Battle for dominance in heat pump markets reaches Europe

Following the disastrous loss of the EU's solar industry, heat pump manufacturers in the bloc are wary of meeting a similar fate. [Shutterstock/Nimur]

*This article has been amended with comments received after publication

Heat pumps, considered crucial to climate-neutral heating, are another industrial sector in which nations compete over leadership. The EU learnt a harsh lesson from the loss of its solar industry, can it avoid a repeat of history?

Heat pumps are considered two to five times more efficient than fossil heating, as they transfer and concentrate energy through the use of electricity. For now, European heat pump manufacturers are competitive, just like the European solar industry once was.

The European Commission has signalled that it is paying attention to the threat of losing its industrial capacity in yet another sector.

“While the EU is a global leader in electrolyser, wind and heat pump technologies, the EU solar panels and heat pumps market has seen increasing imports from Asia over the last years,” the EU executive wrote in 18 May REPowerEU communication.

The global market for solar panels is arguably the EU’s greatest failure in industrial policymaking. “We gave away this advantage in around 2010 when it came to the solar industry. We had an economic advantage,” said the EU-Greens’ MEP Jutta Paulus.

“And now the technological leader in the solar industry is China. We should not repeat this error,” she added. 

The impact of Europe’s dependence on Russian energy has already increased policymakers’ aversion to being similarly dependent on another regime, for example, China. Recent developments are sure to cause additional worry in the Berlaymont.

According to an EU official, imports from China have significantly shifted the EU’s trade balance in the heat pump industry over the last five years. A trade surplus of €249 million in 2015 became a deficit of €40 million in 2020.

During that period, heat pump imports from China grew by 17% annually until 2020. In 2021, initial data suggested that heat pump imports from China have doubled once again.

The European Commission declined to officially comment on which countries or manufacturers in Asia exported heat pumps to the EU market.

But Asian companies are far from the only serious challenger to European heat pump manufacturers like Bosch, WOLF or Viessmann. The US Senate is preparing a tax credit bill to strengthen its domestic heat pump manufacturers, with the explicit aim of exporting to Europe.

“By spurring US heat pump manufacturing, we can lower emissions, cut European dependence on Russia, and create jobs at home,” explained John Hickenlooper, a Colorado Democratic senator and co-sponsor of the “Heating Efficiency and Affordability through Tax Relief” (HEATR) Act

The bill, initially put forward in early May, would “spur domestic job creation by requiring equipment to be manufactured in the US” to qualify for the proposed tax cut, said its main sponsor Minnesota Democratic Senator Amy Klobuchar.

Exporting US-made heat pumps to Europe has been the subject of EU-US coordination. “The sides also discussed options to reduce Europe’s demand for natural gas, including with the deployment of heat pumps,” read the statement of a 28 April meeting of the EU-US task force on energy security.

European industry position

Europe’s heat pump manufacturers are watching these developments carefully.

In late 2021, the German manufacturer WOLF doubled its heat pump production capacity. “We have completely restructured heat pump assembly at WOLF,” said project lead Siegfried Ziegler then. 

Similarly, Viessmann, the second-largest heat pump producer in Europe, has invested a lot. “Viessmann plans to invest more than €1 billion in heat pumps and other green solutions in the coming years,” said Alix Chambris, vice president of public affairs and sustainability at Viessmann. 

“Given the enormity of the task ahead, we can’t do it alone,” she added, calling for a boost to “domestic production and R&D capabilities” to ensure a competitive European heat pump industry. Doing so would safeguard “more than 1.8 million direct and indirect jobs.”

This push for more government support is backed by the European Heat Pump Association (EHPA), which counts third-country heat pump producers among its members. 

“We need a strategic approach to support the local industry and maintain Europe’s know-how leadership,” said Thomas Nowak, EHPA secretary-general, calling for a heat pump accelerator similar to the EU’s policy support for hydrogen.

Europe’s booming demand for heat pumps exposes bottlenecks

Sky-high gas prices have sent demand for heat pumps booming across Europe, exposing a range of bottlenecks limiting industry’s ability to deliver, including a shortage of skilled labour, as well as the need to simultaneously insulate buildings to ensure maximum efficiency.

[Edited by Benjamin Fox]

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