Germany’s hydronic heat pump market has seen a couple of excellent years. Following growth rates of 18% in both 2016 and 2017 the market grew by another 8% in 2018, an increase of 51% over 2015. But is that party coming to an end? Many indicators are pointing in this direction.

Recap: A market both driven and held back by subsidies & regulations

Two factors drove the German heat pump market in the last three years: a change to the building regulations taking effect in 2016 as well as a change in subsidies in 2015. This combination created the perfect storm for heat pumps. But the success may be built on thin ice, as subsidy applications equivalent to 50-80% of all installations were made in 2017.

The potential for hydrogen is emerging

There is a range of stakeholders across the energy landscape looking at hydrogen through a new lens. Why the fuss? Simply put, hydrogen has the potential to help us solve some of the most pressing energy challenges in the decades to come. However, the timeline is important, therefore ‘decades’ is the key word here, as it is unlikely that pure hydrogen will be flowing through the gas mains or into your car in the next few months or even the next few years. But there is huge potential. Hydrogen is an energy vector that can be used for a range of heat, transport and power generation applications. See Cate Lyon’s blog for more on hydrogen and its relation to domestic heat here. The big question is where can it best be used?

Slowly, but very surely, the EU is getting us used to the idea of a fully decarbonised heating and cooling sector across Europe. It’s a bold and necessary objective which has profound implications for companies right across the energy sector. 

But is the European Commission going about it the right way?  

Delta-ee may have been early to the conversation. We started talking 10-15 years ago about decentralised energy, customers not meter points; who has needs, wants and preferences, services beyond commodity. These dynamics have now firmly moved from being on the periphery of the debate to front and centre. Most companies now recognise the direction in which the market is heading, and it seems like we are approaching the cusp of change.

Developing the right strategy and tactics is however challenging – exciting, but challenging.

Last Thursday I attended the UK’s 2018 Heat and Decentralised Energy Conference. There were several exciting sessions on policy, technology, infrastructure and customers – reflecting a market that is starting to see a lot of change and disruption. Tim Rotheray, Director of the Association for Decentralised Energy, gave what I thought was an especially interesting talk on why he believes the time for Energy-as-a-Service (EaaS) has finally come.

Whether Energy-as-a-Service will lead to the death of the kilowatt-hour, as Tim suggested, has been a topic of debate within Delta-ee. We agree that customer culture is certainly changing. The trend from product and commodity towards services and outcomes is emerging across multiple industries. Customers will pay for services’ outcomes (such as comfort or mobility) rather than products and commodities (such as fuel). Just look at car leasing, music streaming and even clothing rental.

Heat networks have been around a very long time – group heating systems date back to the 14th century in France. However, while the sector boomed from the 1930s and again from the 1970s, Europe has seen only very modest expansion in recent years. This is not a growth market. And yet the underlying assets, the heat generation and distribution systems, continue to be highly sought after by investors.  We know this because we have helped clients seek them out.   

Can this apparent contradiction tell us something about the future of this sector? Is it fated to flat-line and fade, or can it boom again and be a core part of the transition to the new energy world?  Understanding the future of heating markets is a core part of Delta-ee’s research so this is an important question for us.