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The proposition is heating up: How Europe’s heat market could change


The transition from ‘old’ to ‘new’ heat is disrupting the market in several ways, creating new business models, customer propositions and technology ecosystems, as well as opening up opportunities for new market players and sales channels. This two-part blog series will consider how the heat market could evolve and what could be seen in the next few years.

This first part considers heating system functionality and connectivity, value stream diversification and hydrogen for heat. The second will look at customer propositions.

Heating system functionality and connectivity

Connectivity is no longer a nice to have but is becoming a basic requirement for new heating products being launched to market. Individual appliances are evolving from being just stand-alone systems, to being increasingly integrated with the smart home as part of a wider technology ecosystem. 

The new technology ecosystem brings value to the customer. Aside from the obvious enhancement to user-friendliness, this granular level of connectivity can enable supply and demand to be managed in real-time at the household (or community/region) level, optimising performance and potentially reducing running costs.

Connectivity is making installation and maintenance easier and more effective. Remote diagnostics services, for example, reduce the need for onsite engineer visits. Engineers can complete simple fixes such as system resets remotely, and can read fault codes and arrive with the right parts ready to be fitted. It is expected that by 2021, over 1.3 million systems will be equipped with remote diagnostics across Europe. 

What to watch: We are likely to see the next step as the monetisation of heat and the automatic adjustment of controls according to price signals.

Value stream diversification

Decarbonisation of electricity requires more grid flexibility, and this is creating new revenue opportunities and driving new heat business models. The value of energy consumption will be derived less from the quantity consumed, and more from the ability to control the timing of consumption. 

In 2017, Sweden became the first European country to enable this flexible demand side through regulation, requiring energy suppliers to offer half-hourly tariffs (with prices tied to market spot prices). This has given rise to heat pump manufacturers, such as NIBE, introducing a service whereby the heat pump can automatically respond to price signals. While this may have minimal impact in the Nordics, where wholesale prices are relatively stable, countries like Germany and the UK could have more impact with their volatile prices.

Some companies are making these offerings despite no legal requirement to do so. In the UK, Glen Dimplex has partnered with the energy supplier OVO to unlock the flexibility potential of its storage heaters. The storage heaters can also be bought directly from OVO, offering a new route to market.  

What to watch: The big question for this offering is how much value is, and can be, given back to customers. If sufficient value does not come back to the customer, progress may be slow, but with several trials and projects taking place across Europe, we expect the learnings to inform decision-making on a region-by-region level.

In part two of this blog series, we’ll review how new propositions and market players will transform the heat sector.

This blog series demonstrates the variety of innovations and routes to market for developing heating options as the sector continues to remain in focus for decarbonisation. Get in touch to find out more about our heat services. You can email me at



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Friday, 27 November 2020

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