New research from Delta Energy & Environment (Delta-ee) has identified some significant opportunities for hybrid heat pumps, which combine a gas boiler with a heat pump, in the largest European heating markets.
Yet, several barriers identified in Delta-ee’s latest report are keeping the technology from realising its full market potential.
The latest report from Delta-ee’s Heat Pump Research Service, titled ‘The State of Play of the Hybrid Heat Pump Market’, found that hybrid heat pumps, with less than 10,000 units sold in Europe in 2014, have had a slow start since their wide-spread market introduction. The report is based upon Delta-ee’s comprehensive European data collection and analysis for hybrid heat pump sales.
- System complexity and size– This remains a major barrier, but we see that new products are decreasing in both size and installation complexity. Thus the challenge is now to educate installers and customers about the technology.
- Pricing of hybrids– While prices have become more competitive, the total installed costs of a boiler remain significantly lower than for a hybrid.
- Running cost savings are uncertain–The current reality is that electricity is too expensive in most markets (except France) meaning that running cost savings from hybrids are too low. Additionally, falling oil prices have marginalised the economic proposition for oil hybrids in recent months.
With hybrid products offering the potential to achieve A++ ratings on the new Energy Label and being able to open up the gas boiler replacement market (worth an estimated €25 billion per year) for heat pumps, there are big expectations of the products doing well.
- The French retrofit market.A large potential exists as a result oflow electricity prices – manufacturers should especially target retrofit solutions in properties with high thermal demand.
- The Italian new build market. Newbuilding regulationsin Italyfavouring hybrids over pure boilers may provide an unexpected ‘wildcard’ catapulting the technology into the mainstream, but their impact is yet to be seen.
- The UK market for renewable heat. A year on from its introduction in the UK, theRenewable Heat Incentive (RHI)has failed to drive hybrid sales. However, when factoring RHI payments into economic calculations,hybrid heat pumps can achieve attractive paybacks in the UK.So the potential remains.
A current UK project aiming to demonstrate the potential of hybrids as part of the emerging smart grid is the Smart Community Project in the Greater Manchester Region. The main funder of this project is Japan’s New Energy Development Organization (NEDO), with consortium partners including Hitachi Smart Cities Energy Group, Daikin, Mizuho Bank and DECC.
The £22m project will run until 2017. It aims to install 600 air/water and hybrid heat pumps in social housing in the Greater Manchester Region, with the overall goal of demonstrating energy load-balancing through the control of residential heat pumps, and to establish business models in the electricity trading and aggregation market.
So while the potential of hybrid heat pump technology is not yet being fulfilled, Delta-ee are confident that sales will grow in future. We have identified the barriers that need to be addressed but also that there are some specific near term market opportunities in Europe. These should be the focus for manufacturers.
In the longer term, the emerging smart grid may unlock additional value drivers. In overall terms, Delta-ee concludes that unit sales of hybrid heat pumps in Europe are to at least quadruple by 2020. However, with the right targeting of market segments and if the key barriers to the technology are addressed successfully, the market has a potential for more than 100,000 units per year.