When Europe and the United Kingdom brace for cold weather, it’s a good time to explore the potential for a rapid transition from fossil fuel energy to heat pumps. Helping households fight the cold while tackling climate change, the heat pump has quickly emerged as the leading technology to decarbonise heating and cooling within buildings, which makes up a vast share of countries’ home-based emissions.

Oddly, the rapid rise of heat pumps galvanises the technology’s opponents, especially in UK which, compared to Scandinavia, is a latecomer to heat pumps. Some politicians have warned that heat pumps could leave households in the cold, while other critics suggest that heat pumps “won’t save us from freezing in winter”. These comments often omit the fact that swapping all 23 million gas boilers in the UK to heat pumps could save roughly £11 billion in wholesale gas costs – approximately 0.5 percent of the UK’s national income. They also ignore the fact that the technology is already wildly successful in some of the coldest countries in Europe, those with the longest, harshest winters, where the heat pump reigns supreme

 In Finland, where temperatures can reach -50°C in the long winter months, the heat pump market increased by 50 percent in 2022, with 200,000 pumps sold in a single year. Around 41 percent of Finnish households have a heat pump installed. In Norway, where the average winter temperatures sit at -6.8°C, the heat pump market grew by 25 percent in 2022. Almost two thirds of Norwegian households now have a heat pump installed, which makes chilly Norway the country with the highest heat pump penetration in the world. In Sweden, there are 427 installed heat pumps per every 1,000 households. Despite all these markets being relatively mature, they are still delivering double-digit growth rates each year.     

Understanding what’s driving the rapid growth in heat pump sales and installations in these cold countries could provide insight into how the UK, for example, or other slow starter nation, can get its nascent heat pump sector off the ground and meet climate targets, set by the Climate Change Committee in the case of the UK to be installing 600,000 heat pumps each year by 2028. Hitting that not only requires training and upskilling heating engineers and scaling up manufacturing capacity, but it will also require significant investment in the British transmission and distribution network to ensure households can make the jump to pumps smoothly.

Lessons for rapid transition:

  1. Heat pumps work – and are getting cheaper to buy and run. Reducing costs of heat pumps, and rapid deployments of clean and cheap energy, will drive the adoption of heat pumps. But more needs to be done.
  2. Governments need to incentivise heat pumps and push out fossil fuels. To scale up heat pumps, there needs to be a comprehensive framework of taxes and subsidies to help households make the jump to pumps.
  3. War in Europe is reshaping energy security and, in turn, industrial policy. Governments are scrambling to get off gas which means scaling up the manufacture, deployment and installation of heat pumps, and this will be a test of new policies’ success.

The big picture

Decarbonising heat is a major challenge for rapid transition. Globally, buildings are responsible for 39 percent of global energy related carbon emissions, with much of this coming from heating and cooling. Most of these buildings will still be in operation by the middle of the century, when the global economy needs to have completely curtailed its carbon emissions. Given this, it’s no wonder that buildings are often dubbed as a sleeping giant within the energy transition

Heating buildings in Britain is a carbon-intensive endeavour. Heating alone accounts for around 23 percent of the UK’s total emissions. Heating British homes creates the same amount of emissions as all the petrol and diesel vehicles on UK roads. Given this large emissions footprint, it is no surprise that fossil fuels currently account for over 90 percent of the energy used to heat homes and buildings. Almost all of this energy (86 percent) currently comes from expensive gas. The UK government’s own net zero targets state that  emissions from British housing stock must fall by at least 47 percent by 2035. Yet progress so far has been extremely sluggish: emissions from buildings have fallen by just 18 percent since 1990. A rapid transition within Britain’s built environment is now the only option available if climate targets are to be met.  

While there are a suite of technologies being put forward to help decarbonise the built environment, heat pumps have quickly emerged as the technology of choice. According to the International Energy Agency (IEA), investment into heat pumps grew by a record 25 percent in 2021. Investment into scaling heat pump markets is likely to climb further in the years ahead as national governments introduce more stringent rules around building standards and carbon emissions, like the recent policy shifts in Germany with a government target of 500,000 heat pump installations a year by 2024. Although there is still much more to be done to ramp up heat pump installations around the world, the progress so far in such a short period is remarkable. In Europe, heat pumps have already replaced approximately 20 percent of installed gas boilers

Driving down emissions is just one imperative driving the global jump to heat pumps. The other is the ongoing war in Ukraine. Reducing dependency on Russian gas has been a priority for governments around the world so as to not bolster Putin’s war chest. And these measures have achieved rapid results: Russia accounted for 55 percent of Germany’s gas imports in 2021, but by June 2022 this had fallen to 26 percent. By the middle of next year – 2024 – Germany will not be importing any Russian fossil fuels. A recent study concluded that replacing gas boilers with heat pumps would be the most rapid route for Germany to cut its gas usage. The IEA has reported that the war in Ukraine has “turbocharged” the global growth in renewables as nations look to cut ties with the Russian pariah state, secure their energy supplies in the most cost effective fashion, and meet international climate goals.

Context and background

The prominence of heat pumps in countries with colder and longer winters is due to a mixture of historical, material, and political factors. Yet the growth in heat pump markets that countries like Finland and Norway have reported in recent years is due to the fact that heat pumps work – and with the right support mechanisms, they can work for all types of households, from small flats to large detached houses

In 1970, 90 percent of Finland’s heating supply came from burning timber and oil. But, when the 1973 oil crisis struck, the country was forced to look elsewhere for sources of heat. Due to the lack of gas infrastructure throughout Finland, and the country’s relatively cheap electricity due to the abundance of geothermal energy, heat pumps seemed an attractive choice. Scaling the market up, however, was not simple. In the 2000s, the Finish heat pump market started to gather pace when legislative changes sought to encourage the take-up of low carbon technologies – especially in buildings.

Much of Finland’s housing stock also suits heat pumps. Almost 40 percent of Finnish homes are detached, which makes them perfect for ground source heat pumps due to the required piping. Heat-pumps provide an excellent means for demand-side management of the power grid and are flexible, able to use water volumes, buildings, geothermal wells and other features as energy resources. The legal requirements for high-quality home insulation also make air-source heat pumps a shrewd investment choice for homeowners by ensuring they perform at the highest efficiency. Finnish fiscal policy also makes heat pumps an attractive choice, and actively discourages fossil fuel usage within buildings (see enabling conditions).

Norway tops the global table for the amount of heat pumps per capita, with 604 installed heat pumps for every 1,000 households. Much like Finland, it was the oil crisis of 1973 that spurred Norwegians to search for alternative heating sources with the heat pump market growing slowly until the 2000s. Since then the market has ballooned, with 125,000 heat pumps sold in 2021. Of all the heat pumps in Norwegian homes, 90 percent of them are air source heat pumps. This rapid growth has been buttressed by cheap and clean electricity, high taxes on fossil fuels, generous government subsidies for households, and an outright ban on oil boilers

Enabling conditions

Heat pumps work – and are getting cheaper to buy and run

It’s very simple: heat pumps work. A 2022 customer survey of heat pump owners across 22 European countries, and the UK and Norway, found that 88 percent were satisfied with making the jump to a heat pump. Of those surveyed, 64 percent said they now spent less money on heating than before and 81 percent said their homes now had a better level of thermal comfort than before. 

In places like the UK, with the most inefficient homes in Europe, opponents of heat pumps have pointed out that a huge amount of retrofitting and insulation is required before the technology could make any meaningful impact on emissions or household bills. While the better insulated a house is, the less heat will be ultimately lost and the more efficient the performance of a heat pump, it is not a prerequisite

Heat pumps are incredibly efficient to run. Even if the electricity grid was powered solely by the combustion of gas or other fossil fuels, a widespread installation programme for heat pumps would still reduce the amount of energy required to heat peoples homes. Heat pumps deliver three to four units of heat for every one unit of electricity needed to run them. If gas prices stay high, as they are predicted to, then heat pumps become more affordable to run. 

There are, however, concerns over the cost of buying a heat pump and installing it. In the UK, these factors mean that gas boilers remain cheaper than heat pumps. However, this appears to be shifting as a price war may be about to ensue. Just this week, Octopus Energy has unveiled a self-designed heat pump that costs around £2,500 to purchase and install – the same amount as a brand new gas boiler. This comes just days after UK heating giant British Gas announced a heat pump for £2,999. A price war like this should benefit homeowners in the long-run. 

More can be done though. The UK innovation foundation, Nesta, has pulled together a number of scenarios that could help bring down the cost of installing a heat pump in the UK, including shifting environmental levies away from general electricity bills to solely gas bills, which would reduce the cost of a heat pump  over its operational lifespan by between £260 and £600, depending on the size of the home. In addition, further savings could be made by improving the quality of heat pump installations to increase efficiency and performance, as well as rolling out heat pump-specific electricity tariffs that factor in real-time usage and dynamic pricing.

Governments incentivising heat pumps, pushing out fossil fuels, and giving local government the power to meet local needs

Nordic and Scandinavian governments have been proactive in shaping the heat pump market and incentivising their sales through taxes and subsidies. These governments have also been robust in squeezing out carbon-intensive forms of heating through taxes or outright bans. Unfortunately, the UK government is yet to develop a comprehensive framework of incentives for scaling up heat pump installations and, over the last decade, several policy failures may have actually encouraged the uptake of high-carbon heating systems. For instance, the Energy Company Obligation (ECO) scheme subsidises new boiler installations in fuel-poor households, which locks them into fossil fuelled heating for another 15-20 years.

In both Sweden and Norway, putting a price on carbon has been essential for driving the transition towards low carbon heating. Sweden’s carbon tax was first introduced in 1991 and was received well by the general public. From its inception, the Swedish carbon tax has risen from 250 kronor (£20) per tonne of CO2 to 1200 kronor per tonne (£97) in 2022. While not as high as Sweden’s carbon tax, Norway’s carbon price hit €50.80 (£45.40) per tonne of CO2 in 2019

The subsidies have also been generous in these countries to encourage the uptake of low carbon heating options. In Norway, the subsidy regime was launched in the early 2000s to incentivise the shift to electric sources of heating. In practice, the subsidies covered around 25 percent of the investment costs of heat pumps and were combined with subsidies to aid the removal of fossil fuel heating systems. These pecuniary perks, combined with low electricity rates and outright bans on oil heating systems, meant that 1.5 million heat pumps were sold in Norway by 2020 – a country that has less than 2.6 million households

War in Europe is reshaping energy security and, in turn, industrial policy

The dearth of fossil fuel supply, and the acknowledgement of vulnerability that swept across Norway, Sweden and Norway in the wake of the oil crises of the 1970s is mirrored today with Russia’s invasion of the Ukraine. As gas prices spiked, and fossil fuel profits were used to wage war, governments were quick to use their industrial heft to shift domestic economies away from Russian fossil fuel imports in the immediate term, but also with an eye on long-term energy security. 

President Biden was quick to invoke the Defense Production Act to provide guarantees to manufacturers that the federal government will purchase heat pumps and insulation that the market might not in order to rapidly scale up production and – crucially – bring down costs for citizens. This is another example of Biden flexing the federal governments’ purchasing power to create new domestic markets in low carbon technologies. On the demand side, the recently passed Inflation Reduction Act gives households a tax credit of up to $2,000 to cover the installation of a heat pump, with this rising to $8,000 for low income households 

The EU has also been quick to flex its green industrial might, not just in response to the war in Ukraine, but also out of fear of losing ground to President Biden’s green push in the US. Heat pumps will be at the heart of this push to rid Europe’s dependency on gas, cutting gas demand by 21 billion cubic metres by 2030, while also driving emissions down. While the details of the EU’s Green Deal Industrial Plan are yet to be finalised, it is clear that the Net Zero race is on. And, if the UK isn’t careful, it may fall behind.


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2020s, 2030s

Areas of change

Clean energy