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Why Italy favours gas for heating

Even though Italy can boast that it is gearing up to implement Europe’s strong RES directive regulations sooner than other countries (a step that will improve prospects for low carbon technologies in the new build sector) – our Roadmap Service research indicates that this is merely the silver lining on a very foreboding cloud. Many other important factors fail to support decarbonising the residential heating sector in Italy.

Cracking the retrofit sector remains the key challenge, and we believe that gas based low carbon technologies represent the most promising solution. Market dynamics strongly favour gas, especially in the short to medium term:

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European Gas boiler sales to fall 22% by 2025 – but don’t panic!

Delta-ee’s Roadmap Service forecasts how the residential heating market will develop out to 2025 across five of Europe’s major boiler markets – France, Germany, Italy, the Netherlands and the UK. For each market, we forecast the annual sales of a range of low carbon heating appliances and under our reference scenario, gas boiler sales across Europe will be eroded by a range of low carbon alternatives – with sales falling by 800,000 units per year to 2025.

Annual heating appliance sales across five of Europe’s Major heating markets
Gas boiler sales will be hardest hit, with sales dropping by ~800,000 units / year by 2025 as low carbon appliances take a bigger share of the heating market

But what does this mean for key players in the industry – in particular the gas boiler manufacturers and the gas utilities?

Our research shows there will be a significant change in the structure of the heating appliance market, but despite a forecast that indicates a slowing of gas boiler sales, we believe the low carbon technology opportunity will present opportunities for all – including those that want to sell gas.

Manufacturers: Gas boiler manufacturers need to take  ‘boiler plus’ solutions seriously, and there are good opportunities for new low carbon entrants.

A changing market where the traditional boiler is ‘under attack’ certainly presents challenges to key stakeholders in the European heating industry. The oil boiler market will be in steady decline. And while we see strong pressure on gas boiler sales – it’s not all bad - as a new ‘low carbon gas’ opportunity will emerge.  This is up for grabs by both new entrants & existing players – if the latter are willing to diversify their offering.

While appliance sales will vary from country to country, there are some common themes across the European market.  One, is a strong role for gas boiler plus* options in the near term (total annual sales will be 320,000 by 2025 across Europe). By adding the right products to your portfolio (e.g. solar thermal or hot water heat pumps) at the right time, and targeting it at the right housing segments, savvy players can protect and possibly even grow their share of the boiler market.

Energy Companies: Gas demand will face downward pressure – but there are opportunities for gas and electric utilities around new technologies

Overall, we expect to see a small reduction in gas demand for residential heating by 2025. While annual sales of gas boilers do fall to 2025, most of these are being displaced by gas boiler plus* options or new gas-based technologies.  A small amount will be displaced by electric heat pumps. And much of the new build housing stock we will see by 2025 will be connected to gas – adding new gas demand.  To protect gas sales, gas utilities could consider raising the awareness of more efficient gas appliances (such as gas heat pumps) & ‘transitional’ technologies such as hybrid heat pumps to their customers.  Investing in R&D to facilitate bringing new gas based technologies to market (or even offering the technologies to customers) could also help protect sales.

The story for electricity is quite different, where we see some potential for growth in electricity demand for residential heating by 2025. Electric heat pumps will experience strong growth in off-gas and new build dwellings – where regulations are encouraging uptake.  And we expect to see good growth in hybrid heat pumps sales (boiler with an ASHP) which will enable electricity to eat into the gas market.  The result will be significant amounts of new electric appliances being installed, adding new electricity demand in the residential heating sector.  Electric utilities need to consider developing innovative heat pump tariffs to help them attract new customers as well as maintain their current market share. They could also consider playing in the heat pump market, either directly by selling product or indirectly through information dissemination to help grow overall electricity demand (and thus their own sales).

To find out more about roadmap service click here.

To read more on the above download our whitepaper here.

*Boiler plus: Delta-ee defines ‘boiler plus’ solutions as a gas boiler plus one of: solar PV, solar thermal, hot water heat pump

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v1.17 of the Pathways Tool is now available to download

This is the largest update to date and includes two great new features:

1. Detailed housing segment information is now presented in the compare technologies and compare measures reports:

Users are now able to view a detailed breakdown of how many dwellings are in the selected housing segment(s) and how the selected housing segment is broken down, firstly by housing type (detached, terraced, flats, etc.) and secondly by tenure (owner occupier, private rental, RSLs).

2. A new report has been added, presenting Delta-ee’s reference scenario sales forecasts from the Roadmap Service.

Users are now able to:
  1. View our projected sales forecasts for heating appliances across all housing segments
  2. Compare and contrast annual sales for different technologies for the selected country
  3. View the overall sales forecast for a market – broken down by gas boiler, oil boiler, electric heating and low carbon technologies
  4. See what the current installed base of different technologies looks today.

In addition to these new features the following general improvements are also in the update:
  1. An updated Germany dataset
  2. Improved performance when generating the base case information table
  3. The option to disable the base case information table and housing segment information when generating a report.
  4. An updated user guide detailing how to use all the new features

You should have access to the tool via your Hightail link that was emailed to you, but if you would prefer to download via the website, the files will be available shortly after the New Year.

As always, if you have any questions, comments or feedback, do not hesitate to contact Sean Duddy or Stephen Harkin.

Thanks again, we hope you enjoy using the tool and wish you a very merry Christmas!
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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

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Ariston’s acquisition of ATAG gives them a platform to grow in the Netherlands

It can be tough for heating appliance manufacturers to grow market share. There are really only three main routes to this if you’re working with boilers or conventional heating appliances. Two are based on organic growth. First, convince installers to select your product from the wholesaler shelves (or directly from you). Second, convince specifiers to select your product in new build or managed housing applications. Both of these tactics involves fighting in what is already an intensively competitive market. A third option is more straightforward but requires deep pockets: acquisition – buy market share.

acquisition of Dutch boiler manufacturer ATAG gives them a ready-made strong market position in the Netherlands. Although Remeha (Thermea) and Nefit (Bosch) lead the Dutch market, ATAG has a long history and pedigree in the Dutch market with a relatively strong reputation in the market. While they export product to several other markets, they struggle to compete with the large pan-European manufacturers on volumes and cost. ATAG employs on 200 people in the Netherlands – for comparison Ariston and BDR Thermea each employ 6-7,000 people; Bosch Thermotechnology, Vaillant and Viessmann each employ well over 10,000.

Ariston’s acquisition fills in a “gap” for them in European market – they have always struggled to penetrate the Dutch market, with a previous acquisition of Rendamax helping a bit but not giving them a strong position. The Dutch market is, however, a tough market to operate in. It has some of the lowest boiler prices in Europe – margins are already very thin. Condensing combi products dominate, and gaining a strong market position through organic growth is especially tough.

I mentioned in the first paragraph about competing with “conventional” product. Boilers are increasingly commoditised, with the ability to differentiate becoming more limited over time. There still are ways to do so. ATAG, for example, uses a stainless steel heat exchanger. Connectivity is another way to differentiate (part of the focus of our new Connected Home Service).

New – or less mature - technologies and new products can be a launch-pad for companies to grow their market share. For example, Daikin is now a sizeable player in the French heating market off the back of strong growth in the last decade in the French heat pump market. Daikin is now adding another string to their bow with hybrid heat pumps, which Delta-ee sees a bright future for in certain European markets. But in the Netherlands, new technologies will find it tough – the central scenario from our Roadmap Services shows gas boilers sales fall by 15% - 20% by 2025 (most of these sales are replaced by ‘boiler plus’ options) .

So, while the make-up of the top five European heating appliance manufacturers is unlikely to change in the short term, there are still acquisition opportunities – such as ATAG – which will enable the big players to grow further. Or, that will allow ambitious companies to buy their way into the market. The alternative involves playing a longer game – being ahead of the game in developing new products, technologies and offerings. In my next blog I’ll look at offerings – and how there is potential to disrupt the market with more consumer focussed offerings.

If you would like information on how to subscribe and prices for our Roadmap Service please contact Stephen Harkin.
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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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