A heat pump is a device used for cooling and heating by extracting heat from lower heat sources and deliver it to higher potential for water, space, and floor heating/cooling. Technically air conditioner and refrigerator are two prime examples where heat pump is used. Refrigerator and air conditioner work only on cooling cycle, whereas heat pumps can operate on fully reversible cooling cycle. Condenser, evaporator, expansion valve, and compressor are some of the common examples of heat pump. The heat transferred through these components is called refrigerant. Moreover, heat pumps are increasingly used in domestic hot water for kitchen, bathroom, and clothes washer.
The global heat pump market is estimated to account for US$ 7,920.1 Mn in terms of value by the end of 2019.
Market Dynamics- Drivers
- Growing urbanization and complementary regulatory policies are expected to drive growth of the global heat pump market during the forecast period
Significant growth of construction industry combined with growing implementation of strict regulatory policies by governments, especially in China, South Korea, Japan, and the U.S. are expected to boost the demand for heat pumps for residential application. Moreover, subsidies on purchase of heat pumps provided by the government, tax credit schemes and increasing use of energy are expected to boost the market. Countries such as the U.S., Australia, Japan, and European offer subsidies purchase for heat pumps, in order to reduce carbon footprint and increase use of renewable energy for heating and cooling purpose. For instance, the European Union has adopted renewable energy policy, which includes contribution of heat pumps to the EU target of reaching 20% of renewable energy share by 2020. In 2016, the U.K. Government adopted a ‘Zero Carbon’ policy for new homes. Moreover, In Europe, the government provides subsidies for purchase of heat pumps and has implemented several stringent new building regulations such as mandatory use of renewable energy for heating purpose in new buildings. Thus, these factors are expected to boost the market growth during the forecast period.
- Increasing demand for eco-friendly and technologically advanced devices are expected to propel the global heat pump market growth over the forecast period
Increasing demand for eco-friendly and technologically advanced devices in heating and cooling applications is expected to boost the demand for heat pumps. Growing demand for eco-friendly devices worldwide is directly proportional to the global heat pumps demand, as heat pumps are very useful in reducing CO2 emission. It uses only ¼ electrical energy and ¾ environmental energy. Thus, such factors are expected to propel the market growth in the near future.
Europe region dominated the global heat pump market in 2018, accounting for 43.7% share in terms of value, followed by Asia Pacific, North America, Latin America, and MEA, respectively.
Source: Coherent Market Insights
Market Dynamics- Restraints
- High installation cost is expected to restrain growth of the global heat pump market over the forecast period
Heat pump requires significant cost for installation, which in turn, is expected to hinder its demand in the near future. The total cost installation includes cost of heat pumps, installation cost, cost of groundwork for ground source heat pumps and cost of ancillary items (buffer tank, manifolds, hot water cylinder). For instance, if per unit cost of heat pump for 11kW capacity is US$ 1,000–US$ 2,000, the cost increases by 25%–30% when installation cost is included. Furthermore, cost-sensitivity is a major issue in emerging economies such as India, Brazil, South Africa, and Poland, which is major factor hindering its adoption.
- Lack of awareness concerning benefits heat pumps in emerging economies is expected to hinder the global heat pump market growth over the forecast period
Low awareness regarding benefits and advantages of heat pumps in emerging economies such as Brazil, India, and South Africa is a major factor hindering adoption of heat pumps. Moreover, poor consumer awareness of ground source heat pumps in regions such as APEJ, Latin America and MEA is factor hampering growth of the global heat pumps market. Therefore, these factors are expected hinder the overall growth of the market.
- Growing demand for CO2 refrigerant heat pumps is expected to offer lucrative growth opportunities for market players
CO2 refrigerant heat pumps offer significant growth opportunity for heat pumps manufacturers.CO2 refrigerant heat pumps are eco-friendly, low cost, and offer easy recyclability. Moreover, CO2 heat pumps are widely preferred in Europe and Japan due to excellent qualities offered such as zero ozone depletion and low global warming potential. CO2 refrigerant pumps find applications in air-source heat pumps, since it has lower installation cost than ground source heat pumps for residential water heating application.
- High demand for heat pumps from emerging economies is expected to present significant growth opportunity
Heat pumps have witnessed significant demand from emerging market, especially APEJ countries such as India, China, Philippines, Indonesia, and Malaysia. Eco-friendly heat pumps are also expected to witness lucrative demand from these countries in the near future, which in turn, is expected to pose significant growth opportunity for market players during the forecast period. In India, South Korea, Brazil, South Africa and ASEAN countries, heat pumps are used in industrial or commercial sectors and to a small extent in residential sector, therefore market penetration for heat pumps in these countries is low. This provides opportunities for heat pumps suppliers to optimize their profit margins.
Source: Coherent Market Insights
Global air-air heat pump based market was valued at US$ 3,257.6 Mn market in 2018 and is forecast to reach a value of US$ 5,554.2 Mn by 2027 at a CAGR of 6.0% between 2017 and 2027.
- Hybrid pumps are expected to witness significant demand in the near future
End users around the world are preferring hybrid heat pump for various industry segments. These pumps are a combination of air source heat pumps and gas boiler/solar heaters. These pumps are gaining significant demand across the globe, especially in Europe. Key players operating in the market are Daikin, Bosch Thermotechnik GmbH, Vaillant, Viessmann, Dimplex, and Ariston provide hybrid heat pumps. Hybrid pumps offer numerous benefits such as switching automatically two heating methods namely electricity or gas boiler heaters, depending upon the prevalent weather conditions. Moreover, In APEJ hybrid heat pumps gaining more traction owing to its substantial cost savings and energy efficiency for domestic water heating purpose. China is the largest market for hybrid heat pumps.
- Growing inclination towards use of eco-friendly refrigerants
Heat pumps that use natural refrigerants have gained significant traction in the market. Natural refrigerants such as carbon dioxide R744), ammonia (R717) and hydrocarbon are being increasingly preferred due to their environment-friendly properties. Moreover, aforementioned refrigerants are increasingly replacing hydroflurocarbon (HFC), owing to low global warming potential and no adverse effects on ozone layer. Moreover, CO2 refrigerant heat pumps demand in Japan is expected to increase during the forecast period, owing to increasing use of these pumps.
According to the U.S. Department of Energy, residential central air conditioners and central air conditioning heat pumps manufactured and distributed in commerce, as defined by 42 U.S.C. 6291(16), must meet the energy conservation standards specified in the Code of Federal Regulations at CFR 430.32(c)(3). Furthermore, according to the Energy Improvement and Extension Act of 2008, customers using and installing geothermal heat pumps and small wind energy systems are entitled for tax credit. However, the systems must be placed in service on or after January 01, 2008 and on or before December 31, 2016. Moreover, according to the Air Conditioning, Heating, and Refrigeration Institute, the federal government offers tax credits for some residential HVAC systems and products, and deduction for energy savings in commercial buildings. According to Current 25D law, which expires on December 31, 2016, a taxpayer may claim credit of 30% of total investment for a system that serves a dwelling unit located in the United States that is owned and used as a residence by the taxpayer. Expenditures include labor costs for on-site groundwork, assembly or original system installation, and for piping or wiring to interconnect a system to the home.
Value Chain Analysis
Key players operating in the global heat pump market are Daikin Industries Limited, Viessmann Group, NIBE Group, Danfoss Group Global, Stiebel Eltron Group, Mitsubishi Electric Corporation, United Technologies Corporation, Panasonic Corporation, Glen Dimplex Group, and The Bosch Group.
- Key players in the market are focused product launch, in order to gain competitive edge in the market. For instance, in January 2019, Daikin Industries Limited showcased its advanced and commercial HVAC equipment for providing superior air to consumers.
- Major market players are involved in product launch, in order to enhance their product portfolio. For instance, in February 2019, Viessmenn introduced two new air source heat pumps namely Vitocal 222-A and Vitocal 200-A.