Case study: Heat pumps

Heat pumps (HPs) are a technology that ought to have a central place in the European energy policies. In the current energy crisis, with unprecedented energy prices caused mainly by a shortage of natural gas in Europe, reducing gas demand has a critical economic and strategic importance. And this is exactly what HPs, which are highly energy-efficient systems running on electricity, are best positioned to do in the heating sector. Indeed, the electrification of residential heating is a key policy towards the full decarbonization of energy use in buildings. 

According to the European Heat Pumps Association (EHPA), even before the increase of gas prices due to the war in Ukraine, heat pumps had reached 25% of sales in the heating market. For 2030, the European Union has set a target of 50 million units, which comes down to about one third of the bloc’s 150 million boilers. HPs frontrunners in Europe are the Scandinavian countries (Norway, Sweden, and Finland) as well as Austria, Germany, France, and Switzerland. 

However, HPs’ adoption faces objective hurdles that must be acknowledged and dealt with:

• The upfront costs for HP installation are substantial, ranging from just under €5,000 to over €50,000, depending on type of technology and complexity 
• HPs require space to be installed and can be noisy
• Unlike gas boilers, HPs operate by maintaining constant temperature, rather than delivering rapid temperature changes
• HPs require strong electricity grids and buildings that are electrically wired to accommodate the needed surplus of power
• Installation and maintenance of HPs requires skilled installers and technicians
• A rapid and ample roll-out of HPs requires sufficient availability, which in turn requires coordinated energy and industrial policies at national and EU levels
• Roll-out of HPs depends on efficient public programs of subsidies to overcome the high-cost burden especially for low-income social categories

However, as the successful experience of the mentioned European states shows, such hurdles can be managed by proper policies, regulations, and smart public spending. Recent academic research studied the factors that influence the homeowners’ decisions of adopting HPs. In a statistical analysis of data from Swedish households, Mahapatra and Gustafson showed that income is positively correlated with the willingness to switch from a conventional heating system to an HP, whereas age, capital and running costs are negatively correlated. In a study of German homeowners’ choices of renewable heating systems, Michelsen and Madlener found low maintenance requirements, comfort, fuel security, education and income level to be important factors.

Therefore, while better off, better educated, and younger homeowners are amenable to adopt HPs, governments must introduce policies to extend energy efficiency programs that subsidize HPs for other members of society, combined with other favorable regulatory elements, such as special electricity tariffs for HP owners and/or parallel financial support for installation of roof-top PV panels.

A strand of public policy in the European Union that serves the adoption of HPs in buildings is the requirement in the Directive 2010/31/EU on the energy performance of buildings (EPBD), according to which every new building and every major renovation must achieve the level of nearly zero-energy building (nZEB), i.e., a building of very high energy performance and covering a significant extent of the needed energy from renewable sources on-site or nearby. Typically, such buildings involve the installation of HPs and roof-top photovoltaic panels. 

Although major renovations are an imperative in the effort to achieve a fully decarbonized building stock by 2050 (and to that purpose EU member states are required to have National Building Renovation Plans in place), the installation of HPs must take place at a considerably quicker pace than even the most ambitious rates of major renovation. Therefore, the installation of HPs, roof-top PV panels as well as insulation of windows, walls, attics or floors must be publicly supported.