Strong policy support essential for heat pump growth
The global heat pump market is facing a slowdown amid economic and political uncertainty, according to analysis from Frost & Sullivan.
The US-based consulting firm’s said the global residential heat pump market will likely grow from 7.59 million units in 2024 to 17 million units by 2035, with revenues reaching $80.42 billion.
However, it said that after strong momentum earlier in the decade, growth in the heat pump market stalled in both 2023 and 2024. It attributed this to an easing of gas prices, high electricity taxes, policy inconsistencies, shifting regulations and reduced funding.
Neha Tatikota, industry analyst at Frost & Sullivan, called the industry slowdown “concerning … Clear policies and supportive regulations are crucial to revitalizing investment, particularly in Europe, and strengthening EU manufacturers through economies of scale. With strong demand for renewable heating, the right regulations could drive growth, while policy setbacks risk stalling the market.”
The consultancy listed a higher proportion of aging households, inadequate insulation, higher installation and capital costs and a shortage of skilled installers and consultants as other factors limiting the market’s growth potential.
To combat these challenges, Frost & Sullivan said that global and local players are focusing on cost optimization, efficiency improvements and localized production to reduce import costs. Some new market entrants are also introducing smaller, modular and more affordable heat pumps designed for compact residential spaces, added the consultancy.
“While smaller manufacturers are rapidly increasing output, they face challenges in achieving the economies of scale that larger players can leverage, impacting their cost competitiveness and market positioning,” Frost & Sullivan said. “Overcoming these barriers will be key to ensuring sustainable growth and broader market adoption.”
It added that service-based models such as heat-as-a-service (HaaS), subscriptions, leasing and pay-per-use are all gaining traction. They are helping to reduce upfront costs by shifting expenses from capital to operational, while also serving as entry points to whole-home electrification, including solar and electric vehicle solutions.
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