HEAT PUMP MARKET ANALYSIS

Heat Pump Market Size and Trends

The heat pump market is estimated to be valued at USD 77.95 Bn in 2024 and is expected to reach USD 157.35 Bn by 2031, growing at a compound annual growth rate (CAGR) of 10.6% from 2024 to 2031.

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The widespread emphasis on energy efficiency and reducing carbon emissions is driving the increased adoption of heat pumps around the world. Various government incentives and subsidies for shifting to green technology have also supported the growth of this market. Additionally, innovations improving performance and lowering costs have made heat pumps an appealing alternative to traditional heating and cooling methods. The heat pump market is expected to witness steady growth over the forecast period. Stringent regulations regarding power consumption and carbon footprint reduction are compelling more commercial and residential complexes to switch to energy efficient heat pumps. Also, higher acceptance of integrating renewable energy with heating and cooling solutions will continue boosting the sales of heat pumps. However, lack of awareness about the technology and high installation expenditure may limit the adoption rate in price sensitive regions.

Climate Change Concerns

As the concerns over climate change increases, more consumers and businesses are looking for energy efficient solutions to reduce the carbon footprint. Heat pumps offer an excellent solution in this regard as they are far more efficient than traditional heating and cooling systems. While they use electricity to function, they do so in a way that transfers heat rather than generating it directly, thus reducing emissions. Studies show that heat pumps can reduce carbon emissions by up to 60% compared to standard air conditioners and furnaces. This has driven growth in sales of heat pumps as consumers look to play their part in mitigating the effects of global warming.

For instance, in November 2023, the U.S. allocated $169 million from the previous year's climate bill to fund nine projects accelerating the development of heat pumps and other systems for more efficient cooling and heating in homes and buildings. This initiative under the Defense Production Act (DPA) aims to increase spending on clean energy technologies.

Market Concentration and Competitive Landscape

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Rising energy costs and a greater focus on sustainability in the building sector has led many governments to introduce stricter energy efficiency mandates and codes. These regulations require new constructions to meet certain performance standards for heating and cooling that can be best achieved through technologies like heat pumps. For example, countries in the European Union have stipulated reduction targets for energy use from space heating through directives like the Energy Performance of Buildings Directive. Similarly, in countries like Japan and South Korea, subsidies are provided to make heat pumps a more economically viable choice that can fulfil renewable energy obligations.

For instance, in November 2023, LG Electronics is a manufacturer of  consumer electronics & home appliances, is establishing a research facility in Alaska, U.S., as part of the Consortium for Advanced Heat Pump Research (CAHR), a partnership between LG Electronics and local universities. The focus is on advancing research and development in heating, ventilation, and air conditioning (HVAC) with a goal to enhance the competitiveness of LG's HVAC products through innovations in cold climate technology.

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The heat pump market faces several challenges. Due to lack of consumer awareness, there is low demand and adoption of heat pumps compared to traditional heating systems. High initial installation costs make heat pumps unaffordable for many customers. Strict energy efficiency standards increase manufacturing costs. Dependence on refrigerants that have high global warming potential is an environmental concern. Skilled workforce shortage is a challenge for broad-based installation and maintenance of these technically-complex systems. Utilities' resistance to change from traditional fuel-based heating poses regulatory and policy barriers to market growth.

Market Opportunities: Innovation for Sustainability and Government Subsidies

The heat pump market offers significant opportunities for growth. Government incentives and subsidies can make heat pumps cost-competitive with gas furnaces and boost consumer demand. More energy efficient and innovative product designs will appeal to eco-conscious customers.

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In terms of pump type, air-water heat pump is expected to contribute the highest share of 72.1% in 2024, owing to rapid technological advancements. Air-water heat pumps use refrigerants to extract heat from outdoor air and transfer it indoors for heating, as well as moving heat from indoor air to outdoor air for cooling. The latest generation of air-water heat pumps offer higher efficiencies and capacities. Units now available can operate efficiently even in sub-zero climates. Manufacturers incorporating inverters, heating-boost modes, and improved compression cycles have enhanced performance. Connectivity features allow remote monitoring and control via smartphones. Growing understanding among contractors and end-users of air-water heat pumps' benefits over conventional HVAC systems have also supported the market growth. Their installation requires minimal outdoor equipment and piping compared to other heat pump types.

Insights, By Capacity- Operational Flexibility Boosts the 20-30kW Capacity Segment

In terms of capacity, the 20-30kW segment is expected to contribute the highest share of 38.71% in 2024, owing to its flexible operations. Heat pumps in the 20-30kW range can effectively handle heating and cooling requirements of medium-sized commercial buildings. Their capacities make them suitable for small hotels, retail stores, schools and office complexes. Compared to lower capacity units, they offer economies of scale. However, their outputs are still reasonably sized to serve staggered or part-load conditions common in commercial facilities. The 20-30kW range strikes an optimal balance between capabilities and right-sizing. They face minimal issues of over- or under-sizing faced by units above or below this bracket. Their modular designs also allow capacity expansion overtime as needs grow.

Insights, By Application- Growth in Housing Drives the Residential Segment

In terms of application, the residential segment is expected to contribute the highest share of 68.13% in 2024, driven by housing construction growth. Demand for heating and cooling solutions increases in line with new household formations. Risen disposable incomes boost upgrades to higher efficiency equipment. Air-source heat pumps have emerged as an affordable and eco-friendly solution versus conventional HVAC systems. Governments also offer consumer rebates and tax credits to adopt renewable technologies. Manufacturers launch attractive financing schemes to promote heat pumps as part of home improvement and existing home upgrades. Rising sustainability focus and performance improvements make heat pumps an attractive value proposition for residential buyers.

Regional Insights

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The Asia Pacific region, is expected to have a largest share of 52.23% in 2024, especially China and Japan, is witnessing exponential growth in the heat pump market. Rapid urbanization, infrastructure development activities, and improving living standards have boosted the demand for space heating & cooling equipment in the region. Additionally, low manufacturing and labor costs have encouraged global players to establish production bases in several APAC countries. This has made heat pumps more affordable for local customers. Country-level initiatives to transition away from fossil fuel-based systems and bring down carbon footprint are favoring the adoption of renewable heating technologies such as heat pumps.

The European heat pump market is expected to have a highest CAGR of 14.34% in 2024, dominated by countries like Germany, France, Italy, and the Nordic nations owing to stringent regulations on energy efficiency and carbon reduction. Majority of homes in these countries are installed with high-efficiency ground source or air source heat pumps that utilize renewable energy sources for space conditioning. Heat pumps also gain prominence in the commercial sector of Europe due to incentives offered on green construction projects. On the other hand, the rising and developing markets in Central and Eastern Europe are importing heat pumps in large volumes.

Market Report Scope

Heat Pump Industry News

• In September 2023, a U.K.-based energy provider, Octopus unveiled a high-temperature heat pump as part of its efforts to expedite the transition to more sustainable heating solutions
• In August 2023, Glasgow-based energy infrastructure company, Smart Metering Systems (SMS plc) acquired the home services division of Evergreen Energy, a Manchester-based company specializing in heat pump solutions and Europe-made renewable energy equipment.
• In March 2023, Mitsubishi Electric developed an air-source heat pump utilizing propane (R290) as the refrigerant, capable of producing heat and domestic hot water up to a temperature of 75°C
• In October 2022, Midea Group began constructing a new base in Feltre, Northern Italy, with a USD 65 million investment, dedicated to producing, researching, and developing heat pumps. This initiative supports Midea Group's international market expansion and involves collaboration with Clivet, a Europe-based company specializing in cooling, heating, air ventilation, and air purification systems.

*Definition: The heat pump market includes companies involved in manufacturing and selling heat pumps. Heat pumps are electrical devices that can heat or cool indoor air through the transfer of heat in outdoor air or by extracting heat from the surrounding soil, water or air. Heat pumps provide an energy efficient alternative to traditional furnaces and air conditioners. The growing demand for green energy solutions is driving the growth of the heat pump market. More consumers and businesses are adopting heat pumps to cut down heating and cooling costs as well as reduce their carbon footprint.

Market Segmentation

• Pump Type Insights (Revenue, USD Bn, 2019 - 2031)
  • Air-water Heat Pump
  • Air-air Heat Pump
  • Ground Source Heat Pump
  • Hybrid Heat Pump
• Capacity Insights (Revenue, USD Bn, 2019 - 2031)
  • Up to 10kW
  • 10-20kW
  • 20-30kW
  • Above 30kW
• Application Insights (Revenue, USD Bn, 2019 - 2031)
  • Residential
  • Industrial
  • Commercial
• Regional Insights (Revenue, USD Bn, 2019 - 2031)
  • North America
    • U.S.
    • Canada
  • Latin America
    • Brazil
    • Argentina
    • Mexico
    • Rest of Latin America
  • Europe
    • Germany
    • U.K.
    • Spain
    • France
    • Italy
    • Russia
    • Rest of Europe
  • Asia Pacific
    • China
    • India
    • Japan
    • Australia
    • South Korea
    • ASEAN
    • Rest of Asia Pacific
  • Middle East & Africa
    • GCC Countries
    • South Africa
    • Israel
    • Rest of Middle East & Africa
• Key Players Insights
  • Carrier
  • Daikin Industries, Ltd.
  • Danfoss Group Global
  • Fujitsu
  • GDC Group Limited
  • Glen Dimplex Group
  • HAIER(GENERAL ELECTRIC)
  • Hitachi, Ltd.
  • Ingersoll Rand Plc.
  • Johnson Controls, Inc.
  • Lennox International
  • LG Electronics, Inc.
  • Melrose Industries PLC
  • Midea Group
  • Mitsubishi Electric Corporation
  • NIBE Industrier AB, Corp.
  • Panasonic Holdings Corporation
  • Rheem Manufacturing Company
  • Robert Bosch GmbH
  • Samsung
  • Stiebel Eltron Group
  • The Bosch Group
  • United Technologies Corporation
  • Vaillant Group
  • ViessmannWerke GmbH & Co. KG