First drop in sales: Honeymoon is over for Europe’s heat pump industry
Europe’s heat pump industry is flagging and has been forced to cut, or temporarily freeze, 3,000 jobs following investments into production capacity that overshot demand growth.
“In 2023, we saw sales fall for the first time in 15 years,” Jozefien Vanbecelaere, head of EU affairs at the European Heat Pump Association (EHPA), said in a press call on Tuesday (27 February).
Based on 2023 sales data from 14 countries that make up 90% of the European heat pump market, units sold went down by 5% from 2022, she explained.
Heat pumps, that work with ambient air to efficiently heat homes and have been described as “reverse fridges”, are central to EU efforts to slash consumption of natural gas and supplant fossil heaters as the dominant source of heat.
European heat pump producers who had invested hoping for a boom in demand have been cutting jobs in response – 3,000 in total so far.
Japanese manufacturer Daikin cut 500 jobs in Belgium. Vaillant, the German heat pump maker, sent 100 workers into “Kurzarbeit” in late 2023, a scheme where working hours are reduced and the government steps in to ensure workers remain remunerated.
Stiebel Eltron, another German company, is sending 800 employees into the same scheme from March.
French heat pump makers are similarly affected. Saunier Duval put 500 workers on furlough, and Groupe Atlantic did the same for 500 of its workers – reducing operations to two out of five days a week.
“We saw a clear decline in the European heat pump market in particular towards the end of the year,” Gerteric Lindquist, CEO of Swedish heat pump manufacturer NIBE, said as he announced 500 layoffs.
The industry association EHPA blames political uncertainty – a stalled heat pump action plan – and consumer uncertainty, alongside a drop in gas prices, for the job cuts and lagging demand.
Brussels takes heat pump ‘action plan’ off the agenda
The European Commission has shelved proposals to boost the roll-out of heat pumps with a dedicated action plan, a move that will likely delay the initiative beyond the EU elections in June.
Ratio of doom
The attractiveness of heat pumps lives and dies with the price difference between natural gas and electricity. Heat pumps, which are more expensive, operate around three times more efficiently than natural gas boilers.
But their higher degree of efficiency pales in comparison with the extraordinarily cheap gas prices in Europe. As of February, gas is traded for less than €30 per Megawatt-hour, (MWh) resulting in consumer prices between €60 to 80 per MWh.
Meanwhile, electricity comes in at around €300 per MWh – a far distance from the 2.5-times difference experts say is optimal for incentivising heat pump purchases.
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