The transition from ‘old’ to ‘new’ heat is disrupting the market in several ways, creating new business models, customer propositions and new technology ecosystems, as well as opening up opportunities for new market players and sales channels. In part one of this two-part blog series, we discussed  how new technology ecosystems and connectivity are shaping the market. 

For this second and final part of the heat blog series we consider customer propositions and new market entrants and how they will impact the heating market. 

The transition from ‘old’ to ‘new’ heat is disrupting the market in several ways, creating new business models, customer propositions and technology ecosystems, as well as opening up opportunities for new market players and sales channels. This two-part blog series will consider how the heat market could evolve and what could be seen in the next few years.

This first part considers heating system functionality and connectivity, value stream diversification and hydrogen for heat. The second will look at customer propositions.

It was an inspiring two days at the Delta-EE European Heat Summit in London last week when close to 100 delegates from across the heating sector were brought together in an exciting programme spanning start-ups to energy giants and topics as diverse as hydrogen networks, smart electric heating controls and heat-as-a-service.

With this year’s Summit, it seems to us at Delta-EE that we have reached a tipping point in the decarbonisation debate. Decarbonising new build across Europe is looking increasingly positive, and though retrofit remains the largest challenge, the Summit demonstrated that there is a wealth of technologies, business models and proposition ideas that – targeted at the right sectors – promise to overcome some of this challenge.

We are at a pivotal time for the heating market in Europe, as the transition from ‘old’ to ‘new’ heat gains traction.

The decarbonisation agenda is finally placing heat at its centre in many markets. The heating market is seeing more disruption than ever before, as new market players compete with the incumbents, new business models and propositions emerge, traditional routes to market are turned on their heads, and technology ecosystems evolve. 

Building on the success of previous events and bringing together key stakeholders in the European heating space, we are holding another Heat Summit this year. The event, taking place in London this September, will focus on several key themes emerging from the transition from ‘old heat’ to ‘new heat’. Read on to find out what we’ll be covering and register for this unmissable event.

Navigating the transition to ‘new heat’

Gas heat pumps struggle to gain traction in the market even though the technology is ready and proven (nearly 15,000 installed in Europe and 800,000 in Asia, for a wide range of applications).  In most European markets, installations number less than 1% of annual heating installations.  

Delta-ee has been investigating the potential opportunities for gas heat pumps in commercial buildings, as part of research for the UK Department of Energy and Climate Change.  We identify potential for at least an order of magnitude growth for gas heat pumps in the UK by 2020, with the best opportunities in sectors such as health care, restaurants, hotels and education.
 

Why are we positive?  Here are three reasons:

1. Gas heat pumps can already make economic sense against the incumbent and notoriously challenging-to-compete-with gas boiler.
2. Gas HPs represent off gas grid opportunities too (e.g. switching from oil boiler to LPG Gas HP).
3. Gas HPs have less impact on our aging electrical grid infrastructure and represent an opportunity to decarbonise without so much grid investment to support it. 

But there are significant barriers to overcome if this potential is to be unlocked.  Based on our research, the top five barriers to gas heat pumps being installed were:

1. Specifiers - arguably the most critical link in the supply chain to get gas heat pumps to market - are a block. “Why would we choose an unknown technology when we can more quickly design a boiler solution which we know works?” quote from specifier
2. Limited sales channels and routes to market for gas heat pumps create challenges for accessing the technology (especially in the UK)
3. Lack of awareness and/or in some cases poor perception of gas HP technology due to lack of information
4. Upfront cost of gas heat pumps relative to incumbent technology (i.e. gas boiler)
5. Policy - this does not currently set a framework which places Gas HPs on an even playing field

We believe that gas heat pumps should receive any incentive offered to other renewable technologies, including electric heat pumps, but that incentives alone are not the key to unlocking the market.  There is a role to play for gas heat pump suppliers and heating suppliers to drive this market themselves.  A focus on information dissemination throughout the value chain, developing the supply chain, and paying particular attention to specifiers will be a strong starting point to building a sustainable market.

Find out more about our previous work with DECC here. For more information on our in depth gas heat pump reports visit our Heat Pump Research Service web page.