The European Heat Pump market has doubled over the recent years. However, as illustrated in the chart below this growth has been rather unstable. The most important indicator is the energy price ratio, which compares major energy sources such as gas or oil. In most markets competition with gas is very close due to the relative high Seasonal Performance Factor (SPF) compensating for the lower price of gas on a per kWh basis (usually around 1/3 of the price of electricity per kWh). The current volatility of electricity and gas prices makes it difficult to predict future price ratios on a per kWh basis. In addition, initial investment cost is a major factor. Currently, ASHP’s (Air Source Heat Pumps) are approximately 1.5 times more expensive than a comparable highly efficient gas condensing boiler. This means that payback periods are usually 6-8 years.

European heat pump market

In 2008 growth was 48% with subsequent declines of 16% and 10% respectively in 2009 and 2010. The reasons for this volatility are complex but the main underlying cause is a combination of the sheer diversity of energy infrastructures in Europe and the general economic slowdown. For example, in some markets (i.e. The Netherlands, UK) gas is the main energy source used for heating due its relatively low cost, whereas other countries rely largely on electricity (i.e. France, Sweden). The actual volatility is not only due to this diversity but it compounds the impact of local government policy as well as price variations on the overall European market for heat pumps. For example, in 2008 the French market increased by 127% due to government tax incentives. This had a major impact on the overall European market.