Heat pumps have been around for a while, they increasingly make cost and environmental sense for buildings, yet their adoption is still limited. Buildings represent 40% of global energy consumption and, within the building, space and water heating make up two-thirds of energy consumption. This means that heating/cooling in buildings represents over 25% of all energy consumed on earth and we have an established technology to address that issue but we are not seizing this cost and climate-saving opportunity. In order to solve the energy for heating problem, all stakeholders must adapt and engage to drive the heat pump solution.
“Consumer and installer perceptions based on older generations of heat pump technology have built up over decades. Memories of chilly homes or unhappy customers during the heating season will continue to make installers in colder climates slow to adopt heat pumps as a core offering,” write Michael Gartman and Amar Shah in an article for RMI. “But heat pump technology has changed, and we need to address these outdated perceptions to achieve the rapid scale required to reach our climate goals.”
Heat pumps are essentially the opposite of refrigerators, using electricity and refrigerant fluid to capture heat from the air and ground outdoors, then transfer it into the building. Modern heat pumps can be up to six times more energy efficient than the fossil fuel-fired and electric resistance equipment they usually replace. Heat pumps have become an increasingly effective way for buildings and, if implemented worldwide, using heat pumps instead of traditional boilers and furnaces could cut global CO2 emissions by 3 gigatons per year.
Heat pumps are approaching cost-parity with fossil-fuel sources of heat in multiple markets. The relatively low adoption rates we have seen with heat pumps thus far are mainly down to installation cost and disruption, as there are no “one-size-fits-all” or “off-the-shelf” solutions. However, in recent years the demand for heat pumps is starting to pick up due to the rising cost of electricity and increasingly stricter environmental regulations around the world. Mckinsey now predicts that heat pumps could constitute approximately 90% of new heating unit sales by 2050, compared with just 35% today.
“While heat pumps offer a potential decarbonization solution, they don’t currently meet every building and building owner’s needs. Operational viability and installation costs vary widely across different types of buildings, due to factors such as age, size, and the current heat distribution,” explains the McKinsey Study. “It’s key for building owners and other relevant stakeholders to have flexibility in considering different decarbonization paths, even if timelines are tight.”
For property developers on greenfield projects, the choice is simple and modern heat pump technology can be integrated at the design phase. However, for owners of established buildings the decision to retrofit heat pump technology is more complex due to the disruption on building operations. Building owners must not only consider the installation issues of heat pumps but also weigh them up against operational costs, expected life and maintenance needs of existing equipment, and the trajectory of environmental regulations. Ideally, building owners would be able to align heat pump installation with a range of other retrofits and upgrades to reduce cost and make disruptions more worthwhile.
McKinsey estimates that decarbonizing the buildings sector would require increased capital spending at an average of $1.7 trillion per year between 2020 and 2050, meaning investors will also have a big role to play in the transition to heat pumps and other green tech. Real estate investors will also be driven by cost-saving and regulatory compliance but could also do more to drive adoption, such as setting decarbonization targets or exploring green or as-a-Service financing models. Private equity investors, meanwhile, may support the transition by funding the start-ups that are innovating in this area of building development.
To overcome the cost and disruption of heat pump installation, we must streamline the installation process by developing the relationship between installers and manufacturers. Better education of HVAC professionals on best practice for the solutions they work with will provide immediate results and begin to change negative customer preconceptions. Heat pump manufacturers can always also improve the performance and cost of the technology, of course, and could also add greater flexibility through modular designs that better serve a wider range of buildings in a variety of climates. And, through partnerships, heat pumps could be bundled with smart building monitoring and control to create more attractive combined solutions.
Finally, broad adoption of heat pumps will combine with other electrification trends to place increased demand on the power grid; experts suggest that electricity demand could even triple by 2050. Electric utility companies will, therefore, also have to adapt operations to play their role in driving heat pump adoption and support the electrification trend. Utilities must analyze and forecast future power demands and develop the grid for greater flexibility and efficiency, to account for heat pumps, renewable energy, storage, and other building energy developments.
“Electrifying building heat is a key and challenging step in achieving global and local net-zero goals, as well as in decarbonizing real-estate assets. It will likely require a significant investment of time, money, and planning,” reads the McKinsey study. “A one-size-fits-all solution doesn’t yet exist, as full electrification might not be suitable for a subset of building types or energy delivery systems. However, electric heat pumps have emerged as a viable decarbonization technology for many building types and could provide a path to energy efficiency and emissions reductions.”