A widespread energy crisis? Runaway inflation? If history rhymes, 2022 is full of references to the 1970s. At the time, the double whammy of the 1973 Arab-Israeli War and the 1979 Iranian Revolution caused major disruptions to oil exports from the Middle East, and the ensuing energy crisis exacerbated the recession in the West and reminded many of the need for alternative energy sources.
The crisis marked the maturation of a technology first developed in the mid-19th century: heat pumps that transfer heat from the ground, water and air into buildings. Companies struggled to invest in those big, unremarkable boxes, but the crisis was over, fossil fuels were cheap again, and the humble heat pump was all but abandoned.
Now the heat pump is back as a Russian gas plot is forcing Europe to close factories and face a cold winter. And this time around, a cascading climate crisis requiring rapid deployment of renewables means it is likely to persist.
“There are solutions,” said Max Wiessmann, CEO of German heating and cooling giant Viessmann. “[The heat pump] is actually a lot more advanced than people think and needs to be expanded now.”
Heat pump systems, which consist of connected equipment inside and outside the building they serve, may not be very attractive: air source heat pumps are the most common type, similar to large air conditioning units but very efficient.
While a gas stove-based heating system is no more than 95 percent efficient, meaning it provides 95 units of energy for every 100 units of energy it burns, modern heat pumps are 450 percent more efficient. To power the system, one unit of electrical energy is introduced, and the output is usually at least 4.5 units of thermal energy. The heat generated by the system is already in the atmosphere, unlike the energy that comes from fossil fuels.
So, according to a November report from the International Energy Agency (IEA), it’s not hard to see why nearly half of new multi-family homes and more than 40% of new single-family homes in the US are built with heat pumps. Old buildings can also be equipped with heat pumps, but this means cutting a hole in the wall and installing new electrical connections, which gives a relatively small market share today. Buying a heat pump is certainly more expensive than buying its dirtier counterparts – they can easily cost tens of thousands of dollars depending on the size of the property – but they are much cheaper to run.
Heat pumps have an added bonus: most can also be used as cooling systems. Like refrigerators and air conditioners, heat pumps use a fluid called refrigerant to transfer heat—they simply transfer heat from the outside to the inside rather than from the inside to the outside. According to the German Heat Pump Association, a reversible system, like most air and water heat pumps, can lower the room temperature by up to 5°C. This is a big advantage in relatively temperate regions such as Europe where air conditioning is rare but heat waves are becoming more common and extreme.
Viessmann, a 105-year-old company, recently announced a $1 billion investment over the next three years in heat pumps and other sustainable products.
The company is a prime example of a medium-sized Mittelstand family business, a category that forms the backbone of the German economy, a country that is keen to respond to rapid climate change and the current energy crisis. Max represents the fourth generation of his family leading a $3.4 billion company. Viessmann introduced the first heat pump in 1979, but discontinued the technology after the energy crisis subsided. But a few decades ago, it returned to the heat pump market and captured about 15% of the German market last year.
Viessmann now needs to defend its position as one of the country’s market leaders as its competitors pour more money into heat pump technology.
Stiebel Eltron, with 98 years of experience, entered the heat pump industry in the 1970s and stuck with it, even though the technology failed very recently. The company has increased production of heat pumps by 60 percent over the past year to meet demand. It’s now one of Europe’s top five heat pump manufacturers and last month announced a fresh $600 million investment in heat pump production and R&D over the next five years. It’s now one of Europe’s top five heat pump manufacturers and last month announced a fresh $600 million investment in heat pump production and R&D over the next five years. The company is now one of the top five heat pump manufacturers in Europe and last month announced a new $600 million investment in heat pump manufacturing and research and development over the next five years. The company is now one of the top five heat pump manufacturers in Europe and last month announced a new investment of US$600 million in heat pump manufacturing, research and development over the next five years.
“In a world where no one thought about using natural gas and emitting a lot of CO2, it’s hard to sell something more expensive with the benefit of less CO2,” said managing director Kay Schiffelburn. “Today we see the heat pump market in Europe growing rapidly, mainly thanks to climate protection.”
In fact, while the Ukrainian crisis caused a sudden surge in demand for heat pumps this year, leaving many buyers waiting months for a new one, demand in Germany has skyrocketed since 2019 when the government ramped up demand to meet demand. goals.
Globally, heating, cooling and powering buildings account for more than a quarter of greenhouse gas emissions. Germany’s per capita carbon emissions in 2020 were 56% higher than the G20 average, according to the government-backed group Climate Transparency, thanks in large part to the widespread use of natural gas and oil to heat buildings. This makes heating and transportation a priority for lawmakers.
With the introduction of new subsidies, heat pump sales in Germany jumped by 40% between 2019 and 2020 and then rose by another 28% to reach 154,000 units in 2021, compared to about 900,000 heating units sold in Germany that year. same year. (According to the IEA, 177 million heat pumps were installed worldwide in 2020, an annual increase of about 10 percent over the past five years.)
Last month, Germany’s new environmentally conscious government revised the subsidy scheme, cutting the maximum subsidy for heat pumps from 50 percent of list price to 40 percent.
This is not a big blow to the heat pump industry, as the government has also stopped subsidizing gas boilers (still the most popular way to heat buildings) and oil-fired heating systems. He pledged to pass a law requiring that all new heating installations receive at least 65% of their energy from renewable sources.
“In order for the industry to be able to plan and ensure planning safety, it is very important that this is legislated,” said Katja Weinhold, director of public relations for the German Heat Pump Association. “This will send an important signal that the case standard in Germany is no longer a gas boiler will be installed, and an electric heat pump will be installed instead.”
The 65% rule is yet to be defined, which is just one of several uncertainties currently plaguing the heat pump industry.
A looming problem, especially given the skyrocketing demand for heat pumps, is the ongoing global shortage of chips. “It’s hard to get microchips right now, especially processors,” says Stiebel Eltron’s Schifelbein. “The chips are mainly supplied to the automotive industry,” says Max Wiessmann. “Do we need more cars or do we need more heat pumps to make our homes and industrial processes independent of [fossil fuels]?”
Lars Ivar Nitter Havro, senior analyst at Rystad Energy, who expects global demand for heat pumps to grow sevenfold by 2050, said the chip supply chain is still “feeling some of the effects of the COVID lockdown.” But he also warned of potential problems down the road as relations between China and Taiwan deteriorate, with the former supplying key materials for chip production for the latter, and Russia’s war in Ukraine suspending Ukraine’s inert gas production (which is also critical to chip production).
Another important source of uncertainty is related to the refrigerant that powers the heat pump. These are currently typically so-called fluorinated gases such as HFCs, which ironically have up to 1,700 times the global warming potential of carbon dioxide if they leak from the system.
Europe could order a phase-out of these substances later this year, leaving heat pump production in limbo. Some companies are already turning to natural, greener alternatives – some Viessmann products use propane, for example – but many fear that switching too quickly could kill the heat pump market when they are most needed.
“Compared to energy efficiency improvements, refrigerants have a very small impact on the climate,” Shifelbein says. “Of course everyone wants to use natural refrigerants like propane in heat pumps, but if we move away from HFCs too quickly, it will only slow down the growth of the entire heat pump market… Many products today cannot use natural refrigerants. My personal suggestion is that if someone develops a new heat pump and brings it to market for the first time, then [the rules might say] it should use a natural refrigerant.”
There are other challenges in finding enough skilled workers to install a heat pump, most importantly, making sure the home is well enough insulated to take full advantage of a heat pump installation. The question of how many people should be forced to install them also remains open. Max Fissmann warned that Germany’s overly draconian approach could lead to a “yellow vest movement similar to what we’ve seen in France,” referring to popular uprisings fueled by high energy prices.
But the environmental benefits of heat pumps are clear, and politicians around the world are embracing the technology. For example, the United States, which already accounts for half of the market, is further incentivizing the installation of heat pumps through subsidies in the Inflation Reduction Act.
Like electric cars, heat pumps show that much of the technology the world needs to tackle the climate crisis already exists—just make it standard.
Clarification, September 15, 2022: This article has been updated to clarify the cooling potential of heat pumps.
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