP of 4.7 whereas current systems commonly use six times thatamount (Fraunhofer ISE, 2022). Some manufacturers have also developed alternative HFCs
with lower GWP levels, such as HFC R‐32. HFOs such as R‐1234yf and R‐1234ze have lower
flammability, are not ozone depleting and have significantly lower GWPs but cause potential
environmental and human health hazards.3 CO2 refrigerants are not flammable and have very
low toxicity and a GWP of one (Patenaude, 2015). However, their use requires higher
operating pressures and more powerful compressors, which increases the demand forenergy and materials in making and using the heat pump. Due to its physical properties, CO2offers increased efficiencies in specific use‐cases with high temperature differentials such as
water heaters or certain industrial and commercial applications.
Figure 2.6 ⊳2Heat pump refrigerant lifetime GHG emissions per MWh of annual
useful heat output and abatement cost by refrigerant option
USD (2021)/MWh
5

10

15

20
Emissions

Full leakage

Abatement cost
(top axis)

Good practiceHydrocarbon‐
refrigerant
50

100

150
200
kg CO₂‐eq/MWh
EA. CC BY 4.0.

Specialised maintenance, recycling and the use of alternative refrigerants
can substantially reduce emissions due to refrigerant leakage
Notes: kg CO2‐eq = kilogrammes of CO2 equivalent. Baseline refrigerant mix with a GWP of 2 000. Lifetime GHG
emissions include greenhouse gas emissions from refrigerant leakage during operation and decommissioning.
Source: IEA analysis based on Purohit and Höglund‐Isaksson (2017).

HFOs are considered a per‐ and polyfluoroalkyl substance (PFAS) due to their transformation into TFA in theatmosphere, an environmental and human health hazard with a very long lifetime. Possible future regulation
on PFAS may prohibit their use in the European Union (European Chemicals Agency, 2022).

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3

The highest potential for cost‐effective GHG emissions reductions from heat pump
refrigerants lies in replacing HFCs with hydrocarbons, but adds the challenge of flammability(Figure 2.6). Between 6% and 40% of the lifetime CO2 equivalent emissions of an average
residential heat pump using the HFC R‐134a are associated with refrigerant leaks, dependingon the power mix, the heat pump performance and if the refrigerant is recovered at the endof life. This share will rise as electricity production is increasingly decarbonised.
With today’s F‐gas refrigerants and full leakage, heat pumps still reduce greenhouse gas
emissions by at least 20% compared with a high‐efficiency gas boiler, even when running on
emissions‐intensive electricity. In regions accounting for 70% of world energy consumption,
the emissions savings are above 45% and reach 80% in countries with cleaner electricity
mixes. These values can be improved by 10 percentage points, respectively, with alternativerefrigerants. The large variation is mainly due to differences in the emissions intensity ofelectricity generation rather than refrigerant choice. Figure 2.7 illustrates emissions savings
in four countries based on their climate conditions and emissions intensity of electricity
production.

t CO₂‐eq

Figure 2.7 ⊳Total lifetime GHG emissions per MWh of annual useful heat
output for gas boiler and heat pump by refrigerant option

3.0

Gas boiler
Heat pump

2.5

Full leakage
2.0Good practice
HC‐refrigerant

1.5
1.0
0.5

CanadaGermany

Korea

China
IEA. CC BY 4.0.

Switching to a heat pump substantially decreases emissions regardless of climate
conditions and electricity mix. Addressing F-gas emissions can reduce emissions further.

Sources: IEA analysis based on Purohit and Höglund‐Isaksson (2017); Purohit et al. (2022a); and Kowalski and
Szałański (2019).

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Notes: t CO2‐eq = tonnes of CO2 equivalent; HC = hydrocarbon. Emissions savings of a heat pump are comparedwith a gas boiler with 90% efficiency and F‐gas emissions for a refrigerant mix with GWP = 2 000. Total lifetime
GHG emissions include greenhouse gas emissions from electricity use and refrigerant leakage during operationand decommissioning. Electricity production emissions factors: Canada (119 g CO2‐eq/kWh), Germany(352 g/kWh), Korea (424 g/kWh), China (549 g/kWh). Canada climate based on Ontario and China on
Northeastern China.

If F‐gas refrigerants continue to be used in the same way, by 2030 in the NZE Scenario, theglobal heat pump stock will bank nearly 740 Mt CO2 equivalent of greenhouse gas emissions– about twice the total annual greenhouse gas emissions of Australia. Even if today's bestpractices in maintenance and recycling were applied worldwide, only one‐third of theseemissions would be prevented, making it harder to limit the global temperature rise to 1.5 °C.

2Switching to non‐HFC refrigerants is technically possible, but risks impeding the deploymentof heat pumps due to the technical and cost implications. Importantly, refrigerants cannot
be simply swapped in existing units. While a range of heat pump manufacturers do notheavily rely on HFCs anymore, others will need to change the production process and use
different components and materials. Workers in production and installation may require
additional training for flammable material. A stable and ambitious regulatory framework istherefore important to give investment certainty. In the short term, an important focus forpolicy action should be to set up standards for leakage proofing and enforced recycling
systems to avoid conventional high‐GWP refrigerants to be emitted into the air from oldequipment. Since F‐gas leakage occurs over the duration and at the end of equipment
lifetime, continued use of these refrigerants in new appliances means that F‐gases will still
be emitted beyond 2050 (Purohit et al., 2022b). Policy makers need to ensure that measuresto accelerate the phase‐out of HFCs do not hold back strengthened heat pump uptake, whose
climate benefits far outweigh the negative climate effects of HFC leaks. This implies
minimising HFC use for equipment for which alternatives with low GWP are available without
significant losses in efficiency or other technical qualities.

2.6

Job creation

In 2019, around 450 000 people work directly in manufacturing, planning and installation,
wholesale, servicing, and maintenance of heat pumps globally (Figure 2.8). Installation is themost labour‐intensive part of the heat pumps value chain, with an estimated
210 000 workers employed. China has the most installers, since much of the building stock,particularly in the south of the country, relies on heat pumps for both cooling in the summer
and heating in the winter. Air‐to‐water and ground‐source heat pumps typically require moreworker‐hours per installation, boosting the numbers employed in the sector and the need torecruit new workers as the market expands. Manufacturing, servicing and maintenancetogether make up about half of direct heat pump jobs. As with installers, China has thebiggest heat pump manufacturing labour force, numbering around 55 000, consistent withits 40% share of global heat pump manufacturing, followed by the United States, wherearound a quarter of heat pumps are produced.

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A rapid scaling‐up of the deployment of heat pumps would necessitate a commensurate
expansion of the workforce in manufacturing and installing them, as well as in making thevarious materials and components needed for their assembly. This implies a massive drive torecruit and train workers.

Thousand employees

Figure 2.8 ⊳Change in heat pump employment by activity andregion/country in the APS, 2019-2030

1 500

Economic activities
Manufacturing
Installation
Servicing and maintenance
Other

1 200
900

Regions
EuropeNorth America
China
Rest of world

600
300

2019

Change byeconomic
activity

Change byregion2030

IEA. CC BY 4.0.

Heat pumps create 800 000 new jobs by 2030 mainly in installation and maintenance,
calling for a major recruitment and training drive
Note: Other includes wholesale and transport.

Global employment in heat pump supply nearly triples to over 1.3 million workers to 2030 in
the APS. The European workforce nearly triples as manufacturers and installers respond to
ambitious targets in the REPowerEU initiative and other national heat pump deployment
plans. The projected growth of the heat pump workforce worldwide is accompanied byaround 700 000 additional workers building more energy‐efficient buildings and carrying out
retrofits improving the insulation of building envelopes. Integrated heat pump systems also
stimulate the creation of jobs in installing household solar PV panels and batteries.

The number of jobs in heat pump manufacturing increases more slowly, by around 40%
globally, due to improvements in labour productivity as new, more efficient factories comeonline. Innovative sensor controls and programming can streamline manufacturing
processes and increase the efficiency of assembly lines, while modular designs and60

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The growth in heat pump employment in the APS is concentrated in installation. The numberof heat pump installers needed climbs to 850 000 in the APS, an increase of nearly 650 000.
The greatest growth in demand is in China and the rest of the Asia Pacific. The number of
installers in Europe increases threefold mainly thanks to the rapid heat pump uptake in theEuropean Union and the United Kingdom. In addition, around 170 000 more workers areneeded to maintain and service the additional heat pumps that are installed worldwide by2030. Recruiting and training all these workers represents a considerable task. There are
already concerns in the industry about whether all these positions can be filled given current
tight labour markets for occupations related to heating (see Chapter 3).

standardised components compatible with different types of heat pumps and 3D printing
can reduce manufacturing times and labour inputs (RHC and EHPA, 2021). Employment inheat pump manufacturing is concentrated in China, North America and Europe, where thebulk of the manufacturing capacity is today and where major manufacturers direct the mostinvestment into capacity expansions over the period to 2030. New manufacturing plants
coming online in Europe and the United States reflect recent policy moves to onshore criticalparts of supply chains (see Chapter 3). Manufacturing costs there are significantly higher
than in Asia‐Pacific, where most heat pumps and components are made today, due to higher
labour costs, but can be lowered by automation. However, many manufacturing activities,
such as welding, will remain labour‐intensive.

2

The heat pump industry requires different types of professionals along the value chain
equipped with different skill sets. Manufacturing workers need to be able to operatemechanised equipment and perform manual tasks similarly to jobs in manufacturing of other
home and industrial appliances, while installation requires one or more highly skilled heating
professionals who can calculate heat losses, scale the size of the heat pump and carry out
plumbing and electrical tasks (see Chapter 3). Many of these skills are interchangeable withthose in similar jobs in the manufacturing and heating industry, thereby offering analternative career path to workers in the fossil fuel heating industry, such as gas boiler
installers, and making it easier to recruit new workers (subject to local regulations andrelated mandatory qualifications).

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Training will be critical to expanding the heat pump workforce around the world, particularly
for installers. Installation training programmes, including those proposed by industry
associations and manufacturers, need to cover rural as well as urban areas. As with the air‐conditioning industry, the heat pump manufacturing and installation sector today isdominated by males. Efforts to improve gender balance could be integrated with training
and recruitment programmes. Heat pump workers also generally earn a wage premium ofaround one‐quarter over the average construction worker – though this varies considerablyacross countries. But training is costly, which can discourage new applicants. Decent
remuneration for apprenticeships and public funding of retraining schemes are importantlevers for attracting workers into the sector. Labour union representation can help topromote better work conditions, safety standards and fair wages. In the United States, heatpumps as a part of the energy efficiency sector have a higher‐than‐average unionisation rate
(US DOE, 2022).

Chapter 3
Barriers and solutions
Pumping up the market
S U M M A R Y
 Accelerating the take‐up of heat pumps hinges on overcoming a number of barriers,
chief of which are the upfront cost of installations, other non‐cost deterrents to
consumer adoption, manufacturing constraints and potential shortages of qualified
installers. Concerted action by governments and the heat pump industry is needed toalleviate these constraints and hit the rates of deployment envisioned in the APS.

 The high upfront cost of buying and installing a heat pump relative to other heating
options can deter many consumers, even though lower running costs mean that they
can be cost‐competitive over their lifetime—even without subsidies in some regions.
The cost of installing an air‐to‐air heat pump is comparable to that of a gas boiler inmost major heating markets today thanks to policy support, though air‐to‐water heatpumps can still be two to four times more expensive. Financial support is available inmore than 30 countries, with many offering additional support for low‐income
households (as in Poland) and/or high‐efficiency models (e.g. Canada). Energy tax
reform and evenly applying CO2 penalties across household heating fuels andelectricity can lower running costs and make heat pumps financially attractive.

 A number of non‐cost barriers, such as complicated approval processes, a lack of
information, and split incentives for building owners and tenants, are major reasonsfor the low consumer adoption of heat pumps today in many countries. Several havetaken action to ease permitting procedures (such as in the Czech Republic), create“one‐stop shops” for consumers (e.g. Ireland), and encouraged alternative businessmodels to address the split incentive problem, notably in North America, theUnited Kingdom and Germany, though stronger efforts are needed everywhere.

 Leading manufacturers have recently announced plans to invest more than
EUR 4 billion in expanding heat pump production capacity and related efforts, mostly
in Europe. However, supply chain bottlenecks, notably affecting chip sets and copper,
are adding to manufacturing costs and threaten to hold back the expansion of heatpump production capacity. Several countries, notably the United States, areresponding with incentives to build up domestic manufacturing capacity. Long‐term
policy consistency and regulatory certainty, together with targeted action tostrengthen supply chains, are needed to encourage further investment.
undermining heat pump deployment. Demand for full‐time installers quadruples toover 850 000 in 2030 in the APS. Incorporating heat pumps into existing certifications
for plumbers and electrical engineers, who have similar skills, would help reduce
training requirements. Financial incentives, such as those used across Europe, can also
be used to attract new workers to specialised training programmes.

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 Shortages of qualified installers, already a problem in many key heating markets, risk

3.1

Introduction

Accelerating the deployment of heat pumps to the extent envisioned in the APS hinges on
overcoming a number of barriers, some of which are universal while others are specific toparticular countries or regions. This chapter focuses on the main hurdles for heat pumps inbuildings on both the demand side – cost and other market hurdles to customer adoption ofheat pumps – and the supply side – practical constraints on expanding manufacturing andthe availability of sufficient numbers of trained installers. The key policy options to addressthese barriers are summarised in Table 3.1 and discussed in detail throughout the rest of thechapter.
Supply chain barriers upstream of the assembly and installation of heat pumps, including
potential constraints on the supply of raw materials, equipment and components needed for
manufacturing heat pumps, are covered in detail in the forthcoming IEA report Energy
Technology Perspectives 2023, which is due to be released in January 2023.
Table 3.1 ⊳Overview of key barriers to accelerating the deployment of heatpumps and corresponding policy solutions

Barriers

Policy solutions

Demand side
Upfront costs:
 Grants
 Low‐interest loans Tax rebates
 Green mortgages
 Alternative business models
Cost barriers

 Risk mitigation schemes for medium‐ to large‐scale projects
Operating costs:
 Rebalancing electricity and fossil fuel taxes, CO2 tax with compensation
 Electricity tariff reforms
 Support for building insulation and heat distribution system upgrades Quality and settings control after installation
 User training One‐stop‐shop platforms for consumers and comparer tools
 Facilitation and support of alternative business models for heating to address split
incentives
 Regulation changes for optics, noise and building permissions

Non‐cost hurdles
to consumer
adoption

 Revision of decision‐making rules in multi‐owner buildings
 Minimum energy efficiency requirements for rented properties or at point‐of‐saletransactions
 Information campaigns towards consumers
 Independent and free audits to inform heating system replacement decisions

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 Performance labels for heating technologies

Table 3.1 ⊳Overview of key barriers to accelerating the deployment of heatpumps and corresponding policy solutions (continued…)

Barriers

Policy solutions

Supply side
Manufacturing
constraints andsupply chain
vulnerabilities

 Long‐term certainty in policy support and regulations, as well as visibility into
forthcoming regulation changes, including industry consultation
 National heat pump deployment targets and roadmaps
 Industrial policy including financial support to manufacturers

3 Securing of heat pump component supply chains Integration of heat pumps in pre‐existing certifications for heating, ventilation andair conditioning (HVAC), construction, and electrical professions

Shortages ofskilled installers

 Incentives to attract HVAC professionals to gain additional certifications
 Reinforcing manufacturer‐run trainings and simplify installation process Internationally standardised certification schemes with broad curricula National heat pump deployment targets and roadmaps to build confidence andprovide professionals with long‐term employment prospects

Designing and tailoring these policy strategies to context specificities requires reliable data,
which are often lacking in practice. In particular, there is need for data on heat demand,
industrial process needs and the sources of waste heat, using, for example, heat mapping
techniques, as well as on the characteristics of building and heating system stocks, market
development, installation and maintenance costs, and the real‐world performance ofinstalled systems. Governments everywhere need to step up efforts to improve data
gathering to better inform both policy‐making processes and investment decisions.

3.2

Cost barriers

The ability of heat pumps to compete on cost today varies markedly across countries
according to differences in all these factors. Based on average 2021 equipment prices andfuel prices projected in the APS, a new heat pump to heat an average home in a cold climate
is cheaper than a natural gas condensing boiler in most of the main heating markets, often
even without subsidy (Figure 3.1). In some countries such as the United Kingdom, however,subsidies for heat pumps are required to make them cost‐competitive. Even where the costof a heat pump over its lifetime is already the cheapest heating option, financial incentives,
including grants and low‐interest loans, may still be needed to reduce the initial cost burden,
which may deter the building owner from installing a heat pump in the first place.
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The overall cost‐competitiveness of heat pumps against other heating technologies depends
on a combination of factors, including the initial purchase price, operating and maintenancecosts (including the price of the electricity needed to run them), their durability, and financial
incentives such as grants or tax credits. In most markets, heat pumps generally entail higher
upfront costs than conventional fossil fuel heating equipment such as oil or gas boilers, evenwhen financial incentives are taken into account, but benefit from lower running costs overtheir lifetime due to their much higher energy efficiency.

Figure 3.1 ⊳Levelised cost of heating and cooling of residential heat pumps
and alternatives in selected countries, 2021

50

UnitedStates

Air‐air
Air‐water
Gas

Japan

Germany

Air‐air
Air‐waterGas

Air‐air
Elec heat + AC
Gas + ACAir‐air
Elec heat + AC
Gas + AC

Italy

Korea

Air‐air
Air‐water
Gas

Levelised cost of heating andcooling in mild climates

Air‐air
Elec heat + AC
Gas + AC

China

CanadaAir‐air
Air‐water
Gas

UnitedKingdom

Levelised cost of heatingin cold climates

Air‐air
Elec heat + AC
Gas + AC100

100 150 200
USD (2021)/MWh

Capital expenditures

Operating expenditures

200 300 400
USD (2021)/MWh

Levelised cost with subsidies
IEA. CC BY 4.0.

Thanks to lower operating costs, heat pumps can be competitive with gas boilers
in some leading heating markets today, even without subsidy
Notes: Air‐air = air‐to‐air heat pump; Air‐water = air‐to‐water heat pump; Gas = gas condensing boiler; Elecheat = electric resistance heater; AC = air conditioner. The levelised cost of heating and cooling estimates theaverage cost of providing 1 MWh of heating or cooling over the lifetime of the equipment, considering thecapital cost of the equipment and installation; operating expenditures include the cost of fuel and regular
maintenance. The analysis assumes heating and cooling degree days of one representative, city in each
representative country, then uses average energy prices in that country. For cold climates, we use Toronto,
Seoul, Berlin, Edinburgh and for representative cities in mild climates we use Washington, D.C., Kyoto, Rome,
Shanghai. Medium market prices for the equipment and projected fuel costs under the APS have been used.
A lifetime of 17 years is assumed for gas boilers, 15 years for air‐to‐air and 18 years for air‐to‐water heatpumps. Electric resistance heaters and air conditioners are assumed to have a lifetime of 10 years.

Reducing upfront costs

Reducing the upfront cost of purchasing and installing heat pumps is critical to boosting their
attractiveness to consumers, notably households. Equipment costs vary substantiallydepending on the technology type (air‐to‐air, air‐to‐water or ground‐source), rated capacity,
manufacturing quality and functionality, as well as across countries and regions, partly
according to the maturity of the market. The latter factor also influences installation andancillary costs, such as electrical and piping work or storage tanks, the need for which vary
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3.2.1

widely depending on the specific configuration of each installation. Differences in the cost oflabour further explain upfront cost variations across countries.
In most markets, the upfront cost of a residential heat pump (including installation) is
generally much higher than that of a fossil fuel boiler, though the extent of the cost gap varies
widely within and across countries, even for the same technology (see Figure A.1 in Annex A).
Nonetheless, in some mature markets, such as Denmark and Japan, the least expensive
ductless air‐to‐air heat pump models have become cheaper than gas boilers for new
installations in small houses, in particular thanks to reduced piping work and installation
costs (Figure 3.2). In the case of ductless air‐to‐air systems, however, larger households withmultiple heating zones require more than one unit, which generally makes them more
expensive than gas boilers. Hydronic (air‐to‐water) heat pumps are more expensive than air‐to‐air heat pumps, and even the cheapest models remain more costly than gas boilers in all
the main markets, with the exception of Sweden, whose early‐on policies enabled thewidespread adoption of heat pumps bringing installation costs down. Ground‐source heatpumps are the most expensive technology type in all countries, due to the earthworks or
drilling needed to install the underground heat exchanger, which can represent more thanhalf of the total price of the system (though their far greater durability and efficiency meanthat they can be competitive on a levelised cost basis). Installing a reversible heat pump, by
eliminating the added cost of a separate air‐conditioning unit, can effectively lower the costfor heating purposes in climates with cooling needs during part of the year.

3

The higher upfront cost of heat pumps compared with gas or oil boilers means that somehouseholds are simply unable to afford them, even though their lifetime cost may be much
lower. To help overcome this barrier, a number of countries have introduced subsidies onheat pumps to encourage their uptake. Taking account of the minimum subsidies currently
available, upfront costs for both air‐to‐air and air‐to‐water heat pumps are below those forgas boilers in some countries, including France and the United States. The cost advantage forheat pumps can be even larger for low‐income households that are entitled to bigger
subsidies, such as in Poland. Subsidies are also higher in some countries, such as Canada, forthe most efficient models, which are generally more expensive.
Switching to a heat pump in an existing house may incur additional costs, which can also
constitute a barrier to choosing that option. Older homes may have to upgrade theirelectrical system to accommodate a higher power load depending on the capacity of the heatpump. In addition, existing radiators may need to be replaced with larger ones, or with
underfloor heating or forced‐air heating systems, in order to allow heat pumps to operate atlower temperatures and benefit from greater efficiency.1 These upgrade costs can make up
as much as a third of the total cost of installing a heat pump.

Fossil fuel boilers generally operate with output temperatures at 60‐80 °C. While heat pumps can produce
heat above 55 °C and potentially up to 70 °C, their performance declines as their output temperature
increases.

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1

Figure 3.2 ⊳Equipment and installation cost of the cheapest model of main
residential heating technologies in selected countries, 2022

CanadaChina
Denmark

FranceGermany

Italy
Japan

Korea
PolandUnitedKingdom
UnitedStatesSweden5 000
Condensing gas boiler
Ground‐source

10 000

15 000Air‐to‐air heat pumps
Subsidy

20 00025 000USD (2021)

Air‐to‐water heat pumps
Cost after maximum subsidy
IEA. CC BY 4.0.

Air-to-air heat pumps can be cheaper than gas boilers in some markets, but subsidies

Notes: Costs include the price of the equipment and its installation. Subsidies account for the minimum levelof national financial support offered to households that qualify for it in each country. China and Japan do notoffer subsidies at the national level. Some countries, such as Italy, offer subsidies that can exceed the purchaseprice in some cases.

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remain key to increase the competitiveness of air-to-water and ground-source units

Table 3.2 ⊳Coverage of financial support mechanisms for residential heatpumps worldwide, 2022
Number ofcountries

Share of global
residential
space heating

30

70%

Primarily used for heat production

27

47%

Installed in older dwellings
Running fully on electricity (hybrids excluded)

20

28%

16

11%

Replacing fossil fuel heating systems

12

34%

Installed in the main residence

12

15%

As share of expenses and capped by maximum amount

16

39%

Depending on heat pump technology

10

16%

Depending on other factors

6

3%More efficient technologies

18

29%

Lower‐income households

12

34%

Heat pumps installed in houses rather than appartments

42%Heat pumps installed in disadvantaged areas (e.g. no district heating)

42%

Heat pumps replacing a fossil fuel heating system

3

7%

9

33%

Installed in older dwellings

5

12%Installed in the main residence

36%Type of financial support and key features
GrantsSupport eligible only for heat pumps…

3

Base amount set…

Additional support for…

Income tax rebate
Support eligible only for heat pumps…

Base amount set…
As share of purchase/installation price and capped by a maximum

730%

Equal to the purchase price22%Higher than the purchase/installation price depending on
efficiency/energy savings

1

3%

Additional support for…
Heat pumps replacing a fossil fuel heating system
VAT rebate

1

<1%

5

12%

5

12%

VAT rate…
Reduced for the purchase and/or installation of a heat pump
Equal to zero for the purchase and/or installation of a heat pump

1

4%

24

29%

Low interest and conditions on amount and maturity

20

18%

Zero interest and conditions on amount and maturity

7

13%

Low‐interest loans

Note: Analysis based on national‐level policies except for Japan and China, where only subnational schemes
exist but cover a substantial share of national space heating demand.

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Loans with…

There is a wide range and diversity of financial incentive schemes available across the main
heating countries, reflecting differences in political will, national policy strategy and local
factors (Table 3.2). In many countries, financial support for heat pump installations isavailable only if existing fossil fuel boilers are scrapped. Those countries collectively accountfor more than a third of global heating demand.
Grants are the most commonly used policy tool and are currently available in 30 countries,
together representing 70% of global space heating demand. In some countries, grants covermost if not all the cost of purchasing and installing a heat pump for low‐income households.
Some countries, including France and the United Kingdom, have reduced or completely
removed VAT on alternatives to gas boilers. Income tax credits are used in some countries.
For instance, Italy’s Superbonus scheme provides a tax credit worth up to 110% of the costof a substantial building retrofit that can include heat pumps. However, in contrast to direct
grants and subsidies, tax credits only reach consumers with a delay, often two years, but ashigh as five. Low‐ or no‐interest loans, green mortgages and specific loan repayment schemes(e.g. pay‐as‐you consume) are widely available in many countries. In the case of medium‐and large‐scale ground‐source heat pump projects, schemes to limit the financial risks
associated with drilling are used in some countries, notably France (Georisk, 2021). It can bedaunting for consumers to obtain information about their eligibility for the various types offinancial support on offer and how to apply for them, so some countries have set up “one‐stop shops” to facilitate this; Electric Ireland Superhomes is but one example.

The cost of buying and installing a heat pump is expected to decline gradually in real terms
over the rest of the current decade, as markets expand and suppliers benefit from economies
of scale. The largest cost components in manufacturing a heat pump are the compressor,
heat exchanger and electronics, which together make up around two‐thirds the cost of an air
source heat pump (US DOE, 2016). There is considerable potential for reducing production
costs through large‐scale automation, though strong and stable policy signals are needed for
manufacturers to commit to the substantial investments required to expand output capacity.
Industry‐wide measures could help spur faster declines, such as standardising parts andquality control testing, which could lower the cost of components, installation, and repair
and maintenance. Manufacturers can also develop plug‐and‐play designs to makeinstallation faster, easier and cheaper. Targeting serial installations across similar buildingsin the same neighbourhood – drawing for instance on the Dutch‐originated Energiesprong
approach to energy efficiency retrofits to buildings – can help mutualise logistical costs

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Other policy approaches can also help lower the initial cost of purchasing and installing aheat pump. The right regulatory environment can enable the emergence of new businessand financing models that alleviate the financial burden on consumers by reducing or
eliminating the upfront cost borne by the consumer, and instead allow them to pay backthese costs along with their usage, for instance through rental or heat‐as‐a‐service models(see the next section). Where relevant, regulators should remove other upfront barriers that
impede adoption, such as gas network disconnection charges.

(Energiesprong, 2021). In the more mature markets, growing competition among installers
is also expected to put downward pressure on costs.
Overall, total upfront costs for heat pumps could potentially decline by one‐fifth in mostmarkets during this decade, and up to 40% in some countries such as Germany (Heptonstalland Winskel, forthcoming; Agora Energiwende, 2022). However, the outlook for costs
remains highly uncertain, because of the impact of other factors that could work against thetrends described above, such as the tightening of regulations on the energy performance ofheat pumps and the types of refrigerants permitted, as well as higher retrofit costs, as heatpumps are progressively deployed in existing buildings that require deep energy retrofits.
Box 3.1 ⊳3

EBRD financing for heat pumps

The European Bank for Reconstruction and Development (EBRD) supports the rapid
deployment of heat pumps as a means of decarbonising heating systems. Through theGreen Economy Financing Facility, the EBRD works with a network of over 170 local
financial institutions and 2 300 technology providers to support businesses andhomeowners wishing to invest in green technologies. It has already directly invested over
EUR 80 million in a range of projects, particularly in East and South‐East Europe, enabling
the installation of 30 000 heat pumps. In addition, loan funds have supported thedeployment of heat pumps as part of energy efficiency‐focused building retrofit
programmes in Poland and Romania.
To support heat pump deployment, the EBRD relies on four main levers:Supporting analyses on heat pumps to optimise the scale‐up of the technology in
specific markets.

Working with governments to remove barriers to heat pump deployment andassisting them in the creation of minimum performance standards.

Supporting municipal infrastructure clients to install industrial‐scale heat pumps for
district heating – especially in the western Balkans – as well as building‐scale heatpumps as part of both deep energy retrofits and new building projects.

Strengthening green economy finance through the banking sector.

3.2.2

Reducing operating costs

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Heat pump running costs were already lower than those of gas boilers in the main heating
markets before the current energy crisis (Figure 3.3). In Europe, this advantage has grown inrecent months, saving the average European household over USD 900 annually. This isbecause households’ tariffs for electricity generally increased less than those for gas, partly
due to government interventions to dampen price increases.

USD (2021)

Figure 3.3 ⊳Energy bill savings for households switching to a heat pump froma gas boiler in selected regions/countries, 2021 and 2022

United States

Europe

Korea

Japan

2021 2022

2021 2022

2021 2022

2021 2022

1 000
800
600
400
200

IEA. CC BY 4.0.

Soaring gas prices have boosted the cost advantage of runninga heat pump over a gas boiler in most countries
Note: Savings in energy bills in 2022 take account of policy interventions up to September 2022 to limit pricerises, including reductions in VAT, direct subsidies, and caps on increases in electricity and gas prices. The
analysis is based on average electricity and gas prices across regions/countries and an average household
demand for space heating and hot water in representative cities in respective regions/countries (Detroit,
Stockholm, Seoul, Niigata).
Source: IEA analysis based on Energie‐Control Austria, MEKH and VaasaETT (2022).

Carbon pricing can also help level the playing field between fossil fuel and low‐carbon
technologies, and can significantly improve the competitiveness of heat pumps, in particular
in regions with low‐emissions electricity generation. Today, more than 20 countries
worldwide put a price on CO2 emissions in the buildings sector (World Bank, 2022). In
Sweden, the introduction of a carbon tax in 1991 and subsequent steady increases in the tax
rate have driven a large‐scale switch from oil boilers to heat pumps. The Swedish carbon
price reached EUR 118 per tonne of CO2 in 2022 – one of the highest in the world. As a

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There remains considerable scope for reforming fuel taxes in some countries, where gas still
benefits from more favourable taxation than electricity. Others have taken steps torebalance taxes. For instance, a tax reform in the Netherlands reduced tax rates onelectricity, while taxes for gas use were increased, making heat pumps even cheaper to run
than gas boilers. A ban on gas connections to new buildings was introduced in 2018, which
has already led to an increase in demand for heat pumps (RAP, 2022a). In Denmark, where
taxes made up more than half of the residential electricity price in 2021, homeowners andtenants pay a lower rate of tax of just 0.1 euro cents per kilowatt‐hour of electricity if theirhome is heated by a heat pump (IEA, 2021).

consequence, oil boilers have largely been phased out, with heat pumps now accounting for
more than 90% of heating system sales today.
In all cases, energy taxation and carbon pricing policies need to take account of distributional
impacts. Compensatory measures to protect the most vulnerable populations may beneeded, which can be financed by the additional revenues generated by higher fuel and/or
carbon taxes. That revenue can also be used to subsidise heat pumps and other clean energy
technologies.

3

Electricity tariffs can also be designed in a way that reduces the running costs of heat pumps.
The thermal inertia of buildings and hot water tanks offers considerable potential for heatpumps to be operated flexibly, allowing them to consume power at off‐peak times of theday. This flexibility needs to be valued through time‐of‐use and dynamic electricity tariffs andautomated operation. For example, Electric Ireland offers a night rate that is around half theprice of the day rate, allowing heat pump owners to programme their devices to operate
especially at night (Electric Ireland, 2022). Integrated metering, communication and active
control features can enhance the demand‐response potential of heat pumps and minimise
operating costs. This can also help to balance the overall electricity system and reduce theimpact of the large‐scale deployment of heat pumps on peak demand. Flexible operation canalso enable the coupling of heat pumps with rooftop solar PV, which can further reduce
operating costs, though it does entail significant upfront costs.

The running costs of a heat pump are also affected by how well it is operated and maintained.
It is essential that the owner of a heat pump is informed about correct handling and the needfor thorough maintenance by qualified technicians so that they operate efficiently and at
optimal cost throughout their lifetime. Air‐source heat pumps can become clogged with dirt
over time, leading to increased electricity consumption and premature wearing of the unit,
as well as noisier operation. Refrigerants also tend to leak out over time, which reduces
efficiency, as well as contributing to climate change (see Chapter 2). Refrigerant leakage
warning systems are currently commercially available for large heat pumps; a roll‐out toresidential systems could help users identify the reason for loss in performance and avoid
the emission of refrigerant gas.

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Improved energy efficiency can also lower running costs. Well‐insulated buildings andefficient heat pumps, which can be encouraged through minimum energy performancestandards and labelling, are essential to reduce the capacity of heat pumps needed to warm
a given amount of space and volume of water, thereby cutting the cost of operating as wellas installing them. This also allows for lower flow temperatures, enabling heat pumps tooperate more efficiently and cheaply. In Denmark, electricity consumption by heat pumps
has been found to be up to 30 times lower in homes with the highest efficiency ratingcompared with the lowest efficiency rating (Figure 3.4). Improving a home’s efficiency ratingby two grades (e.g. from D to B) can half the heating energy demand, saving consumers
money. The IEA Energy Efficiency Market Report 2022 discusses the nexus of insulation andheat pumps in more detail (IEA, 2022a).

Electricity consumption (MWh/100 m²)

Figure 3.4 ⊳Annual heat pump electricity consumption by building energy
efficiency class in Denmark, 2022

12
G
10
F

8
E

6
D

4
2

C
B
A+ A

0
Heating requirement (kWh/m²)
IEA. CC BY 4.0.

Electricity consumption by heat pumps in Denmark is up to 30 times lower in homes
with the highest efficiency rating compared with the lowest efficiency rating
Notes: m2 = square metre. The absolute values are based on the Danish building classification. Thresholdvalues for classes depend on local climate conditions. Class A2015 is presented as A, Class A2020 is presented
as A+. The electricity consumption refers to a 100 m² floor area.
Source: IEA representation based on Danish Energy Agency (2022).

3.3

Non‐cost hurdles to consumer adoption

In addition to cost, there are a range of other hurdles to the adoption by consumers of heatpumps, notably restrictions relating to heat pump installation, a lack of information about
the benefits of heat pumps, and split incentives between building owners and tenants. Whilethese barriers are less concrete in nature than costs, they contribute significantly to thereticence of many consumers to opt for a heat pump over other heating systems. A failure
to take action to address them could deter large numbers of consumers and hold backdeployment of the technology. Many countries have developed programmes to addresssome of the barriers. Further efforts are needed to strengthen them and apply them more
widely.

Restrictions on new installations

The installation of a heat pump is subject to a number of restrictions, approvals and practicalconstraints in most countries. Installations must usually adhere to building, fire safety, land‐
use and electrical codes and regulations. They may also require the approval from
homeowners or buildings associations, which may be concerned about aesthetics and noise,
as well as from the local authority under planning rules. Smaller households, notably in
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3.3.1

multifamily buildings, may not have the external space needed to install a heat pump (though
centralised heat pump solutions exist [IEA, 2022b]), and there may be problems attaching
the external compressor unit to the building facade. Obtaining approvals and designingsystems to avoid practical constraints can be time‐consuming and costly, leading someconsumers to change their mind during the process. For water‐source heat pumps utilisingwaste heat from sewage water in district heating or commercial applications, regulations
may prohibit the rerouting of wastewater from sewage pipes past the heat exchanger.

3

Some countries have eased permitting procedures for heat pumps in order to encourage
their deployment. In the Czech Republic, for example, outdoor residential heat pumps witha capacity of up to 20 kW are now exempt from applying for building permits. The European
Commission has recently proposed to impose shorter deadlines for the permit‐granting
process for heat pumps across the European Union (European Commission, 2022). Many
countries also do not require planning permission for small heat pumps. Some countries haverelaxed approval procedures for multi‐owner buildings by requiring only simple majorities
for installing heat pumps and other clean technologies. For ground‐source heat pumps,
which may face restrictions on boring depth under drilling regulations, some governments
have increased permitted depths to enable more installations. Geothermal maps that
identify and classify areas according to geothermal heat availability and regulatory
requirements can help streamline permitting and licensing procedures for geothermal heatpump projects (BRGM, 2022).
But many other restrictions remain in most jurisdictions. A comprehensive review of all
regulations, codes and approval processes applicable to heat pumps is needed to identify
redundant or onerous restrictions that do not materially improve health, safety, liveability
or other outcomes. This process can be complex, involving a large number of local, national
and international authorities, and so needs to be conducted by a strong, centralised body.
Sharing of experiences in this domain among countries can play an important role inpromoting best practice in removing red tape.

3.3.2

Lack of reliable information

Energy labels are a crucial measure to help consumers identify the most energy‐efficientheating solutions. In most cases, energy labelling is mandatory where minimum energy
performance standards are in force for heating and cooling technologies (110 countries haveadopted such standards or plan to do so). In addition to energy efficiency, labels should
include smart‐readiness, recyclability and noise reduction features to guide consumers.
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Obtaining reliable information about heat pumps is crucial to the decision by a consumer to
opt for that technology over other heating solutions. The process of comparing heat pump
options, choosing an installer, obtaining approvals and qualifying for relevant subsidies canbe very complex and time‐consuming. In surveys, many consumers who have consideredbuying a heat pump have cited these barriers as reasons for why they eventually decided not
to proceed (dena, 2022).

Information and awareness campaigns can also be used to debunk misconceptions among
consumers about heat pump performance. Many consumers are unaware of the significant
improvements that have been made in heat pump performance, including efficiency andnoise, in recent years. Initiatives to promote dialogue at the community level can also bolster
consumer trust in the technology, share lessons learned and impart information tohomeowners considering switching to a heat pump (RAP, 2022b). Some countries havechampioned the use of one‐stop shops, which help consumers compare options, assess
lifetime costs, choose an approved installer, obtain financing and apply for subsidies. They
can be particularly helpful in assisting consumers make an informed choice in the event of a“distress purchase”, when the urgency of replacing an existing heating system when it
suddenly breaks down leads most consumers to simply opt for replacing their existingheating equipment without considering alternatives. Distress purchases can account for up
to 60% of all heating equipment purchases in some countries (Nesta, 2021). One‐stop shops
can also help installers reach prospective clients. An alternative approach involves requiring
energy utilities to provide comparer tools run by a third party through efficiency
programmes, or requiring energy companies, manufacturers or installer networks tocontribute to the cost of such initiatives. Offering free third‐party energy audits, which may
be seen as more trustworthy than advice provided by the utility itself, can also help
consumers make informed decisions on replacing their heating system.

3.3.3

Split incentives between building owners and tenants

Financing models such as energy performance and heat‐as‐a‐service contracts that reduceor eliminate upfront investment costs can also help overcome split incentive barriers. They
involve an agreement between the building owner and tenant, whereby the financial,performance or technical risks of investing in a heat pump are transferred to a specialised
service company or utility, which recoups the upfront cost through a regular fee over apredetermined period, in some cases based on actual energy savings (Table 3.3). Most of the76

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Split incentives between building owners and tenants are a common barrier to investments
in energy efficiency in buildings, including the adoption of more efficient heating systems
such as heat pumps. The owner of a building can be wary of spending more on a heat pump
if they are unsure that they will be able to recoup the cost through higher rents or a higher
resale value of the property at a later stage, though heat pumps can add a significant
premium on the property sale price (Shen, 2021). To increase the incentive for landlords toinvest in heat pumps and other clean energy technologies, some governments have passed
legislation that allows homeowners to increase the gross rent by a certain percentage of theheating cost savings to split the benefit with the tenant. Minimum energy efficiency
requirements for rented properties or at point‐of‐sale transactions can also incentivise
investments in heat pumps. For example, in France, properties with an energy efficiency
rating in the lowest class (G) will no longer be able to be rented as of 2023, while dwellings
with ratings F and G will be subject to a rent freeze, which will only be lifted if they retrofit
to reach at least an E rating.

models currently available in major heating markets aim to offer an alternative to loans. In
some cases, the heat pump remains the property of the service company, reducing thefinancial risk for the property owner.
Table 3.3 ⊳Main business models to facilitate heat pump uptake

Model

Description

ExamplesEnergyperformance
contracts(EPCs)

An energy service company (ESCO) installs,
owns and operates the heat pump under along‐term EPC with commercial customers
based on a shared energy savings model orguarantee energy savings.

Used under the UK Renewable Heat
Incentive programme

Heat‐as‐a‐service The heat pump, its maintenance and heat areprovided by specialised ESCOs to housing
associations, household owners or utilities on
a long‐term basis as a bundled service paid
through a single subscription payment withguaranteed savings.

Being trialled in many countries,
notably in Europe

Pay‐for‐performance

The customer pays a fixed rental fee for theheat pump equipment based on energy
savings.

Used in US states such as California,
Oregon and New York

On‐bill financing

The cost of the heat pump installation andequipment is covered by a long‐term loan
repaid through the utility bill attached to theproperty, which can be transferred to futuretenants.

Used in several Canadian provinces

Property
assessed clean
energyThe heat pump installation in a residential orcommercial property is financed by a loan thatis attached to the property and repaid as anaddition to the property tax over 10‐20 years,
allowing for easier transfer to future tenants
and more favourable interest rates.

Widely used in North America

Conventional
equipment lease

The heat pump is leased to the property ownerover a predetermined period, after which
ownership of the pump is transferred to theuser.

Available in Germany and some othercountries

Clean energy
intermediate
lending

A large bank lends funds to a small local bankto lend out to building owners investing in heatpumps. This model enables large volumes offinance to be directed to many small‐scale
investment opportunities.

Widely deployed by multilateraldevelopment banks such as the EBRD,
which uses the Green Technology
Selector – a database of technologies
that are eligible for support without
additional approval – to speed up
financing decisions

3

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Sources: Catapult Energy Systems (2022); Urban (2021); EBRD (2022).

3.4

Manufacturing constraints

Accelerating the deployment of heat pumps worldwide on the scale envisioned in the APS
hinges on a massive expansion of manufacturing capacity. The ability of manufacturers tomeet rising demand may be constrained by various factors, including the availability ofmaterials and components, the business and investment environment, and regulatory andlegal restrictions. While not the primary focus of this report, policy makers need to be awareof these potential constraints and identify ways of assisting the private sector in addressing
them. Today, most of the heat pumps sold around the world are manufactured in China, theUnited States, Europe, Japan and Korea. There is unutilised manufacturing capacity at
existing factories at present, amounting to about 20% of total capacity in 2021, but it would
not even be sufficient to meet the projected increase in sales in the APS for two years(Figure 3.5). The supply of basic materials and specialised components, including
compressors, heat exchangers and refrigerants, would also need to be scaled up rapidly.

GW

Figure 3.5 ⊳Current and projected heat pump sales in the APS and unutilised
manufacturing capacity today

350
300

Unutilised
manufacturing
capacity

250

Sales

200
150
100
50
2021

2025

2030
IEA. CC BY 4.0.

Unutilised heat pump manufacturing capacity, while equal to about 20% of total capacity,
would not even be sufficient to meet the growth in sales in the APS for two years

Supply chain constraints are already affecting manufacturing of heat pumps and key
components, especially semiconductors and chip sets in the past two years. Global shortages
have already driven up costs and slowed production in the heating, ventilation and air
conditioning (HVAC) industry. Higher prices of copper, steel, aluminium, silver for welding
and certain plastics are also driving up costs (First Citizens Bank, 2022). Some of thesematerials, notably copper, are set to remain in high demand as clean energy transitions
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Source: IEA analysis for 2021 based on data provided by Global Research View.

advance. Air‐source heat pumps for residential applications contain around 15 to
20 kilogrammes of copper, predominantly in their pipes and valves, making up roughly 10%of the overall cost of the device (International Copper Alliance, 2022; GOV.UK, 2016). The
industry is exploring using aluminium alternatives to copper for key components to reduce
costs (Bloomberg News, 2021). Residential hydronic heat pumps typically contain more than
twice as much aluminium and 15 times more copper and brass than their condensing gas
boiler equivalents.2

3

In the medium and long term, increased recovery and recycling of materials from scrappedheat pumps, air conditioners and fossil fuel boilers through end‐of‐life management
regulations could provide a secondary stream for the supply of copper, aluminium and iron,while avoiding impacts associated with their mining. In the European Union, heat pumps andair conditioners are currently covered by end‐of‐life management regulations under the
Waste Electrical and Electronic Equipment Directive, which sets criteria for the collection,
treatment and recovery of waste equipment (European Union, 2012).
Governments are increasingly playing a role in stimulating domestic investment in heat pump
manufacturing, addressing supply chain bottlenecks and fostering innovation. Several
countries have recently introduced policies aimed at onshoring the manufacture of criticalclean energy technologies, including some that explicitly target heat pumps, such as the US
Defense Production Act. Others target semiconductors and critical mineral manufacturing,such as the EU European Chips Act and Critical Raw Minerals Act. Some countries provide
manufacturing incentives such as RD&D support for heat pumps, on top of deployment
targets, bans on fossil fuel boilers and consumer incentives, all of which enhance market
certainty for manufacturers as they expand their production capacities. Another measure,being planned by the UK government, involves imposing a rising quota for the number ofheat pump sales in relation to a boiler manufacturer’s overall sales of heating systems(GOV.UK, 2022). Reducing regulatory uncertainty is key for manufacturers to commit toscaling up production. In the European Union, a revised version of the F‐gas Regulation,
currently under discussion based on the Commission’s proposal, is expected to enter into
force from 2024 and will provide clarity on limitations for F‐gas usage by manufacturers ofheat pumps and other technologies (see Chapter 2).

2

Based on PEP (2022) and personal communication with Assoclima, November 2022.

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Leading manufacturers have recently announced plans to invest more than EUR 4 billion in
expanding heat pump production capacity and related efforts. Most announcements
concern projects in Europe, though capacity is set to rise in other regions where new projects
are generally less publicised (Table 3.4).

Table 3.4 ⊳Recently announced investments in heat pump production by
selected manufacturers in Europe

Company

Region/country

Investment allocation

Vaillant

EU

Heat pumps and energy
efficiency

130 million 2022‐2023

Hoval

Liechtenstein, Slovakia

Heat pumps

60 million

Clivet (Midea Group) Italy

Heat pumps

60 million

2024

Mitsubishi

Turkey, UK

Heat pumps and air conditioning 128 million

2024

Bosch

EuropeHeat pumps

300 million

2025

Daikin Europe

1.2 billion

2025

Stiebel Eltron

Belgium, Czech Republic, Heat pumps, digitalisation, R&D
Germany, Poland
and service capacity
Germany
Heat pumps

600 million

2025

NIBE

SwedenHeat pumps

460 million

2025

Viessmann

PolandHeat pumps and other green
solutions

1 billion

2025

Panasonic

Czech Republic

Heat pumps

145 million

2026

Investment Date of(EUR)
completion

2023‐2024

Note: Converted to EUR for Mitsubishi (USD 113 million plus GBP 15 million) and NIBE (SEK 5 billion [Swedishkronor]).
Sources: Vaillant Group (2022); Business Solutions (2021); Hoval (2022); Quanlin (2022); Mitsubishi (2022);
Walker (2021); Bosch (2022); Daikin (2022); Klingauf (2022); NIBE (2022); Viessman Group (2022); Panasonic(2022).

3.5

Shortages of skilled installers

A shortage of skilled installers is already starting to create bottlenecks in the deployment ofheat pumps in several countries. The skills needed to install heat pumps are similar to thoseof many standard occupations in construction, but require additional specialisations. These
include assessing the property, calculating heat losses to design the installation, updatingparts of the existing heating system and electrical wiring (Table 3.5). Some of these skills canbe taught through on‐the‐job training, while others, notably sizing the heat pumpinstallation, drilling, electrical work and refrigerant handling, require trained and certified
personnel. Both installation and electrical skills are often included in the same qualification
schemes, though in some countries such as Canada different professionals are required.
Additional qualifications are required for ground‐source heat pumps, including in drilling or
trenching, thermal fusion of pipes and geological analysis. Skilled drilling engineers in the oiland gas sector are well‐placed to take on such jobs.
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The rapid growth in deployment of heat pumps worldwide in the APS would require a big
increase in the workforce at every step of the supply chain, especially installation (seeChapter 2). Today, roughly half of heat pump workers worldwide are involved in the
installation process, while another quarter work in maintaining and servicing of heat pumps.
Demand for installers is expected to quadruple to 2030 to over 850 000 in the APS(Figure 3.6). All the new installers would need to be adequately trained under certified
programmes.

Thousand employees

Figure 3.6 ⊳Employment in heat pumps by region/country in the APS

European
Union

400

UnitedStatesChina

Other key
countries
O&M workers
Installers

300

3

200
100

2019 2030

2019 2030

2019 2030

2019 2030
IEA. CC BY 4.0

Demand for installers, which make up about half of the total heat pumpworkforce globally, increases by around 650 000 by 2030 in the APS
Notes: O&M = operations and maintenance. Other key countries = Australia, New Zealand, Canada, Japan,
Korea, Eurasia and the rest of Europe.

Mapping of typical skills and occupations required for heatpump installation by installation phase

SkillsOccupation
Sizing and heat pump system design
On‐site assessment of existing heating
General construction worker,
infrastructure and property insulation
heat pump installer
Heat losses and heating load calculations
Heat pump installer
Design, choice of materials and system layout
Heat pump installer
Pressure drop calculations, thermal conductivity Heat pump installer
assessment
Installation
Trenching and drilling
Pipe joining and plumbing
Handling refrigerants

Electrical work
Electrical wiring
System configuration
Final system setup, refrigerant gas stabilisation

Chapter 3 | Barriers and solutions

Heat pump type
All
All
All
All

Certified drilling professional
Plumber, pipefitter,heat pump installer
Heat pump installer with
F‐gas certification
Heat pump installer qualified
to handle flammable materials

Ground‐source
All

Electrician,heat pump installer

All

Heat pump installer

All

Systems with onsite
F‐gas refrigerant
handling
Systems with on‐sitehydrocarbon refrigerant
handling

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Table 3.5 ⊳Maintaining standards for installers remains essential to the growth of the industry.
Underqualified installers can result in underperforming systems or persistent maintenanceproblems, including leaks and electrical issues, possibly breaching the warranty offered by
the manufacturer or the terms and condition of home insurance, as well as posing
reputational risks to the heat pump industry. Additionally, many installers continue tooperate using outdated notions of heat pump performance, and can try to dissuadeconsumers from adopting heat pumps when consulting them while replacing boilers.
Certification schemes designed by either regulatory or industry bodies are available in all
major markets. They vary in scope and duration and are not harmonised internationally. In
China, a voluntary qualification certificate is in place for companies servicing industrial andcommercial refrigeration and air‐conditioning equipment, including heat pumps. In Europe,
installers need to obtain relevant accreditations or demonstrate a given number of years of
relevant experience.
While training is needed for the safe and proper installation of heat pumps, onerous
certification schemes can deter workers from procuring these qualifications. Additional
training requirements, costs or a lack of demand for heat pumps in their local area candissuade workers from applying for training and certifications and the owners of traditional
heating system businesses from diversifying into heat pumps. To alleviate these hurdles,
certifications for heat pumps can build on existing qualification schemes and be incorporated
into the existing curriculum for electricians, plumbers, and other heating and refrigeration
technicians, or in fire risk safety training. A growing number of manufacturers are alsooffering their own installation training programmes, which can be more targeted and shorterin duration, allowing companies to build up a workforce of certified installers more quickly.
Standardising credentials and training across manufacturers and jurisdictions could help to
expand the installer workforce and increase labour mobility across countries and regions. Oiland gas boiler bans and other policies that increase long‐term certainty about the prospects
for the heat pump industry can also encourage workers to enter the industry.
Governments can play a major role in promoting the training and recruitment of heat pumpinstallers. They need to work with industry to update certifications, provide incentives toworkers to pursue vocational education and support apprenticeships. Incentives can beprovided through installers, as is the case in the United Kingdom. Government programmes
focused on training heat pump installers have been introduced in several countries, including
Netherlands, the United Kingdom and EU members, notably since the launch of REPowerEU(Box 3.2).

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Manufacturers can also help ease installer shortages by designing more robust, standardisedand easier‐to‐install heat pumps and by equipping installation companies with the right
digital tools and applications to help them install the units correctly. Open data on building
characteristics could benefit innovative business models that use digital tools to assess how
easily a heat pump can be installed and to connect customers with installers.

Box 3.2 ⊳Meeting the growing demand for heat pump installers in theEuropean Union

The REPowerEU targets for heat pumps, reflected in the APS, call for an increase in thenumber of trained heat pump installers from around 40 000 in 2019 to 110 000 by 2030.
Certification is mandatory across all EU countries for heat pump installations that require
refrigerant handling by the installer, which is the case for most systems, except self‐contained systems like a monobloc. With increasing restrictions on F‐Gas refrigerant
usage in line with the Kigali Amendment, the required certification may pass fromhandling of F‐Gases to handling of flammable material. However, for the majority of
installations, requirements for training and certification of installers vary between
countries, despite the requirement for mutually recognised certification under the
Renewable Energy Directive. Given the enormous differences in the maturity of the heatpump market across countries, collaboration between them on heat pump installer
training and transfer of best‐practice know‐how could help ensure efficient and high‐quality installations and achieve the REPowerEU targets.

Thousand employees

Figure 3.7 ⊳3Number of employees in occupations related to heat pumpinstallation with labour shortages in the European Union, 2020
and 2030

1 200

24

1 000

20

800

16

600

12

400

8

200

4

Employees
in 2020
O&M
workers
Installers
Regions withhiring gaps
(right axis)

Heat pump
AC andPlumbers Building and Electricalmechanics refrigeration workers
relatedand pipeelectricians and fitters mechanics needed byfitters2030
IEA. CC BY 4.0.

Many EU countries face labour shortages in occupations key to heat pump installation.
Workers that could be quickly upskilled to install heat pumps outnumber needs in 2030.
Note: Occupations as defined in the International Standard Classification of Occupations. “Regions withhiring gaps” includes the EU27 with Belgium divided into three autonomous regions, as well as Switzerland
and Norway.

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Source: IEA analysis based on ELA (2021).

Additional training requirements will put a strain on an already tight European labour
market. There is a shortage of workers in a range of occupations related to heat pumpinstallations, such as plumbers and pipefitters, air‐conditioning and refrigeration
mechanics, electrical mechanics and fitters, and electricians (Figure 3.7). In a recent
survey, hiring gaps for plumbers and pipefitters were reported by the most countries,
with that occupation ranking second for shortages among all economic sectors (ELA,2021). However, the number of heat pump installers and those servicing heat pumps
remains far smaller than the current employment in related occupations. This places thefocus squarely on incorporating heat pump‐specific training into existing certification
schemes and providing incentives to attract workers already in related occupations topursue heat pump certification schemes.

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Rapid upskilling and training will be crucial to meet growing demand for installers. Somemeasures could alleviate the risk of worsening labour shortages, including revisingexisting certification curriculum for plumbers, electricians and HVAC mechanics; reducing
training hours and recertification to needed minimums; subsidising training costs; andintroducing a comprehensive EU‐wide certification scheme, which would improve thevisibility of training requirements and improve labour mobility.

ANNEXES

Explore the data behind theWorld Energy Outlook 2022

Data used for this report comes from the Global Energy andClimate Model. Further data can be found in the latest version of
the World Energy Outlook report in the link below:
iea.li/weo22

Annex A
Technology costs and financial support schemes
Technology costs
Figure A.1 ⊳Upfront cost ranges by technology in selected countries, 2022

CanadaChina

Denmark

FranceGermany

Italy

Japan

Korea

PolandUnitedKingdom
UnitedStatesSwedenCondensing gas boiler

20 000Air‐to‐air heat pumps

30 000Air‐to‐water heat pumps

40 000USD (2021)
Ground‐source
IEA. CC BY 4.0.

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10 000Financial support schemes
Table A.1 ⊳Financial support schemes for residential heat pumps in selected
countries, September 2022
Grant

Tax
rebateLoan

Australia
Small‐scale technology certificates
No Interest Loans Scheme
Austria
Get out of oil and gas
Sauber Heizen für Alle (Clean Heating for Everyone): private individuals
Belgium
Brussels: Primes RENOLUTION (RENOLUTION Premiums)
Wallonia: Prime Habitation (Housing Premium)
Wallonia: Renopack
Flanders: My Renovation Premium
Flanders: My Renovation Loan
National: Reduced VAT rate on heat pumps
Bulgaria
Energy Efficiency and Renewable Sources FundTax regulation mechanism
CanadaGreener Homes initiative: Grant
Greener Homes initiative: Loan
China
Northern Provinces: Clean winter heating plan
Croatia
Energy renovation of family houses program
Czech RepublicNová zelená úsporám (New green savings): Heating system replacement
Nová zelená úsporám (New green savings): New water heater
Kotlíkové dotace (Boiler subsidy)
Private bank loans
Denmark

Low interest rate loans

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Bygningspuljen (Building pool)Table A.1 ⊳Financial support schemes for residential heat pumps in selected
countries, September 2022 (continued)
Grant

Tax
rebateLoan

FinlandReplacement of oil and gas heating scheme
Income tax deduction: Basic improvement work
FranceMa Prime Renov’
Certificates of Energy Savings (CEE)
ecoPTZ: Eco‐prêt à taux zéro (zero interest loan)
Reduced VAT rate on heat pumps
Germany
Federal funding for efficient buildings (BEG): BEG EM (individual measures)
Federal funding for efficient buildings (BEG): BEG WG (residential buildings)
Income tax law: Section 35c (residential buildings)
GreeceSave programme: εξοικονομώ
Save programme loan: εξοικονομώ
Tax regulation mechanism I: Law No. 2238/1994
Hungary
Home Renovation grantGreen capital requirement discount programme for residential purposes
Italy
Conto Termico 2.0 (incentive scheme)
Superbonus 110%
Ecobonus 65%
Reduced VAT rate on heat pumps
Ireland
SEAI home energy grants: Individual energy upgrade grants for Heat Pumps
SEAI home energy grants: Fully funded energy upgrade
An Post home energy improvement loans
Japan
Heat pump subsidy programmes
Korea

Private bank loans

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KEPCO (Korea Electric Power Corp): Support for installing heat pumps

ATable A.1 ⊳Financial support schemes for residential heat pumps in selected
countries, September 2022 (continued)
Grant

Tax
rebateLoan

Latvia
VARAM: Support for the use of renewable energy resources in households
Ministry of Economy: Renovation of private houses and energy efficiency
Private bank loans backed by the state
Lithuania
Ministry of Environment: Use of renewable energy sources
Private bank loans
Luxembourg
PRIMe House 2017
Reduced VAT rate on heat pumps
KlimaPrêt: Zero interest rate
KlimaPrêt: Reduced interest rate
Private banks: Energy renovation loans
Netherlands
ISDE: Investment grant for sustainable energy and energy savings
National Heat Fund: Low interest rate loans
New Zealand
Energy Efficiency Conservation Authority: Warmer Kiwi Homes programme
Healthy homes standards
Private banks: Green loans
NorwayEnova grant
PolandClean Air Programme: Clean Air
Clean Air Programme: Stop Smog
Clean Air Programme: Thermal modernisation tax relief
Moje Cieplo (My Warmth)
Private bank loans
Portugal
Renewable equipment loans
Romania90

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Casa Eficienta Energetic (Energy Efficient House programme)

Table A.1 ⊳Financial support schemes for residential heat pumps in selected
countries, September 2022 (continued)
Grant

Tax
rebateLoan

Slovakia
Zelená domácnostiam II (Green for households II programme)
Slovakia’s Recovery and Resilience Plan
Slovenia
Eko Sklad (Eco Fund): Subsidies
Eko Sklad (Eco Fund): Soft loan
Spain
PREE 5000: Energy Rehabilitation Programme for Buildings in
Municipalities of the Demographic Challenge
RD 477/2021 Programme 6: Implementation of renewable thermal systems
in the residential sector
RD 853/2021: Refurbishment of residential buildings and social housing
SwedenROT‐avdrag: Tax reduction
United Kingdom
Boiler Upgrade SchemeHome Energy Scotland: Interest free loan
Free Heat Pumps Grants Scotland
Reduced VAT rate on heat pumps
United States
Residential renewable energy tax credits: Geothermal heat pumps
Inflation Reduction Act: Heat pumps tax credit

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Inflation Reduction Act: High‐Efficiency Electric Home Rebate programmeAAnnex B
Definitions
This annex provides general information on terminology used throughout this report
including: units and general conversion factors; definitions of fuels, processes and sectors;
regional and country groupings; and abbreviations and acronyms.

Units
Energy

EJ
MWh
GWh
TWh

exajoule (1 joule x 1018)
megawatt‐hour
gigawatt‐hour
terawatt‐hour

Gas

bcm

billion cubic metres

Mass

kg
t
kt
Mt
Gt

kilogrammetonne (1 tonne = 1 000 kg)
kilotonnes (1 tonne x 103)
million tonnes (1 tonne x 106)
gigatonnes (1 tonne x 109)

Monetary

USD million
USD billion
USD/t CO2

1 US dollar x 106
1 US dollar x 109
US dollars per tonne of carbon dioxide

Power

W
kW
MW
GW

watt (1 joule per second)kilowatt (1 watt x 103)
megawatt (1 watt x 106)
gigawatt (1 watt x 109)

General conversion factors for energy

Convertfrom:Multiplier to convert to:
EJ

bcme

GWh

1

27.78

2.778 x 105

bcme

0.036

1

9 999

GWh

3.6 x 10‐6

1 x 10‐4

1

EJ

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Notes: Natural gas is attributed a low heating value of 1 MJ per 44.1 kg. Conversions to and from billion cubic
metres of natural gas equivalent (bcme) are given as representative multipliers but may differ from theaverage values obtained by converting natural gas volumes between IEA balances due to the use of country‐
specific energy densities. Lower heating values are used throughout.

Definitions
Buildings: The buildings sector includes energy used in residential, commercial andinstitutional buildings and non‐specified other. Building energy use includes space heating
and cooling, water heating, lighting, appliances, and cooking equipment.
Carbon dioxide (CO2): A gas consisting of one part carbon and two parts oxygen. It is an
important greenhouse (heat‐trapping) gas.
Clean energy: In power, clean energy includes: generation from renewable sources, nuclear
and fossil fuels fitted with carbon capture, utilisation and storage (CCUS); battery storage;
and electricity grids. In efficiency, clean energy includes energy efficiency in buildings,
industry and transport, excluding aviation bunkers and domestic navigation. In end‐use
applications, clean energy includes: direct use of renewables; electric vehicles; electrificationin buildings, industry and international marine transport; CCUS in industry and direct air
capture. In fuel supply, clean energy includes low‐emissions fuels.
Coal: Includes both primary coal, i.e. lignite, coking and steam coal, and derived fuels,
e.g. patent fuel, brown‐coal briquettes, coke‐oven coke, gas coke, gas works gas, coke‐ovengas, blast furnace gas and oxygen steel furnace gas. Peat is also included.
Coefficient of Performance (COP): COP is a ratio used to measure the amount of usefulenergy (i.e. heating or cooling output) delivered relative to the energy input. The higher the
COP, the more efficient the device.
Demand‐side flexibility resource: Describes resources which can influence the load profilesuch as shifting the load curve in time without affecting total electricity demand, or load
shedding such as interrupting demand for a short duration or adjusting the intensity ofdemand for a certain amount of time.
Electricity demand: Defined as total gross electricity generation less own use generation,plus net trade (imports less exports), less transmission and distribution losses.
Electricity generation: Defined as the total amount of electricity generated by power only or
co‐generation (combined heat and power) plants including generation required for own use.
This is also referred to as gross generation.
Energy sector greenhouse gas (GHG) emissions: Energy‐related and industrial process CO2
emissions plus fugitive and vented methane and nitrous dioxide emissions from the energy
and industry sectors.
Energy services: See useful energy.
F‐gas: Fluorinated gases that are used in different applications including refrigeration, airconditioning and heat pumps where they are the main component of the refrigerant cycle.

Geothermal: Geothermal energy is heat from the subsurface of the earth. Water and/or
steam carry the geothermal energy to the surface. Depending on its characteristics,
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Fossil fuels: Include coal, natural gas and oil.

geothermal energy can be used for heating and cooling purposes or be harnessed togenerate clean electricity if the temperature is adequate.
Global warming potential (GWP): This metric allows comparing different greenhouse gases
in terms of their effect on climate change and is used for the CO₂‐equivalent calculations.
The GWP of CO₂ is set to 1, so all other gases are classified relative to CO₂. To account fordiffering lifetimes of gases in the atmosphere, the most common metric is the 100‐year GWP;
sometimes also the 20‐year GWP is used. A gas with a GWP100 of 27 has a 27‐times‐stronger
impact on global warming than CO₂ over a 100‐year time frame.
Heat (end use): Can be obtained from the combustion of fossil or renewable fuels, direct
geothermal or solar heat systems, exothermic chemical processes, and electricity (throughresistance heating or heat pumps, which can extract it from ambient air and liquids). This
category refers to the wide range of end uses, including space and water heating, andcooking in buildings, desalination and process applications in industry. It does not include
cooling applications.
Heat (supply): Obtained from the combustion of fuels, nuclear reactors, geothermal
resources or the capture of sunlight. It may be used for heating or cooling, or converted intomechanical energy for transport or electricity generation. Commercial heat sold is reported
under total final consumption with the fuel inputs allocated under power generation.
Heat pump: A heat pump extracts heat from a source, such as the surrounding air,geothermal energy stored in the ground, or nearby sources of water or waste heat from afactory. It then amplifies and transfers the heat to where it is needed.
Hydronic heat pump: Heat pump used in a hydronic heating systems that uses water to moveheat from a heat pump through piping to each room via radiators or underfloor heating.

Levelised cost of heating and cooling: The levelised cost of heating and cooling estimates
the average cost of providing 1 MWh of heating or cooling over the lifetime of theequipment, considering the capital cost of the equipment and installation; operating
expenditures include the cost of fuel and regular maintenance.
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Investment: Investment is the capital expenditure in energy supply, infrastructure, end use
and efficiency. Fuel supply investment includes the production, transformation and transportof oil, gas, coal and low‐emissions fuels. Power sector investment includes new construction
and refurbishment of generation, electricity networks (transmission, distribution and public
electric vehicle chargers), and battery storage. Energy efficiency investment includes
efficiency improvements in buildings, industry and transport. Other end use investment
includes the purchase of equipment for the direct use of renewables; electric vehicles;
electrification in buildings, industry and international marine transport; equipment for theuse of low‐emissions fuels; and CCUS in industry and direct air capture. Data and projections
reflect spending over the lifetime of projects and are presented in real terms in year‐2021
US dollars unless otherwise stated. Total investment reported for a year reflects the amountspent in that year.

BLow‐emissions electricity: Includes renewable energy technologies, low‐emissionshydrogen‐based generation, low‐emissions hydrogen‐based fuel generation, nuclear power
and fossil fuel power plants equipped with CCUS.
Low‐emissions fuels: Include modern bioenergy, low‐emissions hydrogen and low‐emissionshydrogen‐based fuels.
Natural gas: Includes gas occurring in deposits, whether liquefied or gaseous, consisting
mainly of methane. It includes both non‐associated gas originating from fields producing
hydrocarbons only in gaseous form, and associated gas produced in association with crude
oil production as well as methane recovered from coal mines (colliery gas). Natural gas
liquids, manufactured gas (produced from municipal or industrial waste, or sewage) andquantities vented or flared are not included. Gas data in cubic metres are expressed on agross calorific value basis and are measured at 15 °C and at 760 mm Hg (standard conditions).
Gas data expressed in tonnes of oil equivalent, mainly for comparison reasons with otherfuels, are on a net calorific basis. The difference between the net and the gross calorific value
is the latent heat of vapourisation of the water vapour produced during combustion of thefuel (for gas the net calorific value is 10% lower than the gross calorific value).
Oil: Includes both conventional and unconventional oil production. Petroleum products
include refinery gas, ethane, liquid petroleum gas, aviation gasoline, motor gasoline, jet
fuels, kerosene, gas/diesel oil, heavy fuel oil, naphtha, white spirits, lubricants, bitumen,paraffin, waxes and petroleum coke.
Power generation: Refers to fuel use in electricity generation plants, heat plants andco‐generation plants. Both main activity producer plants and small plants that produce fuelfor their own use (auto‐producers) are included.
Refrigerant: Substance that transfers heat through the refrigeration cycle in a refrigeration
appliance (e.g. heat pump, air conditioner, refrigerator).
Renewables: Includes bioenergy, geothermal, hydropower, solar photovoltaics (PV),concentrating solar power, and wind and marine (tide and wave) energy for electricity andheat generation.
Residential: Energy used by households including space heating and cooling, water heating,lighting, appliances, electronic devices and cooking.
Services: Energy used in commercial facilities, e.g. offices, shops, hotels, restaurants, and ininstitutional buildings, e.g. schools, hospitals, public offices. Energy use in services includes
space heating and cooling, water heating, lighting, appliances, cooking and desalination.

Total final consumption (TFC): Is the sum of consumption by the various end‐use sectors.
TFC is broken down into energy demand in the following sectors: industry (including
manufacturing, mining, chemicals production, blast furnaces and coke ovens), transport,
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Solar photovoltaic (PV): Electricity produced from solar PV cells.

non‐energy use). It excludes international marine and aviation bunkers, except at world level
where it is included in the transport sector.
Useful energy: Refers to the energy that is available to end users to satisfy their needs. Thisis also referred to as energy services demand. As result of transformation losses at the pointof use, the amount of useful energy is lower than the corresponding final energy demand formost technologies. Equipment using electricity often has higher conversion efficiency thanequipment using other fuels, meaning that for a unit of energy consumed, electricity canprovide more energy services.
Zero‐carbon‐ready buildings: A zero‐carbon‐ready building is highly energy efficient anduses either renewable energy directly or an energy supply that can be fully decarbonised,such as electricity or district heat.

Regional and country groupings
Figure B.1 ⊳Main country groupings

Note: This map is without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries
and to the name of any territory, city or area.

Advanced economies: OECD regional grouping and Bulgaria, Croatia, Cyprus,1,2 Malta andRomania.
Africa: North Africa and sub‐Saharan Africa regional groupings.

Caspian: Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan andUzbekistan.
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Asia‐Pacific: Southeast Asia regional grouping and Australia, Bangladesh, Democratic
People’s Republic of Korea (North Korea), India, Japan, Korea, Mongolia, Nepal, New Zealand,
Pakistan, People’s Republic of China (China), Sri Lanka, Chinese Taipei, and other Asia‐Pacificcountries and territories.3

B

Central and South America: Argentina, Plurinational State of Bolivia (Bolivia), Brazil, Chile,
Colombia, Costa Rica, Cuba, Curaçao, Dominican Republic, Ecuador, El Salvador, Guatemala,Haiti, Honduras, Jamaica, Nicaragua, Panama, Paraguay, Peru, Suriname, Trinidad andTobago, Uruguay, Bolivarian Republic of Venezuela (Venezuela), and other Central and SouthAmerican countries and territories.4
China: Includes the People's Republic of China and Hong Kong.
Developing Asia: Asia‐Pacific regional grouping excluding Australia, Japan, Korea and
New Zealand.
Emerging market and developing economies: All other countries not included in theadvanced economies regional grouping.
Eurasia: Caspian regional grouping and the Russian Federation (Russia).
Europe: European Union regional grouping and Albania, Belarus, Bosnia and Herzegovina,
North Macedonia, Gibraltar, Iceland, Israel,5 Kosovo, Montenegro, Norway, Serbia,
Switzerland, Republic of Moldova, Türkiye, Ukraine, and United Kingdom.
European Union: Austria, Belgium, Bulgaria, Croatia, Cyprus,1,2 Czech Republic, Denmark,Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania,
Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovak Republic, Slovenia,
Spain and Sweden.
IEA (International Energy Agency): OECD regional grouping excluding Chile, Colombia, Costa
Rica, Iceland, Israel, Latvia and Slovenia.
Latin America: Central and South America regional grouping and Mexico.
Middle East: Bahrain, Islamic Republic of Iran (Iran), Iraq, Jordan, Kuwait, Lebanon, Oman,
Qatar, Saudi Arabia, Syrian Arab Republic (Syria), United Arab Emirates and Yemen.
Non‐OECD: All other countries not included in the OECD regional grouping.
Non‐OPEC: All other countries not included in the OPEC regional grouping.
North Africa: Algeria, Egypt, Libya, Morocco and Tunisia.
North America: Canada, Mexico and United States.

OPEC (Organization of the Petroleum Exporting Countries): Algeria, Angola, Republic of theCongo (Congo), Equatorial Guinea, Gabon, the Islamic Republic of Iran (Iran), Iraq, Kuwait,
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OECD (Organisation for Economic Co‐operation and Development): Australia, Austria,
Belgium, Canada, Chile, Czech Republic, Colombia, Costa Rica, Denmark, Estonia, Finland,
France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Latvia,
Lithuania, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal,
Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Türkiye, United Kingdom and UnitedStates.

Libya, Nigeria, Saudi Arabia, United Arab Emirates and Bolivarian Republic of Venezuela(Venezuela).
Southeast Asia: Brunei Darussalam, Cambodia, Indonesia, Lao People’s Democratic Republic(Lao PDR), Malaysia, Myanmar, Philippines, Singapore, Thailand and Viet Nam. These
countries are all members of the Association of Southeast Asian Nations (ASEAN).
Sub‐Saharan Africa: Angola, Benin, Botswana, Cameroon, Republic of the Congo (Congo),
Côte d’Ivoire, Democratic Republic of the Congo, Eritrea, Ethiopia, Gabon, Ghana, Kenya,
Mauritius, Mozambique, Namibia, Niger, Nigeria, Senegal, South Africa, South Sudan, Sudan,
United Republic of Tanzania (Tanzania), Togo, Zambia, Zimbabwe, and other Africancountries and territories.6

Country notes
1
Note by Republic of Türkiye: The information in this document with reference to “Cyprus” relates to thesouthern part of the island. There is no single authority representing both Turkish and Greek Cypriot people
on the island. Türkiye recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable
solution is found within the context of the United Nations, Türkiye shall preserve its position concerning the“Cyprus issue”.
2
Note by all the European Union Member States of the OECD and the European Union: The Republic of Cyprus
is recognised by all members of the United Nations with the exception of Türkiye. The information in thisdocument relates to the area under the effective control of the Government of the Republic of Cyprus.
3

Individual data are not available and are estimated in aggregate for: Afghanistan, Bhutan, Cook Islands, Fiji,
French Polynesia, Kiribati, Macau (China), Maldives, New Caledonia, Palau, Papua New Guinea, Samoa,
Solomon Islands, Timor‐Leste, Tonga and Vanuatu.

4

Individual data are not available and are estimated in aggregate for: Anguilla, Antigua and Barbuda, Aruba,
Bahamas, Barbados, Belize, Bermuda, Bonaire, British Virgin Islands, Cayman Islands, Dominica, Falkland
Islands (Malvinas), French Guiana, Grenada, Guadeloupe, Guyana, Martinique, Montserrat, Saba, Saint
Eustatius, Saint Kitts and Nevis, Saint Lucia, Saint Pierre and Miquelon, Saint Vincent and Grenadines, Saint
Maarten, Turks and Caicos Islands.
5
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities.
The use of such data by the OECD and/or the IEA is without prejudice to the status of the Golan Heights, East
Jerusalem and Israeli settlements in the West Bank under the terms of international law.
6
Individual data are not available and are estimated in aggregate for: Burkina Faso, Burundi, Cabo Verde,Central African Republic, Chad, Comoros, Djibouti, Kingdom of Eswatini, Gambia, Guinea, Guinea‐Bissau,
Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Réunion, Rwanda, Sao Tome and Principe, Seychelles,
Sierra Leone, Somalia, and Uganda.

APS
CCUS
CDD
CO2
CO2‐eq
COP
EBRD
EPC

Announced Pledges Scenario
carbon capture, utilisation and storage
cooling degree day
carbon dioxidecarbon dioxide equivalentcoefficient of performance
European Bank for Reconstruction and Development
energy performance contracts

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Abbreviations and acronyms

B

100

energy service company
European Union
electric vehicle
fluorinated gas
Group of Sevengreenhouse gas
global warming potential
Green Transformation
heating degree dayhydrocarbonhydrofluorocarbonhydrofluoro‐olefin
Heat Pumping Technologies Technology Collaboration Programmeheating, ventilation and air conditioning
International Energy Agency
International Electrotechnical Commission
Intergovernmental Panel on Climate Changemechanical vapour recompression
nitrogen oxides
Net Zero Emissions by 2050 Scenario
operations and maintenance
Organisation for Economic Co‐operation and Development
per‐ and polyfluoroalkyl substancefine particulate matterphotovoltaic
research, development and demonstration
sulphur dioxide
Stated Policies Scenario
trifluoroacetic acidtechnology readiness leveltransmission system operator
United Nations Environment Programme
United States
World Energy Outlook

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ESCO
EU
EV
F‐gas
G7
GHG
GWP
GX
HDD
HC
HFC
HFO
HPT TCP
HVAC
IEA
IEC
IPCC
MVR
NOX
NZE
O&M
OECD
PFAS
PM2.5
PV
RD&D
SO2
STEPS
TFA
TRL
TSO
UNEP
US
WEO

Annex C
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CChapter 3: Barriers and solutions
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The Future of Heat Pumps
World Energy Outlook Special Report
Heat pumps, powered by low-emissions electricity,
are the central technology in the global transition tosecure and sustainable heating. The Future of Heat
Pumps, a special report in the IEA’s World Energy
Outlook series, provides an outlook for heat pumps,
identifying key opportunities to accelerate theirdeployment. It also highlights the major barriers andpolicy solutions, and explores the implications of anaccelerated uptake of heat pumps for energy security,
consumers’ energy bills, employment and efforts totackle climate change.
Around 10% of space heating needs globally were met
by heat pumps in 2021, but the pace of installation is
growing rapidly with sales at record levels.
Government policy support is needed, though, to help
consumers overcome heat pumps’ higher upfront
costs relative to alternatives. Financial incentives forheat pumps are already available in over 30 countries,
which together cover more than 70% of heating
demand today. The IEA estimates heat pumps globally
have the potential to reduce global carbon dioxide(CO2) emissions by at least 500 million tonnes in
2030 – equal to the annual CO2 emissions of all carsin Europe today.

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