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Stephen developed and manages Delta-ee's Pathways Tool and Roadmap Service and leads our ongoing research in this field - forecasting the future of domestic heating in different European countries.  He also developed Delta-ee's Microgeneration Insight Service which includes customer research and microgeneration uptake forecasts for the UK.  Since joining Delta-ee in June 2008, Stephen has managed a wide range of client assignments including topics such as solar PV, smart home energy management systems, fuel cell micro-CHP, electric vehicle recharging infrastructure and heat pumps. Stephen completed an MSc in Sustainable Energy Systems and a BSc in Mathematics at the University of Edinburgh.

Low carbon heating market in Europe to see a four-fold growth in annual sales by 2025

In my previous blogs & webinars, I discussed the outlook for low carbon heating appliances in five of Europe’s largest heating markets – Germany, France, Italy, the Netherlands and the UK – comparing and contrasting the opportunities in these markets.

Summing up the analysis from our Roadmap Service across all five countries, ‘gas boiler only’ sales fall by more than 800,000 units per year in the next decade. That’s equivalent to the entire Italian gas boiler market disappearing, or a 22% fall in market size across these five countries.

In the same time frame, the low carbon heating market across these countries will grow four-fold to just over 1.5 million units per year (almost the same size as the UK heating appliance market!).

Below are two interesting charts I’ve generated from analysis across all five markets:

Low carbon technology sales forecasts per country




France – narrowly – offers the best prospects for low carbon appliance sales by 2025. It has by some way the biggest new build market in Europe (~300,000 new dwellings per year) and strict building regulations (RT 2012) forcing a shift towards low carbon.

Breaking down the growth in low carbon technology sales, by technology

Annual sales of low carbon appliances will grow by ~1.1 million units per year by 2025 – with more than ten technologies fighting for a slice of the pie.




Across the five markets, ‘gas boiler plus’ solutions (this is a boiler in combination with solar thermal, solar PV or a hot water heat pump) captures the biggest share of this opportunity – just less than one quarter of the growth in the low carbon market. But there are three other key technologies hot on its heels, each grabbing a 15 – 20% slice of the growth in sales.

So, lots of change on the horizon and varying levels of engagement with low carbon among the appliance manufacturers. Some are being more cautious than others, but it’s too early to call which approach will win. A few examples of what we are seeing today are:
  1. Viessmann already offers air source and ground source heat pumps & is planning on introducing a fuel cell offering in Germany in 2015. It also announced recently plans to open the ‘largest technical centre of its kind’ in 2017 for developing new technologies.
  2. Vaillant has added air source, ground source and hybrid heat pump offerings to its portfolio in recent years.
  3. Daikin launched a hybrid heat pump offering in Europe in 2014.
What’s next?

In an upcoming webinar in December 2014, we’ll explore in more depth the opportunity for low carbon sales in Germany, France, Italy, the Netherlands and the UK, highlighting which markets are most attractive and which technologies offer the best hopes for growing new sales.

To register an interest in this webinar, please email [email protected]

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Italy: A huge residential boiler market, but is there an opportunity for low carbon?

We recently completed our Roadmap Service forecasts for Italy and, having now assessed a number of major European residential boiler markets and the opportunity they present for low carbon technologies, it’s clear that no two markets are the same. Italy is certainly unique!

With around 1 million residential scale heating appliance sales per year, Italy is a big boiler market – the majority of which are gas boilers. So it’s potentially a large market for developers of new heating technologies to target. But Italy is very different to other European markets in terms of: the mix of heating appliances installed; climate (influencing the choice & appeal of heating systems in the North versus the South); the policy framework for low carbon; & economy.

So, does a big boiler market = a big opportunity for low carbon?

Our Roadmap Service takes these factors into account and quantifies the significant role that boilers will continue to play in Italy to 2025. It also identifies clear opportunities for a number of low carbon technologies. A significant share of the heating market is up for grabs.

The figure below illustrates how the value of the heating market in Italy transforms to 2025 from our Roadmap Service forecasts. “Other” technologies (i.e. low carbon heating technologies such as heat pumps, hybrids, micro-CHP, solar etc.) double their market value to ~€2billion by 2025.

Breakdown of the value of the heating market in Italy today and in 2025.



What will drive this transformation in the value of the Italian residential heating market to 2025?

The key drivers that we see delivering this growth are:

1. A recovery in the new build market, which is almost non-existent today

2. Tightening and enforcement of building regulations

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The future of the French and Dutch heating markets: How will they evolve?

In May 2014, more than fifty specialists from Europe’s leading utilities and heating industry companies joined a Delta-ee webinar to discuss the future of the French and Dutch heating markets. To access the webinar recording and slide set follow this link.

During the webinar, we explored two key questions using the Pathways Tool and Roadmap Service (Netherlands & France editions):

1.       How are residential properties heated in the Netherlands and France today?

2.       How will the heating markets in both countries change to 2025?

This was the second in a series of webinars exploring how the residential heating markets across different European countries will evolve to 2025.[1]  

Q1. How are residential properties heated in the Netherlands and France today?

The Netherlands and France are two major European markets for heating appliance sales – but are incredibly different in terms of the mix of annual appliance sales in each market, the mix of fuels used to heat homes and in the scale of their new build housing markets. 

BREAKDOWN OF THE HOUSING STOCK IN THE NETHERLANDS AND FRANCE BY THE FUEL TYPE USED TO HEAT HOMES, AND A COMPARISON OF THEIR NEW BUILD MARKETS



In the Netherlands, more than 95% of residential dwellings are connected to gas with low cost gas boilers dominating annual boiler sales.  Competing with cheap gas boilers is a huge challenge for lower carbon technologies, meaning lower carbon appliances only account for 3% of annual appliance sales today.  Air source heat pumps, ground source heat pumps, biomass boilers and solar thermal are competing closely for these sales today – each achieving sales of a few thousand units per year.

In France, the story is very different – homes are more likely to be heated by electricity or oil than they are by gas.  This higher share of “off-gas” homes (where heating bills are usually high) presents a good opportunity for lower carbon technologies to deliver fuel bills savings and deliver a more attractive proposition for customer.  As a result, 10% of annual appliance sales today are lower carbon, with air source heat pumps dominating these sales.

Another key difference between both markets which influences uptake of lower carbon technologies is the size of their new build markets.  In France, the new build market is near 300,000 dwellings per year.  Coupled with tough building regulations – requiring a share of the hot water demand to be met by renewables – this is encouraging the adoption of lower carbon technologies.  In the Netherlands, where building regulations are weaker and where the new build market is much smaller, new builds present only a small opportunity for lower carbon technologies.


Q2. How will the two heating markets change to 2025?

EVOLUTION OF LOWER CARBON HEATING APPLIANCE SALES IN THE NETHERLANDS & FRANCE TO 2025



By 2025, we expect lower carbon technologies to account for one quarter of annual heating appliance sales in the Netherlands, with gas boiler sales falling by around 75,000 units per year. A number of technologies will be competing for a share of these sales, with two key technologies dominating sales.  Lower carbon gas technologies will win out.

In France, we also see significant growth in lower carbon sales.  By 2025, we expect low carbon technologies to account for 30% of annual heating appliance sales – around 240,000 units per year.  A range of technologies will be competing for this – but we expect ASHPs to remain the leading technology, displacing primarily electric heating.  Lower carbon gas technologies such as hybrids, gas heat pumps and micro CHP will also be competing. 

To access the slide set for this webinar please go to our website.

 
How similar is this story in other European markets?

One thing is for certain – each European country has its own unique story as to why it’s heating market looks the way it does. And each country will have a new story to tell as to why each will develop uniquely out to 2025.

Next in this webinar series, we will be looking at the prospects for one or two key technologies across a number of European markets.  To register an interest in this webinar, please email [email protected]. Places are limited.



[1] In our previous webinar, we compared Germany and the UK – two markets that will develop very differently in the next 10 years.  To access the slides set & recording of this, click here
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Comparing the future of the German and UK heating markets

Earlier this year, 70 specialists from Europe's leading heating industry and utility companies joined a webinar to discuss the future of the German and UK heating markets. ( To access the slide set for this webinar, or to download the recording, click here and scroll down) .

To a backdrop of a transforming European home energy market (read more on the challenge for utilities here), we addressed two fundamental questions using the Pathways Tool and Roadmap Service (Germany & UK editions):

1.       How do the German and UK heating markets compare today? 

2.       How will the two heating markets change to 2025?

Q1. How do the German and UK heating markets compare today?

While Germany and the UK are similar in terms of being two of Europe’s largest heating markets and in the dominant role gas boilers play within each market – this is where the similarity ends.

Annual sales of heating appliances in the UK and German markets, broken down by gas boilers, oil boilers, electric heating and low carbon technologies
























In Germany, there is already a relatively high penetration of low carbon heating appliance sales – around 20% of annual sales (130,000 units).  And there is a broad range of appliances being adopted – air source heat pumps (ASHP), ground source heat pumps (GSHP), biomass and ‘gas boiler plus solar thermal’ share the majority of these sales.

A key driver for this is policy (building regulations and the EEWärmeG), which is forcing the adoption of lower carbon heating solutions in newly built properties (ASHPs or biomass boilers are now the standard solution for new build homes without a gas connection). Other drivers include the high residential energy prices resulting in high energy bills and the fact that German homeowners have higher awareness and willingness to pay for low carbon heating systems.

In the UK, the story is very different with much more emphasis on ‘low cost’ heating solutions.  Despite having a heating market that’s more than double the size of Germany’s, the penetration of low carbon technologies is much lower.  Higher cost, low carbon technologies are usually only adopted by the UK’s wealthy innovators with the result that only 2% of annual heating appliance sales can be classed as ‘low carbon’.

The range of technologies adopted is also more limited than in Germany.  ASHPs dominate annual sales, driven primarily by building regulations forcing adoption in new builds (especially in social housing), and by the promise of the renewable heat incentive.

Q2. How will the two heating markets change to 2025?


SHARES OF ANNUAL HEATING APPLIANCE SALES IN GERMANY & THE UK TO 2025





















By 2025, we expect the share of low carbon appliances to grow to around 40% in Germany, with conventional appliance sales falling by around 130,000 units per year. Gas boilers will take the biggest hit. And a number of technologies will be competing for a share of these sales. We have identified five key technologies that will dominate this growth.

In the UK, we also see significant growth but from a much lower starting point. By 2025, we expect low carbon technologies to account for just under a third of annual heating appliance sales – around 400,000 units per year. Much of this will be low carbon gas technologies (hybrids, micro-CHP, gas heat pumps) or electric technologies, displacing gas boiler replacements. In the UK, we also see oil boiler sales almost disappearing by 2025 – being displaced mainly by electric technologies or by low carbon, high efficiency oil appliances.

To access the slide set for this webinar, or to download the recording, click here.

How similar is this story in other European markets?

The movement of European heating markets away from conventional heating systems is uniform – but the differences between markets is unique and varied.

Next in this webinar series, we compare the Dutch and French heating markets, and ask how these two major markets evolve differently out to 2025. To register an interest in this webinar, please email [email protected]. Places are limited.




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Is Germany moving into the slow lane for low carbon heat?

Today Germany is ahead of the pack for delivering a low carbon domestic sector – but can it keep it up?

Each year, 650MW of solar PV and around 120,000 low carbon heating appliances (mainly ASHPs and gas boiler plus solar thermal) are installed in domestic properties – substantially more than most other European countries.  But for how much longer will Germany remain in the lead?  Our latest Roadmap Service research, which focuses on Germany, forecasts how the residential heating market will evolve to 2025 – it shows that the mix of low carbon heating appliances will dramatically change in next decade and that the UK could soon overtake Germany (see our previous blog 'Will the Renewable Heat Incentive revolutionise domestic heating in the UK?').

Annual appliance sales in Germany in 2012 – 20% of sales are low carbon appliances 
 
Source: Delta-ee, 2013


A changing energy landscape means some low carbon heat technologies will struggle to 2025…


Despite an already impressive penetration of low carbon heating technologies (accounting for 20% of annual sales), we expect to see only slow growth in annual sales to 2025 – with low carbon gas-based technologies winning out.  High electricity prices in Germany make the running costs of electric heating systems painfully expensive for consumers – we expect this to stunt the growth in the ASHP market, as other low carbon technologies become economically more attractive.

Germany’s ‘Energiewende’ is responsible, in part, for these high prices – over 20% of the retail electricity price is funding the EEG tariffs for renewable electricity.  This share has been steadily growing over the last few years, and with the annual market for PV still growing in Germany, this share could continue to grow.  A widening gap between electricity and gas prices will naturally favour gas-based heating appliances.

 

But, has the ‘boom’ in renewable electricity in Germany killed the opportunity to decarbonise heat?

I don’t think it has – for 3 key reasons:

1.       I see a strong opportunity for low carbon gas technologies as more products – offering lower running costs than boilers – enter the market in the next 2 – 3 years.  In particular, the future is bright for gas heat pumps, engine based micro CHP and fuel cell micro CHP.

2.       ASHPs are still attractive off gas – and more attractive heat pump tariffs could be a game-changer: High electricity prices, and rising EEG costs, will make it difficult to grow electric heating.  Using our Pathways Tool, I’ve modelled the impact of removing the EEG costs from retail electricity prices.  While this does little to improve the economics of ASHPs against gas appliances, it does make ASHPs more attractive in off gas properties. If more attractive heat pump tariffs are also introduced, electric heat pumps could compete in on-gas segments.

3.       Continued growth in renewable electricity generation could support decarbonisation of the gas grid: A growing interest in ‘power to gas’ projects could see excess renewable electricity ramping up the de-carbonisation of the gas grid in Germany. Although this is still a long way off.

 For further information on the above, please contact [email protected]

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Will the Renewable Heat Incentive revolutionise domestic heating in the UK?

The announcement of the domestic Renewable Heat Incentive (RHI) scheme in July this year is welcome news for the fledgling renewable heat industry, as discussed in our previous entry: ‘RHI = Really Happy Industry'.  But, will the proposed incentive levels ignite genuine interest amongst discerning UK customers and drive significant uptake?

I’ve been using our Pathways Tool and Roadmap Service research to explore this question, and the answer is yes!

Over the next decade, there’s going to be a huge shift in the structure of the UK’s domestic heating market.  Overall boiler sales are set to fall by 30% (by more than 400,000 units per year).  Oil boiler sales will almost disappear (see the figure below).  These heating systems will be displaced by a range of low-carbon alternatives whose market will grow from low 10,000s today to 100,000s by 2025 – with an installed market value worth £2.5 billion in 2025.

Evolution of residential heating appliance sales in the UK to 2025.

Source: Delta-ee, 2013

And the winners will be….     
  • I expect to see a boom in sales of hybrid heat pumps to 2020 – the combination of a relatively low upfront cost with a great payback (even on gas), and a comparatively straightforward retrofit will grab the attention of UK customers. Most other low carbon alternatives will struggle to compete with this in the short term.    
  • And the market for ASHPs will take off – ASHP economics means they will become very attractive options for off gas homes, with this opportunity extending to on gas properties in the 2020 – 2025 period. 

But many other technologies will also have a role to play!  

Some other low carbon heating technologies are supported by the RHI (biomass, solar thermal, GSHPs), and others are supported by the feed-in tariff scheme (micro CHP and fuel cells).  With growing awareness of low carbon technologies that will come with the RHI introduction, all will become more attractive to customers and grow their market shares in the next decade. I expect to see growing competition among the low carbon technologies and an increasingly dynamic market.

What does all this mean?
  1. There are great opportunities for energy suppliers to become service providers, and to develop new product offerings for their customers.
  2. Boiler manufacturers face a real challenge as their boiler sales take a hit in the next decade.  But low carbon technologies, if added to their portfolio, could make up for this.
  3. The UK will miss its carbon target for decarbonising residential heat, if the uptake of low carbon heating appliances remains on this trajectory.

For further information on the above, please contact [email protected]

For shorter term forecasts to 2016 and insights into what UK customers really think, please check out our Microgen Insight Service.
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