Over the past decade, the European market for heat pumps has been growing at a steady pace, with an annual growth rate of 10% from 2011 to 2020, resulting in the expected installation of 1 million heat pumps per year in in the year of 2021, indicating a market growth of 39% from 20201. In the next decade, by 2030, at Daikin we do not only see a growth, but an actual acceleration of the yearly installation of heat pumps that will go up to 4 million, representing an annual growth rate of 20%. In other words, 1 out of 3 heating systems installed is going to be a heat pump, from 1 out of 10 in 2020. Although this shows a steep growth versus past years, we consider this as a minimum to move to a decarbonised residential heating market in Europe.
The key driver for growth has undoubtedly been the introduction of strengthened legislation governing new builds in many European countries, ranging from general regulations in France such as RT2012, which sets the new minimum standard of thermal insulation of dwellings, to a ban on combustion boilers in the Netherlands.
Alongside this, we have seen a number of initiatives in recent years, particularly in France, Germany and Italy, aimed at promoting heat pumps in the replacement market, accompanied by government incentives at both national and local levels. At the same time, the technology has developed to help make heat pumps an attractive option. For example, the arrival to the market of optimised ‘high temperature’ heat pumps2 enables the replacement of existing combustion boilers without the need to update or modify existing radiators.
We are pioneers in this field, having introduced our first solution back in 2008 and then delivered a completely revamped heat pump to the market in 2019, supplying unparalleled efficiency and setting the new heat pump standard.
2020 will go down as a defining year for the heat pump industry. With the introduction of the EU Green Deal3 came the firm commitment to reduce CO2 emissions and make the EU the first climate neutral bloc by 2050. It is widely accepted that the decarbonization of the heating and cooling sector, which contributes 40% of CO2 emissions4, will be key in helping to achieve this goal. The last two years have also seen a growing public awareness of the negative effects of climate change along with a willingness to do something about it.
“Fit for 55” - what does it mean for you and the heat pump market?
As an intermediate step towards climate neutrality, the EU has raised its 2030 climate ambition, committing to cutting emissions by at least 55% by 2030. “Fit for 55” is the European Commission’s ambitious plan to put the decarbonization strategy into practice and set the EU on course to slash greenhouse gas emissions by 55% by 20305.The directive maintains that a policy targeting higher energy efficiency and a switch from fossil-based heat supply to renewable sources is imperative.
The market outlook for heat pumps will be determined by the drive to decarbonise the heating sector, resulting in a monumental move to renewable heating, and a faster than expected growth of the use of heat pumps. Different drivers apply:
The growing awareness of global warming and the increasing conscience that each European citizen needs to and/or is willing to contribute to a better environment, play a crucial role in the growth of renewable heating systems like heat pumps.
A key step to decarbonising heat is to actively increase the replacement rate of heating systems. Doubling this replacement rate is a minimum requirement to be on track with reaching the “Fit for 55” targets.
If this is realised, we would expect a significant increase of the number of heating systems replaced, up to possibly 11 million heating systems per year by 2030.
Several European countries are implementing incentive initiatives prompting European citizens to install heat pumps giving consumers easier access to sustainable and efficient heating. Sometimes it is also combined with boiler-scrappage schemes. For example:
In Italy, the super Eco bonus has seen tremendous success and has been extended to 2022.
In the UK, the Clean Heat Grant incentive will be put in place in 2022 to support heat pump installations in UK households. Later in 2024 it is expected that gas boilers will be banned in Scotland new builds, with the rest of the UK intending to follow in 2025
In France, incentives schemes have been running for some years now with the latest France – “Maprimerenov” launched in 2020. This helps both consumers and the industry (installers, job creation, investment,..) to engage in a strong growing economy
Comparable initiatives are being launched or under discussion in most of the EU markets
Towards 2030 heat pumps are seen as the solution that has an immediate effect on CO2 emission in residential homes, with relatively easy individual decision making and installation.
Alternative technologies are being developed, like 100% hydrogen boilers, biomass fuelled boilers, are expected to gain some interest in selected areas, however their importance will remain limited on a pan-European scale. District heating is expected to grow in selected areas, especially with an expanding implementation of local district heating networks. District heating often involves infrastructure works and investments, and is less easy to implement, especially in the case of (individual) replacement of heating systems.
It becomes clear that, in the long term, different heating solutions will exist in Europe. The drive to renewable heat will materialise through a mix of solutions, of which one might become more dominant than the other, depending on the country & geographical location.
Daikin Europe is ready to face the net zero challenge
This obviously triggers the question; is the industry ready in terms of production capacity, logistics structures, installation capacity and follow up?
The European heat pump sector is widely spread across all countries with a mix of small, medium sized – often locally operating - businesses to large multinational companies. The latter especially will have the potential to drive the growth and secure the European-wide deployment of heat pumps.
At Daikin Europe, we installed over 750 000 heat pumps, and we have the structure and capability to face the growing challenge with confidence in Europe.
Daikin heat pumps are developed in Europe, for Europe, in our European Development Centre (EDC), created in 2012. In 2022 we will invest 140M€ in the construction of a new extended development centre in Ghent, which will allow a wider and faster development of heat pumps. This will make the total employment at EDC increase from 220 people today to 380 people in 2025.6
We have 14 manufacturing locations throughout Europe, with five of them dedicated to heat pump production. Overall manufacturing output amounts to about 1,5 million heat pumps in 2021 (covering all applications, whether residential, commercial, industrial). This shows an increase of about 170% in the past 5 years. This growth was reached through optimization of the existing facilities, increase of production lines and increased productivity, without adding new production entities. Our hydronic heat pumps are entirely produced in our EU factories. Their share of total EU production has increased to over 20% (5% in 2017).
We have a growing network of over 30 warehouses allowing us to easily deliver across Europe and beyond. It is our aim to increase this number thereby reducing delivery distance to customers, irrespective whether they are installers, wholesalers or end users.
Over the years we have created a fully integrated stock & warehouse management approach, where inventories were moved from the sales subsidiaries and transferred to a new, leaner distribution structure allowing us to be in full control. The advantages of such changes are overall lower stocks, better service and lower logistics costs.
We deliver an average of 100.000 m3 to customers per month, representing 71.000 deliveries on a daily basis. Even with the challenges the COVID-19 crisis presented to us and our partners, our network remained strong and we were able to support each and every customer throughout the pandemic.
We ensure that our customers and service technicians (whether buying direct or indirect) receive the right support and guidance.
We believe it is key to provide the appropriate training, which we organise on a continuous basis in our 54 training centres across Europe, Middle East and Africa, delivering starter courses on installation of heat pumps and direct expansion technology, to advanced troubleshooting courses and service controls on new products. While we have seen an exponential increase in online training during 2020, we are making a gradual move to hybrid training courses, where part can be followed online, and then reinforced with workshops in our training centres. In 2020 the number of online trainees quadrupled, while in 2021 the participants to classroom training is picking up again. Altogether, online and physical, in 2020 the number of trainees has doubled.
Once trained, refresher courses are available, and furthermore, our Stand By Me online support platform and e-Care app means our service technicians are supported in all facets of the job they have to do at all times.
Daikin Europe is truly present on a pan-European basis from A to Z, with multiple factories, logistics capability and installer care. We are proud to be helping all our customers take the lead creating a stable climate, safer and healthier homes, and more affordable energy bills.