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Heat Pump Business Models – Could they enable market growth in retrofit?

The European heat pump (HP) markets are on the upturn. After half a decade of stagnation, the improving economic situation in many markets and changes in new build regulations have driven significant growth in 2015 and first results for 2016 suggest that this positive trend continued in many markets last year.

Yet, if we compare HP sales to the millions of fossil fuel boilers being sold in Europe every year, the HP market, and in particular the market for hydronic systems for space heating, is still niche. The prime reason for this is a set of barriers regarding the economic proposition for HPs in retrofit situations. Many markets are also facing a lack of installer expertise in & customer information about the technology. Together these issues lead to a lack of installhp business modelser push and customer pull for the technology in many retrofit markets.

How can the market help to overcome retrofit barriers?

In order to significantly increase sales in the retrofit sector and contribute to the decarbonisation of the European residential and commercial heat demand, addressing these barriers will be crucial. A key barrier, energy prices, is for policy makers to address, e.g. through addressing the taxes and levies which currently favour fossil fuels over electricity in many European markets. Whereas in 2007-2016 average taxes and levies on gas in the EU-28 have fluctuated around 21-25% of the final price per kWh, average T&Ls for electricity have steadily risen from 27% to 37% of the kWh cost to customers.

However, as important as the levelling of the playing field in terms of equal taxation of the fuels may be, the industry cannot repose on this fact and leave the development of the HP retrofit market to politicians alone. But what can industry players do to address the market barriers which still entangle HPs in the retrofit sector and hinder market growth?

Innovative business models can support HP market growth in the retrofit sector – reducing costs, raising awareness and creating peace of mind for customers while generating new revenue streams for stakeholders

In our most recent study for the Delta-ee Heat Pump Research Service we have researched the role that innovative business models could play in addressing these barriers and increasing HP sales in Europe. Through the analysis of business models from Denmark (Best Green), Germany (Thermondo & Digital Energy Solutions) and Switzerland (tiko) we have been able to show that these companies and others developing similar approaches have a potentially significant role to play in overcoming economic, informational and quality barriers.

HP business models

For more information on the report or to exchange views on the topic please contact me via

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