Consumers hold back as heat pump market fails to accelerate.

Power - Patients stand by: Heat pump industry fails to pick up speed.

The heat pump is a crucial part of Germany's "energy transition," but its market isn't growing. Instead, sales have declined significantly. Industry leaders are frustrated and customers are waiting. Frank Ebisch, a spokesperson for the Central Association of Sanitary Heating and Air Conditioning, remarked that "the uncertainty is palpable among heating installation companies across the country." The German Heating Industry Association (BDH) describes the situation as "challenging."

This year's first quarter saw a massive 52% drop in heat pump sales, compared to the previous year, with only 46,000 units sold. The industry predicts about 200,000 units will be sold by the end of the year. This would leave the market significantly underperforming. The German government had aimed for 500,000 heat pumps to be installed per year starting in 2024.

BDH's spokesperson attributed the falling demand in part to a long and public debate about the Building Energy Act (GEG), which has undermined consumer trust in heating modernization. "With regard to the GEG-compliant technical solutions and the new funding plans, people know very little," he said.

Several factors contributed to the decline in demand. When considering the price and supply security of gas and oil in 2020, consumers were concerned. However, the demand for these fuels has dropped due to falling gas prices and stability-related uncertainties. Additionally, the impending rise in CO2 prices may be due to the European Certificate Market in 2027.

The Heat Pumps Association's managing director, Martin Sabel, expressed concern over the GEG and municipal heating planning. "There's a lot of uncertainty," he said. "Investors who are considering modernization are standing back, looking at the upcoming heating plans in the municipalities, and may settle for gas or oil heating out of doubt."

After lengthy political disputes, even inside the traffic light coalition, the GEG (also known as the Heating Act) came into effect in 2024. This law aims to significantly advance climate protection in the building sector. As of 2024, 65% of new heating systems must be operated using renewable energy. The law only applies to new buildings in a new building area at the moment, but existing heating systems can continue to operate.

The focus for existing buildings is on a municipal heating plan. By mid-2026, it should be available in major cities. For the rest of the municipalities, it'll be ready by mid-2028. Homeowners would benefit from knowing whether they'll be connected to a district heating network or whether they'll need a decentralized solution, like a heat pump. However, uncertainty around municipal heating planning and the expansion of district heating could temporarily slow down the heat pump market.

According to industry representatives, the proposed GEG and municipal heating plans could postpone heating modernization decisions. "Investors who are considering modernization are waiting, glancing at the municipal heating plans in the municipalities, and may opt for gas or oil heating out of concern," said Ebisch. Politics needs to be open about municipal heating planning and the expansion of district heating, said Sabel. "It's clear in most supply areas that building owners will have to grapple with a decentralized form of climate-neutral heating."

Heat pumps could regain their prominence if people understand their benefits. "For many people, it was clear in the summer of 2022: I want to get away from natural gas and the heat pump is the solution," said Tillmann von Schroeter, managing director of heating system manufacturer Vaillant Germany. "At the table, it was said: 'Heat pump, heat pump, heat pump.' However, now they need to face reality. 'We have to get off this roller coaster where the heat pump was initially portrayed as a panacea and then wrongly as an inappropriate and extremely expensive technology.'"

Awaiting municipal heating planning doesn't make any sense, according to von Schroeter. "If I, as a homeowner, have space to install a heat pump, it's the best solution for most properties," he said. "In terms of installation costs and funding, the heat pump is comparable to a gas or oil heating system. Operating costs are lower in the long term. Investing in a heat pump can also increase your property's value."

The industry believes that the government should strengthen its efforts to educate people about channelling funds and legal conditions. "We anticipate that the federal government will intensify its efforts to inform about the funding program and the legal framework after the GEG amendment," said Sabel. "Since federal funding has greatly improved, the BDH also urges politics to launch a 'thorough' communication campaign." (Original text has been paraphrased)

Enpal CEO Mario Kohle desires simpler bureaucratic procedures for acquiring funding. To be eligible for the income bonus, an individual must present tax return documents from the previous two years. However, many pensioners do not submit income tax forms, necessitating a different approach. Furthermore, Kohle emphasizes the need for political clarity as there is a common misconception that heat pumps are ineffective in existing structures or without underfloor heating. In truth, they function efficiently and effectively in the majority of buildings.