The heat pump sector has the investments and capacity to meet the EU’s target to install 30 million heat pumps or more by 2030, a new study has found by heat pump market specialists at Eunomia Research & Consulting. Supply chain bottlenecks will be resolved by 2025 and manufacturers can scale up heat pump production.

The EU is the global market leader for hydronic heat pump manufacturing, but without policy support to provide long-term demand for manufacturers and investors, Europe’s ability to maintain its leadership in this growing energy technology is at risk, as recent dipping sales attest.  China has increased its competitiveness, and the US is scaling up production in respond to the Inflation Reduction Act, presenting a threat to the EU’s leader position in heat pump manufacturing. 

For the EU heat pump industry to scale up production, the report recommends that the EU, governments, industry leaders and civil society work to establish a robust legislation and policies focused on a comprehensive action plan to meet heat pump deployment targets, financial incentives and reform energy taxation to remove gas’ unfair cost advantage over electricity. 

With this policy support, the EU industry would be more than able to increase its estimated annual production capacity from 1.4 million units currently to at least 6 million units by 2030 to meet and exceed the REPowerEU target. EU manufacturers could increase their supply by 20-25% annually over a 7-year period, according to the study.

In 2023, the European Commission published its Net Zero Industry Act which included heat pumps as a key growth sector, and announced the launch of a Heat Pump Action Plan to accelerate the heat pump market. However, the EU has decided to delay the launch of the Action plan. 

“The EU’s world-leading heat pump manufacturing sector is ready to ramp up production, but it is not seeing the strong, clear policy support that is needed to make this a reality,” said Jozefien Vanbecelaere, head of EU affairs at European Heat Pump Association. “With stable long-term policies and a rebalancing of energy prices to make electricity no more than double the price of gas, the EU could lead the way in supplying clean heating solutions worldwide. A key first step should be the publication of the EU Heat Pump Action Plan in early 2024 as planned.”

The study shows that with the current level of investment of nearly 7 billion euros over the next 3 years, the EU can maintain its market share of heat pump production, meet growing demand and reduce costs. However, further investment is needed to avoid a heavy reliance on imports to meet domestic demand and capitalise on increased heat pump demand from non-EU countries. 

Laura Williams at Eunomia Research & Consulting added: “It’s clear when we looked at the current state of the EU heat pump manufacturing sector and spoke to stakeholders that there was plenty of room for improving domestic production capacity. Our recommendations to grow the sector are based on extensive analysis of the EU sector as well as comparison to competitors, and will require collaboration between EU governments, industry and citizens to fully reap the benefits.”

Download: EU Hydronic Heat Pump Manufacturing Market Assessment Report.