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World Energy Outlook Special Report

The Future

of Heat Pumps

The IEA examines the

full spectrum

of energy issues

including oil, gas and

coal supply and

demand, renewable

energy technologies,

electricity markets,

energy efficiency,

access to energy,

demand side

management and

much more. Through

its work, the IEA

advocates policies

that will enhance the

reliability, affordability

and sustainability of

energy in its

31 member countries,

11 association

countries and

beyond.

This publication and any

map included herein are

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.

Source: IEA.

International Energy Agency

Website: www.iea.org

IEA member

countries:

Australia

Austria

Belgium

Canada

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Japan

Korea

Lithuania

Luxembourg

Mexico

Netherlands

New Zealand

Norway

Poland

Portugal

Slovak Republic

Spain

Sweden

Switzerland

Republic of Türkiye

United Kingdom

United States

The European

Commission also

participates in the

work of the IEA

IEA association

countries:

INTERNATIONAL ENERGY

AGENCY

Argentina

Brazil

China

Egypt

India

Indonesia

Morocco

Singapore

South Africa

Thailand

Ukraine



Foreword 3

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been

clear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and

cleaner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a

comprehensiveglobalstudyofthestateofplayofheatpumps–andtheirfutureroleinour

energy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of

gas,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–heating

in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an

urgentprioritytoshieldlow‐incomehouseholdsfromtheenergycrisis.Thereisalsoalack

of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.

Thegrowingroleofheatpumpsalsorequirespolicymakerstopaycarefulattentiontothe

electricitysecurityimplications.Combiningheatpumpdeploymentwithenergyefficiency

retrofitsofbuildingscanreducetheserisks,andleveragingsmartcontrolscanturnheat

pumpsintoagridasset,whenemployedalongsideappropriateplanningforelectricitygrids.

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from

governments,industryandacademiaaroundtheworldwhotookpartintheexcellentheat

pump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to

assemblethistimelyandcomprehensivereport,undertheoutstandingleadershipofmy

colleagueLauraCozzi.Iamconfidentitwillhelpinformdecision‐makersaroundtheworldin

thisurgentmomentonhowtoclearthewayforheatpumpstoplaytheircriticalrolein

addressingtheenergyandclimatecrises.

DrFatihBirol

ExecutiveDirector

InternationalEnergyAgency

IEA. CC BY 4.4.

/110

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WorldEnergyOutlookSpecialReportTheFutureofHeatPumpsTheIEAexaminesthefullspectrumofenergyissuesincludingoil,gasandcoalsupplyanddemand,renewableenergytechnologies,electricitymarkets,energyefficiency,accesstoenergy,demandsidemanagementandmuchmore.Throughitswork,theIEAadvocatespoliciesthatwillenhancethereliability,affordabilityandsustainabilityofenergyinits31membercountries,11associationcountriesandbeyond.Thispublicationandanymapincludedhereinarewithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.Source:IEA.InternationalEnergyAgencyWebsite:www.iea.orgIEAmembercountries:AustraliaAustriaBelgiumCanadaCzechRepublicDenmarkEstoniaFinlandFranceGermanyGreeceHungaryIrelandItalyJapanKoreaLithuaniaLuxembourgMexicoNetherlandsNewZealandNorwayPolandPortugalSlovakRepublicSpainSwedenSwitzerlandRepublicofTürkiyeUnitedKingdomUnitedStatesTheEuropeanCommissionalsoparticipatesintheworkoftheIEAIEAassociationcountries:INTERNATIONALENERGYAGENCYArgentinaBrazilChinaEgyptIndiaIndonesiaMoroccoSingaporeSouthAfricaThailandUkraineForeword3ForewordToday,manyofthewaysweheatbuildingsaroundtheworld–suchashomes,offices,schoolsandfactories–stillrelylargelyonfossilfuels,particularlynaturalgas.Ithaslongbeenclearthatthisleadstolargeamountsofgreenhousegasemissions–andthecurrentglobalenergycrisisisasharpreminderoftheurgencyofmovingtomoreaffordable,reliableandcleanerwaysofheatingbuildings.Inthiscontext,heatpumps,whichcanefficientlyprovideheatingtobuildingsandindustry,arethekeytechnologytomakeheatingmoresecureandsustainable.Theyarequicklybecomingmorecostcompetitive,drawinginterestfromagrowingnumberofgovernments,businessesandconsumersacrosstheglobe.Untilnow,though,therehasnotbeenacomprehensiveglobalstudyofthestateofplayofheatpumps–andtheirfutureroleinourenergysystems.ThisWorldEnergyOutlookspecialreportaimstofillthatgap.Ourin‐depthanalysisfindsthatpolicyplansannouncedsofarbygovernmentsgloballypointtoalargeexpansionoftheuseofheatpumps,whichwillhaveaclearimpactontheuseofgas,oilandcoalforheating.Heatpumpshavethepotentialtoreduceglobalcarbondioxideemissionsbyatleast500milliontonnesin2030.ForEurope,theyareavitaltooltocutrelianceonRussiangas,sincetheycanlowerEurope’slargestsourceofgasdemand–heatinginbuildings–byatleast21billioncubicmetresin2030.However,thisspecialreportshowstherearekeybottlenecksthatneedaddressingtorampupheatpumps’productionanddeployment.Governmentsupportisessentialtohelpconsumersovercomeupfrontcostsandtapintothesavingsheatpumpsprovide.Thisisanurgentprioritytoshieldlow‐incomehouseholdsfromtheenergycrisis.Thereisalsoalackofworkerstoinstallheatpumps,withelectricians,techniciansandconstructionworkersalreadyamongthejobsthatcompaniesinEuropeandtheUnitedStatesarestrugglingtofill.Thegrowingroleofheatpumpsalsorequirespolicymakerstopaycarefulattentiontotheelectricitysecurityimplications.Combiningheatpumpdeploymentwithenergyefficiencyretrofitsofbuildingscanreducetheserisks,andleveragingsmartcontrolscanturnheatpumpsintoagridasset,whenemployedalongsideappropriateplanningforelectricitygrids.IwouldliketothanktheEuropeanBankforReconstructionandDevelopmentforitscollaborationonthisreport–andalsotheover120high‐levelrepresentativesfromgovernments,industryandacademiaaroundtheworldwhotookpartintheexcellentheatpumpworkshopweheldinOctoberatIEAheadquartersinParis,sharingvaluableperspectiveandinsights.IamalsoverygratefultotheIEAteamwhoworkedquicklytoassemblethistimelyandcomprehensivereport,undertheoutstandingleadershipofmycolleagueLauraCozzi.Iamconfidentitwillhelpinformdecision‐makersaroundtheworldinthisurgentmomentonhowtoclearthewayforheatpumpstoplaytheircriticalroleinaddressingtheenergyandclimatecrises.DrFatihBirolExecutiveDirectorInternationalEnergyAgencyIEA.CCBY4.4.Acknowledgements5AcknowledgementsThisstudywaspreparedbytheWorldEnergyOutlookteamintheDirectorateofSustainability,TechnologyandOutlooksinco‐operationwithotherdirectoratesandofficesoftheInternationalEnergyAgency(IEA).ThestudywasdesignedanddirectedbyLauraCozzi,ChiefEnergyModellerandHeadofDivisionforEnergyDemandOutlook.YannickMonschauerco‐ordinatedtheprojectandwastheleadauthor.DanielWetzelprovidedco‐ordinationandauthoringsupport.StéphanieBouckaertoversawthemodellingdevelopment.OtherprincipalIEAauthorsofthereportinclude:JustinaBodláková(labourandsupplychains),FrançoisBriens(costs),OliviaChen(employment),DanielCrow(climateandimplications),DavideD’Ambrosio(datascience),VíctorGarcíaTapia(outlook),TimothyGoodson(outlookandinvestments),PaulineHenriot(demandflexibility),BrunoIdini(costsandreportproduction),HyejiKim(affordabilityandcosts),ArthurRogé(policiesandEUfocus),FabianVoswinkel(industry,F‐gasesandnon‐costbarriers).MarinaDosSantosprovidedessentialsupport.ChiaraDelmastroandRafaelMartínez‐Gordónledthemodellingandprovidedessentialcontributions,alongwiththeEnergyTechnologyandPolicyteam.OthervaluablecontributionsweremadebyAshleyAcker,AnaAlcaldeBáscones,OskarasAlšauskas,CaleighAndrews,ElisaAsmelash,YasmineArsalane,VittoriaChen,JulieDallard,NouhounDiarra,MichaelDrtil,WillHall,IlkkaHannula,PaulHugues,MartinHusek,MartinKüppers,KazuhiroKurumi,ToruMuta,AloysNghiem,MaxSchönfisch,CarloStarace,MonicaTroilo,GianlucaTonoloandAnthonyVautrin.TrevorMorgancarriededitorialresponsibility.ErinCrumwasthecopy‐editor.ValuablecommentsandfeedbackwereprovidedbyotherseniormanagementandnumerousothercolleagueswithintheIEA.Inparticular,KeisukeSadamori,DanDorner,TimGould,PaoloFrankl,TimurGül,BrianMotherwayandAraceliFernandezPales.ThanksgototheIEA’sCommunicationsandDigitalOfficefortheirhelpinproducingthereportandwebsitematerials,particularlytoJadMouawad,CurtisBrainard,HortensedeRoffignac,AstridDumond,TanyaDyhin,GraceGordon,JethroMullen,IsabelleNonain‐Semelin,JuliePuech,RobertStone,ClaraVallois,GregoryViscusi,LucileWall,ThereseWalshandWonjikYang.IEA’sOfficeoftheLegalCounsel,OfficeofManagementandAdministration,andEnergyDataCentreprovidedassistancethroughoutthepreparationofthereport.ExternalcontributionswereprovidedbytheEuropeanBankforReconstructionandDevelopment(NigelJollands,GregGebrail,LyzaRossi),theIEATechnologyCollaborationProgrammeonHeatPumpingTechnologies(CarolineHaglundStignor,MonicaAxell,MetkelYebiyo,StephanRenz,MorganWillis,BenjaminZühlsdorf,ChristophReichl)andDavidWilkinson(independentconsultant).IEA.CCBY4.0.6WorldEnergyOutlookSpecialReportTheworkcouldnothavebeenachievedwithoutthesupportandinputprovidedbytheEuropeanBankforReconstructionandDevelopment,EuropeanHeatPumpAssociation,SiemensEnergy,ViessmannandtheIEACleanEnergyTransitionProgramme.AconsultationworkshopwasheldatIEAheadquartersinParisatthebeginningofOctober2022with120high‐levelrepresentativesfromgovernments,majormanufacturersandacademiainwhichparticipantsofferedvaluableinsights,feedbackanddataforthisanalysis.Wearegratefulfortheirinput.Manyseniorgovernmentofficialsandinternationalexpertsprovidedinputandreviewedpreliminarydraftsofthereport.Theircommentsandsuggestionswereofgreatvalue.Theyinclude:DriesAckeSolarPowerEuropeDanieleMariaAgostiniEnelMonicaAxellResearchInstituteofSweden,HeatPumpCentreMarionBakkerNetherlandsEnterpriseAgencyMarcoBaresiTurbodenPascalBartheMinistryforEnergyTransition(France)AurélieBeauvaisEuroheat&PowerVeerleBeelaertsEuropeanHeatingIndustry(EHI)StefanoBellòAssoclimaAntonioBouzaUSDepartmentofEnergySusanneBuscherFederalMinistryforEconomicAffairsandClimateAction(Germany)TomasCahaSakoCZEmmanuelChabutEDFAlbertoCoronasUniversitatRoviraiVirgili(Spain)MarcoDall'OmbraAssoclimaBiancaDeFariasLettiClimateChangeCommittee(UK)RaymondDecorvetMANEnergySolutionsStefanoDemattèAristonNaokoDoiInstituteOfEnergyEconomics,JapanJohnDulacSaint‐GobainThomasFlecklAustrianInstituteofTechnologyDuncanGibbRegulatoryAssistanceProjectMoniqueGoyensBEUCJoanGroizardInstitutefortheDiversificationandSavingofEnergy(Spain)BenjaminHaasEngieIEA.CCBY4.0.Acknowledgements7CarolineHagelundStignorResearchInstituteofSweden,HeatPumpCentreChristianHüttlSiemensEnergyTakuInamuraMinistryoftheEconomy,TradeandIndustry(Japan)NicolasJensenBoschAndrejJentschIEADHCTCPNigelJollandsEuropeanBankforReconstructionandDevelopmentArnoKaschlEuropeanCommission(DGClimateAction)PaulKennyDepartmentofCommunications,ClimateAction&Environment(Ireland)StephanKolbViessmannSanjeevKumarEGECPawelLachmanPortPCRebeccaLamasEuropeanUniversityInstituteFranciscoLaverónSimavillaIberdrolaChristianMaaßFederalMinistryforEconomicAffairsandClimateAction(Germany)SilviaMadedduSchneiderElectricJosephineMaguireSustainableEnergyAuthorityofIrelandTomMarsikNationalRenewableEnergyLaboratoryNickMeetenAppliedEnergyVincentMinierSchneiderElectricMasashigeMorishitaMinistryoftheEconomy,TradeandIndustry(Japan)ThomasNowakEuropeanHeatPumpAssociationKarlOchsnersen.OchsnerHeatPumpsAlanPearsRMITUniversity(Australia)EloiPielEuroheat&PowerMaurizioPieveItalianAgencyforNewTechnologies,Energy&SustainableEconomicDevelopmentReinhardRadermacherUniversityofMaryland(US)StephanRenzIEAHPTTCPRowenaRodriguesGlenDimplexHugoSanchoMinistryforEnergyTransition(France)BansSanliPermanentDelegationofTürkiyetotheOECDWolf‐PeterSchillGermanInstituteforEconomicResearchAndreasScholzDataAheadPeterSchossigFraunhoferInstituteforSolarEnergySystemsIEA.CCBY4.0.8WorldEnergyOutlookSpecialReportJasSinghWorldBankGroupShintaroTabuchiAgencyforNaturalResourcesandEnergy,JapanTomvanIerlandEuropeanCommission(DGClimateAction)JozefienVanbecelaereEuropeanHeatPumpAssociationUtaWeißAgoraEnergiewendeMarkWinskelUKEnergyResearchCentre,UniversityofEdinburghMikiYamanakaDaikinKristianYdeAgerboLunBenjaminZühlsdorfDanishTechnologicalInstitute,EnergyandClimateTheworkreflectstheviewsoftheIEASecretariatbutdoesnotnecessarilyreflectthoseofindividualIEAmembercountriesorofanyparticularfunder,supporterorcollaborator.NoneoftheIEAoranyfunder,supporterorcollaboratorthatcontributedtothisworkmakesanyrepresentationorwarranty,expressorimplied,inrespectofthereport’scontents(includingitscompletenessoraccuracy)andshallnotberesponsibleforanyuseof,orrelianceon,thework.Thisdocumentandanymapincludedhereinarewithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.Commentsandquestionsarewelcomeandshouldbeaddressedto:LauraCozziDirectorateofSustainability,TechnologyandOutlooksInternationalEnergyAgency9,ruedelaFédération75739ParisCedex15FranceE‐mail:weo@iea.orgMoreinformationabouttheWorldEnergyOutlookisavailableatwww.iea.org/weo.IEA.CCBY4.0.TableofContents9TableofContentsForeword.................................................................................................................................3Acknowledgements.................................................................................................................5Executivesummary...............................................................................................................11Introduction..........................................................................................................................15Outlookfordeployingheatpumps171.1Introduction...................................................................................................181.2Heatingneeds................................................................................................211.3Heatpumpsinbuildings................................................................................251.4Industrialheatpumps...................................................................................361.5Heatpumpsfordistrictheating.....................................................................41Implicationsofacceleratedheatpumpdeployment452.1Introduction...................................................................................................462.2Energysecurity..............................................................................................462.3Electricitysystemsanddemandflexibility....................................................482.4Energyaffordability.......................................................................................522.5Publichealthandenvironment.....................................................................542.6Jobcreation...................................................................................................59Barriersandsolutions633.1Introduction...................................................................................................643.2Costbarriers..................................................................................................653.3Non-costhurdlestoconsumeradoption......................................................743.4Manufacturingconstraints............................................................................783.5Shortagesofskilledinstallers........................................................................80AnnexesAnnexA.Technologycostsandfinancialsupportschemes..................................................87AnnexB.Definitions..............................................................................................................93AnnexC.References...........................................................................................................101123IEA.CCBY4.4.ExecutiveSummary11ExecutiveSummaryHeatpumpsareaprovenwaytoprovidesecureandsustainableheatingHeatpumps,poweredbylow‐emissionselectricity,arethecentraltechnologyintheglobaltransitiontosecureandsustainableheating.Heatpumpscurrentlyavailableonthemarketarethree‐to‐fivetimesmoreenergyefficientthannaturalgasboilers.Theyreducehouseholds’exposuretofossilfuelpricespikes,whichhasbeenmadeallthemoreurgentbytheongoingglobalenergycrisis.Overone‐sixthofglobalnaturalgasdemandisforheatinginbuildings–intheEuropeanUnion,thisnumberisone‐third.Manyheatpumpscanprovidecooling,too,whicheliminatestheneedforaseparateairconditionerforthe2.6billionpeoplewhowillliveinregionsrequiringheatingandcoolingby2050.Heatinginbuildingsisresponsiblefor4gigatonnes(Gt)ofCO2emissionsannually–10%ofglobalemissions.Installingheatpumpsinsteadofafossil‐fuel‐basedboilerssignificantlyreducesgreenhousegasemissionsinallmajorheatingmarkets,evenwiththecurrentelectricitygenerationmix—anadvantagethatwillincreasefurtheraselectricitysystemsdecarbonise.Around10%ofspaceheatingneedsgloballyweremetbyheatpumpsin2021,butthepaceofinstallationisgrowingrapidly.Theshareofheatpumpsiscomparabletothatoffueloilforheatingandofotherformsofelectricheatingbutlowerthantheover40%ofheatingreliantongasheatingandthe15%reliantondistrictheating.Insomecountries,heatpumpsarealreadythelargestsourceofheating.InNorway,60%ofbuildingsareequippedwithheatpumps,withSwedenandFinlandatover40%,undercuttingtheargumentthatheatpumpsareunsuitableforcoldclimates.Globalsalesgrewbynearly15%in2021,doubletheaverageofthelastdecade.GrowthintheEuropeanUnionwasaround35%,andisslatedtoacceleratefurtherinlightoftheenergycrisis,withsalesinthefirsthalfof2022roughlydoubleoverthesameperiodlastyearinPoland,theNetherlands,ItalyandAustria.Chinacontinuestobethelargestmarketfornewsales,whileNorthAmericahasthelargestnumberofhomeswithheatpumpstoday.Together,theseregions,alongwithJapanandKorea,arealsomajormanufacturinghubs,hometotheindustry’slargestplayers.Governmentenergysecurityconcernsandclimatecommitmentswouldmakeheatpumpsbecometheprimarymeansofdecarbonisingspaceandwaterheating.Thisreportexploresascenarioinwhichgovernmentsaroundtheworldmeetalltheirannouncedenergyandclimate‐relatedcommitmentsinfullandontime.Astheproventechnologyofchoicetodecarboniseheating,globalcapacityofheatpumpsjumpsfrom1000GWin2021tonearly2600GWby2030inthisscenario,boostingtheirshareoftotalheatingneedsinbuildingsfromone‐tenthtonearlyone‐fifth.Asaresult,naturalgasdemandfallsby80billioncubicmetres(bcm),heatingoildropsby1millionbarrelsperday,andcoaldeclinesby55milliontonnesofcoalequivalent.Inaggregate,thismeansheatpumpsaccountfornearlyhalfoftheglobalreductionsinfossilfueluseforheatinginbuildingsby2030,withtheremainedcomingfromotherefficiencymeasures.Inascenarioconsistentwiththeglobalclimatetargetof1.5°C,heatpumpsacceleratefaster–theircapacitynearlytriplesby2030andtheirshareinheatingreachesone‐quarter.IEA.CCBY4.4.12WorldEnergyOutlookSpecialReportHeatpumpscanalsoaddressheatingneedsinindustryanddistrictheating.Largeheatpumpscanprovideheatupto140‐160oCtoday,withhighertemperaturespossiblethroughinnovationandimproveddesigns.Themostcommonindustrialheatpumpstodayprovidelowertemperatureheat.Thepaper,foodandchemicalsindustrieshavethelargestnear‐termopportunities,withnearly30%oftheircombinedheatingneedsabletobeaddressedbyheatpumps.InEuropealone,15GWofheatpumpscouldbeinstalledin3000facilitiesinthesethreesectors,whichhavebeenhithardbyrecentrisesinnaturalgasprices.Heatpumpscontributetocuttinggasimportsquickly,especiallyinEuropeThepotentialforheatpumpstocutdependenceonnaturalgasforheatingisparticularlylargeintheEuropeanUnion,wherenaturalgasisthemostusedheatingfuelandwheregaspriceshaverisenthemost.InascenarioconsistentwiththeEU’sclimateambitions,heatpumpsalesriseto7millionby2030–upfrom2millionin2021–helpingachievetheREPowerEUobjectiveofendingRussiangasimportswellbefore2030.Thisdeploymentreducestheconsumptionofnaturalgasby7bcmin2025and21bcmby2030,anamountequivalenttoalmost15%ofEUpipelineimportsfromRussiain2021.RetrofittingbuildingsinparallelreducesthestrainonthepowersectorTheaccelerateddeploymentofheatpumpsinevitablyincreasesglobalelectricitydemand,thoughenergyefficiencyanddemandresponsemeasurescangreatlyreducetheimpactonpowersystems.Theshareofelectricityinheatingforbuildingsandindustrydoublesbetween2021and2030to16%ifclimatepledgesaremet.Overthatsametime,globalelectricitydemandrisesbyonequarter,towhichheatpumpscontributelessthanonetenth.Forhouseholdsthataddaheatpumpwithoutimprovingefficiencyinparallel,thiscannearlytripletheirpeakdemandduringwinter.Improvingahome’sefficiencyratingbytwogrades(e.g.fromDtoBinEuropeancountries)canhalveheatingenergydemandandreducethesizeoftheheatpumpneeded,savingconsumersmoneyandreducingthegrowthinpeakdemandbyone‐third.Togetherwithcarefulgridplanninganddemand‐sidemanagement,thismoderatestheneedfordistributiongridupgradescausedbyelectrifyingheatandminimisestheneedforadditionalflexiblegenerationcapacityto2030.TheaccelerateddeploymentofheatpumpsbringsarangeofbenefitsOvertheirlifetime,heatpumpscansaveconsumersmoneyandshieldthemfrompriceshocks.Theaveragehouseholdorbusinessthatusesaheatpumpspendslessonenergythanthoseusingagasboiler.Thesesavingsoffsetthehigherupfrontcostsforheatpumpsinmanymarketstoday–insome,evenwithoutsubsidies.Theeconomicpropositionofheatpumpsimprovesinthecontextoftoday’senergypricespikes:householdsavingsrangefromUSD300peryearintheUnitedStatestoUSD900inEurope.Withappropriatesupportforpoorerhouseholdstomanagetheupfrontcosts,heatpumpscanmeaningfullyaddressenergypoverty,withenergybillsavingsinlow‐incomehouseholdsrangingbetween2%and6%oftheirhouseholdincomeaftermovingawayfromanaturalgasboiler.IEA.CCBY4.0.ExecutiveSummary13Switchingtoheatpumpscutsemissionsofgreenhousegasesandhelpsimproveairquality.Accelerateddeploymentofheatpumps,inlinewithnationalclimatetargets,canreduceglobalCO2emissionsbyhalfagigatonnealreadyby2030.However,unintendedleaksofF‐gasrefrigerants–potentgreenhousegases–candecreasetheirpositiveclimateimpacts.Withtoday’srefrigerants,heatpumpsstillreducegreenhousegasemissionsbyatleast20%comparedwithagasboiler,evenwhenrunningonemissions‐intensiveelectricity.Thisreductioncanbeaslargeas80%incountrieswithcleanerelectricity.Globalemissionsofmajorairpollutantscausedbycombustionheatinginbuildingsalsodrop,particularlyfromcoalinChina,whileotherhazardsassociatedwithheatingbyfuelcombustiondiminish.Theexpansionofheatpumpmanufacturingandinstallationstomeetrisingdemandwouldcreatemorejobs.Globalemploymentinheatpumpsupplynearlytriplestoover1.3millionworkersto2030inourscenario.Jobsininstallationgrowthemost,withgrowthalsoinmaintenanceandmanufacturing,providingnumerousopportunities,especiallyformedium‐skilledworkers.ConcertedactionisneededtoovercomebarrierstofasteradoptionAcceleratingthetake‐upofheatpumpsrequiresovercominganumberofbarriers.Chiefamongthemarethehigherupfrontcostofbuyingandinstallingthedevicesrelativetootherheatingoptions;othernon‐costdeterrentstoconsumeradoption;manufacturingconstraints;andpotentialshortagesofqualifiedinstallers.Concertedactionbygovernments,inpartnershipwiththeheatpumpindustry,isneededtoaddressthesehurdlesandachievehigherratesofdeployment.Despitelong‐termsavings,highupfrontcostscandeterconsumers.Thecostofpurchasingandinstallinganair‐to‐airheatpumpistypicallybetweenUSD3000andUSD6000.However,eventhecheapestair‐to‐watermodels,includingmodificationstotheexistingradiatorsystems,remaintwotofourtimesmorecostlythannaturalgasboilersinmostmajorheatingmarkets.Financialincentivesarecurrentlyavailableinover30countriesaroundtheworld–coveringmorethan70%oftoday’sheatingdemand.Thesubsidiesinthesecountriesmakethecheapestheatpumpoptionscomparabletothecostofanewgasboilerforconsumers.Additionalincentivescantargetlow‐incomehouseholds(asinPoland)and/orhighefficiencymodels(asinCanada).Insomecountries,thedesignofelectricitytariffsandenergytaxationputheatpumpsatadisadvantagerelativetofossilfuelboilers.Tariffsandtaxesshouldinsteadbetiltedinfavourofcleanerandmoreefficientconsumerchoices.Anumberofnon‐costbarriersholdbackconsumeradoptionofheatpumpstoday.Theseincludelackofinformation,splitincentivesforbuildingownersandtenants,andbuildingregulations.Severalgovernmentshavetakenactiontoadjustbuildingcodes(suchasintheCzechRepublic),create“one‐stopshops”forconsumers(suchasinIreland)andencouragealternativebusinessmodelstoaddressthesplitincentive–notablyinNorthAmerica,theUnitedKingdomandGermany–thoughstrongereffortsarerequired.Particularattentionneedstobepaidtoaddressingbarrierstotheinstallationofheatpumpsinmulti‐familyandcommercialbuildings,whichaccountforalowshareofsalestoday.IEA.CCBY4.4.14WorldEnergyOutlookSpecialReportShortagesofqualifiedinstallers,alreadyabottleneckinmanykeyheatingmarkets,callforlarge‐scaleworkerreskilling.Globaldemandforfull‐timeinstallersquadruplesby2030inourscenario.Incorporatingheatpumpsintoexistingcertificationsforheatingtechnicians,plumbersandelectricalengineers,whohavesimilarskills,wouldhelpreducetrainingrequirements.Financialincentives,suchasthoseusedacrossEurope,canalsoattractnewworkerstospecialisedtrainingprogrammes.Governmentsneedtoworkwithindustrytolowersupply‐sidehurdlesLeadingmanufacturershaverecentlyannouncedplanstoinvestmorethanUSD4billioninexpandingheatpumpproductioncapacityandrelatedefforts,mostlyinEurope.Newheatpumpinstallationinthenextfouryearswouldberoughlyequaltothenumberofheatpumpsinstalledinthelastdecade.Severalcountries,notablytheUnitedStates,arerespondingtosupplychainvulnerabilitieswithincentivestobuildupdomesticmanufacturingcapacity.Long‐termpolicyconsistencyandregulatorycertainty,togetherwithtargetedactiontostrengthensupplychains,remaincriticalformanufacturersastheyconsiderwheretoexpandtheiroperations.Inparticular,regulationsonF‐gasesmustbalancetheneedtolimitrefrigerantemissionswithcost,safety,energyefficiencyandsupplychainconsiderations.Acceleratingdeploymentofheatpumpsinlinewithnationalclimatetargetsiswellwithinreachbutrequiresfurthereffortsfrompolicymakersandindustry.ThemarketgrowthinheatpumpsneededthisdecadetohitnationalclimatetargetsisnotassteepastheexpansionwehavealreadyseeninsolarPVandelectricvehicles,althoughtherewouldneedtobeafurtheraccelerationtogetontrackfortheIEA’sNetZeroEmissionsby2050Scenario.Theadditionalupfrontinvestmentrequiredissizable,reachingUSD160billionannuallyby2030,buttheseincrementalcostsareoutweighedbyeconomy‐widesavingsonfuel,especiallyiftoday’shighpricespersist.Governmentsandindustryhavevitalrolestoplaytoaddresspersistentmarketbarriersandenableheatpumpstoplaytheirfullpartinaddressingtoday’smostpressingissues–energysecurity,energyaffordability,andrapidreductionsinemissions.IEA.CCBY4.4.Introduction15IntroductionTheRussianFederation’sinvasionofUkraineanditssubsequentdecisiontoslashdeliveriesofnaturalgastoEuropehaveplungedtheworldintothebiggestenergycrisissincethe1970s.WhileEuropeisattheepicentre,surgingenergypricesarehittinghouseholdsandcompaniesaroundtheworld,givingadditionalreasonforgovernmentstostepupurgenteffortstoreducerelianceonfossilfuelsastheeffectsoftheglobalclimatecrisisbecomeevermoreapparent.Thisreportassessestherolethatheatpumpscouldplayinaddressingbothenergysecurityandclimateimperatives,focusingontheconcretestepsneededtoacceleratetheirdeploymentovertherestofthecurrentdecade.HeatpumpscanreducetheEuropeanUnion’srelianceonRussianfossilfuelsbyreplacinggas‐andoil‐firedboilers.1Inthelongerterm,theyaresettoplaytheleadingroleindecarbonisingtheprovisionofheataspartofeffortstoachievenetzeroemissionsofcarbondioxideby2050.Heatpumpscanbeinstalledinbuildingsanddistrictheatingnetworkstoprovidebothheatingandcooling,andinindustrytoprovidelow‐andmedium‐temperatureheat.Astheyareveryenergyefficient,theycanlowerenergybillsforbothhouseholdsandbusinesses.Totheextenttheyarepoweredbylow‐emissionselectricity,theiruseresultsinfarlessgreenhousegasemissionsthanstandardheatingequipmenttoday.Whileheatpumpscanbedesignedtoprovidebothheatingandcooling(knownasreversibleheatpumps),thisreportfocusesonheating.SpecialfocusisgiventotheimplicationsofheatpumpdeploymentinEuropeforthatregion’sgasdemandinlightoftheEuropeanUnion’spolicyobjective,adoptedinMarch2022,ofeliminatingRussianimportsofnaturalgaswellbefore2030.Thereportisstructuredasfollows:Chapter1startsbyexplainingwhataheatpumpisandhowitworks,andthendescribestheoutlookforheatingneedsto2050,highlightingthedifferencesinthecurrentandfutureenergymixesandtheevolutionofthebuildingstockbetweenregions.Itgoesontodescribethedetailedglobalandregionalprojectionsoftheuptakeofheatpumpsinbuildings,industryanddistrictheating,focusingontheperiodto2030,andtheimplicationsforenergydemand,emissionsandinvestmentneeds.Chapter2setsoutinmoredetailtheimplicationsofacceleratingthedeploymentofheatpumpsforenergysecurity,electricitysystemsanddemandflexibility,energyaffordability,publichealth,theenvironment,andjobcreation.Chapter3assessestheprincipalpotentialhurdlestothedeploymentofheatpumps,includingtheupfrontcostofinstallingthem,othermarketbarriers,manufacturingandothersupplychainconstraints,andshortagesofskilledworkers,aswellasthemainpolicyoptionsforaddressingthem.1SeeIEA’s10‐pointplantoreducerelianceonRussia’sgasimports,iea.li/gas‐relianceIEA.CCBY4.4.Chapter1Outlookfordeployingheatpumps17Chapter1OutlookfordeployingheatpumpsMercuryrising?Reducingfossilfueluseinheatingisessentialtosimultaneouslyaddresspressingenergysecurityrisks,protecthouseholdsandbusinessesfromvolatileenergyprices,andachieveclimateobjectives.Nearlyhalfofglobalbuildings‐relatedenergyusegoestoheating,wherenaturalgasisthedominantsourcetoday,consuming760bcmannually.TheshareishigherintheEuropeanUnion,wheregasheatinginbuildingsconsumesmorethanthepowersector.Togetherwithotherfossilfuels,heatingdirectlyandindirectlyemittedover4GtCO2in2021–10%ofglobalenergy‐relatedCO2emissions.Heatpumpsaretheprimarymeansofdecarbonisingspaceandwaterheatinginbuildings.Heatpumpsinstalledinbuildingshaveacombinedcapacityofmorethan1000GWtoday.Capacityissettogrowto2600GWby2030intheAnnouncedPledgesScenario,inwhichnationalclimateandenergysecuritytargetsareassumedtobemet.Thiswouldboosttheirshareoftotalheatingneedsinbuildingsfromalmost10%in2021toonefifth.Manyofthesepumpsarereversible,i.e.theycanprovidecooling,too.By2050,2.6billionpeoplewillbelivinginareaswithsubstantialcoolingandheatingneeds.Heatpumpscontributealmosthalfofglobalreductionsinfossilfueluseforheatinginbuildingsin2030intheAPS.Heatpumpshelpdecreasenaturalgasdemandbymorethan80bcmandheatingoildemandby1mb/d,whilecoalusefallstonegligiblelevels.Heatpumpscontributearound9%oftheincreaseinelectricitydemandto2030,addingonlymodestlytosystem‐widepeakloadsinthewinter.Thiscouldbeabsorbedwithoutnewgenerationcapacityinmostregions,thoughcarefulgridplanningwouldbeneededtoensurenetworkstability,especiallyindistributiongrids.TheEuropeanUnionseesasharpdeclineinnaturalgasthankstoheatpumpsintheAPSinanefforttomeetobjectivesinREPowerEU.AnnualinstallationsofheatpumpsacrosstheEuropeanUnionreachnearly7millionin2030–upfromjust2millionin2021.Thisrapidgrowthreducesgasconsumptionby7bcmin2025and21bcmin2030,roughlyequalto15%ofEUimportsfromRussiain2021.Heatpumpsalsoreducefossilfueldemandinindustry,whichaccountsforroughlyafifthofnaturalgasconsumptiontoday.Theycanbeusedforlow‐temperatureprocessheatbelow100°Cinarangeofsectorstoday,buttechnologiesarecommerciallyavailableforprocessesupto150°C,withhighertemperaturestechnicallyachievable.Nearly40%ofindustrialheatingdemandin2030isattemperaturessuitableforheatpumps.Districtheatingnetworkscanalsoberepurposedtouselarge‐scaleheatpumps.SeveralEuropeancountrieshavetargetstodecarbonisetheirheatingnetworksby2040.SUMMARYIEA.CCBY4.4.18WorldEnergyOutlookSpecialReport1.1IntroductionThischapterassessestheoutlookforheatpumpinstallationsandtheirimpactontheenergymixforheatinginbuildingsandindustry,drawingontheprojectionsofthesystem‐wideenergyscenariosdepictedinthelatesteditionoftheWorldEnergyOutlook(WEO),releasedinOctober2022(IEA,2022a).EmphasisisgivenheretotheAnnouncedPledgesScenario(APS),whichassumesthatgovernmentsaroundtheworldmeetallannouncedenergy‐andclimate‐relatedcommitmentsinfullandontime.ThisiscontrastedthroughoutthereportwiththeStatedPoliciesScenario(STEPS),whichdescribeshowtheglobalenergysystemwouldevolveunderthepoliciesalreadyinplacetoday,providedtheyarebackedbyconcreteimplementationplans.Thesecomparisonsareintendedtohighlightwhereadditionaleffortsarerequiredtoaccelerateheatpumpdeployment.Insomecases,theAPSprojectionsarealsocomparedwiththeNetZeroEmissionsby2050(NZE)Scenario,whichrepresentsapathwaytoreduceenergyemissionstozeroonanetbasisby2050inordertostabiliseglobalaveragetemperaturesat1.5°Cabovepre‐industriallevels.MoredetailaboutthescenariosandtheprojectionscanbefoundinWEO2022.Aheatpumpusestechnologysimilartothatfoundinarefrigeratororanairconditioner.Itextractsheat1fromasource,suchasthesurroundingair,geothermalenergystoredintheground,ornearbysourcesofwaterorwasteheatfromafactory.Itthenamplifiesandtransferstheheattowhereitisneeded(Figure1.1).Becausemostoftheheatistransferredratherthangenerated,heatpumpsarefarmoreefficientthanconventionalheatingtechnologiessuchasboilersorelectricheatersandcanbecheapertorun.Theoutputofenergyintheformofheatisnormallyseveraltimesgreaterthanthatrequiredtopowertheheatpump,normallyintheformofelectricity.Forexample,thecoefficientofperformance(COP)foratypicalhouseholdheatpumpisaroundfour,i.e.theenergyoutputisfourtimesgreaterthantheelectricalenergyusedtorunit.Thismakescurrentmodels3‐5timesmoreenergyefficientthangasboilers.Heatpumpscanbecombinedwithotherheatingsystems,commonlygas,inhybridconfigurations.Theheatpumpitselfconsistsofacompressor,whichmovesarefrigerantthrougharefrigerationcycle,andaheatexchanger,whichextractsheatfromthesource.Theheatisthenpassedontoaheatsinkthroughanotherheatexchanger.Inbuildings,theheatisdeliveredusingeitherforcedairorhydronicsystemssuchasradiatorsorunder‐floorheating.Heatpumpscanbeconnectedtoatanktoproducesanitaryhotwaterorprovideflexibilityinhydronicsystems.Manyoftheheatpumpscanalsoprovidespacecoolinginsummerinadditiontomeetingspaceheatingneedsinwinter.Inindustry,heatpumpsareusedtodeliverhotair,waterorsteam,ortodirectlyheatmaterials.Large‐scaleheatpumpsincommercialorindustrialapplicationsorindistrictheatingnetworksrequirehigherinputtemperaturesthaninresidentialapplications,whichcanbesourcedfromthewasteheatofindustrialprocesses,datacentresorwastewater.1Physically,heatenergyispresentwheneverthetemperatureisaboveabsolutezero(at0Kelvinor‐273°C).IEA.CCBY4.4.Chapter1Outlookfordeployingheatpumps191Figure1.1⊳HowaheatpumpworksIEA.CCBY4.0.Atypicalresidentialheatpumpneedsjustoneunitofelectricityinputtoprovidefourunitsofheatoutput;thecyclecanbereversedtoprovidecoolingservicesNotes:Theauxiliaryenergysourcecanalsobeanotherfuelsuchasnaturalgas,butmostheatpumpstodayarepoweredbyelectricity.IEA.CCBY4.4.20WorldEnergyOutlookSpecialReportTheefficiencyofaheatpumpdependscriticallyonthesourceoftheheat.Inwinter,thegroundandexternalwatersourcestypicallyremainwarmerthantheambientair,soground‐sourceandwater‐sourceheatpumpsconsumelesselectricitythanair‐sourceones,yieldingahigherCOP.Thisisparticularlythecaseincoldclimateswheredefrostingtheoutsidecomponentsofair‐sourceheatpumpscanconsumeadditionalenergy.However,ground‐sourceheatpumpsaremoreexpensivetoinstall,astheyrequireanundergroundheatexchanger–adeepverticalboreholeoralargenetworkofpipesburiedatleastonemetrebelowthesurfaceoftheground.Connectingawater‐sourceheatpumptoanearbyriver,groundwaterorwastewatercanalsobecostly.Forthesereasons,ground‐andwater‐sourceheatpumpsaregenerallylesscommonthanair‐sourcepumps.Worldwide,almost85%ofallheatpumpssoldforbuildingsworldwideareair‐source,astheyrequiretheleastefforttobeinstalled.Manyoftheseareair‐to‐airunits,whileinheating‐dominatedregionsair‐to‐water(orhydronic)unitsaregrowinginprevalence.InEurope,air‐sourcehydronicsystemsaremorecommonthaninotherregionsandaccountfornearlyhalfofallunitssold.Ground‐sourceheatpumpsandhybridheatpumpsthatcombineaheatpumpwithanotherheatingsource,likeagasboiler,areasmallportionofglobalsalestoday,butmakeupasubstantialshareofthemarketinsomecountries.InSweden,theleadingmarketforground‐sourceheatpumps,everyfourthhouseisequippedwithsuchamodel.Themarketforground‐sourceheatpumpsisalsogrowingsteadilyinthePeople’sRepublicofChina(hereafter,“China”),wheretheyoftenreplacecoal‐basedheatingsystems,helpingtoreducecarbondioxide(CO2)emissionsandimproveairquality.Single‐familyhomesandapartmentscanuseasingleormultiplesmallunits,or,inmulti‐familyandcommercialbuildings,acentralisedunittoprovideheatingandcoolingtomultipleunits.InAsia,individualair‐to‐airunitsarecommoninmultifamilyhousing,howeverrestrictionsinmultifamilyhousing,notablyinEurope,makeheatpumpslesscommonoutsidesingle‐familyhomes.Centralisedheatpumpscanprovideheattoentiremultifamilyandcommercialbuildings,butmakeupasmallshareoftotalheatpumpcapacityinstalledtoday.InEurope,forexample,only10%ofunitssoldin2021werelarger,centralisedunitsformultifamilyhousing(EHPA,2022).Commercialbuildingsareparticularlywell‐suitedforcentralisedheatpumpsastheyoftenhavesubstantialyear‐roundcoolingneeds,suchasforhospitals,foodrefrigerationinsupermarketsorlargeserverroomsinoffices,inadditiontospaceheatingneeds.Commercialsystemscanachievehighefficienciesandminimiseelectricityconsumptionbyutilisingthewasteheatfromcoolingtomeetheatingneeds.Heatpumptechnologyismatureandtheirproductionandinstallationcan,inprinciple,bescaledupquickly.Butthereareanumberofhurdlestoexpandingtheirdeployment,includingtherelativelyhighcostofinstallingthemandvarioussupplychainconstraintssuchasshortagesofskilledworkers.Concertedeffortsareneededtoreducemarketandregulatorybarriersandbolstersupplychains,reflectedintherecentproliferationofnewgovernmentpoliciesandroadmapstoencouragetheuptakeofheatpumps,notablytheEuropeanUnion(EU)REPowerEUPlanandtheUnitedStates(US)InflationReductionAct,bothofwhichwereadoptedin2022.IEA.CCBY4.4.Chapter1Outlookfordeployingheatpumps2111.2HeatingneedsHeatingcurrentlyrepresentsasizeableshareofglobalenergyconsumptionandamajorsourceofCO2emissions.Globalenergydemandforspaceandwaterheatingamountedto62exajoules(EJ)in2021,accountingforaroundhalfofenergyconsumptioninbuildingsanddirectlyemitting2.5gigatonnes(Gt)ofCO2–roughly80%ofdirectbuildingsemissions.Thismovesupto4GtofCO2whenconsideringindirectemissionsfromelectricityanddistrictheating.Figure1.2⊳Householdspaceheatinginselectedcountries/regions,2021IEA.CCBY4.0.Naturalgasistheleadingformofenergyforspaceheatinginbuildings,meetingaround45%ofspaceheatingenergydemandgloballyNotes:GJ=gigajoules;HDD=heatingdegreeday.HDDsareastandardisedmeasureofheatingneedspermittingcomparisonsacrossregions.Theymeasurehowcoldagivenlocationisbycomparingactualtemperatureswithastandardbasetemperature.Forthisanalysis,abasetemperatureof18°Cisassumed,whiletheimpactofhumidityisalsotakenintoaccount.Thelevelofenergydemandvariessubstantiallybyhouseholdwithinandacrosscountriesandregions,mainlyaccordingtoclimate,householdsize,livingspace,thedegreetowhichbuildingsarewell‐insulated,andthetypeandqualityofheatingequipment(Figure1.2).Around70%oftotalheatingneedsareforspaceheatingandtherestforhotwater.Theenergymixforheatingalsovaries.Naturalgasistheleadingformofenergyforheatinginbuildings,meeting42%ofheatingenergydemandglobally.Onesixthofglobalnaturalgasdemandisforheatinginbuildings—intheEuropeanUnionthisnumbermovesuptoone25%50%75%100%NorthAmericaEuropeanUnionJapanandKoreaChinaNaturalgasOilCoalElectricityDistrictheatModernbioenergyEnergymix100020003000400010203040NorthAmericaEuropeanUnionJapanandKoreaChinaGJ/householdHeatingintensityHDD(Topaxis)SpaceheatingintensityanddegreedaysIEA.CCBY4.4.22WorldEnergyOutlookSpecialReportthird.Oilfollowsnextwith15%,thenelectricityat15%,anddistrictheating–concentratedinChina,NorthernandEasternEurope,andCentralAsia–at11%.Thedirectuseofbiomassandcoalmakeupthedifference.Thefuelmixforheatingdifferssubstantiallyacrossmajorheatingregions,thoughgasdominateseverywhereexceptEastAsia.Figure1.3⊳BuildingsspaceheatingandwaterheatingservicedemandbyregionandsectorintheSTEPSandAPS,2021and2030IEA.CCBY4.0.Buildingenvelopeimprovementscurbdemandforheatingservicesinadvancedeconomies,whileanexpandingbuildingstockboostsdemandinemergingeconomiesNote:EMDE=emergingmarketanddevelopingeconomies.Themajorityoftheworld’spopulationthatneedsspaceheatingalreadyhasaccess,makingtheoutlookforheatingdemandrelativelypredictable.Atpresent,nearly40%oftheglobalpopulationlivesinregionsthatexperienceambienttemperatureswhichwouldrequirespaceheatingatleastpartoftheyear.Thenumberofpeopleintheseregions,mainlyinthenorthernhemisphere,isexpectedtoremainbroadlystableoverthecomingdecades.Butrisingprosperityislikelytopushupoverallheatingneeds,especiallyinemergingmarketanddevelopingeconomies,aspeoplemoveintonew,largerdwellingsandincreasetheiruseofheatingservices,especiallyhotwater,thoughefficiencygainsarelikelytooffsetsomeofthisgrowth.Increasedeconomicactivitywillalsopushupheatingneedsincommercialbuildings.Overallheatingdemandinbuildingsinemergingeconomiesincreasessignificantlybetween2021and2030inboththeSTEPSandtheAPS,drivenmainlybyhotwater(Figure1.3).Bycontrast,heatingdemandinadvancedeconomiesisbroadlystableintheSTEPSasefficiencyimprovementsbalanceoutagrowingnumberofsingle‐personhouseholds,whilegreatereffortstoincreasebuildingsefficiency,notablybyimprovingbuildingenvelopes,reducespaceheatingdemandmodestlyintheAPS.102030402021STEPSAPS2021STEPSAPSServicesResidentialServicesResidentialEJWaterheatingSpaceheatingAdvancedeconomiesEMDE20302030IEA.CCBY4.4.Chapter1Outlookfordeployingheatpumps231Figure1.4⊳HeatingandcoolingneedsbyregionintheSTEPS,2021and2050IEA.CCBY4.0.Regionswhereheatingisneededseelittlegrowthinpopulationto2050,whereasitgrowsbyaquarterinregionswithcoolingneedsNotes:HeatingandcoolingrefertoareaswhereHDDscalculatedwithbasetemperature18°CHDD(18°C)aregreaterorequalthan1000(°Cdays)andcoolingdegreedays(CDDs)calculatedwithbasetemperature10°CCDD(10°C)aregreaterorequalthan1000(°Cdays).ForfurtherinformationontheindicatorseeIEA(2020a)andforfurtherinformationonHDDsandCDDsseeIEA(2022b).IEA.CCBY4.4.24WorldEnergyOutlookSpecialReportInthelongterm,overallenergyuseforheatingintheregionsthathavesignificantspaceheatingneedsisexpectedtodeclineduetoclimatechange(thoughthiswillbeoffsettosomedegreebyincreasedcoolingneedsinthoseandotherregions).Conversely,nearlyeveryonegloballywillfaceheatwavesthatposeapublichealthriskby2050,drivinggreateruseofairconditioninginmostregions(alsoseeSection5.7onspacecoolinginWEO2022).Heatpumpscanprovidebothheatingandcooling,andsocouldbecomethepreferredchoicefornewbuildingsandheatingretrofitsinregionsthatrequirebothatdifferenttimesoftheyear.Thenumberofpeoplelivinginregionswhichrequirebothheatingandcoolingneedsissettogrowbyaround3%to2.6billionpeopleby2050intheSTEPS(Figure1.4).Inmostregionsrequiringheating,themajorityofbuildingsbuilttodaywillstillbeinusein2050(Figure1.5).Thismeansthatreducingfossilfueluseinheatingwillcallforefficiencyretrofitsandswitchingtolow‐carbonheatingtechnologies.Strongbuildingcodesthatensurenewbuildingsarezero‐carbon‐readyarealsoneededtodecarboniseheating.Figure1.5⊳Householdadditionsbydecadeinselectedcountries/regions,2021-2050IEA.CCBY4.0.Three-quartersofthebuildingsstockin2050isalreadystandingtodayinNorthAmericaandtheEU,whichtogetheraccountformorethan40%ofcurrentglobalheatingneedsNote:ProjecteddemolitionratesinChinaareassumedlowerthancurrentones.20%40%60%80%100%306090120150NorthAmericaEuropeanUnionChinaJapanandKorea2021‐302031‐402041‐50MillionhouseholdsShareofexistingbuildingsin2050(rightaxis)IEA.CCBY4.4.Chapter1Outlookfordeployingheatpumps2511.3Heatpumpsinbuildings1.3.1GlobalprospectsGlobalheatpumpsalesin2021wereup13%on2020levels,withgrowthfastestataround35%intheEuropeanUnion(Figure1.6).Despiterisingsalesinrecentyears,heatpumpsstillmetmerelyaround10%ofglobalheatingneedsinbuildingsin2021.Heatpumpsinresidentialandnon‐residentialbuildingstodayaccountformorethan1000gigawatts(GW)ofcapacity,2nearlyhalfofwhichisinstalledinNorthAmerica.Manyunitsareusedinmild‐to‐warmclimates,wheretheyareusedprimarilyforcoolingyetstillrepresenttheprimaryheatingsource(forafewmonthsoftheyear).However,thepenetrationofheatpumpstodayishighestinthecoldestpartsofEurope,meeting60%oftotalbuildingsheatingneedsinNorwayandover40%inSwedenandFinlandthankstolong‐standingpolicysupport(Rosenowetal.,2022).Figure1.6⊳Annualgrowthinsalesofheatpumpsinbuildingsinselectedregions,2021IEA.CCBY4.0.NorthAmericahasthemostheatpumpsinstalledandChinathelargestmarket,buttheEuropeanUnionisthefastest-growingmarkettodaySources:IEAanalysisbasedonAHRI(2022),Chinabaogao(2022),EHPA(2021),JRAIA(2022).Alargeincreaseinheatpumppoliciesandincentives,notablyintheUSInflationReductionAct,issettoacceleratetheirdeployment,asshownintheSTEPS.2Heatpumpsaremeasuredbytheirwattageofoutputcapacitytofacilitatecross‐comparisonacrossregions.Theaveragecapacityoftheheatpumpstockvariesgreatlyacrossregions.RegionssuchasNorthAmericaandEuropehavelargerheatpumps(5kWto10kW)onaverage,whileinAsiatheyareoftensmaller(3kWto5kW).Basedonthis,aglobalaverageequivalentforheatpumpcapacityforsingledwellingsorroomscouldbeconsideredaround5kW.Thesizingalsodependsonthebuildingstockandtheclimate.Centralisedunitsinmultifamilybuildingshavecapacitiesofmorethan20kW,andthoseinlargecommercialbuildingscanhavecapacitiesbeyond100kW.10%20%30%40%EuropeanUnionNorthAmericaJapanandKoreaChinaWorldIEA.CCBY4.4.26WorldEnergyOutlookSpecialReportIntheSTEPS,globalcapacityofheatpumpsinbuildingsincreasestomorethan2100GWby2030,meeting14%ofglobalbuildingsheatingneeds(Figure1.7).Policysupportforheatpumpsisavailableinmanymajorheatingregions.Subsidiesareavailableinregionsthatnowcovermorethan70%ofglobalspaceheatingdemandinresidentialbuildings.3Additionally,minimumenergyperformancestandardsforexistingbuildingsandbuildingenergycodesfornewbuildingshavebeenintroducedinseveralcountries,whilefossilfuelboilerbansarenowinforceonthenationallevelinvariouscountries,includingDenmark,France,theNetherlandsandNorwayaswellasonthesubnationallevelintheUnitedStatesandCanada,amongothers.Figure1.7⊳Heatpumpcapacityinbuildingsbycountry/regionandscenario,2021and2030IEA.CCBY4.0.Around20%ofheatingneedsaremetbyheatpumpsin2030intheAPS,withChina,NorthAmericaandEuroperemainingtheleadingmarketsIncreasedpolicysupportforheatpumpsisneededtoachievenationalclimateandenergysecurityobjectives.IntheAPS,whichassumesthoseobjectivesaremet,heatpumpcapacitygrowstonearly2600GWby2030,meetingalmost20%ofthesector’sheatingneeds.Forinstance,tofulfiltheREPowerEUobjectiveofendingnaturalgasimportsfromtheRussianFederation(hereafter,“Russia”)wellbefore2030,thenumberofheatpumpsintheEuropeanUnionmustnearlytripletoreacharound45millionintheAPS.Heatpumpsplayamajorroleinreducingfossilfueluseinbuildingsto2030intheAPS.Theirdirectuseforspaceandwaterheatingfallsby29%between2021and2030globally(comparedwith16%intheSTEPS),almosthalfofwhichisduetoheatpumps(Figure1.8).3Theseincludemainlynational‐levelpolicies,exceptforJapanandChina,wheresubnationalpoliciescoverasubstantialshareofnationalheatingdemand.5%10%15%20%25%30%5001000150020002500300020212030STEPS2030APSRestofworldJapanandKoreaChinaNorthAmericaEuropeShareofheatpumpsGWinglobalheatingdemand(rightaxis)IEA.CCBY4.4.Chapter1Outlookfordeployingheatpumps271Theremainingreductionsinfuelusecomefromimprovementstoenergyefficiencyofbuildings,particularlybuildingenvelopes,includingtheadoptionofautomatedhomecontrolsandbuildingmanagementsystemsfornon‐residentialbuildings.Gasaccountsforthebiggestshareofthetotalfossilenergysavings,itsusedroppingbyover160billioncubicmetres(bcm),or21%,by2030(thefallisjust50bcmintheSTEPS),aroundhalfduetoheatpumps.TheEuropeanUnioncontributesthebiggestgassavingsinbothscenarios.Russia’sdecisiontocutgasflowsintoEuropeandtheconsequentsurgeinpricesarepromptinggovernmentstourgentlyreinforcepoliciesencouragingashiftawayfromnaturalgasandotherfossilfuels.Othermajorgasimporterswithambitious2030climatetargetsalsoseelargefallsingasuseinbuildings,inlargepartduetogreateruseofheatpumps.Figure1.8⊳GlobalenergyconsumptionforspaceandwaterheatinginbuildingsintheAPS,2021-2030IEA.CCBY4.0.Heatpumpscontributeoverhalfofthe29%decreaseindemandforfossilfuelsinspaceandwaterheatingintheAPSby2030,reducingnaturalgasdemandthemostHeatpumpsalsodisplacelargeamountsofoilandcoalforheatinginbuildingsinthetwoscenarios.Oil‐basedheatingsystems,whicharecurrentlyfoundmainlyinregionswherethereisnonaturalgasdistribution,continuetheirrapiddeclineintheAPS,fallingfrom15%ofglobalheatingdemandin2021toaround11%in2030–aslightlyfasterfallthanintheSTEPS.Heatpumpsarethemaincontributortothesedeclines.Coalheatinginhouseholdsisnearlyeliminatedby2030intheAPS,ledbystrongtargetsandcampaignsinChinatoimproveairquality,withheatpumpsreplacingmostcoaluse,notablyinperi‐urbanandruralareas.ThefasterdeploymentofheatpumpsintheAPSdrivesupglobalelectricitydemand,butthisisfaroutweighedbythesavingsinfossilfuelsduetotheirmuchgreaterefficiency.Electricity2040608020212030OtherOtherrenewablesModernbioenergyDistrictheatElectricityNaturalgasOilCoalHeatpumpsOthershiftsConsumptionbyfuelEJFuelsChanges‐6‐4‐202EJChange,2021‐2030CoalOilElectricityNaturalgasIEA.CCBY4.0.28WorldEnergyOutlookSpecialReportuseinheatpumpsdoublesandclimbsbyover500terawatt‐hours(TWh),contributingaround9%ofthetotalincreasesinelectricitydemandover2021‐2030.Inmostregions,existinggenerationcapacityissufficienttomeetthisincreaseindemand,thoughadditionalinvestmenttoupgradenetworks,notablydistributionsystems,willbeneededinsomecountries.Theincreasedelectricitydemandfromheatpumpsdoesnotleadtoariseinfossilfueldemandinthepowersectorinthatscenario,astheassumedachievementofdecarbonisationtargetsleadstoafallofnearlyone‐fifthoffossilfueluseinthepowersectorby2030.ThisdeclineisfastestinGroupofSeven(G7)countriesandtheEuropeanUnion.HydrogenplaysanegligibleroleinthespaceandwaterheatingfuelmixintheAPSby2030.Akeyreasonisthatwhenaccountingfortheenergylossesassociatedwithhydrogenconversion,transportanduse,hydrogentechnologiesforuseinbuildingsaremuchlessefficientthanheatpumpsandotheravailableoptions(IEA,2022c).Theswitchingawayfromfossilfuelstoelectricheatpumpscontributessubstantiallytodecarbonisingheatinginbuildings.CO2emissionsassociatedwithspaceandwaterheatingworldwide,includingindirectemissionsfrompowergeneration,declinebyover1.2Gt,ormorethanaquarter,by2030intheAPS(Figure1.9).Heatpumpsaccountforaround500milliontonnes(Mt),ornearly40%,ofthisreduction,roughlyequivalenttoCanada’semissionsin2021.Advancedeconomies,mainlytheEuropeanUnionandtheUnitedStates,accountfornearlythreequartersofthedeclineinheating‐relatedemissionsthankstoheatpumps.Progressiveincreasesinrenewableelectricitygenerationincreasetheemissionssavingsfromheatpumpsovertime.Figure1.9⊳GlobalCO2emissionsfromspaceandwaterheatinginbuildingsintheAPS,2021-2030IEA.CCBY4.0.HeatpumpsreduceglobalCO2emissionsby500Mtby2030intheAPS,around40%oftotaldirectandindirectemissionsreductionsinspaceandwaterheatinginbuildings123420212030APSWasteCoalOilNaturalgasElectricityanddistrictheatCO₂emissionsGtCO₂Energyefficiency53%Fuelswitchtoheatpumps39%Otherfuelswitch8%Reductionbylever,2021‐30IEA.CCBY4.4.Chapter1Outlookfordeployingheatpumps291TherateofdeploymentofheatpumpsintheAPSimpliesahugeincreaseinspendingontheequipmentanditsinstallationbyownersofresidentialandcommercialbuildings.Globalinvestmenttriplesby2030toUSD350billioninreal2021dollars(Figure1.10).Thisisroughlyequaltothatinvestedinsolarphotovoltaic(PV)andwindpowergloballyin2021.ThepremiumforinvestinginaheatpumpoverbuyingaconventionalheatingoptionsuchasacondensinggasboilerisaroundUSD160billionin2030,muchofwhichisalreadycoveredbypolicyincentivesalreadyavailableintheleadingmarketstoday(andtakenintoaccountintheSTEPS).However,theseincrementalcostsareoutweighedbytheeconomy‐widesavingsonfuel,especiallyshouldtheglobalenergycrisiscontinue(Chapter3).Figure1.10⊳Globalinvestmentsforheatpumpsinbuildingsbyscenario,2021and2030IEA.CCBY4.0.HeatpumpinvestmenttriplestoUSD350billionin2030intheAPS,USD160billionmorethanwhatwouldbeneededifallnewheatingsystemsweregasboilersinsteadInaddition,heatpumprelatedresearch,developmentanddemonstration(RD&D)investmentsneedtobesteppeduptomeetresearchandinnovationneeds(Box1.1).PublicspendingonheatpumpandchillerresearchasreportedtotheIEAisaroundUSD30millionperyear,nearlyfourtimeshigherthanin2010.Globalinvestmentinheatpumpstart‐upsandscale‐upsincreasednearlysixfoldbetween2016and2021(EuropeanCommission,2022a).Patentcountsforheatpumps,ameasureoftechnologyinnovation,havemorethandoubledin2015‐19comparedwith2005‐09,withChinaandJapanaccountingforhalfofallinventions(Figure1.11).1002003004002021STEPSAPSHeatpumpsRequiredinvestmentingasboilersifnoheatpumpsinstalledUSDbillion(2021)2030IEA.CCBY4.4.30WorldEnergyOutlookSpecialReportFigure1.11⊳Patentcountsforheatpumptechnologiesbycountry,1990-2019IEA.CCBY4.0.Thenumberofpatentsforheatpumptechnologieshasrisendrastically,ledbyChinaandJapanwhoaccountedformorethanhalfofthenewpatentssince2010Box1.1⊳RD&DforthenextgenerationofheatpumpsOverthelastdecades,heatpumpperformancehasimprovedsignificantlye.g.intermsofefficiencyandnoise.Forexample,COPshaveincreasedbymorethan70%sincetheearly1990sforair‐to‐waterheatpumpsinSwitzerland(SwissOfficeofEnergy,2020).However,additionalresearchandinnovationcouldyieldfurtherbenefits.RD&Deffortsarecurrentlyfocusedonsmartandflexiblefeatures,reducednoise,higherefficiencies,morecompactdesign,improvedeaseofinstallation,andlowerenvironmentalfootprintsassociatedwiththematerialsandrefrigerantsused.SharingprogressunderkeyRD&Dprogrammesrunbygovernmentsandindustrycouldhelpacceleratethedeploymentofinnovativetechnologiesworldwide,loweringcostsandemissions.TheIEA’sHeatPumpingTechnologiesTechnologyCollaborationProgramme(HPTTCP)andtheInnovationCommunityonAffordableHeatingandCoolingofBuildings(aMissionInnovationinitiative)arekeyforumsforadvancingRD&Dcollaborationonheatpumps.TheHPTTCPisexploringpotentialimprovementsforsystemandresourceefficiencybyoptimisingtheuseofheatpumpsforbothheatingandcoolingpurposes,includingincommercialapplicationswithsimultaneousneeds.Oneaspectbeinglookedatisthedualabilityofaheatpumpwhenoperatedinaverylow‐temperaturethermalgridonadistrictorcityleveltobeusedasaheatsinkandsourcesimultaneously.Airconditionersresultinlargeamountsofwasteheatthatcouldberecoveredtoproducedomestichotwaterinwell‐designedsystems.2004006008001990‐941995‐992000‐042005‐092010‐142015‐19JapanChinaGermanyKoreaUnitedStatesFranceRestofworldNumberofpatentsIEA.CCBY4.4.Chapter1Outlookfordeployingheatpumps311Long‐termRD&Deffortshavemadeheatpumpsaviableoptionevenincoldclimates.However,toefficientlyapplythetechnologyinverycoldclimates,thenextgenerationofheatpumpswillneedtobemoreefficientoveralargertemperaturerange.Progressisalsoneededinadaptingheatpumpsforthemostdifficultconditionsforcarryingoutbuildingretrofits,suchaswhereinsulationistrickyandwheretheheatingsystemrequireshightemperatures.Toachievethis,continuousresearchoncomponentdevelopmentandsystemdesignisnecessary.TheUSDepartmentofEnergyrecentlylaunchedtheResidentialColdClimateHeatPumpTechnologyChallengetoacceleratethedeploymentoftechnologiesinverycoldclimates(USDOE,2022).Optimisedheatpumpsolutionsdifferentiatedbyclimateneedscouldalsobringdownequipmentcosts.Steppingupresearchontechnologiesthatarestillfarfrommarketintroductionisalsoneededtopavethewayforleapfrogginginthedevelopmentofmoreefficientandcost‐effectiveheatingsolutions.Theyincludenon‐traditionalcompressiontechnologiesforheatpumpssuchassolid‐state(e.g.magnetocaloric,thermoelectricandelastocaloric)andgaseous(e.g.BraytonandStirlingcycles)ones.Earlyresultsforelastocaloric‐basedcoolingsystemsareparticularlypromising.Note:ThisboxwaspreparedincollaborationwithCarolineHaglundStignor,MonicaAxellandMetkelYebiyooftheRISEHeatPumpCentreandStephanRenz,ChairmanoftheHPTTCP.AchievingtheAPSlevelofdeploymentwouldfurtherrequirestrengtheningpolicysupport,includingbiggerfinancialincentivesandrestrictionsontheinstallationoffossilfuelboilersinexistingandnewbuildings(seeChapter3).IntheNZEScenario,akeymeasuretosupportevenfasterdeploymentofheatpumpsthanintheAPSistheprohibitionofthesaleofnewfossilfuelboilersfrom2025(seeBox1.2).Box1.2⊳HeatpumpdeploymentintheNZEScenarioIntheNZEScenario,inwhichtheworldachievesthegoalofnetzeroemissionsofCO2bymid‐century,thecapacityofheatpumpsinstalledworldwidenearlytriplesby2030andthendoublesagainby2050(Figure1.12).Thisimpliesthatatleast24%ofglobalheatingneedswillbemetbyheatpumpsin2030,almostthreetimesmorethantoday’sshare.By2050,thissharereaches52%.Therecentintroductionofambitiouspoliciesinseveralcountries,notablytheUSInflationReductionAct,REPowerEUandGreenTransformation(GX)inJapan,arealreadyboostingtheuptakeofheatpumpsandsendingstrongmarketsignalstomanufacturersandinstallers.Thesearealmostsufficienttogettheworldontrackfor2030,butadditionalpolicyeffortswouldbeneededtoachievethecontinuedaccelerationindeploymentrequiredtobeontrackfortheNZEScenariobeyond2030,notablyinemergingeconomies.IntheNZEScenario,deploymentisboostedbybiggerreductionsinheatpumpcoststoendusersthroughinnovationandsubsidies,highercarbonpenalties,andabanofnewfossilfuelboilersalesby2025.IEA.CCBY4.4.32WorldEnergyOutlookSpecialReportFigure1.12⊳GlobalheatpumpcapacityandcoverageofheatingneedsintheAPSandNZEScenario,2021-2050IEA.CCBY4.0Globalheatpumpcapacitynearlytriplesby2030intheNZEScenarioandthendoublesagainby2050,withstrongerpoliciesthanthosealreadyplannedneededbeyond20301.3.2FocusontheEuropeanUnionRussia’sinvasionofUkraineandsubsequentdisruptiontoimportsofRussiangashavedrivenEuropeintoamajorenergycrisiswithfar‐reachingeconomicandsocialconsequences.Inresponse,theEuropeanCommissionreleasedinMay2022theREPowerEUPlan,whichaimstorapidlyphaseoutEUimportsoffossilfuelsfromRussia,withtheimportofgasendingwellbefore2030–agoalthatisfullyachievedintheAPS.REPowerEUsetsoutanumberofmeasurestodiversifythesuppliersofgas,aswellastoaccelerateenergyefficiencyimprovementsandswitchingtocleanfuels.ThesemeasuresreinforcethosethatwerealreadyincludedtheEUFitfor55packagethatwasannouncedin2021–asetofproposalstoreviseandupdateEUlegislationaimedatreducingnetgreenhousegas(GHG)emissionsbyatleast55%by2030(relativeto1990).Loweringnaturalgasuseinbuildings,inlargepartthroughthereplacementofgasboilerswithheatpumps,isavitalpartofREPowerEU.In2021,EUgasuseinbuildingsamountedto150bcm–thelargestsingleuseofgasintheEuropeanUnion,aheadofthepowersector–andcontributed11%oftheUnion’stotalenergy‐relatedCO2emissions.Heatpumpsalesarealreadygrowingrapidly,jumpingby35%toaround2millionin2021,fuelledbystrongpolicysupportintheleadingmarkets,includingFrance,ItalyandPoland(Figure1.13).Insomecases,heatpumpsarealsoreplacingcoalandoilboilers,aswellasinefficientelectricresistanceheaters.InPoland,forexample,acombinationofcleanenergysubsidiesandregional‐levelbansforcoalboilers,motivatedbyairqualityconcerns,helpedtoboostsalesbytwo‐thirdsin2021(MorawieckaandRosenow,2022).InItaly,amorethan60%surgeinsaleswasdrivenbytheSuperbonus–aCovid‐19recoverymeasurethatprovidesataxcreditworthupto110%ofthecostofbuildingrenovationsaimedatimprovingenergyefficiency.20%40%60%20004000600020212030NZE2050NZE2021APSNZEGWShareofheatpumpsinbuildingsenergyuseforheating(rightaxis):IEA.CCBY4.4.Chapter1Outlookfordeployingheatpumps331Figure1.13⊳HeatpumpsalesandgrowthintheEuropeanUnionandselectedmembercountries,2021IEA.CCBY4.0.HeatpumpsalesacrosstheEuropeanUniongrewbyaround35%to2millionin2021,fuelledbystrongpolicysupportincountriesincludingFrance,ItalyandPolandSources:IEAanalysisbasedonEHPA(2022);PORTPC(2022).Table1.1⊳SelectedEuropeanpolicytargetsforheatpumpdeploymentCountryYearTargetEuropeanUnion203030millionadditionalheatpumpsinstalledcomparedwith2022Belgium2030Finalenergyconsumptionbyheatpumpstoincreasefivefoldover2018France2023Reach2.7millionto2.9milliontotalheatpumpsinstalledGermany20242030Install500000heatpumpsperyearReachaheatpumpstockof6millionHungary2030Finalenergyconsumptionbyheatpumpstoincreasesixfoldover2020Italy2030Finalenergyconsumptionbyheatpumpstoincreasetwofoldover2017Poland2030Finalenergyconsumptionbyheatpumpstoincreasethreefoldover2020Spain2030Finalenergyconsumptionbyheatpumpstoincreasesixfoldover2020UnitedKingdom2028600000annualheatpumpinstallationsSources:EuropeanCommission(2022b);France,MinistryofEcologicalTransition(2022);CleanEnergyWire(2022);GOV.UK(2020);GovernmentofItaly(2019);GovernmentofSpain(2019);ToleikyteandCarlsson(2021).AnumberofEUcountrieshaverecentlystrengthenedtheirpolicysupportforheatpumps,puttingtheUniononcourseforanotherrecordyearofinstallationsin2022.SalesinPolanddoubledinthefirsthalfoftheyear,withsimilartrendsbeingreportedintheNetherlands,ItalyandAustria,andstronggrowthinFinlandandGermany(Mathiesenetal.,2022).SeveralEUcountries,aswellastheUnitedKingdom,haveannouncedambitiousdeploymenttargets20%40%60%80%150300450600FranceItalyGermanyEstoniaSwedenFinlandPolandDenmarkNetherlandsPercentgrowth2020‐2021(rightaxis)Thousandheatpumps0.51.01.52.0EuropeanUnionMillionheatpumpsIEA.CCBY4.4.34WorldEnergyOutlookSpecialReportinrecentyears(Table1.1).TheREPowerEUplanaimstoreinforceandbuilduponthesecurrentpoliciesandmarkettrends,targetingadoublinginthecurrentdeploymentrateofindividualheatpumpsleadingtotheinstallationof30millionnewunitsbetween2022and2030.Theplanalsotargetsanaccelerationinthedeploymentoflarge‐scaleheatpumpsbydevelopingandmodernisingdistrictandcommunalheatingandbyintegratingthemintonewprojectsexploitingindustrialheat.EUheatpumpsalesreach4millionunitsby2025andnearly7millionby2030intheAPS,whichtakesaccountofthetargetsdescribedabove.Thisresultsinareductionintheconsumptionofgasforheatinginbuildingsby7bcmin2025and21bcmby2030,roughlyequalto15%ofRussianimportstoday(Figure1.14).Heatpumpscontributeroughlyone‐thirdofthetotalreductioningasuseinbuildingsforheatingbetweennowand2030,withenergyefficiencyretrofitsmakingupmostoftherest.Anaverageof2.5‐3%oftheexistingbuildingstockareretrofittedeachyearinthatscenario,themajorityoftheminvolvingtheinstallationofheatpumps.NewbuildingenergycodesacrossallEUmemberstatesalsosupporttheadoptionofheatpumps.Figure1.14⊳EUheatpumpinstallationsandstockandrelatedcumulativenaturalgassavingsintheAPS,2021-2030IEA.CCBY4.0.Newheatpumpinstallationscuttheconsumptionofgasby7bcmin2025and21bcmby2030intheAPS,roughlyequalto15%ofRussianimportstodayNewpolicymeasuresareneededtoensurethattheEUandnationaltargetsaremet.Policiesthatprovideincentivesforcomprehensiveretrofits,includingheatpumps,areacornerstoneofmanycountries’energyefficiencypackagestoday,includingmeasuresincludedintheEURenovationWaveinitiative,launchedin2020,whichaimstodoubletheenergyrenovationrateofthehousingstock.Tofurtherincentiviseheatpumpdeployment,nineEuropeancountrieshaveannouncedorimplementednationalbansongasandoilboilers,whilefour1020304050246810202120252030NewbuildingsExistingbuildingsStock(rightaxis)MillionunitsMillionunitsAnnualheatpumpinstallations51015202520252030bcmNaturalgassavingsfromheatpumpsIEA.CCBY4.4.Chapter1Outlookfordeployingheatpumps351othershaveannouncedbansforoilboilersonly.Someofthesebanscoverinstallationsonlyinnewbuildingswhileothersalsocoverreplacementsinexistingbuildings.CurrentandannouncedfossilfuelboilerbansintheEUwillrequireroughly16millionhouseholdstoswitchtoalternativeheatingoptionsby2030,10millionofwhichwouldbegasboilers,saving7.5bcmofnaturalgas.Ifallofnewheatingsystemswereheatpumps,thiswouldmakeuparoundhalfofheatpumpshiftsto2030intheAPS.IfallEUcountriesweretoimplementabanonnewfossilfuelboilerinstallationsstartingin2025,thiswouldrequire48millionhouseholdstoswitchtoalternativeheatingoptionsby2030.Evenifonly60%ofthesehouseholdsshiftedtoheatpumps,thiswouldbeequaltoheatpumpshiftsintheAPS(Figure1.15).Inaddition,bansprovideaclearandstablelong‐termvisiontomanufacturers.Figure1.15⊳ImpactofimplementedandannouncedgasboilerbansinEuropeandremainingheatingdemandgapwiththeAPS,2021-50IEA.CCBY4.0.Toachievethenaturalgassavingsin2050intheAPS,allcountrieswithnetzeroby2050targetsneedtobannewfossilfuelboilerinstallationsinallbuildingtypesby2030Note:GasboilerinstallationbanswerealsointroducedinDenmarkfornewbuildingsin2013,inNorwayforallbuildingsin2017andintheNetherlandsfornewbuildingsin2018.Insomecases,suchasGermany,bansarenotexplicit,butratherrelyonrenewableenergyshareobligationswhichcannotbemetbygasboilers.DespiteastrongmanufacturingbaseinEurope,importsofheatpumpsandcomponentsfromAsiahaveincreasedoverthelastfewyears.Tolimitimportdependency,theEuropeanCommissionplanstorampupdomesticproductionbyfacilitatingaccesstofinancewhereneeded.REPowerEUalsoaimstostrengthenEuropeanheatpumpsupplychainsandmake2021203020402050GermanyNetherlandsUnitedKingdomFranceAustria,Ireland,LuxembourgUnitedKingdom100200GermanyUnitedKingdomFranceOtherEuropeHouseholdsusinggasboilersMillionhouseholdsAllbuildingsNewbuildingsInstallationbansAdditionalresidentialsavingsrequiredintheAPS1530456020302050NaturalgassavingsbcmAPStrajectoryIEA.CCBY4.4.36WorldEnergyOutlookSpecialReportthemmoresustainablebyenhancingtheregulatoryframework,ensuringlife‐cyclesustainabilityandsupportinginnovation.Italsoproposestoestablishalarge‐scaleskillspartnershipundertheEUPactforSkillstotrainandreskillpeopletoworkintheheatpumpindustry(seeChapter3).1.4IndustrialheatpumpsThereisconsiderablepotentialforelectricheatpumpstoprovideprocessheatforindustry.Becauseofthecomplexityofindustrialprocesses,heatpumpsgenerallyneedtobetailoredtospecificapplications.Incontrasttothoseusedinbuildings,industrialheatpumpstypicallyrelyonhigherinputtemperatures,astherequiredoutputtemperaturesarealsosignificantlyhigher.Today,industrialheatpumpsaremainlyusedforlow‐temperatureprocessesbelow100°C,notablyinthepaper,foodandchemicalsindustries(Table1.2).However,outputtemperaturesofupto150°Ccanalreadybeachievedifwasteheatofabout100°Cisavailableasinput.Fortemperaturesbetween150°Cand200°C,heatpumpsneedspecialrefrigerantsandcompressors,forwhichtechnologiesarestillinanearlyprototypestage.Table1.2⊳IndustrialheatpumptechnologyreadinessbytemperaturerangeTemperaturerangeTechnologyreadinesslevel(TRL)Exampleprocess<80°CTRL11:ProofofmarketstabilityPaper:De‐inkingFood:ConcentrationChemical:Bio‐reactions80°Cto100°CTRL10:Commercialandcompetitive,butlarge‐scaledeploymentnotyetachievedPaper:BleachingFood:PasteurisationChemical:Boiling100°Cto140°CTRL8‐9:First‐of‐a‐kindcommercialapplicationsinrelevantenvironmentPaper:DryingFood:EvaporationChemical:Concentration140°Cto160°CTRL6‐7:Pre‐commercialdemonstrationPaper:PulpboilingFood:DryingChemical:DistillationVariousindustries:Steamproduction160°Cto200°CTRL8‐9:First‐of‐a‐kindcommercialapplicationsforsmall‐scaleMVRsystemsandheattransformersTRL4‐5:EarlytolargeprototypeVariousindustries:High‐temperaturesteamproduction>200°CTRL4:EarlyprototypeVariousindustries:High‐temperatureprocessesReadinesslevel:TRL1to5TRL6to7TRL8to11Notes:MVR=mechanicalvapourrecompression.TRLscanvaryforspecificprocessesordifferentheatpumpcapacities.Sources:RepresentationusingtheIEAextendedTRLs(IEA,2020b)basedonMarufetal.(2022).IEA.CCBY4.4.Chapter1Outlookfordeployingheatpumps371Industrialheatpumpscanbeveryefficient,withaCOPofmorethanthree,whenthetemperaturelift,i.e.thedifferencebetweentheinputandoutputtemperatures,isinthe30‐50°Crange.Forhighertemperaturelifts,theCOPisgenerallylower,thoughaheatpumpcanbeconfiguredinawaythatlimitsthelossofefficiency,suchasbyincorporatingintermediateheatexchangersorcascadedcycles(wherebythepumpoperatesastwosingle‐stagecyclescoupledtogetherbyacascadeheatexchanger).However,thecostsofsuchheatpumpsystemsareusuallysignificantlyhigher.Thereisgrowinginterestintheuseofsteamwithmechanicalvapourrecompression(MVR)equipmentinasimilarwaytoheatpumps(thatis,usingelectricitytoupgradeheattoahighertemperature).Whenoperatinginaclosedloop,asinacommonheatpump,watercanactastherefrigerantinthecycle.Itsphysicalpropertiesallowittodeliverhighertargettemperaturesthanotherrefrigerantfluidswithoutconstraintsduetoenvironmentalorfirehazards.Inanopen‐cycleconfiguration,hightemperaturesteamcanbeproducedfromlowerpressuresteamorcondensate.Assteamisoneofthepreferredheatcarriersinindustry,thetechnologyiswell‐suitedtomeetindustrialheatingneeds.Publicfundingcanhelpacceleratethedevelopmentandcommercialisationofsolutions,whichcouldopenthewayfornewapplicationssuchassurfacetreatmentofmetalsintheautomotiveindustryordryingandwashinginthetextilessector.TheEUInnovationFundissupportingdemonstrationprojects,includingforindustrialapplications,whiletheHorizonEuropeprogrammeisfundingresearchandinnovationprojectsinthisfield.Attemperaturesabove200°C,directelectrificationofindustrialprocessesisgenerallypreferableoverheatpumpsatpresent(Madedduetal.,2020).Anumberofsuchtechnologiesarebeingdevelopedorarealreadyinuse.Forexample,BASF,SABICandLindehaverecentlystartedconstructionofapilot‐scalesteamcrackerthatuseselectricityinsteadoffossilfuelstoprovidethenecessaryreactionheatofaround850°Ctobreakthehydrocarbonfeedstockintovaluablebasematerialsforthechemicalindustry(BASF,2022).Nonetheless,innovationcouldleadtohigher‐temperatureheatpumpsbecomingviable.Hydrogencombustionisyetanotheroptiontoprovidelow‐emissionsheatforindustry.Whilethegreatestpotentialforhydrogenisinhigh‐temperatureapplicationswhereheatpumpscannotoperateanddirectelectrificationisdifficult,hydrogencouldtechnicallyalsoreplacenaturalgasinboilersforlower‐temperatureheatandsteam.However,comparedwithheatpumpsordirectelectrification,hydrogen‐basedheatsuffersfromlowoverallefficiencyduetolossesincurredintheproductionoflow‐emissionhydrogenviaelectrolysisandassociatedhighcost(fortechnologycostcomparisons,seeFigure1.18).Heatpumps,amongothercleanenergytechnologies,canplayanimportantroleindecarbonisingindustrialheatproduction,particularlyforlow‐temperatureprocessesandquicklyreducingfossilfueldemand.ProcessheatrequirementscontinuetoincreaseacrossalltemperaturerangesoverthisdecadeintheAPS,whiletheshareofheatdemandfromprocessesbelow200°Cremainsjustbelow40%(Figure1.16).IEA.CCBY4.4.38WorldEnergyOutlookSpecialReportFigure1.16⊳GlobalindustrialprocessheatdemandbytemperatureintheAPS,2021and2030IEA.CCBY4.0.Heatpumpscanplayanimportantroleindecarbonisingindustrialheatproduction,particularlyforlow-temperatureprocessesThepotentialforindustrialheatpumpsvariesbysector(Marinaetal.,2021).Inthepaperindustry,around65%ofprocessheatneedsacrossalltemperaturerangescan,inprinciple,bemetbyindustrialheatpumps,butsubstantialsystemchangesmayberequired.Inthefoodindustry,around40%ofallprocessescanbecoveredbyheatpumps,mainlywheretemperaturesofupto150°Careneeded,duetothelimitedavailabilityofhigh‐temperaturewasteheat.Whilearoundtwo‐thirdsofheatdemandbelowthisthresholdcouldbemetbyheatpumpsbasedoncurrentwasteheatavailability,thepotentialwouldbehigherifadditionalheatsourcesfromneighbouringindustrialfacilitiesweretappedorifprocessesweremodifiedtorunonlowertemperatures,forexamplebyemployinghotwaterinsteadofsteam.Inthechemicalindustry,wheremostprocessesrequireveryhightemperatures,heatpumpscancoveronlyaroundaquarterofprocessheatdemand.However,low‐temperatureprocessesinthatsectorbenefitfromsubstantialamountsofwasteheatfromotherprocessesonthesamesite.Ofthecombinedheatingneedsfromthesethreeindustries,around30%couldbeaddressedbytoday’sheatpumptechnologies.Naturalgasforlow‐temperatureheatingintheseindustriesconsumed60bcmgloballyin2021.InEuropealone,heatpumpswithacombinedcapacityof15GWcouldbeimplementedinalmost3000installationsacrossthesethreeindustrialsectors(Figure1.17).Thedesignandtechnicalspecificationsofindustrialheatpumpsoftendiffersubstantiallyfromresidentialones.Inadditiontothehigheroutputtemperaturesneeded,warmindustrialwastewaterorheatedairflowsaretypicallyavailableinindustrialfacilitiestoprovidetherequiredheatsourcestogeneratesufficientlyhightemperatures.However,20406080Below60°C60‐100°C100‐200°C200‐400°CAbove400°C20212030EJIEA.CCBY4.4.Chapter1Outlookfordeployingheatpumps391requirementsforrefrigerants4aredifferentastheyneedtoprovidehighertemperaturesandareemployedatlargerquantities,leadingtoincreasedchallengesintermsofenvironmentalorfirehazards.Inaddition,industrialheatpumpsoftenoperateathigherpressures,requiringthickerpiping,whilecompressorsneedtobeabletooperateathighertemperatures.Figure1.17⊳IndustrialgasandprocessheatdemandbytemperaturelevelandheatpumpreplacementpotentialinEurope,2019IEA.CCBY4.0.Thefoodandpaperindustriesareprimecandidatesfordeployingindustrialheatpumpsonalargescale,helpingtoreduceenergyuse,gasdemandandemissionsNotes:PJ=petajoules.Europe=EuropeanUnionandtheUnitedKingdom.Sources:IEAanalysisbasedonEuropeanCommission(2016)andMarinaetal.(2021).FeasibilitybasedonTRLsfromTable1.2.Switchingtoaheatpumpinanindustrialprocessrequiresspecialisedplanning,design,manufacturingandinstallation.Requirementscanvarybetweenfacilitiesrunningsimilarprocesseswithinthesameindustry.Industrialheatpumpsareoftendesignedforspecificprocessesandtemperatureconfigurations,limitingopportunitiestomassproduce,whichpushesupdesignandmanufacturingcosts.Therearealsodifferencesincostsandfeasibilitybetweeninstallingheatpumpsfornewprocessesandretrofittingexistingprocesseswithheatpumps,whichcanbemuchmorecomplex.Newprojectscanbenefitfromco‐operationwithheatpumpmanufacturerstoestablishstandardtemperaturesettingsforindustrialheatpumpsinspecificprocessesandindustrialsubsectors(e.g.inlettemperaturesandtemperatureliftranges),whichcanbringdowncostsbystreamliningequipment4Whileresidentialheatpumpsmainlyusehydrofluorocarbons(HFCs)suchasR134aorR32or,increasingly,hydrocarbons,suchaspropane,orcarbondioxide,industrialheatpumpsmostlyrelyonhydrofluoro‐olefins(HFOs),ammonia,isobutaneorcyclopentaneasrefrigerants.Watercanfurthermorebeusedasarefrigerantforhigh‐temperaturesteamprocesses.RefrigerantsarediscussedindetailinChapter2.FoodindustryPaperindustryChemicalindustry50010001500102030bcm>200°CHeatpumpnotfeasible≤200°CPartnotreplaceablebyheatpump≤200°CPartreplaceablebyheatpumpIndustrygasdemand(topaxis)Processheat(PJ)IEA.CCBY4.4.40WorldEnergyOutlookSpecialReportmanufacturingandinstallation.Someindustrieshavespecificoperationalrequirements.Forexample,refrigerantsusedinheatpumpsinthefoodindustryfacestricterrequirementsforcontactwiththeproductandmayneedanadditionalheatcycletoguaranteefoodsafety.Asinthebuildingssector,costsremainamajorbarriertotheadoptionofheatpumps.Thecostoftheequipment,installationandrelatedprocesschangesareoftenhighbutlessdecisiveinindustrythanoperatingcosts.Inaddition,currentelectricitymarketdesignsandtaxstructuresoftenfavournaturalgasoverelectricityuseinindustryinmanyjurisdictions.However,recentstronggaspriceincreasesthathaveexceededelectricitypricehikeshavestrengthenedthebusinesscaseforheatpumps.WhileincountriessuchasGermany,whereelectricitytaxesandlevieshavebeenrelativelyhighandgasboilersusedtobeonaveragemorecompetitivethanheatpumpsuntil2020(Figure1.18),risinggaspricesinlate2021madeheatpumpsmorefavourable,andcontinuedpricehikessinceRussia’sinvasionofUkraineareincreasingthateffect.Furthermore,thereformofelectricitypricinginGermanyin2022decreasedtaxesandleviessignificantly,enablingasustainedgrowthpathforindustrialheatpumps.InFinland,theenergycostenvironmenthadalreadybeenmorefavourableforheatpumpsinrecentyears,thankstoacutintheelectricitytaxforindustrytotheEUminimumlevelofEUR0.50permegawatt‐hour(MWh),aimingtodiscouragetheuseoffossilfuels.Figure1.18⊳AveragelevelisedcostofproductionofindustrialheatinGermanyandFinlandIEA.CCBY4.0.RecentgaspriceincreasesandtaxchangeshavemadeheatpumpsthecheapestsolutionforproducingindustrialheatinGermanyandFinlandNotes:Capitalcostisverylowrelativetotheoverallcost.Thebarissometimesnotdiscernibleinthefigure.OperatingcostincludesenergyanddistributionchargesandCO2pricesforgasboilers.Electrolyser‐H2boilercapitalcostincludesestimationsforon‐sitehydrogenproduction;Operatingcostconsiderselectricitypricesandthepower‐to‐heatefficiencyofhydrogen.GasboilerHeatpumpElectricboilerElectrolyser‐H₂boilerGasboilerHeatpumpElectricboilerElectrolyser‐H₂boiler50100150200250CapitalcostOperatingcostTaxesandlevies2016‐2020GermanyFinlandUSD/MWh501001502002502021USD/MWhIEA.CCBY4.4.Chapter1Outlookfordeployingheatpumps411Anumberofcountrieshaveintroducedpoliciestolowerupfrontcostandinformationbarrierstoindustrialheatpumps.InGermany,forexample,subsidiesinthefederalfundingprogrammeforenergyandresourceefficiencyincommercialenterprisescancoverupto55%oftheinitialcostoftheheatpumpuptoaceilingofEUR15millionperproject.OtherEuropeancountrieshaveimplementedsimilarschemesorprovidesupportforindustrialheatpumpsaspartofenergyefficiencyobligationschemes.InBrazil,thePotencializEEprogrammeofferstrainingforindustrialenergyefficiencyexpertstohelpfacilitiesidentifycleanandefficienttechnologiessuchasheatpumps.Additionalincentivesareneededtomakemorewasteheatavailableacrossfactoryboundaries.Thermalstoragecouldfurtherenabletheusageofalargerpartofwasteheat.Strongerindustrialefficiencytargetsandfundingforaudits,technologydevelopmentandthedeploymentoffirst‐of‐a‐kindcommercialunitsarekeytomaximisethepotentialforheatpumps.Lastly,arangeofindustrialheatingsystems,inparticularinemerginganddevelopingeconomies,canbefurtheroptimisedbyintegratingwasteheatevenwithouttheuseofadditionalenergyinputsandheatpumps.1.5HeatpumpsfordistrictheatingIndividualheatpumpsmaynotbethepreferredheatingoptioninbuildingsincertainsettings,suchasindenselypopulatedurbanareas,orinindustryduetotechnical,economicorotherconstraints.Inthesecases,ortoexploitexistingheatsourcesmoreefficiently,districtheatingcanbeaviablesolution.Largeheatpumpscanbeusedtoprovidedistrictheattobuildings,commercialpremisesandindustrialsites,byexpandingexistingnetworksorbydevelopingnewones.IntheEuropeanUnion,forexample,60millionpeoplearecurrentlysuppliedbydistrictheatand80millionmorepeopleliveincitiesthathaveanexistingnetwork(Euroheat&Power,2022).Thedecarbonisationpotentialofdistrictheatingislargelyuntappedatpresent,withfossilfuelsstillsupplyingaround90%ofdistrictheatgloballyandevenhighersharesinthetwolargestmarkets,ChinaandRussia.InEurope,whichaccountsfor20%ofglobaldistrictheatproduction,carbonintensityismorethanone‐thirdbelowtheglobalaverage,thoughrenewablesstillaccountforonlyaquarterofheatsupplyandheatpumpsforamere1%.FourEuropeancountries(Austria,Denmark,FinlandandSweden)currentlyhavetargetstodecarbonisetheirdistrictheatingnetworksbetween2030and2040andDenmarkissettoprovidenearlyathirdofthedistrictheatsupplywithheatpumpsby2030(Euroheat&Power,2022;Energistyrelsen,2022).Districtheatingsystemsusingheatpumpstorecovertheheatfromwastewaterhaveexistedsincethe1980s.Morerecentprojectsuseorplantousewasteheatfromdatacentres,metrotunnels,industrialfacilitiesorelectrolysers.HammarbyverketinStockholm,builtin1986,istheworld’slargestheatpumpdistrictheatingsystemandavitalpartofthecity’soverallheatnetwork(HPTTCP,2018).In2006,alarge‐scalecombinedheatingandcoolingplantwasalsobuiltunderneathKatriValaParkinHelsinki(HelenLtd,2020).ItuseswastewaterheatforIEA.CCBY4.4.42WorldEnergyOutlookSpecialReportdistrictheatingandhotwater,aswellascoolseawaterfordistrictcoolingsimultaneously.WastewaterheatrecyclingprojectshavebeensuccessfullyimplementedinotherEuropeancountriesaswellasinAustralia,Canada,China,JapanandtheUnitedStates.Otherheatpumptechnologiesfordistrictheatingnetworksareemerging.Anovellarge‐scaleheatpumptofeedwasteheatfromacoolingplantforofficesinBerlinintothecity’sdistrictheatingnetworkwasrecentlycompletedbySiemensEnergyandVattenfallWärmeBerlinAGandissettostartoperatingattheendof2022.Ithasathermalcapacityofupto8megawatts(MW)andcansupplyhotwatertoaround30000householdsinsummerandheatandhotwaterto3000householdsinwinter.TheEU‐fundedHEATLEAPprojectaimstodemonstratethebenefitsofwasteheatrecoveryfromenergy‐intensiveindustriesfordistrictheatingnetworkswithlargeheatpumpswithaCOPofuptoeight(HEATLEAP,2022).Thepotentialforexploitingwastewaterfordistrictheatingremainslargelyuntapped(WastewaterHeatOnline,2022).Warmwaterfrombathroomsandkitchenscarriesasubstantialamountofthermalenergythatcanbecapturedandrecycledbacktohouseholdsusinghigh‐temperatureheatpumpsanddistrictheatingnetworks.Arecentanalysisshowsthatalmost4000wastewatertreatmentplantsinEuropeareincloseproximitytoexistingnetworks(EuropeanCommission,2020).Theseplantscombinedcoulddeliver175TWhofheatperyear,equaltoaroundafifthofcurrentdistrictheatsuppliesinEurope.Usingwastewaternetworkheatmappingcanfurthermakeheatsourcesincitysewagesystemsavailable.Partnershipsandinnovativebusinessmodelsinvolvingprivateandpublicentities,suchasspecial‐purposevehicles,caneffectivelydrivenetworktransformation.However,districtheatingprojectstypicallyrelyonpublicfinancialsupport.InFrance,forexample,aheatfundofmorethanEUR500millionperyearhasprovedinstrumentalindrivingtheuptakeofcleandistrictheating.TheGermangovernmenthasrecentlylaunchedaEUR3billionfundingscheme,whichfollowsasystemicapproachbysupportingfeasibilitystudiesandtransformationplansaswellassubsidisingbothcapitalcostsandoperatingcostsofdecarboniseddistrictheatingnetworks(BMWK,2022).Thereisalsoacrucialroleforcitiesandcommunitiestoengageinheatplanningtoidentifysourcessuitabletoreplaceindividualfossilfuelheatingwithrenewableandwasteheatsources.Districtheatingzonepolicies,suchasthoseadoptedinEstonia,canallowcitiestomandatethatbuildingswithincertainareasconnecttodistrictheatingnetworksbeyondaspecifiedheatconsumptionthreshold.Around40%oftheheatgeneratedgloballyindistrictheatingplantsgoestotheindustrialsector,whichaffectsanetwork’sabilitytoreducedistributiontemperatures,asindustrialusersoftenrequirehigh‐temperatureheat.However,usingheatpumpstoincreasetemperaturesatlocalsubstationscanoffersolutionsinsomecases.Chinaleadsindustrialdistrictheatuse,accountingforabout55%oftheglobaltotalin2021,upfromaround35%in2010.Bycontrast,Russia’ssharefelltolessthan25%,downfrommorethan35%in2010.IEA.CCBY4.4.Chapter1Outlookfordeployingheatpumps431Box1.3⊳HeatpumpsfordistrictheatinginSarajevoThedistrictheatingsysteminSarajevo,thecapitalandlargestcityinBosniaandHerzegovina,usesnaturalgasorheavyfueloil,whilehomesnotservedbydistrictheatingareprimarilyheatedusingfirewoodorcoal.Asaconsequence,heatingisthemaincontributortothecity’spoorairquality,withoxidesofsulphurandnitrogenandparticulatematterregularlyexceedingsafelevelsduringwintermonths.Toreducethecity’srelianceonfossilfuels,theEuropeanBankforReconstructionandDevelopment(EBRD)isworkingwithcityauthoritiestointroducelarge‐scalecentralisedwater‐sourceheatpumps.Twoproposedprojectsarecurrentlyunderdiscussion.AEUR25millionprojectinvolvestheconstructionofan18MWheatpumpplantutilisingtreatedwastewateratanaverageyear‐roundtemperatureof10°Cfromanearbywastewatertreatmentplant.Thesecondproject,whichwouldcostaroundEUR21million,involvestheconstructionofa21MWheatpumpplantutilisingcitydrinkingwateratanaverageyear‐roundtemperatureof12°C.Theshareofheatpump‐basedgenerationinSarajevo’sdistrictheatingnetworkwillreachnearly40%ifbothprojectsareimplemented.Finalinvestmentdecisionsareexpectedtobemadeinthefirstquarterof2023.InadditiontoairqualityimprovementsandCO2emissionsreductionsofupto16kilotonnesperyear,theprojectswouldalsohelpaddressconcernsaboutthecostandsecurityofnaturalgassuppliestriggeredbythecurrentenergycrisis.Inthelongerterm,thereisevenmorepotentialforheatpump‐baseddistrictheatinginSarajevo.Asecondphaseprojectbasedonthefullheatingpotentialofthecity’swastewatercouldprovide18MWofadditionalcapacity.IEA.CCBY4.4.Chapter2Implicationsofacceleratedheatpumpdeployment45Chapter2ImplicationsofacceleratedheatpumpdeploymentFuelsswitchingitupTheglobalenergycrisisisdrivingarenewedfocusonenergysecurity.Electricheatpumpscanreducerelianceonimportedfossilfuels.ThedeploymentofheatpumpsintheAPSreducesglobalgasdemandinbuildingsby80bcmby2030comparedwith2021,withtheEuropeanUnionaccountingfor21bcm.Oilimportsforheatingarealsoreducedsignificantly,especiallyinJapanandKorea.However,newrisksemergeforensuringcriticalheatingservicesremainavailableinpoweroutages.Theaccelerateddeploymentofelectricheatpumpscontributestoarapidincreaseindemandforelectricity,especiallyinbuildings,intheAPS,withtheshareofelectricityinthefuelmixforheatinginbuildingsandindustrygloballydoublingover2021‐2030to16%andboostingtotalelectricityuseby24%.Meetingthisincreaseindemandwouldcallforasubstantialincreaseininvestmentinthepowersectorinupgradingcustomerconnections,distributiongrids,generatingcapacityandflexibility.HeatpumpsequippedwithsmarttechnologyplayanimportantroleinmorethandoublingEUdemand‐sideflexibilitybetween2021and2030,theirshareoftotalflexibilityresourcesjumpingfrom8%in2021toaround12%in2030.Onaverage,householdswithaheatpumpspendlessonenergythanthoseusingagasboilerandarelessvulnerabletopriceshocks,especiallyinsystemsthatrelymainlyonrenewables.In2021,householdsthatswitchedfromagasboilertoaheatpumpenjoyedsizeablesavingsontheirenergybills.Inlow‐incomehouseholds,thesesavingscanbeasubstantialshareofincome,between2‐6%inkeyheatingmarkets.Electricitytariffsandfueltaxesneedtobereformedtoensuretheydonotdeterconsumersfromoptingforaheatpump.SwitchingtoheatpumpshelpsreduceGHGemissionsandimproveairquality.IntheAPS,ityieldsa15‐40%reductioninemissionsofmajorairpollutantscausedbyheatinginbuildingsover2021‐30andreducesotherhazardsassociatedwithheatingbyfuelcombustion.Withtoday’srefrigerants,heatpumpsreducegreenhousegasemissionsbyatleast20%comparedwithagasboilerwhenrunningonemissions‐intensiveelectricity,andbyupto80%incountrieswithcleanerelectricity.ByswitchingawayfromF‐gasrefrigerants,thisrangeshiftsto30‐90%.RegulationsonF‐gasrefrigerants,whichhavelargeglobalwarmingpotentials,mustbalanceeffortstocontaintheiremissionswithcost,safety,energyefficiencyandsupplychainconsiderationstomaximisenetemissionsreductions.Globalemploymentinheatpumpsupplynearlytriplestoover1.3millionworkersover2021‐30intheAPS,withathirdofthenewjobsinChina,20%inEuropeand15%inNorthAmerica,whereinstallationandmanufacturingcapacityissettoexpandfastest.Mostnewjobsareininstallation.Thiscallsforamassivedrivetorecruitandtrainnewworkers.SUMMARYIEA.CCBY4.4.46WorldEnergyOutlookSpecialReport2.1IntroductionAcceleratingthedeploymentofheatpumpswouldhavefar‐reachingimplicationsfortheglobalenergysector,withimportantknock‐oneffectsforeconomicactivityandtheenvironment–beyondtheclimatebenefits.Itwouldreducetheuseoffossilfuelsforheating,limitingvulnerabilitytosupplydisruptions,helpingtoreducetheimportbillsofnetimportingcountriesandfreeingupfuelsforexportinthecaseofproducercountries.Butmoreheatpumpswouldraisedemandforelectricity,necessitatinggridupgradesandaneedformoreflexibilityinoperatingpowersystemstoensuresecurityofsupply,especiallyduringthewinter.Thehighupfrontcostofinstallingaheatpumpalsoaffectsenergyaffordabilityforpoorerhouseholds.Theimpactofswitchingtoheatpumpsontheenvironmentandhumanhealth,whileoverwhelminglypositiveinmostcases,isnotwithoutrisk:fluorinatedgases(F‐gases)usedintherefrigerationcyclesofmanymodelsarepotentgreenhousegases(GHGs).Correcthandlingcanreducetheirimpact,andsubstituterefrigerantscanreplacethem,thoughbothsolutionscarryadditionalcostsandchallenges.Andrampingupproductionofheatpumpswouldcreatenewopportunitiesforeconomicgrowthandjobcreation,thoughitwouldrequireworkerstobetrainedintheirmanufacture,installation,maintenanceandcertification.Thissectionexplorestheseimplicationsinturn,highlightingtheopportunitiesforpolicymakerstobalancedifferentpriorities.2.2EnergysecurityTheproductionofheatforbuildingsandindustryisdominatedtodaybyfossilfuels,manyofwhichareimported,leavingcountriesvulnerabletosupplydisruptions.Spaceandwaterheatinginbuildingsalonedirectlyaccountsforone‐fifthofglobalgasdemand,andmorethanone‐thirdofgasuseintheEuropeanUnion,makingheatingforbuildingsthelargestsingleuseofnaturalgasintheEuropeanUnion.Whentherolegasplaysinproducingelectricityanddistrictheatistakenintoaccount,theshareofheatinginbuildingsintheEuropeanUnionisevenbigger,atover40%.Heatingisalsothelargestend‐usesectorforgasintheUnitedStatesandseveralothercountries,mainlyinthenorthernhemisphere.Russia’sinvasionofUkrainehasbroughtfearsaboutenergysecuritytotheforeonceagain,particularlyinEurope,wheretheveryrealriskofgassupplyshortfallstoEuropeoverthewinterthreatentoleavemillionswithoutsufficientaccesstoheating,withobviousharmfulconsequencesforcomfortandhealth.Heatpumps,coupledwithbuildingenergyefficiencyimprovements,canreducerelianceonimportedfossilfuelsusedforheating.TheEuropeanUnion,JapanandKorearelyheavilyonimportedfuelstorunboilersinbuildings,aswellastogenerateelectricityanddistrictheatforheatingbuildings.In2021,over50%ofenergyuseforheatingintheEuropeanUnionrelieddirectlyorindirectlyonfuelimports,withgasmakingupthelargestsharebyfar.InJapanandKorea,importrelianceapproached90%,withoilandgasdominatingimports(Figure2.1).Chinaalsoreliesonfuelimportsforheatingbuildings,thoughtoalesserdegree.IntheAPS,importreliancedropsintheEuropeanUnionandtheothercountries,largelythankstotheimpactoftheinstallationofheatpumpsongasandoildemand.IEA.CCBY4.0.Chapter2Implicationsofacceleratedheatpumpdeployment472Figure2.1⊳Shareofheatinginbuildingsmetbyimportedfossilfuelsbyfuelinselectedregions/countriesintheAPSIEA.CCBY4.0.RelianceonfuelimportsdropssharplyintheEuropeanUnion,JapanandKoreaintheAPS,largelythankstotheimpactofheatpumpsongasandoildemandNote:fossilfuelsusedtogenerateelectricityusedforheatingandtoproduceheatfordistrictheatingareincluded.TheIEA10‐PointplantoreducetheEuropeanUnion’srelianceonRussiannaturalgas,releasedinMarch2022,highlightsmeasuresthatcouldcutgasdemandandalleviatepotentialshortages(IEA,2022a).CurbinggasuseforheatingiscentraltothisplanandtothePlayingMyPartinitiativedevelopedbytheIEAinco‐operationwiththeEuropeanCommission(IEA,2022b).Immediateactiontoaccelerateheatpumpdeploymentandphaseouttheinstallationofgasboilersarecriticalmeasures.IntheAPS,rampinguptheinstallationofheatpumpsreducesgasdemandinthebuildingssectorby80bcmgloballyby2030comparedwithtoday,including21bcmintheEuropeanUnion(Figure2.2).Switchingtoheatpumpsdoesnotcomewithoutotherenergysecurityconcerns.Increaseduseofelectricityforheatingincreasesexposuretopoweroutages,whichcanposeaseriouspublichealthconcernincoldclimates.Moreover,poweroutagesaremorelikelytooccurduringperiodsofinclementweatherwhentheneedforheatingismostacute.Nonetheless,prolongedmajorblackoutsarerareinmostcountrieswithheatingneeds.Backupheatingsolutionsoremergencyrendezvouspointswithincommunitiesthatrequireuninterruptibleheatingsupply,aswellasthewiderdeploymentofdistributedenergyresources,coupledwithbatteriesandthermalenergystorage,canhelpamelioratetheserisksbyreducingpressureonelectricitydistributionnetworksattimesofpeakheatingdemand.Hybridheatpumpscoupledwithfossilfuelboilerscouldalsoreducetheimpactofelectricityoutages,inparticularincoldclimates,thoughtheywouldhamperfulldecarbonisationofbuildings.20%40%60%80%100%202120302021203020212030OilCoalNaturalgasEuropeanUnionJapanandKoreaChinaIEA.CCBY4.0.48WorldEnergyOutlookSpecialReportFigure2.2⊳Reductioninnaturalgasdemandinbuildingsassociatedwithheatpumpdeploymentinselectedregions/countriesintheAPS,2021-30IEA.CCBY4.0.ThereductionsingasdemandbroughtaboutbygreaterdeploymentofheatpumpsintheAPSreducegasimportsinthenetimportingcountries,especiallyintheEU2.3ElectricitysystemsanddemandflexibilityTheaccelerateddeploymentofelectricheatpumpscontributestoamodestincreaseindemandforelectricity,especiallyinbuildings,intheAPS.Electricity'sshareintotalfinalenergyconsumptionworldwiderisesfrom20%in2021to24%by2030.Inadvancedeconomies,itjumpsfrom22%toover27%.Theshareofelectricityinthefuelmixforheatinginbuildingsandindustrygloballydoublesover2021‐2030to16%.Inmajorheatingregionsthisaddslittletoelectricitydemand,roughly1.5%‐2.5%over2021levelsby2030,however,peakdemandcouldgrowsubstantially.Thiscouldcallforasubstantialincreaseininvestmentinthepowersector.Forhouseholdsaddingaheatpump,thiscannearlytripletheirpeakdemandduringthewintertime.Howeverimprovingahome’sefficiencyratingbytwogrades(e.g.fromDtoBinDenmark)canhalftheheatingenergydemandandreducethesizeoftheheatpumpneeded,savingconsumersmoneyandreducingtheirpeakdemandbyonethird.Theseinvestmentswouldtakeseveralforms:Upgradingtheconnectiontotheconsumer,whotypicallybearsthecost.Inmanycases,installingaheatpumprequiresanincreaseincapacity,byupgradingtheconnection.Upgradinglow‐voltagedistributiongridsinareaswherethewidespreaduptakeofheatpumps,alongsideotherend‐usetechnologiessuchaselectricvehicles(EVs),significantlyboostsload.Addinggenerationcapacityorflexibilityresourcestoensureresourceadequacyduringtheheatingseason.Region‐specificassessmentsneedtobedonetodeterminetheadditionalflexiblegenerationcapacityrequiredtomeetincreaseddemandfromheat2%4%6%102030NorthAmericaEuropeanUnionChinaJapanandKoreaReductionbcmAsshareofnetgasimportsin2021(rightaxis)IEA.CCBY4.4.Chapter2Implicationsofacceleratedheatpumpdeployment492pumps.Forexample,RTE,theFrenchtransmissionsystemoperator,foundthatinascenariowhereenergyefficiencyretrofittargetswerehit,newcapacityneedsoutto2035wereunneeded.However,ifonlyminimalbuildingsefficiencyretrofitsweretooccur,RTEfoundthatnewcapacitywouldberequired.Investmentneedsrelatedtoconnectionstobuildingsvaryacrossregions.IntheUnitedStates,connectionsareoftenalreadysizedforairconditionersandcanusuallyaccommodatetheadditionofaheatpump.Bycontrast,inItaly,thetypicalhouseholdcurrentlysubscribestojust3kWofcapacitywithasingle‐phasemeterwithamaximumcapacityof6kW.Theinstallationofaheatpumpcouldeasilyresultinpeakdemandexceedingthislevel,requiringhouseholdstopayforanupgradedconnection.Thecostofupgradingcustomerconnectionsneedstobetakenintoconsiderationbypolicymakerswhendecidingonfinancialsupportforinstallingaheatpump.Theneedtoupgradedistributionsystemsalsovarieswidely.InFrance,electricresistanceheatingiscommonplace,andsocustomerconnectionsandthedistributiongridweredevelopedaccordingly.However,incountriessuchasGermany,whereheatinghastraditionallybeenprovidedmainlybyfossilfuelboilers,distributiongridshavegenerallynotbeenbuilttoaccommodatewidespreadelectricheatinginresidentialbuildings.Inregionswhereelectricheatingiscurrentlylimited,thedeploymentofheatpumpsalongsidetherapidadoptionofEVscouldincreasepeakdemandsubstantially,heighteningtheneedtoupgradedistributiongrids.Otherapproachestodistributionsystemmanagement,includingdeployingdistributedrenewablesalongsidebatteries,wouldamelioratetheneedtoupgradefeederlines.IntheAPS,globaldistributedsolarPVcapacitymorethantriplesbetween2021and2030.Theneedtophysicallyreinforcegridscanalsobereducedthroughloadmanagementonthedemandside(Box2.1).Digitalisationoflow‐voltagedistributionlinescanalsohelpmanagecongestionandincreasemonitoringandremotecontrolofgridassets,whichcouldreducethecostofupgradesbytargetingthematpointsonthegridwheretheyareneeded.Inparticular,thereplacementofoldertransformerswithnewonesincorporatingvoltageregulationtechnologiescanlowercosts.Box2.1⊳Usingdemand-sideflexibilityofheatpumpsforgridstabilityViessmann,aGermanheatpumpmanufacturer,andtheGermanelectricitytransmissionsystemoperators(TSOs),TenneTand50Hertz,recentlylaunchedapilotprojecttodemonstratethevalueofdemand‐sideflexibilitythatcanbeprovidedbyhydronicheatpumpsindealingwiththevariabilityofrenewableelectricitygenerationandensuringgridstability.ViessmannaggregatestheflexibilitypotentialoftheheatpumpsofcustomerswhohaveagreedtojointheschemeandofferstheresultingenergyvolumetothegridoperatorsviatheEquigycrowdbalancingplatform–adataexchangetoenableaggregatorsofsmallloadstoparticipateinelectricitybalancingmarkets–toreduceloadatpeakperiods.IfaTSOacceptsanofferforacertaingridnode,theheatoutputand,therefore,theelectricityuseoftheaggregatedheatpumpunitsisloweredbyturningIEA.CCBY4.4.50WorldEnergyOutlookSpecialReportthemoffordownatspecificperiods.Inordertomaintainindoortemperatures,heatisstoredinahotwaterbuffertank.Thethermalinertiaofthehydronicheatingsystemandthebuildingitself(especiallyifwell‐insulated)alsolimitstheimpactontemperaturesofswitchingofftheheatpump,whichusuallytakesseveralhours.Customersareremuneratedaccordingtotheircontributiontoloweringload.Thetargetofthepilotprojectistoinclude100heatpumps.Forfutureprojects,thefleetofunitswouldneedtobemuchbiggerforthemtodeliversignificantgridstabilisationservices.Barrierstowideradoptionwouldneedtoberemoved,notablycomplexcertificationstandardsandinadequateremunerationfordemand‐sideflexibilityfromresidentialconsumersinmarketsforsystembalancingandancillaryservices.Increaseduseofelectricityforheatingcancontributetomorepronouncedhourlyandseasonalvariationsinelectricitydemand,especiallyduringcoldsnaps,whichcanleadtomorepronouncedspikesindemand.Yetthereisconsiderablepotentialforheatpumpstobeusedflexiblysoastomitigatetheirimpactonoverallelectricitydemandduringpeakperiodsinthewinter.IntheAPS,heatpumpsaccountforaround15%ofresidentialelectricityconsumptionacrosstheEuropeanUnionduringthewinterin2030,andupto70%ofdemandforthosehouseholdsusingaheatpumpforspaceandwaterheating.HeatpumpsplayanimportantroleinmorethantriplingEUdemand‐sideflexibilitybetween2021and2030,withtheirshareoftotalflexibilityresourcesjumpingfrom9%in2021toaround12%in2030(Figure2.3).BuildingswithsolarPVwillhaveanaddedincentivetoshifttheirloads,tomaximiseself‐consumptionduringthedaytime.Unlockingthepotentialforheatpumpstocontributetosystemflexibilityrequirestheadoptionofdigitaltechnologies.Automationisneededtoharnessheatpumpflexibility,sothattheycanbeswitchedonandoffremotely.Thisflexibilityrequirescommunicationsandcontrolfeaturestobebuiltintounits.Minimumenergyperformancestandardscouldrequireappliancestoincludeabasiclevelofcontrollability.Mostheatpumpssoldtodayalreadyallowtoconnectacontroldevicetotheunit,thusenablingdemandresponsefeatures.However,manymanufacturersuseproprietarysystems,whichcanlimitinteroperability.Regulationsobligingmanufacturerstoensureheatpumpscanreceiveandsenddatatoenablenotonlymonitoring,butalsoremotecontrolofthedevices,couldbeafirststeptowardsthewidespreadadoptionofsmartcontrols.Buildingsalsoneedtobebetterconnectedandmoreautomatedtoreceivesignalsfromthegridaboutwhenflexibilityisneededandbettermanagetheirenergyconsumption(IEA,2021b).Thereisalsoaneedformarket‐basedincentivestoencouragetheownersofheatpumpstoofferflexibilityservicestothegrid,viaeitheralowerelectricitytarifforseparatepaymentsbythegridoperator.Changesinmarketdesigncanensurethatheatpumpflexibilityisadequatelyvaluedbyaggregatorsorsuppliers,andthatthevalueispassedontoconsumersintheformoflowerbills(IEA,2021a).Policymakerscanpromoteenergyprovidermodelsthatenablecontrollability,whileestablishingguardrailsforconsumerprivacyandchoice.IEA.CCBY4.4.Chapter2Implicationsofacceleratedheatpumpdeployment512Figure2.3⊳Demandresponsepotentialfromheatpumpsandotherbuildingelectricityusesattimesofhighestflexibilityneedsandshareintotaldemand-sideflexibilityintheEuropeanUnionintheAPSIEA.CCBY4.0.Heatpumpsemergeasamajordemand-sideflexibilityresourceintheAPS,withthethermalinertiaofbuildingsandheatingsystemsallowingelectricityusetobecutatpeakNote:Buildingsotherincludesrefrigerationandappliances.Tomaximisethepotentialofhydronicheatpumpstocontributetopowersystemflexibilitywithoutaffectingthermalcomfortforendusers,someadjustmentstoheatingsystems–includingthestorageofhotwaterortheinstallationofbackupnon‐electricmeansofheatingduringperiodswhentheheatpumpisswitchedoff–aswellasimprovementstothermalinsulationofbuildingsarealsoneeded.Inwell‐insulatedbuildings,switchingoffaheatpumpforseveralhourscanhavelittleimpactonindoortemperatures.ThebenefitsofmoreefficientbuildingenvelopesforsystemflexibilityaredemonstratedbytheworkoftheIEAEnergyinBuildingsandCommunitiesProgramme(IEA,2019).Yetmostbuildings,eveninadvancedeconomies,arepoorlyinsulated,limitingthepotentialforheatpumpstoplayaroleindemand‐sideflexibility.Forexample,inJapan,air‐to‐waterheatpumpsforresidentialbuildingsthatoptimisetheirusebyexploitingreal‐timeweatherforecaststogenerateaprofileofthelikelyavailabilityofrooftopsolarPVgenerationbecameavailableforpurchasein2022.Fornow,harnessingflexibilityfromheatpumpsremainsanichesolution,despiteanumberofpilotprojects(Table2.1).Hybridheatpumpsareanotheroptiontoincreaseflexibility.Forexample,theDutchgovernmenthasproposedmakinghybridheatpumpsthedefaultoptioninnewbuildingstohelpmanagegridcongestion(NetherlandsEnterpriseAgency,2022).5%10%15%20406020212030BuildingsotherHeatpumpsHeatpumpshareintotalGWdemandflexibility(rightaxis)IEA.CCBY4.4.52WorldEnergyOutlookSpecialReportTable2.1⊳PilotprojectsonexploitingtheflexibilitypotentialofheatpumpsCountryProjectnameDescriptionSwitzerlandGeneralizedOperationalFLEXibilityforIntegratingRenewablesintheDistributionGrid0‐5%peakdemandreduction5.5%increaseinself‐consumptionDenmarkEcoGridEU270householdswithheatpumpsprovidedupto167kWpeakshaving(five‐minutetimespan)UnitedKingdomCrowdflexTime‐of‐usetariffsapplicationreduceddailyeveningpeakbyanaverageof12%forhouseholdswithoutEVNetherlandsPower‐to‐HeatforRenewableEnergyIntegration:Technologies,ModelingApproaches,andFlexibilityPotentialsDuringtheflexibilityeventsofanhour,heatpumpsprovided2.5kWflexibilitycapacity2.4EnergyaffordabilityHigherenergypricesareamajorcauseofthebuild‐upofinflationarypressures,whicharedrivingdownhouseholdspendingpowerandlivingstandardsinmanypartsoftheworld.Householdsspentonaveragearound7%oftheirincomeonenergyin2021,aroundone‐halfofwhichisforenergyconsumedinsidethehouse.Inheatingregions,heatoftenrepresentsthemajorityoftotalhouseholdutilitybills.Thiscanbeevenhigherforpoorhouseholds,whichtypicallypayafarhighershareoftheirincomeonenergy,whilereceivingfewerenergyservices.Householdenergybillsaroundtheworldhaveincreasedsharply–insomecasesdoubling.Governmentsaroundtheworldhaverespondedtorisingpricesbyintroducingsupportmeasures,includingcapsonhouseholdenergybills(e.g.FranceandtheUnitedKingdom),directcashtransfers(e.g.Germany)andlong‐termsupplycontractssecuringgasdemand(e.g.ChinaandKorea).Intotal,governmentsworldwidehaveallocatedroughlyUSD550billiontocushionconsumersandbusinessesfromhighenergypricesasofSeptember2022,withmoreunderconsiderationatthetimeofpublication.Switchingtoheatpumpscanhelpreducehouseholdenergybills.In2021,householdsthatswitchedfromagasboilertoaheatpumpenjoyedsizeablesavingsontheirenergybills,rangingfromUSD180intheUnitedStatestoalmostUSD300inEuropeonaverage.Thesesavingsaremuchgreaterundertoday’spricespikes,rangingfromUSD300peryearintheUnitedStatestoUSD900inEurope.Thesavingsweregenerallybiggestinnetgas‐importingcountries,especiallyincountriessuchasChinawithlowresidentialelectricityprices.Asashareoftotalincome,thesavingswerebiggestforpoorhouseholds,rangingfrom2%to6%ofincome(Figure2.4).Despitethepotentialcostsavingsonofferfromswitchingtoaheatpump,manyconsumersarenotfinanciallyabletoreplacetheirexistingheatingsystem,especiallyduringthecurrentcrisis,duetothelargeupfrontinstallationcost.ReducingthiscostwillbekeytoscalingupIEA.CCBY4.4.Chapter2Implicationsofacceleratedheatpumpdeployment532thedeploymentofheatpumps(seeChapter3).Poorhouseholdsareleastabletofinancethiscostandmorelikelytochoosethecheapestreplacementoptionwhentheirheatingsystemneedstobereplaced,carryingtheriskoflockingthemintoexpensivegasheating.Inaddition,gasheatingcostscouldriseovertimeifinvestmentsinthegasnetworkareincreasinglyrecoveredbyadwindlingnumberofconsumersasthecleanenergytransitionprogresses.Somegovernmentsoffertargetedsubsidiesforenergyefficiencyretrofitsandheatpumpsforlesswell‐offhouseholdstoaddressthesebarriers.Atpresent,atotalof12countries,mostlyinEurope,havesuchpolicies,coveringroughlyone‐thirdofglobalheatingdemand.Figure2.4⊳Energybillsavingsforhouseholdsswitchingtoaheatpumpfromagasboilerinselectedregions/countries,2021IEA.CCBY4.0.Householdsswitchingfromagasboilertoaheatpumpenjoyedbigsavingsontheirenergybills,withpoorhouseholdssavingmostasshareoftheirtotalincomeNotes:Low=low‐incomehouseholds;Avg=average‐incomehouseholds.Savingsarebasedonoperatingcostsandexcludeupfrontcosts.Theanalysisisbasedonaverageelectricityandgaspricesacrossregions/countriesandanaveragehouseholddemandforspaceheatingandhotwaterinrepresentativecitiesinrespectiveregions/countries(Detroit,Stockholm,Seoul,Beijing).Poorhouseholdscouldseesmallersavingsandlongerpaybackperiodsfromswitchingtoaheatpumpthanricherones.Thisisbecausepoorerhouseholdstypicallyliveinsmallerunitsandusetheirheatinglessfrequentlytokeepthecostdown.However,poorerfamiliesalsotypicallyliveinlessefficienthousingunits,whichincreasesthepotentialsavingsandshortensthepaybackperiod;low‐incomehousingistypicallylessefficientthantheaveragehousingstock.Inanycase,poorhouseholdsgenerallyrequireupfrontfinancialsupporttobeabletobenefitfromretrofitsand/orswitchingtoheatpumps.Electricitytariffsandfueltaxesneedtobecarefullydesignedtoensuretheydonotdiscourageconsumersfrominstallingaheatpump(seeChapter3).Someelectricitytariffstodayaredesignedtopromoteenergyefficiencybycharginghigherratesoraddingcharges2%4%6%8%100200300400LowAvgLowAvgLowAvgLowAvgUSD(2021)SavingsShareofUnitedStatesEuropeKoreaChinahouseholdincome(rightaxis)IEA.CCBY4.4.54WorldEnergyOutlookSpecialReportforhouseholdsconsuminghigherlevelsofelectricitythantheaverage,butthiscanpenalisethosewhochoosetoswitchtoelectricheatpumps.SomeutilitiesofferspeciallymeteredelectricityorspecialratesforconsumerswithelectricheatingandEVs,toavoiddisincentivisingthesepurchases.Time‐of‐useratescanalsohelpreduceheatpumpoperatingcostscomparedwithflattariffs,ifcoupledwithsmartcontrolstooptimiseheating.Thisalsocontributestoimprovinggridreliabilityandflexibility.Bothenergytaxesandcarbonpricingschemesneedtobedesignedsoasnottopenaliselow‐emissionselectricityoverfossilfueluse.2.5Publichealthandenvironment2.5.1AirpollutionThewidespreadadoptionofheatpumptechnologycouldcontributetoimprovingairqualityandpublichealth.Spaceandwaterheatinginbuildingsbasedoncoal,oilandbiomasscontributestobothhouseholdandambientairpollution.In2021,over19000peoplediedprematurelyeverydayfrombreathingpollutedair,themajorityinemergingmarketanddevelopingeconomies(IEA,2022c).Figure2.5⊳EmissionsofmajorairpollutantsfromfuelcombustionforspaceandwaterheatinginbuildingsintheAPSIEA.CCBY4.0.TheelectrificationofspaceheatingandwaterheatingintheAPSunderpinsabigreductioninemissionsofallmajorairpollutantsfrombuildingsbetween2021and2030Sources:IIASA(2022)andIEA.Aroundone‐eighthoftheemissionsoffineparticulatematterairpollution(PM2.5)arecausedbycombustionactivitiesforspaceandwaterheatinginbuildings,mainlytheuseoffuelwoodandcoalinheatingstovesandboilers.Thoughalesssignificantcontributortooverallemissions,heatservicesinbuildingsalsocauseemissionsofnitrogenoxides(NOx),mainly5%10%15%123202120302021203020212030MtShareoftotalemissions(rightaxis)PM2.5SO2NOXIEA.CCBY4.4.Chapter2Implicationsofacceleratedheatpumpdeployment552fromgasboilers,andsulphurdioxide(SO2),mainlyfromtheuseofcoalinheatingstovesandboilersandoilinboilers.IntheAPS,emissionsofallmajorairpollutantsfromspaceandwaterheatinginbuildingsfallbetween2021and2030,by15‐40%,largelyduetothedeploymentofheatpumps(Figure2.5).Inaddition,alarge‐scaleswitchtoheatpumpscanpreventotherrisksassociatedwithfossilfuelcombustion.Forexample,poorlyservicedheatingstovesandgasboilerscanemitcarbonmonoxide,whichisestimatedtokillaround40000peopleeachyear,andtherearealsoassociatedhazardsduetoexplosionsandfirerisk(IHME,2022).2.5.2F‐gasesThereisapotentialcatchintheenvironmentalcaseforheatpumps.TheprincipalattractionofheatpumpsoverotherheatingtechnologiesistheirpotentialforreducingGHGemissions,especiallywhentheelectricityneededtopowerthemisgeneratedfromlow‐emissionsenergysources.However,themorewidespreaduseofheatpumpscarriestheriskofemissionsofF‐gases,usedasrefrigerantsintheheatpumpunit.Emissionsofthesegases,whicharepowerfulGHGs,threatentooffsetpartoftheclimatebenefitsfromswitchingawayfromfossilfuelsforheating.ThemaintypesofF‐gasesusedtodayinheatpumps,refrigeratorsandothercoolingdevicesareHFCs,whichaccountforover85%ofglobalF‐gasproduction(UNEP,2017).Theywerewidelyadoptedassubstitutesforozone‐depletingsubstancesthathavebeenmostlyphasedoutundertheMontrealProtocol–alandmarkmultilateralenvironmentalagreementonphasingoutchemicalsthatdamagethestratosphericozonelayeradoptedin1987.F‐gasesmakeupabout2.4%ofglobalGHGemissions(IPCC,2022).Emissionscouldgrowrapidlyinthecomingyearswiththeincreaseduptakeofheatpumpsandairconditionersifnofurtheractionistakentocontroltheiruse.IntergovernmentalPanelonClimateChange(IPCC)scenarioscompatiblewitha1.5°CriseinglobaltemperatureimplyreductionsinF‐gasemissionsofabout75%between2021and2030.Duetotheirshortatmosphericlifetimesandhighglobalwarmingpotential(GWP),1immediateactiontocutF‐gasemissionscouldhavearapidimpactonglobaltemperatureincreaseandavoidtechnologylock‐in.In2016,theKigaliAmendmenttotheMontrealProtocolcalledforaphase‐downofF‐gasproductionandconsumptionby80‐85%,tobereachedinadvancedeconomiesby2036andindevelopingandemergingeconomiesby2047totackletheclimateimpactsofF‐gasemissions.AsofOctober2022,partiesrepresentingover80%ofglobalGHGemissionshavesignedtheamendment.TheEuropeanUnionimplementsitsphase‐downpathmainlyusingtheF‐GasRegulation,forwhichtheEuropeanCommissionhaspresentedarevisionproposalinApril2022.ItproposesabanofrefrigerantswithGWPover150forallself‐containedandsmallersplitheatpumpandair‐conditioningsystems.1TheGWPmakesitpossibletocomparedifferentGHGsintermsoftheirclimateimpacts.ItisdefinedastheheatabsorbedbyagivenGHGexpressedasamultipleoftheheatthatwouldbeabsorbedbythesamemassofCO2.Toaccountfordifferentlifetimesofgasesintheatmosphere,themostcommonmetricisthe100‐yearGWP,whichcorrespondstotheheatabsorbedovera100‐yearperiodfromthetimeofemission.Unlessotherwisestated,thisreportusesthe100‐yearGWP.IEA.CCBY4.4.56WorldEnergyOutlookSpecialReportTable2.2⊳CommonrefrigerantsandalternativesforresidentialheatpumpsCategoryRefrigerantGWPFlammabilityTFAyieldConventionalHFCR‐410aR‐134a20881430Non‐flammable(A1)0%7‐20%Hydrocarbon(HC)R‐290(Propane)R‐1270(Propene)R‐600(Butane)R‐691(Pentane)≤3Higherflammability(A3)0%Lower‐GWPHFCR‐32675Lowerflammability(A2L)0%HFC/HFOblendR‐454B490Lowerflammability(A2L)30%HFOR‐1234yfR‐1234ze4<1Lowerflammability(A2L)100%<10%CO2R‐744(Carbondioxide)1Non‐flammable(A1)0%Notes:GWPvaluesoriginatefromtheIPCCFourthAssessmentReport(AR4).Theyhaveexpresseduncertaintiesofover30%.Thresholdvaluesinpolicyhavelargelybeenbasedonthatiteration.Inthemeantime,somevalueshavebeenupdatedinIPCCAR5andAR6.TheTFAyieldisthepercentageofemittedrefrigerantthatdecomposestotrifluoroaceticacid(TFA)intheatmosphere,anenvironmentalandhumanhealthhazardwithaverylonglifetime.Higherpercentagesaremoreharmful.Source:UBA(2021).F‐gasemissionsoccurduringproductionofthegases,manufacturingoftherefrigerationcycle(suchasinaheatpump)andleaksduringtheuseoftheproductanditsdecommissioning.Emissionsfromheatpumpscanbereducedbyregularmaintenanceandbyproperdecommissioningandrecyclingwhereappropriate(Daikin,2022).However,effectivesystemsforhandlingobsoletedevicesmaynotbeinplaceglobally.Currentin‐fieldbestpracticecouldreduceF‐gasemissionsfromheatpumpsworldwidebyone‐third,buttheseestimatesvarywidelybyregionandheatpumpmodel.Additionally,alternativerefrigerantscouldbeusedsuchasF‐gaseswithlowerGWPsaswellashydrocarbons,HFOsorCO2,whichhavemuchlowerGWPsbutcanbetechnicallycomplexormoreexpensive(Table2.2).Forexample,theuseofpropaneasarefrigerantisrestrictedunderEUbuildingregulationsduetoitshigherflammability.Whiletheinstallationofmonoblochydronicunits,wheretherefrigerantcycleisentirelylocatedoutdoors,getsaroundthisproblem,splitsystemsarealsoanimportantoptiontomakeheatpumpsusableinthemajorityofbuildings.ArevisedInternationalElectrotechnicalCommission(IEC)norm2wasreleasedinMay2022thatisintheprocessofformalharmonisationintheEuropeanUnion,butcanalreadybeadoptedbymanufacturersaccordingtoEUlegislation.Itallowsforchargesofflammablerefrigerantsufficientforsmallersplitsystemswithindoorrefrigerantcycleswhenthesystemmeetsadditionalsafetyrequirements.Forlargersystems,theproposedF‐gasregulationstillallowsHFCrefrigerantswithGWPbelow750.Toensuresafehandlingofflammablerefrigerantalsoduringinstallationanddecommissioningandtominimiseaccidentsworldwide,theUnitedNationsEnvironmentProgramme(UNEP)hassetupaRefrigerant2IEC‐60335‐2‐40onparticularrequirementsforelectricalheatpumps,airconditionersanddehumidifiers(IEC,2022).IEA.CCBY4.4.Chapter2Implicationsofacceleratedheatpumpdeployment572DrivingLicenseprogrammethatfacilitatesbestpracticeknowledgeexchangeandtrainingonsafehandlingofrefrigerantsbetweenadvancedeconomiesandemerginganddevelopingeconomies(UNEP,2018).Technologicalinnovationisneededtoreducerefrigerantloadsandtheirassociatedenvironmentalandsafetyrisks.Forexample,aresearchprojectinGermanyhassuccessfullytestedtheprototypeofaheatpumpwithonly10grammesofpropanerefrigerantperkilowattcapacityataCOPof4.7whereascurrentsystemscommonlyusesixtimesthatamount(FraunhoferISE,2022).SomemanufacturershavealsodevelopedalternativeHFCswithlowerGWPlevels,suchasHFCR‐32.HFOssuchasR‐1234yfandR‐1234zehavelowerflammability,arenotozonedepletingandhavesignificantlylowerGWPsbutcausepotentialenvironmentalandhumanhealthhazards.3CO2refrigerantsarenotflammableandhaveverylowtoxicityandaGWPofone(Patenaude,2015).However,theiruserequireshigheroperatingpressuresandmorepowerfulcompressors,whichincreasesthedemandforenergyandmaterialsinmakingandusingtheheatpump.Duetoitsphysicalproperties,CO2offersincreasedefficienciesinspecificuse‐caseswithhightemperaturedifferentialssuchaswaterheatersorcertainindustrialandcommercialapplications.Figure2.6⊳HeatpumprefrigerantGHGemissionsperMWhofusefulheatoutputandabatementcostbyrefrigerantoptionEA.CCBY4.0.Specialisedmaintenance,recyclingandtheuseofalternativerefrigerantscansubstantiallyreduceemissionsduetorefrigerantleakageNotes:kgCO2‐eq=kilogrammesofCO2equivalent.BaselinerefrigerantmixwithaGWPof2000.Source:IEAanalysisbasedonPurohitandHöglund‐Isaksson(2017).3HFOsareconsideredaper‐andpolyfluoroalkylsubstance(PFAS)duetotheirtransformationintoTFAintheatmosphere,anenvironmentalandhumanhealthhazardwithaverylonglifetime.PossiblefutureregulationonPFASmayprohibittheiruseintheEuropeanUnion(EuropeanChemicalsAgency,2022).510152050100150200USD(2021)/MWhkgCO₂‐eq/MWhEmissionsAbatementcost(topaxis)FullleakageGoodpracticeHydrocarbon‐refrigerantIEA.CCBY4.4.58WorldEnergyOutlookSpecialReportThehighestpotentialforcost‐effectiveGHGemissionsreductionsfromheatpumprefrigerantsliesinreplacingHFCswithhydrocarbons,butaddsthechallengeofflammability(Figure2.6).Between6%and40%ofthelifetimeCO2equivalentemissionsofanaverageresidentialheatpumpusingtheHFCR‐134aareassociatedwithrefrigerantleaks,dependingonthepowermix,theheatpumpperformanceandiftherefrigerantisrecoveredattheendoflife.Thissharewillriseaselectricityproductionisincreasinglydecarbonised.Withtoday’sF‐gasrefrigerantsandfullleakage,heatpumpsstillreducegreenhousegasemissionsbyatleast20%comparedwithahigh‐efficiencygasboiler,evenwhenrunningonemissions‐intensiveelectricity.Inregionsaccountingfor70%ofworldenergyconsumption,theemissionssavingsareabove45%andreach80%incountrieswithcleanerelectricitymixes.Thesevaluescanbeimprovedby10percentagepoints,respectively,withalternativerefrigerants.Thelargevariationismainlyduetodifferencesintheemissionsintensityofelectricitygenerationratherthanrefrigerantchoice.Figure2.7illustratesemissionssavingsinfourcountriesbasedontheirclimateconditionsandemissionsintensityofelectricityproduction.Figure2.7⊳GHGemissionsperMWhofusefulheatoutputforgasboilerandheatpumpdependingonrefrigerantoptionIEA.CCBY4.0.Switchingtoaheatpumpsubstantiallydecreasesemissionsregardlessofclimateconditionsandelectricitymix.AddressingF-gasemissionscanreduceemissionsfurther.Notes:tCO2‐eq=tonnesofCO2equivalent;HC=hydrocarbon.Emissionssavingsofaheatpumparecomparedwithagasboilerwith90%efficiencyandF‐gasemissionsforabaselinewithoutprofessionalrecyclingandabatementoptionsandarefrigerantmixwithGWP=2000.GHGemissionsincludegreenhousegasemissionsfromoperatinganddecommissioning.Electricityproductionemissionsfactors:Canada(119gCO2‐eq/kWh),Germany(352g/kWh),Japan(416g/kWh),China(549g/kWh).CanadaclimatebasedonOntario,JapanonCentralJapanandChinaonNorthernChina.Sources:IEAanalysisbasedonPurohitandHöglund‐Isaksson(2017);Purohitetal.(2022a);andKowalskiandSzałański(2019).0.51.01.52.02.53.0CanadaGermanyKoreaChinaGasboilerFullleakageGoodpracticeHC‐refrigeranttCO₂‐eqHeatpumpIEA.CCBY4.4.Chapter2Implicationsofacceleratedheatpumpdeployment592IfF‐gasrefrigerantscontinuetobeusedinthesameway,by2030intheNZEScenario,theglobalheatpumpstockwillbanknearly740MtCO2equivalentofgreenhousegasemissions–abouttwicethetotalannualgreenhousegasemissionsofAustralia.Eveniftoday'sbestpracticesinmaintenanceandrecyclingwereappliedworldwide,onlyone‐thirdoftheseemissionswouldbeprevented,makingithardertolimittheglobaltemperatureriseto1.5°C.Switchingtonon‐HFCrefrigerantsistechnicallypossible,butrisksimpedingthedeploymentofheatpumpsduetothetechnicalandcostimplications.Importantly,refrigerantscannotbesimplyswappedinexistingunits.WhilearangeofheatpumpmanufacturersdonotheavilyrelyonHFCsanymore,otherswillneedtochangetheproductionprocessandusedifferentcomponentsandmaterials.Workersinproductionandinstallationmayrequireadditionaltrainingforflammablematerial.Astableandambitiousregulatoryframeworkisthereforeimportanttogiveinvestmentcertainty.Intheshortterm,animportantfocusforpolicyactionshouldbetosetupstandardsforleakageproofingandenforcedrecyclingsystemstoavoidconventionalhigh‐GWPrefrigerantstobeemittedintotheairfromoldequipment.SinceF‐gasleakageoccursoverthedurationandattheendofequipmentlifetime,continueduseoftheserefrigerantsinnewappliancesmeansthatF‐gaseswillstillbeemittedbeyond2050(Purohitetal.,2022b).Policymakersneedtoensurethatmeasurestoacceleratethephase‐outofHFCsdonotholdbackstrengthenedheatpumpuptake,whoseclimatebenefitsfaroutweighthenegativeclimateeffectsofHFCleaks.ThisimpliesminimisingHFCuseforequipmentforwhichalternativeswithlowGWPareavailablewithoutsignificantlossesinefficiencyorothertechnicalqualities.2.6JobcreationArapidscaling‐upofthedeploymentofheatpumpswouldnecessitateacommensurateexpansionoftheworkforceinmanufacturingandinstallingthem,aswellasinmakingthevariousmaterialsandcomponentsneededfortheirassembly.Thisimpliesamassivedrivetorecruitandtrainworkers.In2019,around450000peopleworkdirectlyinmanufacturing,planningandinstallation,wholesale,servicing,andmaintenanceofheatpumpsglobally(Figure2.8).Installationisthemostlabour‐intensivepartoftheheatpumpsvaluechain,withanestimated210000workersemployed.Chinahasthemostinstallers,sincemuchofthebuildingstock,particularlyinthesouthofthecountry,reliesonheatpumpsforbothcoolinginthesummerandheatinginthewinter.Air‐to‐waterandground‐sourceheatpumpstypicallyrequiremoreworker‐hoursperinstallation,boostingthenumbersemployedinthesectorandtheneedtorecruitnewworkersasthemarketexpands.Manufacturing,servicingandmaintenancetogethermakeupabouthalfofdirectheatpumpjobs.Aswithinstallers,Chinahasthebiggestheatpumpmanufacturinglabourforce,numberingaround55000,consistentwithits45%shareofglobalheatpumpmanufacturing,followedbytheUnitedStates,wherearoundaquarterofheatpumpsareproduced.IEA.CCBY4.4.60WorldEnergyOutlookSpecialReportFigure2.8⊳Changeinheatpumpemploymentbyactivityandregion/countryintheAPS,2019-2030IEA.CCBY4.0.Heatpumpscreate800000newjobsby2030mainlyininstallationandmaintenance,callingforamajorrecruitmentandtrainingdriveNote:Otherincludeswholesaleandtransport.Globalemploymentinheatpumpsupplynearlytriplestoover1.3millionworkersto2030intheAPS.TheEuropeanworkforcenearlytriplesasmanufacturersandinstallersrespondtoambitioustargetsintheREPowerEUinitiativeandothernationalheatpumpdeploymentplans.Theprojectedgrowthoftheheatpumpworkforceworldwideisaccompaniedbyaround700000additionalworkersbuildingmoreenergy‐efficientbuildingsandcarryingoutretrofitsimprovingtheinsulationofbuildingenvelopes.IntegratedheatpumpsystemsalsostimulatethecreationofjobsininstallinghouseholdsolarPVpanelsandbatteries.ThegrowthinheatpumpemploymentintheAPSisconcentratedininstallation.Thenumberofheatpumpinstallersneededclimbsto850000intheAPS,anincreaseofnearly650000.ThegreatestgrowthindemandisinChinaandtherestoftheAsiaPacific.ThenumberofinstallersinEuropeincreasesthreefoldmainlythankstotherapidheatpumpuptakeintheEuropeanUnionandtheUnitedKingdom.Inaddition,around170000moreworkersareneededtomaintainandservicetheadditionalheatpumpsthatareinstalledworldwideby2030.Recruitingandtrainingalltheseworkersrepresentsaconsiderabletask.Therearealreadyconcernsintheindustryaboutwhetherallthesepositionscanbefilledgivencurrenttightlabourmarketsforoccupationsrelatedtoheating(seeChapter3).Thenumberofjobsinheatpumpmanufacturingincreasesmoreslowly,byaround40%globally,duetoimprovementsinlabourproductivityasnew,moreefficientfactoriescomeonline.Innovativesensorcontrolsandprogrammingcanstreamlinemanufacturingprocessesandincreasetheefficiencyofassemblylines,whilemodulardesignsand300600900120015002019ChangebyeconomicactivityChangebyregion2030ThousandemployeesManufacturingInstallationServicingandmaintenanceOtherEuropeNorthAmericaChinaRestofworldRegionsEconomicactivitiesIEA.CCBY4.4.Chapter2Implicationsofacceleratedheatpumpdeployment612standardisedcomponentscompatiblewithdifferenttypesofheatpumpsand3Dprintingcanreducemanufacturingtimesandlabourinputs(RHCandEHPA,2021).EmploymentinheatpumpmanufacturingisconcentratedinChina,NorthAmericaandEurope,wherethebulkofthemanufacturingcapacityistodayandwheremajormanufacturersdirectthemostinvestmentintocapacityexpansionsovertheperiodto2030.NewmanufacturingplantscomingonlineinEuropeandtheUnitedStatesreflectrecentpolicymovestoonshorecriticalpartsofsupplychains(seeChapter3).ManufacturingcoststherearesignificantlyhigherthaninAsia‐Pacific,wheremostheatpumpsandcomponentsaremadetoday,duetohigherlabourcosts,butcanbeloweredbyautomation.However,manymanufacturingactivities,suchaswelding,willremainlabour‐intensive.Theheatpumpindustryrequiresdifferenttypesofprofessionalsalongthevaluechainequippedwithdifferentskillsets.Manufacturingworkersneedtobeabletooperatemechanisedequipmentandperformmanualtaskssimilarlytojobsinmanufacturingofotherhomeandindustrialappliances,whileinstallationrequiresoneormorehighlyskilledheatingprofessionalswhocancalculateheatlosses,scalethesizeoftheheatpumpandcarryoutplumbingandelectricaltasks(seeChapter3).Manyoftheseskillsareinterchangeablewiththoseinsimilarjobsinthemanufacturingandheatingindustry,therebyofferinganalternativecareerpathtoworkersinthefossilfuelheatingindustry,suchasgasboilerinstallers,andmakingiteasiertorecruitnewworkers(subjecttolocalregulationsandrelatedmandatoryqualifications).Trainingwillbecriticaltoexpandingtheheatpumpworkforcearoundtheworld,particularlyforinstallers.Installationtrainingprogrammes,includingthoseproposedbyindustryassociationsandmanufacturers,needtocoverruralaswellasurbanareas.Aswiththeair‐conditioningindustry,theheatpumpmanufacturingandinstallationsectortodayisdominatedbymales.Effortstoimprovegenderbalancecouldbeintegratedwithtrainingandrecruitmentprogrammes.Heatpumpworkersalsogenerallyearnawagepremiumofaroundone‐quarterovertheaverageconstructionworker–thoughthisvariesconsiderablyacrosscountries.Buttrainingiscostly,whichcandiscouragenewapplicants.Decentremunerationforapprenticeshipsandpublicfundingofretrainingschemesareimportantleversforattractingworkersintothesector.Labourunionrepresentationcanhelptopromotebetterworkconditions,safetystandardsandfairwages.IntheUnitedStates,heatpumpsasapartoftheenergyefficiencysectorhaveahigher‐than‐averageunionisationrate(USDOE,2022).IEA.CCBY4.4.Chapter3Barriersandsolutions63Chapter3BarriersandsolutionsPumpingupthemarketAcceleratingthetake‐upofheatpumpshingesonovercominganumberofbarriers,chiefofwhicharetheupfrontcostofinstallations,othernon‐costdeterrentstoconsumeradoption,manufacturingconstraintsandpotentialshortagesofqualifiedinstallers.ConcertedactionbygovernmentsandtheheatpumpindustryisneededtoalleviatetheseconstraintsandhittheratesofdeploymentenvisionedintheAPS.Thehighupfrontcostofbuyingandinstallingaheatpumprelativetootherheatingoptionscandetermanyconsumers,eventhoughlowerrunningcostsmeanthattheycanbecost‐competitiveovertheirlifetime—evenwithoutsubsidiesinsomeregions.Thecostofinstallinganair‐to‐airheatpumpiscomparabletothatofagasboilerinmostmajorheatingmarketstodaythankstopolicysupport,thoughair‐to‐waterheatpumpscanstillbetwotofourtimesmoreexpensive.Financialsupportisavailableinmorethan30countries,withmanyofferingadditionalsupportforlow‐incomehouseholds(asinPoland)and/orhigh‐efficiencymodels(e.g.Canada).EnergytaxreformandevenlyapplyingCO2penaltiesacrosshouseholdheatingfuelsandelectricitycanlowerrunningcostsandmakeheatpumpsfinanciallyattractive.Anumberofnon‐costbarriers,suchascomplicatedapprovalprocesses,alackofinformation,andsplitincentivesforbuildingownersandtenants,aremajorreasonsforthelowconsumeradoptionofheatpumpstodayinmanycountries.Severalhavetakenactiontoeasepermittingprocedures(suchasintheCzechRepublic),create“one‐stopshops”forconsumers(e.g.Ireland),andencouragedalternativebusinessmodelstoaddressthesplitincentiveproblem,notablyinNorthAmerica,theUnitedKingdomandGermany,thoughstrongereffortsareneededeverywhere.LeadingmanufacturershaverecentlyannouncedplanstoinvestmorethanEUR4billioninexpandingheatpumpproductioncapacityandrelatedefforts,mostlyinEurope.However,supplychainbottlenecks,notablyaffectingchipsetsandcopper,areaddingtomanufacturingcostsandthreatentoholdbacktheexpansionofheatpumpproductioncapacity.Severalcountries,notablytheUnitedStates,arerespondingwithincentivestobuildupdomesticmanufacturingcapacity.Long‐termpolicyconsistencyandregulatorycertainty,togetherwithtargetedactiontostrengthensupplychains,areneededtoencouragefurtherinvestment.Shortagesofqualifiedinstallers,alreadyaprobleminmanykeyheatingmarkets,riskunderminingheatpumpdeployment.Demandforfull‐timeinstallersquadruplestoover850000in2030intheAPS.Incorporatingheatpumpsintoexistingcertificationsforplumbersandelectricalengineers,whohavesimilarskills,wouldhelpreducetrainingrequirements.Financialincentives,suchasthoseusedacrossEurope,canalsobeusedtoattractnewworkerstospecialisedtrainingprogrammes.SUMMARYIEA.CCBY4.4.64WorldEnergyOutlookSpecialReport3.1IntroductionAcceleratingthedeploymentofheatpumpstotheextentenvisionedintheAPShingesonovercominganumberofbarriers,someofwhichareuniversalwhileothersarespecifictoparticularcountriesorregions.Thischapterfocusesonthemainhurdlesforheatpumpsinbuildingsonboththedemandside–costandothermarkethurdlestocustomeradoptionofheatpumps–andthesupplyside–practicalconstraintsonexpandingmanufacturingandtheavailabilityofsufficientnumbersoftrainedinstallers.ThekeypolicyoptionstoaddressthesebarriersaresummarisedinTable3.1anddiscussedindetailthroughouttherestofthechapter.Supplychainbarriersupstreamoftheassemblyandinstallationofheatpumps,includingpotentialconstraintsonthesupplyofrawmaterials,equipmentandcomponentsneededformanufacturingheatpumps,arecoveredindetailintheforthcomingIEAreportEnergyTechnologyPerspectives2023,whichisduetobereleasedinJanuary2023.Table3.1⊳OverviewofkeybarrierstoacceleratingthedeploymentofheatpumpsandcorrespondingpolicysolutionsBarriersPolicysolutionsDemandsideCostbarriersUpfrontcosts:GrantsLow‐interestloansTaxrebatesGreenmortgagesAlternativebusinessmodelsRiskmitigationschemesformedium‐tolarge‐scaleprojectsOperatingcosts:Rebalancingelectricityandfossilfueltaxes,CO2taxwithcompensationElectricitytariffreformsSupportforbuildinginsulationandheatdistributionsystemupgradesQualityandsettingscontrolafterinstallationUsertrainingNon‐costhurdlestoconsumeradoptionOne‐stop‐shopplatformsforconsumersandcomparertoolsFacilitationandsupportofalternativebusinessmodelsforheatingtoaddresssplitincentivesRegulationchangesforoptics,noiseandbuildingpermissionsRevisionofdecision‐makingrulesinmulti‐ownerbuildingsMinimumenergyefficiencyrequirementsforrentedpropertiesoratpoint‐of‐saletransactionsPerformancelabelsforheatingtechnologiesInformationcampaignstowardsconsumersIndependentandfreeauditstoinformheatingsystemreplacementdecisionsIEA.CCBY4.4.Chapter3Barriersandsolutions653Table3.1⊳Overviewofkeybarrierstoacceleratingthedeploymentofheatpumpsandcorrespondingpolicysolutions(continued…)BarriersPolicysolutionsSupplysideManufacturingconstraintsandsupplychainvulnerabilitiesLong‐termcertaintyinpolicysupportandregulations,aswellasvisibilityintoforthcomingregulationchanges,includingindustryconsultationNationalheatpumpdeploymenttargetsandroadmapsIndustrialpolicyincludingfinancialsupporttomanufacturersSecuringofheatpumpcomponentsupplychainsShortagesofskilledinstallersIntegrationofheatpumpsinpre‐existingcertificationsforheating,ventilationandairconditioning(HVAC),construction,andelectricalprofessionsIncentivestoattractHVACprofessionalstogainadditionalcertificationsReinforcingmanufacturer‐runtrainingsandsimplifyinstallationprocessInternationallystandardisedcertificationschemeswithbroadcurriculaNationalheatpumpdeploymenttargetsandroadmapstobuildconfidenceandprovideprofessionalswithlong‐termemploymentprospectsDesigningandtailoringthesepolicystrategiestocontextspecificitiesrequiresreliabledata,whichareoftenlackinginpractice.Inparticular,thereisneedfordataonheatdemand,industrialprocessneedsandthesourcesofwasteheat,using,forexample,heatmappingtechniques,aswellasonthecharacteristicsofbuildingandheatingsystemstocks,marketdevelopment,installationandmaintenancecosts,andthereal‐worldperformanceofinstalledsystems.Governmentseverywhereneedtostepupeffortstoimprovedatagatheringtobetterinformbothpolicy‐makingprocessesandinvestmentdecisions.3.2CostbarriersTheoverallcost‐competitivenessofheatpumpsagainstotherheatingtechnologiesdependsonacombinationoffactors,includingtheinitialpurchaseprice,operatingandmaintenancecosts(includingthepriceoftheelectricityneededtorunthem),theirdurability,andfinancialincentivessuchasgrantsortaxcredits.Inmostmarkets,heatpumpsgenerallyentailhigherupfrontcoststhanconventionalfossilfuelheatingequipmentsuchasoilorgasboilers,evenwhenfinancialincentivesaretakenintoaccount,butbenefitfromlowerrunningcostsovertheirlifetimeduetotheirmuchhigherenergyefficiency.Theabilityofheatpumpstocompeteoncosttodayvariesmarkedlyacrosscountriesaccordingtodifferencesinallthesefactors.Basedonaverage2021equipmentpricesandfuelpricesprojectedintheAPS,anewheatpumptoheatanaveragehomeinacoldclimateischeaperthananaturalgascondensingboilerinmostofthemainheatingmarkets,oftenevenwithoutsubsidy(Figure3.1).InsomecountriessuchastheUnitedKingdom,however,subsidiesforheatpumpsarerequiredtomakethemcost‐competitive.Evenwherethecostofaheatpumpoveritslifetimeisalreadythecheapestheatingoption,financialincentives,includinggrantsandlow‐interestloans,maystillbeneededtoreducetheinitialcostburden,whichmaydeterthebuildingownerfrominstallingaheatpumpinthefirstplace.IEA.CCBY4.4.66WorldEnergyOutlookSpecialReportFigure3.1⊳Levelisedcostofheatingandcoolingofresidentialheatpumpsandalternativesinselectedcountries,2021IEA.CCBY4.0.Thankstoloweroperatingcosts,heatpumpscanbecompetitivewithgasboilersinsomeleadingheatingmarketstoday,evenwithoutsubsidyNotes:Air‐air=air‐to‐airheatpump;Air‐water=air‐to‐waterheatpump;Gas=gascondensingboiler;Elecheat=electricresistanceheater;AC=airconditioner.Thelevelisedcostofheatingandcoolingestimatestheaveragecostofproviding1MWhofheatingorcoolingoverthelifetimeoftheequipment,consideringthecapitalcostoftheequipmentandinstallation;operatingexpendituresincludethecostoffuelandregularmaintenance.Theanalysisassumesheatingandcoolingdegreedaysofonerepresentative,cityineachrepresentativecountry,thenusesaverageenergypricesinthatcountry.Forcoldclimates,weuseToronto,Seoul,Berlin,EdinburghandforrepresentativecitiesinmildclimatesweuseWashington,D.C.,Kyoto,Rome,Shanghai.MediummarketpricesfortheequipmentandprojectedfuelcostsundertheAPShavebeenused.Alifetimeof17yearsisassumedforgasboilers,15yearsforair‐to‐airand18yearsforair‐to‐waterheatpumps.Electricresistanceheatersandairconditionersareassumedtohavealifetimeof10years.3.2.1ReducingupfrontcostsReducingtheupfrontcostofpurchasingandinstallingheatpumpsiscriticaltoboostingtheirattractivenesstoconsumers,notablyhouseholds.Equipmentcostsvarysubstantiallydependingonthetechnologytype(air‐to‐air,air‐to‐waterorground‐source),ratedcapacity,manufacturingqualityandfunctionality,aswellasacrosscountriesandregions,partlyaccordingtothematurityofthemarket.Thelatterfactoralsoinfluencesinstallationandancillarycosts,suchaselectricalandpipingworkorstoragetanks,theneedforwhichvary50100150200Air‐airAir‐waterGasAir‐airAir‐waterGasAir‐airAir‐waterGasAir‐airAir‐waterGasCapitalexpendituresOperatingexpendituresLevelisedcostwithsubsidiesUSD(2021)/MWhKoreaUnitedKingdomGermanyCanadaUSD(2021)/MWhLevelisedcostofheatingincoldclimatesLevelisedcostofheatingandcoolinginmildclimates100200300400Air‐airElecheat+ACGas+ACAir‐airElecheat+ACGas+ACAir‐airElecheat+ACGas+ACAir‐airElecheat+ACGas+ACUnitedStatesJapanItalyChinaIEA.CCBY4.0.Chapter3Barriersandsolutions673widelydependingonthespecificconfigurationofeachinstallation.Differencesinthecostoflabourfurtherexplainupfrontcostvariationsacrosscountries.Inmostmarkets,theupfrontcostofaresidentialheatpump(includinginstallation)isgenerallymuchhigherthanthatofafossilfuelboiler,thoughtheextentofthecostgapvarieswidelywithinandacrosscountries,evenforthesametechnology(seeFigureA.1inAnnexA).Nonetheless,insomematuremarkets,suchasDenmarkandJapan,theleastexpensiveductlessair‐to‐airheatpumpmodelshavebecomecheaperthangasboilersfornewinstallationsinsmallhouses,inparticularthankstoreducedpipingworkandinstallationcosts(Figure3.2).Inthecaseofductlessair‐to‐airsystems,however,largerhouseholdswithmultipleheatingzonesrequiremorethanoneunit,whichgenerallymakesthemmoreexpensivethangasboilers.Hydronic(air‐to‐water)heatpumpsaremoreexpensivethanair‐to‐airheatpumps,andeventhecheapestmodelsremainmorecostlythangasboilersinallthemainmarkets,withtheexceptionofSweden,whoseearly‐onpoliciesenabledthewidespreadadoptionofheatpumpsbringinginstallationcostsdown.Ground‐sourceheatpumpsarethemostexpensivetechnologytypeinallcountries,duetotheearthworksordrillingneededtoinstalltheundergroundheatexchanger,whichcanrepresentmorethanhalfofthetotalpriceofthesystem(thoughtheirfargreaterdurabilityandefficiencymeanthattheycanbecompetitiveonalevelisedcostbasis).Installingareversibleheatpump,byeliminatingtheaddedcostofaseparateair‐conditioningunit,caneffectivelylowerthecostforheatingpurposesinclimateswithcoolingneedsduringpartoftheyear.Thehigherupfrontcostofheatpumpscomparedwithgasoroilboilersmeansthatsomehouseholdsaresimplyunabletoaffordthem,eventhoughtheirlifetimecostmaybemuchlower.Tohelpovercomethisbarrier,anumberofcountrieshaveintroducedsubsidiesonheatpumpstoencouragetheiruptake.Takingaccountoftheminimumsubsidiescurrentlyavailable,upfrontcostsforbothair‐to‐airandair‐to‐waterheatpumpsarebelowthoseforgasboilersinsomecountries,includingFranceandtheUnitedStates.Thecostadvantageforheatpumpscanbeevenlargerforlow‐incomehouseholdsthatareentitledtobiggersubsidies,suchasinPoland.Subsidiesarealsohigherinsomecountries,suchasCanada,forthemostefficientmodels,whicharegenerallymoreexpensive.Switchingtoaheatpumpinanexistinghousemayincuradditionalcosts,whichcanalsoconstituteabarriertochoosingthatoption.Olderhomesmayhavetoupgradetheirelectricalsystemtoaccommodateahigherpowerloaddependingonthecapacityoftheheatpump.Inaddition,existingradiatorsmayneedtobereplacedwithlargerones,orwithunderfloorheatingorforced‐airheatingsystems,inordertoallowheatpumpstooperateatlowertemperaturesandbenefitfromgreaterefficiency.1Theseupgradecostscanmakeupasmuchasathirdofthetotalcostofinstallingaheatpump.1Fossilfuelboilersgenerallyoperatewithoutputtemperaturesat60‐80°C.Whileheatpumpscanproduceheatabove55°Candpotentiallyupto70°C,theirperformancedeclinesastheiroutputtemperatureincreases.IEA.CCBY4.4.68WorldEnergyOutlookSpecialReportFigure3.2⊳Equipmentandinstallationcostofthecheapestmodelofmainresidentialheatingtechnologiesinselectedcountries,2022IEA.CCBY4.0.Air-to-airheatpumpscanbecheaperthangasboilersinsomemarkets,butsubsidiesremainkeytoincreasethecompetitivenessofair-to-waterandground-sourceunitsNotes:Costsincludethepriceoftheequipmentanditsinstallation.Subsidiesaccountfortheminimumlevelofnationalfinancialsupportofferedtohouseholdsthatqualifyforitineachcountry.ChinaandJapandonotoffersubsidiesatthenationallevel.Somecountries,suchasItaly,offersubsidiesthatcanexceedthepurchasepriceinsomecases.500010000150002000025000CondensinggasboilerAir‐to‐airheatpumpsAir‐to‐waterheatpumpsGround‐sourceSubsidyCostaftermaximumsubsidyUSD(2021)KoreaGermanyItalyChinaJapanCanadaPolandDenmarkFranceUnitedKingdomUnitedStatesSwedenIEA.CCBY4.4.Chapter3Barriersandsolutions693Table3.2⊳Coverageoffinancialsupportmechanismsforresidentialheatpumpsworldwide,2022TypeoffinancialsupportandkeyfeaturesNumberofcountriesShareofglobalresidentialspaceheatingGrants3070%Supporteligibleonlyforheatpumps…Primarilyusedforheatproduction2747%Installedinolderdwellings2028%Runningfullyonelectricity(hybridsexcluded)1611%Replacingfossilfuelheatingsystems1234%Installedinthemainresidence1215%Baseamountset…Asshareofexpensesandcappedbymaximumamount1639%Dependingonheatpumptechnology1016%Dependingonotherfactors63%Additionalsupportfor…Moreefficienttechnologies1829%Lower‐incomehouseholds1234%Heatpumpsinstalledinhousesratherthanappartments42%Heatpumpsinstalledindisadvantagedareas(e.g.nodistrictheating)42%Heatpumpsreplacingafossilfuelheatingsystem37%Incometaxrebate933%Supporteligibleonlyforheatpumps…Installedinolderdwellings512%Installedinthemainresidence36%Baseamountset…Asshareofpurchase/installationpriceandcappedbyamaximum730%Equaltothepurchaseprice22%Higherthanthepurchase/installationpricedependingonefficiency/energysavings13%Additionalsupportfor…Heatpumpsreplacingafossilfuelheatingsystem1<1%VATrebate512%VATrate…Reducedforthepurchaseand/orinstallationofaheatpump512%Equaltozeroforthepurchaseand/orinstallationofaheatpump14%Low‐interestloans2429%Loanswith…Lowinterestandconditionsonamountandmaturity2018%Zerointerestandconditionsonamountandmaturity713%Note:Analysisbasedonnational‐levelpoliciesexceptforJapanandChina,whereonlysubnationalschemesexistbutcoverasubstantialshareofnationalspaceheatingdemand.IEA.CCBY4.4.70WorldEnergyOutlookSpecialReportThereisawiderangeanddiversityoffinancialincentiveschemesavailableacrossthemainheatingcountries,reflectingdifferencesinpoliticalwill,nationalpolicystrategyandlocalfactors(Table3.2).Inmanycountries,financialsupportforheatpumpinstallationsisavailableonlyifexistingfossilfuelboilersarescrapped.Thosecountriescollectivelyaccountformorethanathirdofglobalheatingdemand.Grantsarethemostcommonlyusedpolicytoolandarecurrentlyavailablein30countries,togetherrepresenting70%ofglobalspaceheatingdemand.Insomecountries,grantscovermostifnotallthecostofpurchasingandinstallingaheatpumpforlow‐incomehouseholds.Somecountries,includingFranceandtheUnitedKingdom,havereducedorcompletelyremovedVATonalternativestogasboilers.Incometaxcreditsareusedinsomecountries.Forinstance,Italy’sSuperbonusschemeprovidesataxcreditworthupto110%ofthecostofasubstantialbuildingretrofitthatcanincludeheatpumps.However,incontrasttodirectgrantsandsubsidies,taxcreditsonlyreachconsumerswithadelay,oftentwoyears,butashighasfive.Low‐orno‐interestloans,greenmortgagesandspecificloanrepaymentschemes(e.g.pay‐as‐youconsume)arewidelyavailableinmanycountries.Inthecaseofmedium‐andlarge‐scaleground‐sourceheatpumpprojects,schemestolimitthefinancialrisksassociatedwithdrillingareusedinsomecountries,notablyFrance(Georisk,2021).Itcanbedauntingforconsumerstoobtaininformationabouttheireligibilityforthevarioustypesoffinancialsupportonofferandhowtoapplyforthem,sosomecountrieshavesetup“one‐stopshops”tofacilitatethis;ElectricIrelandSuperhomesisbutoneexample.Otherpolicyapproachescanalsohelplowertheinitialcostofpurchasingandinstallingaheatpump.Therightregulatoryenvironmentcanenabletheemergenceofnewbusinessandfinancingmodelsthatalleviatethefinancialburdenonconsumersbyreducingoreliminatingtheupfrontcostbornebytheconsumer,andinsteadallowthemtopaybackthesecostsalongwiththeirusage,forinstancethroughrentalorheat‐as‐a‐servicemodels(seethenextsection).Whererelevant,regulatorsshouldremoveotherupfrontbarriersthatimpedeadoption,suchasgasnetworkdisconnectioncharges.Thecostofbuyingandinstallingaheatpumpisexpectedtodeclinegraduallyinrealtermsovertherestofthecurrentdecade,asmarketsexpandandsuppliersbenefitfromeconomiesofscale.Thelargestcostcomponentsinmanufacturingaheatpumparethecompressor,heatexchangerandelectronics,whichtogethermakeuparoundtwo‐thirdsthecostofanairsourceheatpump(USDOE,2016).Thereisconsiderablepotentialforreducingproductioncoststhroughlarge‐scaleautomation,thoughstrongandstablepolicysignalsareneededformanufacturerstocommittothesubstantialinvestmentsrequiredtoexpandoutputcapacity.Industry‐widemeasurescouldhelpspurfasterdeclines,suchasstandardisingpartsandqualitycontroltesting,whichcouldlowerthecostofcomponents,installation,andrepairandmaintenance.Manufacturerscanalsodevelopplug‐and‐playdesignstomakeinstallationfaster,easierandcheaper.Targetingserialinstallationsacrosssimilarbuildingsinthesameneighbourhood–drawingforinstanceontheDutch‐originatedEnergiesprongapproachtoenergyefficiencyretrofitstobuildings–canhelpmutualiselogisticalcostsIEA.CCBY4.4.Chapter3Barriersandsolutions713(Energiesprong,2021).Inthemorematuremarkets,growingcompetitionamonginstallersisalsoexpectedtoputdownwardpressureoncosts.Overall,totalupfrontcostsforheatpumpscouldpotentiallydeclinebyone‐fifthinmostmarketsduringthisdecade,andupto40%insomecountriessuchasGermany(HeptonstallandWinskel,forthcoming;AgoraEnergiwende,2022).However,theoutlookforcostsremainshighlyuncertain,becauseoftheimpactofotherfactorsthatcouldworkagainstthetrendsdescribedabove,suchasthetighteningofregulationsontheenergyperformanceofheatpumpsandthetypesofrefrigerantspermitted,aswellashigherretrofitcosts,asheatpumpsareprogressivelydeployedinexistingbuildingsthatrequiredeepenergyretrofits.Box3.1⊳EBRDfinancingforheatpumpsTheEuropeanBankforReconstructionandDevelopment(EBRD)supportstherapiddeploymentofheatpumpsasameansofdecarbonisingheatingsystems.ThroughtheGreenEconomyFinancingFacility,theEBRDworkswithanetworkofover170localfinancialinstitutionsand2300technologyproviderstosupportbusinessesandhomeownerswishingtoinvestingreentechnologies.IthasalreadydirectlyinvestedoverEUR80millioninarangeofprojects,particularlyinEastandSouth‐EastEurope,enablingtheinstallationof30000heatpumps.Inaddition,loanfundshavesupportedthedeploymentofheatpumpsaspartofenergyefficiency‐focusedbuildingretrofitprogrammesinPolandandRomania.Tosupportheatpumpdeployment,theEBRDreliesonfourmainlevers:Supportinganalysesonheatpumpstooptimisethescale‐upofthetechnologyinspecificmarkets.Workingwithgovernmentstoremovebarrierstoheatpumpdeploymentandassistingtheminthecreationofminimumperformancestandards.Supportingmunicipalinfrastructureclientstoinstallindustrial‐scaleheatpumpsfordistrictheating–especiallyinthewesternBalkans–aswellasbuilding‐scaleheatpumpsaspartofbothdeepenergyretrofitsandnewbuildingprojects.Strengtheninggreeneconomyfinancethroughthebankingsector.3.2.2ReducingoperatingcostsHeatpumprunningcostswerealreadylowerthanthoseofgasboilersinthemainheatingmarketsbeforethecurrentenergycrisis(Figure3.3).InEurope,thisadvantagehasgrowninrecentmonths,savingtheaverageEuropeanhouseholdoverUSD900annually.Thisisbecausehouseholds’tariffsforelectricitygenerallyincreasedlessthanthoseforgas,partlyduetogovernmentinterventionstodampenpriceincreases.IEA.CCBY4.4.72WorldEnergyOutlookSpecialReportFigure3.3⊳Energybillsavingsforhouseholdsswitchingtoaheatpumpfromagasboilerinselectedregions/countries,2021and2022IEA.CCBY4.0.SoaringgaspriceshaveboostedthecostadvantageofrunningaheatpumpoveragasboilerinmostcountriesNote:Savingsinenergybillsin2022takeaccountofpolicyinterventionsuptoSeptember2022tolimitpricerises,includingreductionsinVAT,directsubsidies,andcapsonincreasesinelectricityandgasprices.Theanalysisisbasedonaverageelectricityandgaspricesacrossregions/countriesandanaveragehouseholddemandforspaceheatingandhotwaterinrepresentativecitiesinrespectiveregions/countries(Detroit,Stockholm,Seoul,Niigata).Source:IEAanalysisbasedonEnergie‐ControlAustria,MEKHandVaasaETT(2022).Thereremainsconsiderablescopeforreformingfueltaxesinsomecountries,wheregasstillbenefitsfrommorefavourabletaxationthanelectricity.Othershavetakenstepstorebalancetaxes.Forinstance,ataxreformintheNetherlandsreducedtaxratesonelectricity,whiletaxesforgasusewereincreased,makingheatpumpsevencheapertorunthangasboilers.Abanongasconnectionstonewbuildingswasintroducedin2018,whichhasalreadyledtoanincreaseindemandforheatpumps(RAP,2022a).InDenmark,wheretaxesmadeupmorethanhalfoftheresidentialelectricitypricein2021,homeownersandtenantspayalowerrateoftaxofjust0.1eurocentsperkilowatt‐hourofelectricityiftheirhomeisheatedbyaheatpump(IEA,2021).Carbonpricingcanalsohelpleveltheplayingfieldbetweenfossilfuelandlow‐carbontechnologies,andcansignificantlyimprovethecompetitivenessofheatpumps,inparticularinregionswithlow‐emissionselectricitygeneration.Today,morethan20countriesworldwideputapriceonCO2emissionsinthebuildingssector(WorldBank,2022).InSweden,theintroductionofacarbontaxin1991andsubsequentsteadyincreasesinthetaxratehavedrivenalarge‐scaleswitchfromoilboilerstoheatpumps.TheSwedishcarbonpricereachedEUR118pertonneofCO2in2022–oneofthehighestintheworld.Asa200400600800100020212022202120222021202220212022USD(2021)UnitedStatesEuropeKoreaJapanIEA.CCBY4.4.Chapter3Barriersandsolutions733consequence,oilboilershavelargelybeenphasedout,withheatpumpsnowaccountingformorethan90%ofheatingsystemsalestoday.Inallcases,energytaxationandcarbonpricingpoliciesneedtotakeaccountofdistributionalimpacts.Compensatorymeasurestoprotectthemostvulnerablepopulationsmaybeneeded,whichcanbefinancedbytheadditionalrevenuesgeneratedbyhigherfueland/orcarbontaxes.Thatrevenuecanalsobeusedtosubsidiseheatpumpsandothercleanenergytechnologies.Electricitytariffscanalsobedesignedinawaythatreducestherunningcostsofheatpumps.Thethermalinertiaofbuildingsandhotwatertanksoffersconsiderablepotentialforheatpumpstobeoperatedflexibly,allowingthemtoconsumepoweratoff‐peaktimesoftheday.Thisflexibilityneedstobevaluedthroughtime‐of‐useanddynamicelectricitytariffsandautomatedoperation.Forexample,ElectricIrelandoffersanightratethatisaroundhalfthepriceofthedayrate,allowingheatpumpownerstoprogrammetheirdevicestooperateespeciallyatnight(ElectricIreland,2022).Integratedmetering,communicationandactivecontrolfeaturescanenhancethedemand‐responsepotentialofheatpumpsandminimiseoperatingcosts.Thiscanalsohelptobalancetheoverallelectricitysystemandreducetheimpactofthelarge‐scaledeploymentofheatpumpsonpeakdemand.FlexibleoperationcanalsoenablethecouplingofheatpumpswithrooftopsolarPV,whichcanfurtherreduceoperatingcosts,thoughitdoesentailsignificantupfrontcosts.Improvedenergyefficiencycanalsolowerrunningcosts.Well‐insulatedbuildingsandefficientheatpumps,whichcanbeencouragedthroughminimumenergyperformancestandardsandlabelling,areessentialtoreducethecapacityofheatpumpsneededtowarmagivenamountofspaceandvolumeofwater,therebycuttingthecostofoperatingaswellasinstallingthem.Thisalsoallowsforlowerflowtemperatures,enablingheatpumpstooperatemoreefficientlyandcheaply.InDenmark,electricityconsumptionbyheatpumpshasbeenfoundtobeupto30timeslowerinhomeswiththehighestefficiencyratingcomparedwiththelowestefficiencyrating(Figure3.4).Improvingahome’sefficiencyratingbytwogrades(e.g.fromDtoB)canhalftheheatingenergydemand,savingconsumersmoney.TheIEAEnergyEfficiencyMarketReport2022discussesthenexusofinsulationandheatpumpsinmoredetail(IEA,2022a).Therunningcostsofaheatpumparealsoaffectedbyhowwellitisoperatedandmaintained.Itisessentialthattheownerofaheatpumpisinformedaboutcorrecthandlingandtheneedforthoroughmaintenancebyqualifiedtechnicianssothattheyoperateefficientlyandatoptimalcostthroughouttheirlifetime.Air‐sourceheatpumpscanbecomecloggedwithdirtovertime,leadingtoincreasedelectricityconsumptionandprematurewearingoftheunit,aswellasnoisieroperation.Refrigerantsalsotendtoleakoutovertime,whichreducesefficiency,aswellascontributingtoclimatechange(seeChapter2).Refrigerantleakagewarningsystemsarecurrentlycommerciallyavailableforlargeheatpumps;aroll‐outtoresidentialsystemscouldhelpusersidentifythereasonforlossinperformanceandavoidtheemissionofrefrigerantgas.IEA.CCBY4.4.74WorldEnergyOutlookSpecialReportFigure3.4⊳AnnualheatpumpelectricityconsumptionbybuildingenergyefficiencyclassinDenmark,2022IEA.CCBY4.0.ElectricityconsumptionbyheatpumpsinDenmarkisupto30timeslowerinhomeswiththehighestefficiencyratingcomparedwiththelowestefficiencyratingNotes:m2=squaremetre.TheabsolutevaluesarebasedontheDanishbuildingclassification.Thresholdvaluesforclassesdependonlocalclimateconditions.ClassA2015ispresentedasA,ClassA2020ispresentedasA+.Theelectricityconsumptionreferstoa100m²floorarea.Source:IEArepresentationbasedonDanishEnergyAgency(2022).3.3Non‐costhurdlestoconsumeradoptionInadditiontocost,therearearangeofotherhurdlestotheadoptionbyconsumersofheatpumps,notablyrestrictionsrelatingtoheatpumpinstallation,alackofinformationaboutthebenefitsofheatpumps,andsplitincentivesbetweenbuildingownersandtenants.Whilethesebarriersarelessconcreteinnaturethancosts,theycontributesignificantlytothereticenceofmanyconsumerstooptforaheatpumpoverotherheatingsystems.Afailuretotakeactiontoaddressthemcoulddeterlargenumbersofconsumersandholdbackdeploymentofthetechnology.Manycountrieshavedevelopedprogrammestoaddresssomeofthebarriers.Furthereffortsareneededtostrengthenthemandapplythemmorewidely.3.3.1RestrictionsonnewinstallationsTheinstallationofaheatpumpissubjecttoanumberofrestrictions,approvalsandpracticalconstraintsinmostcountries.Installationsmustusuallyadheretobuilding,firesafety,land‐useandelectricalcodesandregulations.Theymayalsorequiretheapprovalfromhomeownersorbuildingsassociations,whichmaybeconcernedaboutaestheticsandnoise,aswellasfromthelocalauthorityunderplanningrules.Smallerhouseholds,notablyinA+ABCDEFG024681012Electricityconsumption(MWh/100m²)Heatingrequirement(kWh/m²)IEA.CCBY4.4.Chapter3Barriersandsolutions753multifamilybuildings,maynothavetheexternalspaceneededtoinstallaheatpump(thoughcentralisedheatpumpsolutionsexist[IEA,2022b]),andtheremaybeproblemsattachingtheexternalcompressorunittothebuildingfacade.Obtainingapprovalsanddesigningsystemstoavoidpracticalconstraintscanbetime‐consumingandcostly,leadingsomeconsumerstochangetheirmindduringtheprocess.Forwater‐sourceheatpumpsutilisingwasteheatfromsewagewaterindistrictheatingorcommercialapplications,regulationsmayprohibitthereroutingofwastewaterfromsewagepipespasttheheatexchanger.Somecountrieshaveeasedpermittingproceduresforheatpumpsinordertoencouragetheirdeployment.IntheCzechRepublic,forexample,outdoorresidentialheatpumpswithacapacityofupto20kWarenowexemptfromapplyingforbuildingpermits.TheEuropeanCommissionhasrecentlyproposedtoimposeshorterdeadlinesforthepermit‐grantingprocessforheatpumpsacrosstheEuropeanUnion(EuropeanCommission,2022).Manycountriesalsodonotrequireplanningpermissionforsmallheatpumps.Somecountrieshaverelaxedapprovalproceduresformulti‐ownerbuildingsbyrequiringonlysimplemajoritiesforinstallingheatpumpsandothercleantechnologies.Forground‐sourceheatpumps,whichmayfacerestrictionsonboringdepthunderdrillingregulations,somegovernmentshaveincreasedpermitteddepthstoenablemoreinstallations.Geothermalmapsthatidentifyandclassifyareasaccordingtogeothermalheatavailabilityandregulatoryrequirementscanhelpstreamlinepermittingandlicensingproceduresforgeothermalheatpumpprojects(BRGM,2022).Butmanyotherrestrictionsremaininmostjurisdictions.Acomprehensivereviewofallregulations,codesandapprovalprocessesapplicabletoheatpumpsisneededtoidentifyredundantoronerousrestrictionsthatdonotmateriallyimprovehealth,safety,liveabilityorotheroutcomes.Thisprocesscanbecomplex,involvingalargenumberoflocal,nationalandinternationalauthorities,andsoneedstobeconductedbyastrong,centralisedbody.Sharingofexperiencesinthisdomainamongcountriescanplayanimportantroleinpromotingbestpracticeinremovingredtape.3.3.2LackofreliableinformationObtainingreliableinformationaboutheatpumpsiscrucialtothedecisionbyaconsumertooptforthattechnologyoverotherheatingsolutions.Theprocessofcomparingheatpumpoptions,choosinganinstaller,obtainingapprovalsandqualifyingforrelevantsubsidiescanbeverycomplexandtime‐consuming.Insurveys,manyconsumerswhohaveconsideredbuyingaheatpumphavecitedthesebarriersasreasonsforwhytheyeventuallydecidednottoproceed(dena,2022).Energylabelsareacrucialmeasuretohelpconsumersidentifythemostenergy‐efficientheatingsolutions.Inmostcases,energylabellingismandatorywhereminimumenergyperformancestandardsareinforceforheatingandcoolingtechnologies(110countrieshaveadoptedsuchstandardsorplantodoso).Inadditiontoenergyefficiency,labelsshouldincludesmart‐readiness,recyclabilityandnoisereductionfeaturestoguideconsumers.IEA.CCBY4.4.76WorldEnergyOutlookSpecialReportInformationandawarenesscampaignscanalsobeusedtodebunkmisconceptionsamongconsumersaboutheatpumpperformance.Manyconsumersareunawareofthesignificantimprovementsthathavebeenmadeinheatpumpperformance,includingefficiencyandnoise,inrecentyears.Initiativestopromotedialogueatthecommunitylevelcanalsobolsterconsumertrustinthetechnology,sharelessonslearnedandimpartinformationtohomeownersconsideringswitchingtoaheatpump(RAP,2022b).Somecountrieshavechampionedtheuseofone‐stopshops,whichhelpconsumerscompareoptions,assesslifetimecosts,chooseanapprovedinstaller,obtainfinancingandapplyforsubsidies.Theycanbeparticularlyhelpfulinassistingconsumersmakeaninformedchoiceintheeventofa“distresspurchase”,whentheurgencyofreplacinganexistingheatingsystemwhenitsuddenlybreaksdownleadsmostconsumerstosimplyoptforreplacingtheirexistingheatingequipmentwithoutconsideringalternatives.Distresspurchasescanaccountforupto60%ofallheatingequipmentpurchasesinsomecountries(Nesta,2021).One‐stopshopscanalsohelpinstallersreachprospectiveclients.Analternativeapproachinvolvesrequiringenergyutilitiestoprovidecomparertoolsrunbyathirdpartythroughefficiencyprogrammes,orrequiringenergycompanies,manufacturersorinstallernetworkstocontributetothecostofsuchinitiatives.Offeringfreethird‐partyenergyaudits,whichmaybeseenasmoretrustworthythanadviceprovidedbytheutilityitself,canalsohelpconsumersmakeinformeddecisionsonreplacingtheirheatingsystem.3.3.3SplitincentivesbetweenbuildingownersandtenantsSplitincentivesbetweenbuildingownersandtenantsareacommonbarriertoinvestmentsinenergyefficiencyinbuildings,includingtheadoptionofmoreefficientheatingsystemssuchasheatpumps.Theownerofabuildingcanbewaryofspendingmoreonaheatpumpiftheyareunsurethattheywillbeabletorecoupthecostthroughhigherrentsorahigherresalevalueofthepropertyatalaterstage,thoughheatpumpscanaddasignificantpremiumonthepropertysaleprice(Shen,2021).Toincreasetheincentiveforlandlordstoinvestinheatpumpsandothercleanenergytechnologies,somegovernmentshavepassedlegislationthatallowshomeownerstoincreasethegrossrentbyacertainpercentageoftheheatingcostsavingstosplitthebenefitwiththetenant.Minimumenergyefficiencyrequirementsforrentedpropertiesoratpoint‐of‐saletransactionscanalsoincentiviseinvestmentsinheatpumps.Forexample,inFrance,propertieswithanenergyefficiencyratinginthelowestclass(G)willnolongerbeabletoberentedasof2023,whiledwellingswithratingsFandGwillbesubjecttoarentfreeze,whichwillonlybeliftediftheyretrofittoreachatleastanErating.Financingmodelssuchasenergyperformanceandheat‐as‐a‐servicecontractsthatreduceoreliminateupfrontinvestmentcostscanalsohelpovercomesplitincentivebarriers.Theyinvolveanagreementbetweenthebuildingownerandtenant,wherebythefinancial,performanceortechnicalrisksofinvestinginaheatpumparetransferredtoaspecialisedservicecompanyorutility,whichrecoupstheupfrontcostthrougharegularfeeoverapredeterminedperiod,insomecasesbasedonactualenergysavings(Table3.3).MostoftheIEA.CCBY4.4.Chapter3Barriersandsolutions773modelscurrentlyavailableinmajorheatingmarketsaimtoofferanalternativetoloans.Insomecases,theheatpumpremainsthepropertyoftheservicecompany,reducingthefinancialriskforthepropertyowner.Table3.3⊳MainbusinessmodelstofacilitateheatpumpuptakeModelDescriptionExamplesEnergyperformancecontracts(EPCs)Anenergyservicecompany(ESCO)installs,ownsandoperatestheheatpumpunderalong‐termEPCwithcommercialcustomersbasedonasharedenergysavingsmodelorguaranteeenergysavings.UsedundertheUKRenewableHeatIncentiveprogrammeHeat‐as‐a‐serviceTheheatpump,itsmaintenanceandheatareprovidedbyspecialisedESCOstohousingassociations,householdownersorutilitiesonalong‐termbasisasabundledservicepaidthroughasinglesubscriptionpaymentwithguaranteedsavings.Beingtrialledinmanycountries,notablyinEuropePay‐for‐performanceThecustomerpaysafixedrentalfeefortheheatpumpequipmentbasedonenergysavings.UsedinUSstatessuchasCalifornia,OregonandNewYorkOn‐billfinancingThecostoftheheatpumpinstallationandequipmentiscoveredbyalong‐termloanrepaidthroughtheutilitybillattachedtotheproperty,whichcanbetransferredtofuturetenants.UsedinseveralCanadianprovincesPropertyassessedcleanenergyTheheatpumpinstallationinaresidentialorcommercialpropertyisfinancedbyaloanthatisattachedtothepropertyandrepaidasanadditiontothepropertytaxover10‐20years,allowingforeasiertransfertofuturetenantsandmorefavourableinterestrates.WidelyusedinNorthAmericaConventionalequipmentleaseTheheatpumpisleasedtothepropertyowneroverapredeterminedperiod,afterwhichownershipofthepumpistransferredtotheuser.AvailableinGermanyandsomeothercountriesCleanenergyintermediatelendingAlargebanklendsfundstoasmalllocalbanktolendouttobuildingownersinvestinginheatpumps.Thismodelenableslargevolumesoffinancetobedirectedtomanysmall‐scaleinvestmentopportunities.WidelydeployedbymultilateraldevelopmentbankssuchastheEBRD,whichusestheGreenTechnologySelector–adatabaseoftechnologiesthatareeligibleforsupportwithoutadditionalapproval–tospeedupfinancingdecisionsSources:CatapultEnergySystems(2022);Urban(2021);EBRD(2022).IEA.CCBY4.4.78WorldEnergyOutlookSpecialReport3.4ManufacturingconstraintsAcceleratingthedeploymentofheatpumpsworldwideonthescaleenvisionedintheAPShingesonamassiveexpansionofmanufacturingcapacity.Theabilityofmanufacturerstomeetrisingdemandmaybeconstrainedbyvariousfactors,includingtheavailabilityofmaterialsandcomponents,thebusinessandinvestmentenvironment,andregulatoryandlegalrestrictions.Whilenottheprimaryfocusofthisreport,policymakersneedtobeawareofthesepotentialconstraintsandidentifywaysofassistingtheprivatesectorinaddressingthem.Today,mostoftheheatpumpssoldaroundtheworldaremanufacturedinChina,theUnitedStates,Europe,JapanandKorea.Thereisunutilisedmanufacturingcapacityatexistingfactoriesatpresent,amountingtoabout20%oftotalcapacityin2021,butitwouldnotevenbesufficienttomeettheprojectedincreaseinsalesintheAPSfortwoyears(Figure3.5).Thesupplyofbasicmaterialsandspecialisedcomponents,includingcompressors,heatexchangersandrefrigerants,wouldalsoneedtobescaleduprapidly.Figure3.5⊳CurrentandprojectedheatpumpsalesintheAPSandunutilisedmanufacturingcapacitytodayIEA.CCBY4.0.Unutilisedheatpumpmanufacturingcapacity,whileequaltoabout20%oftotalcapacity,wouldnotevenbesufficienttomeetthegrowthinsalesintheAPSfortwoyearsSource:IEAanalysisfor2021basedondataprovidedbyGlobalResearchView.Supplychainconstraintsarealreadyaffectingmanufacturingofheatpumpsandkeycomponents,especiallysemiconductorsandchipsetsinthepasttwoyears.Globalshortageshavealreadydrivenupcostsandslowedproductionintheheating,ventilationandairconditioning(HVAC)industry.Higherpricesofcopper,steel,aluminium,silverforweldingandcertainplasticsarealsodrivingupcosts(FirstCitizensBank,2022).Someofthesematerials,notablycopper,aresettoremaininhighdemandascleanenergytransitions50100150200250300350202120252030UnutilisedmanufacturingcapacitySalesGWIEA.CCBY4.4.Chapter3Barriersandsolutions793advance.Air‐sourceheatpumpsforresidentialapplicationscontainaround15to20kilogrammesofcopper,predominantlyintheirpipesandvalves,makinguproughly10%oftheoverallcostofthedevice(InternationalCopperAlliance,2022;GOV.UK,2016).Theindustryisexploringusingaluminiumalternativestocopperforkeycomponentstoreducecosts(BloombergNews,2021).Residentialhydronicheatpumpstypicallycontainmorethantwiceasmuchaluminiumand15timesmorecopperandbrassthantheircondensinggasboilerequivalents.2Inthemediumandlongterm,increasedrecoveryandrecyclingofmaterialsfromscrappedheatpumps,airconditionersandfossilfuelboilersthroughend‐of‐lifemanagementregulationscouldprovideasecondarystreamforthesupplyofcopper,aluminiumandiron,whileavoidingimpactsassociatedwiththeirmining.IntheEuropeanUnion,heatpumpsandairconditionersarecurrentlycoveredbyend‐of‐lifemanagementregulationsundertheWasteElectricalandElectronicEquipmentDirective,whichsetscriteriaforthecollection,treatmentandrecoveryofwasteequipment(EuropeanUnion,2012).Governmentsareincreasinglyplayingaroleinstimulatingdomesticinvestmentinheatpumpmanufacturing,addressingsupplychainbottlenecksandfosteringinnovation.Severalcountrieshaverecentlyintroducedpoliciesaimedatonshoringthemanufactureofcriticalcleanenergytechnologies,includingsomethatexplicitlytargetheatpumps,suchastheUSDefenseProductionAct.Otherstargetsemiconductorsandcriticalmineralmanufacturing,suchastheEUEuropeanChipsActandCriticalRawMineralsAct.SomecountriesprovidemanufacturingincentivessuchasRD&Dsupportforheatpumps,ontopofdeploymenttargets,bansonfossilfuelboilersandconsumerincentives,allofwhichenhancemarketcertaintyformanufacturersastheyexpandtheirproductioncapacities.Anothermeasure,beingplannedbytheUKgovernment,involvesimposingarisingquotaforthenumberofheatpumpsalesinrelationtoaboilermanufacturer’soverallsalesofheatingsystems(GOV.UK,2022).Reducingregulatoryuncertaintyiskeyformanufacturerstocommittoscalingupproduction.IntheEuropeanUnion,arevisedversionoftheF‐gasRegulation,currentlyunderdiscussionbasedontheCommission’sproposal,isexpectedtoenterintoforcefrom2024andwillprovideclarityonlimitationsforF‐gasusagebymanufacturersofheatpumpsandothertechnologies(seeChapter2).LeadingmanufacturershaverecentlyannouncedplanstoinvestmorethanEUR4billioninexpandingheatpumpproductioncapacityandrelatedefforts.MostannouncementsconcernprojectsinEurope,thoughcapacityissettoriseinotherregionswherenewprojectsaregenerallylesspublicised(Table3.4).2BasedonPEP(2022)andpersonalcommunicationwithAssoclima,November2022.IEA.CCBY4.4.80WorldEnergyOutlookSpecialReportTable3.4⊳RecentlyannouncedinvestmentsinheatpumpproductionbyselectedmanufacturersinEuropeNote:ConvertedtoEURforMitsubishi(USD113millionplusGBP15million)andNIBE(SEK5billion[Swedishkronor]).Sources:VaillantGroup(2022);BusinessSolutions(2021);Hoval(2022);Quanlin(2022);Mitsubishi(2022);Walker(2021);Bosch(2022);Daikin(2022);Klingauf(2022);NIBE(2022);ViessmanGroup(2022);Panasonic(2022).3.5ShortagesofskilledinstallersTherapidgrowthindeploymentofheatpumpsworldwideintheAPSwouldrequireabigincreaseintheworkforceateverystepofthesupplychain,especiallyinstallation(seeChapter2).Today,roughlyhalfofheatpumpworkersworldwideareinvolvedintheinstallationprocess,whileanotherquarterworkinmaintainingandservicingofheatpumps.Demandforinstallersisexpectedtoquadrupleto2030toover850000intheAPS(Figure3.6).Allthenewinstallerswouldneedtobeadequatelytrainedundercertifiedprogrammes.Ashortageofskilledinstallersisalreadystartingtocreatebottlenecksinthedeploymentofheatpumpsinseveralcountries.Theskillsneededtoinstallheatpumpsaresimilartothoseofmanystandardoccupationsinconstruction,butrequireadditionalspecialisations.Theseincludeassessingtheproperty,calculatingheatlossestodesigntheinstallation,updatingpartsoftheexistingheatingsystemandelectricalwiring(Table3.5).Someoftheseskillscanbetaughtthroughon‐the‐jobtraining,whileothers,notablysizingtheheatpumpinstallation,drilling,electricalworkandrefrigeranthandling,requiretrainedandcertifiedpersonnel.Bothinstallationandelectricalskillsareoftenincludedinthesamequalificationschemes,thoughinsomecountriessuchasCanadadifferentprofessionalsarerequired.Additionalqualificationsarerequiredforground‐sourceheatpumps,includingindrillingortrenching,thermalfusionofpipesandgeologicalanalysis.Skilleddrillingengineersintheoilandgassectorarewell‐placedtotakeonsuchjobs.CompanyRegion/countryInvestmentallocationInvestment(EUR)DateofcompletionVaillantEUHeatpumpsandenergyefficiency130million2022‐2023HovalLiechtenstein,SlovakiaHeatpumps60million2023‐2024Clivet(MideaGroup)ItalyHeatpumps60million2024MitsubishiTurkey,UKHeatpumpsandairconditioning128million2024BoschEuropeHeatpumps300million2025DaikinEuropeBelgium,CzechRepublic,Germany,PolandHeatpumps,digitalisation,R&Dandservicecapacity1.2billion2025StiebelEltronGermanyHeatpumps600million2025NIBESwedenHeatpumps460million2025ViessmannPolandHeatpumpsandothergreensolutions1billion2025PanasonicCzechRepublicHeatpumps145million2026IEA.CCBY4.4.Chapter3Barriersandsolutions813Figure3.6⊳Employmentinheatpumpsbyregion/countryintheAPSIEA.CCBY4.0Demandforinstallers,whichmakeupabouthalfofthetotalheatpumpworkforceglobally,increasesbyaround650000by2030intheAPSNotes:O&M=operationsandmaintenance.Otherkeycountries=Australia,NewZealand,Canada,Japan,Korea,EurasiaandtherestofEurope.Table3.5⊳MappingoftypicalskillsandoccupationsrequiredforheatpumpinstallationbyinstallationphaseSkillsOccupationHeatpumptypeSizingandheatpumpsystemdesignOn‐siteassessmentofexistingheatinginfrastructureandpropertyinsulationGeneralconstructionworker,heatpumpinstallerAllHeatlossesandheatingloadcalculationsHeatpumpinstallerAllDesign,choiceofmaterialsandsystemlayoutHeatpumpinstallerAllPressuredropcalculations,thermalconductivityassessmentHeatpumpinstallerAllInstallationTrenchinganddrillingCertifieddrillingprofessionalGround‐sourcePipejoiningandplumbingPlumber,pipefitter,heatpumpinstallerAllHandlingrefrigerantsHeatpumpinstallerwithF‐gascertificationHeatpumpinstallerqualifiedtohandleflammablematerialsSystemswithonsiteF‐gasrefrigeranthandlingSystemswithon‐sitehydrocarbonrefrigeranthandlingElectricalworkElectricalwiringElectrician,heatpumpinstallerAllSystemconfigurationFinalsystemsetup,refrigerantgasstabilisationHeatpumpinstallerAllEuropeanUnionUnitedStatesChinaOtherkeycountries10020030040020192030201920302019203020192030ThousandemployeesO&MworkersInstallersIEA.CCBY4.4.82WorldEnergyOutlookSpecialReportMaintainingstandardsforinstallersremainsessentialtothegrowthoftheindustry.Underqualifiedinstallerscanresultinunderperformingsystemsorpersistentmaintenanceproblems,includingleaksandelectricalissues,possiblybreachingthewarrantyofferedbythemanufacturerorthetermsandconditionofhomeinsurance,aswellasposingreputationalriskstotheheatpumpindustry.Additionally,manyinstallerscontinuetooperateusingoutdatednotionsofheatpumpperformance,andcantrytodissuadeconsumersfromadoptingheatpumpswhenconsultingthemwhilereplacingboilers.Certificationschemesdesignedbyeitherregulatoryorindustrybodiesareavailableinallmajormarkets.Theyvaryinscopeanddurationandarenotharmonisedinternationally.InChina,avoluntaryqualificationcertificateisinplaceforcompaniesservicingindustrialandcommercialrefrigerationandair‐conditioningequipment,includingheatpumps.InEurope,installersneedtoobtainrelevantaccreditationsordemonstrateagivennumberofyearsofrelevantexperience.Whiletrainingisneededforthesafeandproperinstallationofheatpumps,onerouscertificationschemescandeterworkersfromprocuringthesequalifications.Additionaltrainingrequirements,costsoralackofdemandforheatpumpsintheirlocalareacandissuadeworkersfromapplyingfortrainingandcertificationsandtheownersoftraditionalheatingsystembusinessesfromdiversifyingintoheatpumps.Toalleviatethesehurdles,certificationsforheatpumpscanbuildonexistingqualificationschemesandbeincorporatedintotheexistingcurriculumforelectricians,plumbers,andotherheatingandrefrigerationtechnicians,orinfirerisksafetytraining.Agrowingnumberofmanufacturersarealsoofferingtheirowninstallationtrainingprogrammes,whichcanbemoretargetedandshorterinduration,allowingcompaniestobuildupaworkforceofcertifiedinstallersmorequickly.Standardisingcredentialsandtrainingacrossmanufacturersandjurisdictionscouldhelptoexpandtheinstallerworkforceandincreaselabourmobilityacrosscountriesandregions.Oilandgasboilerbansandotherpoliciesthatincreaselong‐termcertaintyabouttheprospectsfortheheatpumpindustrycanalsoencourageworkerstoentertheindustry.Governmentscanplayamajorroleinpromotingthetrainingandrecruitmentofheatpumpinstallers.Theyneedtoworkwithindustrytoupdatecertifications,provideincentivestoworkerstopursuevocationaleducationandsupportapprenticeships.Incentivescanbeprovidedthroughinstallers,asisthecaseintheUnitedKingdom.Governmentprogrammesfocusedontrainingheatpumpinstallershavebeenintroducedinseveralcountries,includingNetherlands,theUnitedKingdomandEUmembers,notablysincethelaunchofREPowerEU(Box3.2).Manufacturerscanalsohelpeaseinstallershortagesbydesigningmorerobust,standardisedandeasier‐to‐installheatpumpsandbyequippinginstallationcompanieswiththerightdigitaltoolsandapplicationstohelptheminstalltheunitscorrectly.Opendataonbuildingcharacteristicscouldbenefitinnovativebusinessmodelsthatusedigitaltoolstoassesshoweasilyaheatpumpcanbeinstalledandtoconnectcustomerswithinstallers.IEA.CCBY4.4.Chapter3Barriersandsolutions833Box3.2⊳MeetingthegrowingdemandforheatpumpinstallersintheEuropeanUnionTheREPowerEUtargetsforheatpumps,reflectedintheAPS,callforanincreaseinthenumberoftrainedheatpumpinstallersfromaround40000in2019to110000by2030.CertificationismandatoryacrossallEUcountriesforheatpumpinstallationsthatrequirerefrigeranthandlingbytheinstaller,whichisthecaseformostsystems,exceptself‐containedsystemslikeamonobloc.WithincreasingrestrictionsonF‐GasrefrigerantusageinlinewiththeKigaliAmendment,therequiredcertificationmaypassfromhandlingofF‐Gasestohandlingofflammablematerial.However,forthemajorityofinstallations,requirementsfortrainingandcertificationofinstallersvarybetweencountries,despitetherequirementformutuallyrecognisedcertificationundertheRenewableEnergyDirective.Giventheenormousdifferencesinthematurityoftheheatpumpmarketacrosscountries,collaborationbetweenthemonheatpumpinstallertrainingandtransferofbest‐practiceknow‐howcouldhelpensureefficientandhigh‐qualityinstallationsandachievetheREPowerEUtargets.Figure3.7⊳NumberofemployeesinoccupationsrelatedtoheatpumpinstallationwithlabourshortagesintheEuropeanUnion,2020and2030IEA.CCBY4.0.ManyEUcountriesfacelabourshortagesinoccupationskeytoheatpumpinstallation.Workersthatcouldbequicklyupskilledtoinstallheatpumpsoutnumberneedsin2030.Note:OccupationsasdefinedintheInternationalStandardClassificationofOccupations.“Regionswithhiringgaps”includestheEU27withBelgiumdividedintothreeautonomousregions,aswellasSwitzerlandandNorway.Source:IEAanalysisbasedonELA(2021).481216202420040060080010001200PlumbersandpipefittersBuildingandrelatedelectriciansElectricalmechanicsandfittersACandrefrigerationmechanicsHeatpumpworkersneededby2030ThousandemployeesEmployeesin2020O&MworkersInstallersRegionswithhiringgaps(rightaxis)IEA.CCBY4.4.84WorldEnergyOutlookSpecialReportAdditionaltrainingrequirementswillputastrainonanalreadytightEuropeanlabourmarket.Thereisashortageofworkersinarangeofoccupationsrelatedtoheatpumpinstallations,suchasplumbersandpipefitters,air‐conditioningandrefrigerationmechanics,electricalmechanicsandfitters,andelectricians(Figure3.7).Inarecentsurvey,hiringgapsforplumbersandpipefitterswerereportedbythemostcountries,withthatoccupationrankingsecondforshortagesamongalleconomicsectors(ELA,2021).However,thenumberofheatpumpinstallersandthoseservicingheatpumpsremainsfarsmallerthanthecurrentemploymentinrelatedoccupations.Thisplacesthefocussquarelyonincorporatingheatpump‐specifictrainingintoexistingcertificationschemesandprovidingincentivestoattractworkersalreadyinrelatedoccupationstopursueheatpumpcertificationschemes.Rapidupskillingandtrainingwillbecrucialtomeetgrowingdemandforinstallers.Somemeasurescouldalleviatetheriskofworseninglabourshortages,includingrevisingexistingcertificationcurriculumforplumbers,electriciansandHVACmechanics;reducingtraininghoursandrecertificationtoneededminimums;subsidisingtrainingcosts;andintroducingacomprehensiveEU‐widecertificationscheme,whichwouldimprovethevisibilityoftrainingrequirementsandimprovelabourmobility.IEA.CCBY4.4.ANNEXESDatausedforthisreportcomesfromtheGlobalEnergyandClimateModel.FurtherdatacanbefoundinthelatestversionoftheWorldEnergyOutlookreportinthelinkbelow:ExplorethedatabehindtheWorldEnergyOutlook2022iea.li/weo22AnnexATechnologycostsandfinancialsupportschemes87AnnexATechnologycostsandfinancialsupportschemesTechnologycostsFigureA.1⊳Upfrontcostrangesbytechnologyinselectedcountries,2022IEA.CCBY4.0.10000200003000040000CondensinggasboilerAir‐to‐airheatpumpsAir‐to‐waterheatpumpsGround‐sourceUSD(2021)KoreaGermanyItalyChinaJapanCanadaPolandDenmarkFranceUnitedKingdomUnitedStatesSwedenIEA.CCBY4.4.88WorldEnergyOutlookSpecialReportFinancialsupportschemesTableA.1⊳Financialsupportschemesforresidentialheatpumpsinselectedcountries,September2022GrantTaxrebateLoanAustraliaSmall‐scaletechnologycertificatesNoInterestLoansSchemeAustriaGetoutofoilandgasSauberHeizenfürAlle(CleanHeatingforEveryone):privateindividualsBelgiumBrussels:PrimesRENOLUTION(RENOLUTIONPremiums)Wallonia:PrimeHabitation(HousingPremium)Wallonia:RenopackFlanders:MyRenovationPremiumFlanders:MyRenovationLoanNational:ReducedVATrateonheatpumpsBulgariaEnergyEfficiencyandRenewableSourcesFundTaxregulationmechanismCanadaGreenerHomesinitiative:GrantGreenerHomesinitiative:LoanChinaNorthernProvinces:CleanwinterheatingplanCroatiaEnergyrenovationoffamilyhousesprogramCzechRepublicNovázelenáúsporám(Newgreensavings):HeatingsystemreplacementNovázelenáúsporám(Newgreensavings):NewwaterheaterKotlíkovédotace(Boilersubsidy)PrivatebankloansDenmarkBygningspuljen(Buildingpool)LowinterestrateloansIEA.CCBY4.4.AnnexATechnologycostsandfinancialsupportschemes89ATableA.1⊳Financialsupportschemesforresidentialheatpumpsinselectedcountries,September2022(continued)GrantTaxrebateLoanFinlandReplacementofoilandgasheatingschemeIncometaxdeduction:BasicimprovementworkFranceMaPrimeRenov’CertificatesofEnergySavings(CEE)ecoPTZ:Eco‐prêtàtauxzéro(zerointerestloan)ReducedVATrateonheatpumpsGermanyFederalfundingforefficientbuildings(BEG):BEGEM(individualmeasures)Federalfundingforefficientbuildings(BEG):BEGWG(residentialbuildings)Incometaxlaw:Section35c(residentialbuildings)GreeceSaveprogramme:εξοικονομώSaveprogrammeloan:εξοικονομώTaxregulationmechanismI:LawNo.2238/1994HungaryHomeRenovationgrantGreencapitalrequirementdiscountprogrammeforresidentialpurposesItalyContoTermico2.0(incentivescheme)Superbonus110%Ecobonus65%ReducedVATrateonheatpumpsIrelandSEAIhomeenergygrants:IndividualenergyupgradegrantsforHeatPumpsSEAIhomeenergygrants:FullyfundedenergyupgradeAnPosthomeenergyimprovementloansJapanHeatpumpsubsidyprogrammesKoreaKEPCO(KoreaElectricPowerCorp):SupportforinstallingheatpumpsPrivatebankloansIEA.CCBY4.4.90WorldEnergyOutlookSpecialReportTableA.1⊳Financialsupportschemesforresidentialheatpumpsinselectedcountries,September2022(continued)GrantTaxrebateLoanLatviaVARAM:SupportfortheuseofrenewableenergyresourcesinhouseholdsMinistryofEconomy:RenovationofprivatehousesandenergyefficiencyPrivatebankloansbackedbythestateLithuaniaMinistryofEnvironment:UseofrenewableenergysourcesPrivatebankloansLuxembourgPRIMeHouse2017ReducedVATrateonheatpumpsKlimaPrêt:ZerointerestrateKlimaPrêt:ReducedinterestratePrivatebanks:EnergyrenovationloansNetherlandsISDE:InvestmentgrantforsustainableenergyandenergysavingsNationalHeatFund:LowinterestrateloansNewZealandEnergyEfficiencyConservationAuthority:WarmerKiwiHomesprogrammeHealthyhomesstandardsPrivatebanks:GreenloansNorwayEnovagrantPolandCleanAirProgramme:CleanAirCleanAirProgramme:StopSmogCleanAirProgramme:ThermalmodernisationtaxreliefMojeCieplo(MyWarmth)PrivatebankloansPortugalRenewableequipmentloansRomaniaCasaEficientaEnergetic(EnergyEfficientHouseprogramme)IEA.CCBY4.4.AnnexATechnologycostsandfinancialsupportschemes91ATableA.1⊳Financialsupportschemesforresidentialheatpumpsinselectedcountries,September2022(continued)GrantTaxrebateLoanSlovakiaZelenádomácnostiamII(GreenforhouseholdsIIprogramme)Slovakia’sRecoveryandResiliencePlanSloveniaEkoSklad(EcoFund):SubsidiesEkoSklad(EcoFund):SoftloanSpainPREE5000:EnergyRehabilitationProgrammeforBuildingsinMunicipalitiesoftheDemographicChallengeRD477/2021Programme6:ImplementationofrenewablethermalsystemsintheresidentialsectorRD853/2021:RefurbishmentofresidentialbuildingsandsocialhousingSwedenROT‐avdrag:TaxreductionUnitedKingdomBoilerUpgradeSchemeHomeEnergyScotland:InterestfreeloanFreeHeatPumpsGrantsScotlandReducedVATrateonheatpumpsUnitedStatesResidentialrenewableenergytaxcredits:GeothermalheatpumpsInflationReductionAct:HeatpumpstaxcreditInflationReductionAct:High‐EfficiencyElectricHomeRebateprogrammeIEA.CCBY4.4.AnnexBDefinitions93AnnexBDefinitionsThisannexprovidesgeneralinformationonterminologyusedthroughoutthisreportincluding:unitsandgeneralconversionfactors;definitionsoffuels,processesandsectors;regionalandcountrygroupings;andabbreviationsandacronyms.UnitsEnergyEJexajoule(1joulex1018)MWhmegawatt‐hourGWhgigawatt‐hourTWhterawatt‐hourGasbcmbillioncubicmetresMasskgkilogrammettonne(1tonne=1000kg)ktkilotonnes(1tonnex103)Mtmilliontonnes(1tonnex106)Gtgigatonnes(1tonnex109)MonetaryUSDmillion1USdollarx106USDbillion1USdollarx109USD/tCO2USdollarspertonneofcarbondioxidePowerWwatt(1joulepersecond)kWkilowatt(1wattx103)MWmegawatt(1wattx106)GWgigawatt(1wattx109)GeneralconversionfactorsforenergyMultipliertoconvertto:EJbcmeGWhConvertfrom:EJ127.782.778x105bcme0.03619999GWh3.6x10‐61x10‐41Notes:Naturalgasisattributedalowheatingvalueof1MJper44.1kg.Conversionstoandfrombillioncubicmetresofnaturalgasequivalent(bcme)aregivenasrepresentativemultipliersbutmaydifferfromtheaveragevaluesobtainedbyconvertingnaturalgasvolumesbetweenIEAbalancesduetotheuseofcountry‐specificenergydensities.Lowerheatingvaluesareusedthroughout.IEA.CCBY4.4.94WorldEnergyOutlookSpecialReportDefinitionsBuildings:Thebuildingssectorincludesenergyusedinresidential,commercialandinstitutionalbuildingsandnon‐specifiedother.Buildingenergyuseincludesspaceheatingandcooling,waterheating,lighting,appliances,andcookingequipment.Carbondioxide(CO2):Agasconsistingofonepartcarbonandtwopartsoxygen.Itisanimportantgreenhouse(heat‐trapping)gas.Cleanenergy:Inpower,cleanenergyincludes:generationfromrenewablesources,nuclearandfossilfuelsfittedwithcarboncapture,utilisationandstorage(CCUS);batterystorage;andelectricitygrids.Inefficiency,cleanenergyincludesenergyefficiencyinbuildings,industryandtransport,excludingaviationbunkersanddomesticnavigation.Inend‐useapplications,cleanenergyincludes:directuseofrenewables;electricvehicles;electrificationinbuildings,industryandinternationalmarinetransport;CCUSinindustryanddirectaircapture.Infuelsupply,cleanenergyincludeslow‐emissionsfuels.Coal:Includesbothprimarycoal,i.e.lignite,cokingandsteamcoal,andderivedfuels,e.g.patentfuel,brown‐coalbriquettes,coke‐ovencoke,gascoke,gasworksgas,coke‐ovengas,blastfurnacegasandoxygensteelfurnacegas.Peatisalsoincluded.CoefficientofPerformance(COP):COPisaratiousedtomeasuretheamountofusefulenergy(i.e.heatingorcoolingoutput)deliveredrelativetotheenergyinput.ThehighertheCOP,themoreefficientthedevice.Demand‐sideflexibilityresource:Describesresourceswhichcaninfluencetheloadprofilesuchasshiftingtheloadcurveintimewithoutaffectingtotalelectricitydemand,orloadsheddingsuchasinterruptingdemandforashortdurationoradjustingtheintensityofdemandforacertainamountoftime.Electricitydemand:Definedastotalgrosselectricitygenerationlessownusegeneration,plusnettrade(importslessexports),lesstransmissionanddistributionlosses.Electricitygeneration:Definedasthetotalamountofelectricitygeneratedbypoweronlyorco‐generation(combinedheatandpower)plantsincludinggenerationrequiredforownuse.Thisisalsoreferredtoasgrossgeneration.Energysectorgreenhousegas(GHG)emissions:Energy‐relatedandindustrialprocessCO2emissionsplusfugitiveandventedmethaneandnitrousdioxideemissionsfromtheenergyandindustrysectors.Energyservices:Seeusefulenergy.F‐gas:Fluorinatedgasesthatareusedindifferentapplicationsincludingrefrigeration,airconditioningandheatpumpswheretheyarethemaincomponentoftherefrigerantcycle.Fossilfuels:Includecoal,naturalgasandoil.Geothermal:Geothermalenergyisheatfromthesubsurfaceoftheearth.Waterand/orsteamcarrythegeothermalenergytothesurface.Dependingonitscharacteristics,IEA.CCBY4.4.AnnexBDefinitions95Bgeothermalenergycanbeusedforheatingandcoolingpurposesorbeharnessedtogeneratecleanelectricityifthetemperatureisadequate.Globalwarmingpotential(GWP):ThismetricallowscomparingdifferentgreenhousegasesintermsoftheireffectonclimatechangeandisusedfortheCO₂‐equivalentcalculations.TheGWPofCO₂issetto1,soallothergasesareclassifiedrelativetoCO₂.Toaccountfordifferinglifetimesofgasesintheatmosphere,themostcommonmetricisthe100‐yearGWP;sometimesalsothe20‐yearGWPisused.AgaswithaGWP100of27hasa27‐times‐strongerimpactonglobalwarmingthanCO₂overa100‐yeartimeframe.Heat(enduse):Canbeobtainedfromthecombustionoffossilorrenewablefuels,directgeothermalorsolarheatsystems,exothermicchemicalprocesses,andelectricity(throughresistanceheatingorheatpumps,whichcanextractitfromambientairandliquids).Thiscategoryreferstothewiderangeofenduses,includingspaceandwaterheating,andcookinginbuildings,desalinationandprocessapplicationsinindustry.Itdoesnotincludecoolingapplications.Heat(supply):Obtainedfromthecombustionoffuels,nuclearreactors,geothermalresourcesorthecaptureofsunlight.Itmaybeusedforheatingorcooling,orconvertedintomechanicalenergyfortransportorelectricitygeneration.Commercialheatsoldisreportedundertotalfinalconsumptionwiththefuelinputsallocatedunderpowergeneration.Heatpump:Aheatpumpextractsheatfromasource,suchasthesurroundingair,geothermalenergystoredintheground,ornearbysourcesofwaterorwasteheatfromafactory.Itthenamplifiesandtransferstheheattowhereitisneeded.Hydronicheatpump:Heatpumpusedinahydronicheatingsystemsthatuseswatertomoveheatfromaheatpumpthroughpipingtoeachroomviaradiatorsorunderfloorheating.Investment:Investmentisthecapitalexpenditureinenergysupply,infrastructure,enduseandefficiency.Fuelsupplyinvestmentincludestheproduction,transformationandtransportofoil,gas,coalandlow‐emissionsfuels.Powersectorinvestmentincludesnewconstructionandrefurbishmentofgeneration,electricitynetworks(transmission,distributionandpublicelectricvehiclechargers),andbatterystorage.Energyefficiencyinvestmentincludesefficiencyimprovementsinbuildings,industryandtransport.Otherenduseinvestmentincludesthepurchaseofequipmentforthedirectuseofrenewables;electricvehicles;electrificationinbuildings,industryandinternationalmarinetransport;equipmentfortheuseoflow‐emissionsfuels;andCCUSinindustryanddirectaircapture.Dataandprojectionsreflectspendingoverthelifetimeofprojectsandarepresentedinrealtermsinyear‐2021USdollarsunlessotherwisestated.Totalinvestmentreportedforayearreflectstheamountspentinthatyear.Levelisedcostofheatingandcooling:Thelevelisedcostofheatingandcoolingestimatestheaveragecostofproviding1MWhofheatingorcoolingoverthelifetimeoftheequipment,consideringthecapitalcostoftheequipmentandinstallation;operatingexpendituresincludethecostoffuelandregularmaintenance.IEA.CCBY4.4.96WorldEnergyOutlookSpecialReportLow‐emissionselectricity:Includesrenewableenergytechnologies,low‐emissionshydrogen‐basedgeneration,low‐emissionshydrogen‐basedfuelgeneration,nuclearpowerandfossilfuelpowerplantsequippedwithCCUS.Low‐emissionsfuels:Includemodernbioenergy,low‐emissionshydrogenandlow‐emissionshydrogen‐basedfuels.Naturalgas:Includesgasoccurringindeposits,whetherliquefiedorgaseous,consistingmainlyofmethane.Itincludesbothnon‐associatedgasoriginatingfromfieldsproducinghydrocarbonsonlyingaseousform,andassociatedgasproducedinassociationwithcrudeoilproductionaswellasmethanerecoveredfromcoalmines(collierygas).Naturalgasliquids,manufacturedgas(producedfrommunicipalorindustrialwaste,orsewage)andquantitiesventedorflaredarenotincluded.Gasdataincubicmetresareexpressedonagrosscalorificvaluebasisandaremeasuredat15°Candat760mmHg(standardconditions).Gasdataexpressedintonnesofoilequivalent,mainlyforcomparisonreasonswithotherfuels,areonanetcalorificbasis.Thedifferencebetweenthenetandthegrosscalorificvalueisthelatentheatofvapourisationofthewatervapourproducedduringcombustionofthefuel(forgasthenetcalorificvalueis10%lowerthanthegrosscalorificvalue).Oil:Includesbothconventionalandunconventionaloilproduction.Petroleumproductsincluderefinerygas,ethane,liquidpetroleumgas,aviationgasoline,motorgasoline,jetfuels,kerosene,gas/dieseloil,heavyfueloil,naphtha,whitespirits,lubricants,bitumen,paraffin,waxesandpetroleumcoke.Powergeneration:Referstofueluseinelectricitygenerationplants,heatplantsandco‐generationplants.Bothmainactivityproducerplantsandsmallplantsthatproducefuelfortheirownuse(auto‐producers)areincluded.Refrigerant:Substancethattransfersheatthroughtherefrigerationcycleinarefrigerationappliance(e.g.heatpump,airconditioner,refrigerator).Renewables:Includesbioenergy,geothermal,hydropower,solarphotovoltaics(PV),concentratingsolarpower,andwindandmarine(tideandwave)energyforelectricityandheatgeneration.Residential:Energyusedbyhouseholdsincludingspaceheatingandcooling,waterheating,lighting,appliances,electronicdevicesandcooking.Services:Energyusedincommercialfacilities,e.g.offices,shops,hotels,restaurants,andininstitutionalbuildings,e.g.schools,hospitals,publicoffices.Energyuseinservicesincludesspaceheatingandcooling,waterheating,lighting,appliances,cookinganddesalination.Solarphotovoltaic(PV):ElectricityproducedfromsolarPVcells.Totalfinalconsumption(TFC):Isthesumofconsumptionbythevariousend‐usesectors.TFCisbrokendownintoenergydemandinthefollowingsectors:industry(includingmanufacturing,mining,chemicalsproduction,blastfurnacesandcokeovens),transport,buildings(includingresidentialandservices)andother(includingagricultureandotherIEA.CCBY4.4.AnnexBDefinitions97Bnon‐energyuse).Itexcludesinternationalmarineandaviationbunkers,exceptatworldlevelwhereitisincludedinthetransportsector.Usefulenergy:Referstotheenergythatisavailabletoenduserstosatisfytheirneeds.Thisisalsoreferredtoasenergyservicesdemand.Asresultoftransformationlossesatthepointofuse,theamountofusefulenergyislowerthanthecorrespondingfinalenergydemandformosttechnologies.Equipmentusingelectricityoftenhashigherconversionefficiencythanequipmentusingotherfuels,meaningthatforaunitofenergyconsumed,electricitycanprovidemoreenergyservices.Zero‐carbon‐readybuildings:Azero‐carbon‐readybuildingishighlyenergyefficientanduseseitherrenewableenergydirectlyoranenergysupplythatcanbefullydecarbonised,suchaselectricityordistrictheat.RegionalandcountrygroupingsFigureB.1⊳MaincountrygroupingsNote:Thismapiswithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.Advancedeconomies:OECDregionalgroupingandBulgaria,Croatia,Cyprus,1,2MaltaandRomania.Africa:NorthAfricaandsub‐SaharanAfricaregionalgroupings.Asia‐Pacific:SoutheastAsiaregionalgroupingandAustralia,Bangladesh,DemocraticPeople’sRepublicofKorea(NorthKorea),India,Japan,Korea,Mongolia,Nepal,NewZealand,Pakistan,People’sRepublicofChina(China),SriLanka,ChineseTaipei,andotherAsia‐Pacificcountriesandterritories.3Caspian:Armenia,Azerbaijan,Georgia,Kazakhstan,Kyrgyzstan,Tajikistan,TurkmenistanandUzbekistan.IEA.CCBY4.4.98WorldEnergyOutlookSpecialReportCentralandSouthAmerica:Argentina,PlurinationalStateofBolivia(Bolivia),Brazil,Chile,Colombia,CostaRica,Cuba,Curaçao,DominicanRepublic,Ecuador,ElSalvador,Guatemala,Haiti,Honduras,Jamaica,Nicaragua,Panama,Paraguay,Peru,Suriname,TrinidadandTobago,Uruguay,BolivarianRepublicofVenezuela(Venezuela),andotherCentralandSouthAmericancountriesandterritories.4China:IncludesthePeople'sRepublicofChinaandHongKong.DevelopingAsia:Asia‐PacificregionalgroupingexcludingAustralia,Japan,KoreaandNewZealand.Emergingmarketanddevelopingeconomies:Allothercountriesnotincludedintheadvancedeconomiesregionalgrouping.Eurasia:CaspianregionalgroupingandtheRussianFederation(Russia).Europe:EuropeanUnionregionalgroupingandAlbania,Belarus,BosniaandHerzegovina,NorthMacedonia,Gibraltar,Iceland,Israel,5Kosovo,Montenegro,Norway,Serbia,Switzerland,RepublicofMoldova,Türkiye,Ukraine,andUnitedKingdom.EuropeanUnion:Austria,Belgium,Bulgaria,Croatia,Cyprus,1,2CzechRepublic,Denmark,Estonia,Finland,France,Germany,Greece,Hungary,Ireland,Italy,Latvia,Lithuania,Luxembourg,Malta,Netherlands,Poland,Portugal,Romania,SlovakRepublic,Slovenia,SpainandSweden.IEA(InternationalEnergyAgency):OECDregionalgroupingexcludingChile,Colombia,CostaRica,Iceland,Israel,LatviaandSlovenia.LatinAmerica:CentralandSouthAmericaregionalgroupingandMexico.MiddleEast:Bahrain,IslamicRepublicofIran(Iran),Iraq,Jordan,Kuwait,Lebanon,Oman,Qatar,SaudiArabia,SyrianArabRepublic(Syria),UnitedArabEmiratesandYemen.Non‐OECD:AllothercountriesnotincludedintheOECDregionalgrouping.Non‐OPEC:AllothercountriesnotincludedintheOPECregionalgrouping.NorthAfrica:Algeria,Egypt,Libya,MoroccoandTunisia.NorthAmerica:Canada,MexicoandUnitedStates.OECD(OrganisationforEconomicCo‐operationandDevelopment):Australia,Austria,Belgium,Canada,Chile,CzechRepublic,Colombia,CostaRica,Denmark,Estonia,Finland,France,Germany,Greece,Hungary,Iceland,Ireland,Israel,Italy,Japan,Korea,Latvia,Lithuania,Luxembourg,Mexico,Netherlands,NewZealand,Norway,Poland,Portugal,SlovakRepublic,Slovenia,Spain,Sweden,Switzerland,Türkiye,UnitedKingdomandUnitedStates.OPEC(OrganizationofthePetroleumExportingCountries):Algeria,Angola,RepublicoftheCongo(Congo),EquatorialGuinea,Gabon,theIslamicRepublicofIran(Iran),Iraq,Kuwait,IEA.CCBY4.4.AnnexBDefinitions99BLibya,Nigeria,SaudiArabia,UnitedArabEmiratesandBolivarianRepublicofVenezuela(Venezuela).SoutheastAsia:BruneiDarussalam,Cambodia,Indonesia,LaoPeople’sDemocraticRepublic(LaoPDR),Malaysia,Myanmar,Philippines,Singapore,ThailandandVietNam.ThesecountriesareallmembersoftheAssociationofSoutheastAsianNations(ASEAN).Sub‐SaharanAfrica:Angola,Benin,Botswana,Cameroon,RepublicoftheCongo(Congo),Côted’Ivoire,DemocraticRepublicoftheCongo,Eritrea,Ethiopia,Gabon,Ghana,Kenya,Mauritius,Mozambique,Namibia,Niger,Nigeria,Senegal,SouthAfrica,SouthSudan,Sudan,UnitedRepublicofTanzania(Tanzania),Togo,Zambia,Zimbabwe,andotherAfricancountriesandterritories.6Countrynotes1NotebyRepublicofTürkiye:Theinformationinthisdocumentwithreferenceto“Cyprus”relatestothesouthernpartoftheisland.ThereisnosingleauthorityrepresentingbothTurkishandGreekCypriotpeopleontheisland.TürkiyerecognisestheTurkishRepublicofNorthernCyprus(TRNC).UntilalastingandequitablesolutionisfoundwithinthecontextoftheUnitedNations,Türkiyeshallpreserveitspositionconcerningthe“Cyprusissue”.2NotebyalltheEuropeanUnionMemberStatesoftheOECDandtheEuropeanUnion:TheRepublicofCyprusisrecognisedbyallmembersoftheUnitedNationswiththeexceptionofTürkiye.TheinformationinthisdocumentrelatestotheareaundertheeffectivecontroloftheGovernmentoftheRepublicofCyprus.3Individualdataarenotavailableandareestimatedinaggregatefor:Afghanistan,Bhutan,CookIslands,Fiji,FrenchPolynesia,Kiribati,Macau(China),Maldives,NewCaledonia,Palau,PapuaNewGuinea,Samoa,SolomonIslands,Timor‐Leste,TongaandVanuatu.4Individualdataarenotavailableandareestimatedinaggregatefor:Anguilla,AntiguaandBarbuda,Aruba,Bahamas,Barbados,Belize,Bermuda,Bonaire,BritishVirginIslands,CaymanIslands,Dominica,FalklandIslands(Malvinas),FrenchGuiana,Grenada,Guadeloupe,Guyana,Martinique,Montserrat,Saba,SaintEustatius,SaintKittsandNevis,SaintLucia,SaintPierreandMiquelon,SaintVincentandGrenadines,SaintMaarten,TurksandCaicosIslands.5ThestatisticaldataforIsraelaresuppliedbyandundertheresponsibilityoftherelevantIsraeliauthorities.TheuseofsuchdatabytheOECDand/ortheIEAiswithoutprejudicetothestatusoftheGolanHeights,EastJerusalemandIsraelisettlementsintheWestBankunderthetermsofinternationallaw.6Individualdataarenotavailableandareestimatedinaggregatefor:BurkinaFaso,Burundi,CaboVerde,CentralAfricanRepublic,Chad,Comoros,Djibouti,KingdomofEswatini,Gambia,Guinea,Guinea‐Bissau,Lesotho,Liberia,Madagascar,Malawi,Mali,Mauritania,Réunion,Rwanda,SaoTomeandPrincipe,Seychelles,SierraLeone,Somalia,andUganda.AbbreviationsandacronymsAPSAnnouncedPledgesScenarioCCUScarboncapture,utilisationandstorageCDDcoolingdegreedayCO2carbondioxideCO2‐eqcarbondioxideequivalentCOPcoefficientofperformanceEBRDEuropeanBankforReconstructionandDevelopmentEPCenergyperformancecontractsIEA.CCBY4.4.100WorldEnergyOutlookSpecialReportESCOenergyservicecompanyEUEuropeanUnionEVelectricvehicleF‐gasfluorinatedgasG7GroupofSevenGHGgreenhousegasGWPglobalwarmingpotentialGXGreenTransformationHDDheatingdegreedayHChydrocarbonHFChydrofluorocarbonHFOhydrofluoro‐olefinHPTTCPHeatPumpingTechnologiesTechnologyCollaborationProgrammeHVACheating,ventilationandairconditioningIEAInternationalEnergyAgencyIECInternationalElectrotechnicalCommissionIPCCIntergovernmentalPanelonClimateChangeMVRmechanicalvapourrecompressionNOXnitrogenoxidesNZENetZeroEmissionsby2050ScenarioO&MoperationsandmaintenanceOECDOrganisationforEconomicCo‐operationandDevelopmentPFASper‐andpolyfluoroalkylsubstancePM2.5fineparticulatematterPVphotovoltaicRD&Dresearch,developmentanddemonstrationSO2sulphurdioxideSTEPSStatedPoliciesScenarioTFAtrifluoroaceticacidTRLtechnologyreadinesslevelTSOtransmissionsystemoperatorUNEPUnitedNationsEnvironmentProgrammeUSUnitedStatesWEOWorldEnergyOutlookIEA.CCBY4.4.AnnexCReferences101AnnexCReferencesChapter1:OutlookfordeployingheatpumpsAalborgUniversity(2013),HeatRoadmapEurope2050:Secondpre‐studyfortheEU27,https://vbn.aau.dk/ws/portalfiles/portal/77342092/Heat_Roadmap_Europe_Pre_Study_II_May_2013.pdfAHRI(Air‐Conditioning,Heating,andRefrigerationInstitute)(2022),MonthlyShipments,https://www.ahrinet.org/analytics/statistics/monthly‐shipmentsBASF(2022),BASF,SABICandLindestartconstructionoftheworld’sfirstdemonstrationplantforlarge‐scaleelectricallyheatedsteamcrackerfurnaces,https://www.basf.com/global/en/media/news‐releases/2022/09/p‐22‐326.htmlBMWK(BundesministerfürWirtschaftundKlimaschutz)[FederalMinistryforEconomicAffairsandClimateAction,Germany](2022),Boostforgreendistrictheating:Federalfundingforefficientheatnetworks(BEW)begins,https://www.bmwk.de/Redaktion/EN/Pressemitteilungen/2022/09/20220915‐boost‐for‐green‐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