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2014 roundup – The UK renewable heat market is in a steady state, what will change in 2015?

The renewable heat market has side stepped over the last 4 years, with new installations likely to only reach ~22,000 units in 2014. Despite the domestic RHI coming into the microgen arena this April, no significant boost of installations has been observed.

Why is the renewable heat market not growing?

Our research in the Microgen Insight Service shows – despite much potential to grow sales – the renewable heating market faces many barriers, including;
  • Customer awareness of the RHI is low (13%) and appeal is not significant (appealing to around one-in-three people) – our research shows that many homeowners find the RHI complex.
  • High upfront cost remains the largest barrier to a higher uptake of microgen – yet there has been no movement from suppliers to reduce this barrier to date.
  • Expensive DNO connections can block microgen-ready customers from installing ASHPs and PV.
  • There is no consistent message from industry – the boiler market is strong and it appears that whilst boilers are still selling like hot cakes, very few big manufacturers are committed to push their renewable alternatives.
  • Securing funding is challenging, especially in social housing (a key microgen customer segment). And, cash flow problems due to changes with the benefits system are driving them towards like for like boiler replacements rather than microgen.
What will 2015 look like?
We didn’t expect 2014 to be a big year for the RHI due to the long lead times for renewable heating technologies, as well as the many other barriers outlined above. But we are optimistic that the domestic RHI will have an impact in 2015. However, the extent of this impact does depend on the industry becoming more energised. We are already seeing lots of movement in 2014 with a whole host of innovative products becoming widely available (i.e. hybrids and m-CHP), novel business strategies being employed, and financial propositions being considered and offered to home owners. Yes, the microgen market is still very much comprised entirely of ‘early adopters’, however everything is in place for the critical mass to tip the balance.

For more information contact [email protected]
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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 [email protected]

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Gas heat pumps already an option for decarbonising commercial buildings

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.
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Is remote diagnostic the new connected home trend?

When Delta-ee first looked at the connected home space many years ago, there was a fashion for selling or giving away energy monitoring devices. We coined the phrase “average time to kitchen drawer”, which we thought could be as little as two weeks: end-users lose interest in energy monitoring devices very quickly.  From 2012, a new trend emerged - with the beginning of the remote heating control market through smart thermostats.

Now, many energy suppliers and heating appliance manufacturers offer smart thermostats, and recent sales numbers start to demonstrate their potential. These products can now be bought on Amazon, in shops, through different platforms, from an energy supplier or even alongside a boiler installation. Through our Connected Home Service we’ve analysed 48 of these products in our InfoBase – and that doesn’t cover every single product!

So what do we expect from the 2014 heating season?

The IFA event in Berlin has seen lots of announcements of products being brought to more markets – for example Nest will soon be available in France, Belgium, Netherlands and Ireland – and of innovations from the giant appliance manufacturers such as Phillips, Samsung, Apple etc.

Despite all these movements from some big names, there is a new connected home trend starting to emerge: remote boiler diagnostics. Although they are not marketing it strongly for now, some leading connected home players are already active in this field. We think it could be much more than a passing fad.

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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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