Comprehensive Outlook of Germany Heat Pump Market
In 2021, the German heat pump market size was 950 million USD, and it’s expected to have a compound growth rate of over 8% from 2022 to 2030. This growth is primarily driven by the introduction of strict standards to reduce emissions.
In Germany and other major regions, awareness of the increased carbon footprint caused by fossil fuel combustion leading to ozone layer depletion, greenhouse gas emissions, and global warming pollution is steadily rising. To mitigate the impact of climate change, governments around the world have been introducing stringent policy frameworks and regulatory standards.
For example, Germany passed the Federal Climate Protection Act in 2021, aiming to control emissions by 2030 and achieve net-zero emissions by 2050. These factors are the main drivers for the adoption of heat pumps as a means to reduce heating application emissions, with the global heat pump market estimated to surpass 165 billion USD by 2032.
According to Statista, the number of heat pumps in operation in Germany has been increasing each year, reaching 1.7 million units by 2022. In 2013, Germany had around 698,000 heat pumps, and by 2020, this number had increased to 1.29 million units.
Number of heat pumps in operation in Germany from 1990 to 2022 from statista.com
The electrification process for heating in Germany is accelerating, with heat pump sales growing by over half last year. According to data from the Heating Industry Association (BDH) and the Heat Pump Association (BWP), sales grew by 53%, reaching 236,000 units, making heat pumps the fastest-growing technology in the market.
Industry organizations state that this development is a “big step” towards Germany’s goal of installing 500,000 heat pumps annually starting from 2024, but they emphasize that achieving this goal will require further government support for the entire value chain. BDH stated, “The German government must ensure support for domestic industrial investment and capacity development.”
BWP also called for additional measures to lower electricity prices. The lobbying group’s spokesperson, Paul Waning, said, “The market is expanding comprehensively. The ambitious goal set by the German government to sell 500,000 units in 2024 is achievable.”
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How many heat pumps sold in Europe?
According to EHPA, in 2021, the sales of heat pumps in the European Union (EU) increased by 33.8% compared to the previous year, making the EU the fastest-growing market for this technology worldwide. In 2022, 3 million units were sold, contributing to achieving the REPowerEU goal by 2023.
Sales of heating heat pumps in 2022 in selected countries from EHPA
Are heat pumps common in Germany?
From the data above, we can conclude that not only in Germany but also in many European countries, there has been a significant increase in the sales of heat pumps. Is the use of heat pumps common in Germany? So far, Germany has installed 1.2 million heat pumps, with most of them being installed in newly constructed buildings. However, half of Germany’s 19 million residential buildings use natural gas for heating, and a quarter use oil for heating.
Heat pumps operate on electricity. If this electricity comes from renewable sources, then the heating system is essentially climate-neutral. This is why the German government subsidizes installation costs up to 40%.
But even with subsidies, the cost of a single-unit residential heat pump system is around €17,000 (approximately $18,600). Older houses often require renovation, such as insulation and new doors and windows. The more complex the renovation, the higher the cost of transitioning to energy efficiency and renewable energy, potentially exceeding €100,000.
On the other hand, the price of a new gas heater is about €10,000.
Many people argue that, in the long run, it’s better to install a gas heating system in Germany, considering the country’s abundant natural gas supply and the expected future decrease in prices, as it is readily available and cheaper.
However, no one knows how gas prices will evolve in the future, and whether natural gas will indeed remain cheaper in the long term. What’s certain is that if the EU wants to achieve its climate goals, the price of carbon dioxide emissions must increase significantly.
Starting in 2024, the use of fossil fuel heating will be banned.
According to the think tank Agora Energiewende, the construction industry is responsible for about 15% of Germany’s greenhouse gas emissions.
This situation is now set to change. The German government aims to make the construction industry climate-neutral by 2045. The key point of the new draft law is to ban the installation of new oil and gas heating systems from 2024 onward: starting next year, all new heating systems must consist of at least 65% renewable energy sources.
The German Ministry of Economy and Climate stated after reaching a joint declaration with stakeholders that Germany intends to rapidly expand the adoption of heat pumps starting in 2024, with a goal of installing 500,000 new units per year. “We need a faster pace,” said Economy Minister Robert Habeck after the meeting with representatives from the industry, technology sector, labor unions, and consumer protection associations. “If we want to reduce our dependence on Russian imports, we need to consider not only the electricity industry but also the heating sector.”
The industry called these plans “ambitious but feasible” and requested the right regulatory framework. Germany is already facing issues such as long delivery times due to a shortage of skilled workers, installation capacity bottlenecks, and insufficient power grid capacity. The government’s current goal is to draft a “heat pump upgrade plan.”
The government has decided that, “if possible,” from 2024 onward, any new heating installations must use at least 65% renewable energy as fuel. More and more German households are switching to heat pumps when upgrading their heating systems. According to the government, heat pump sales in Germany grew by nearly one-third in 2021, reaching approximately 155,000 units, bringing the total number of installations to over 1 million. However, their share in new heating installations is less than 20%, with the majority (70%) being gas heating systems.
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