European governments are looking at heat pumps as the sustainable, long-term, low-carbon emitting solution for consumers’ heating and cooling needs, with governments committed to heavily subsidising heat pump installations. The EU has a target of approximately 20 million heat pumps units to be installed by 2026, and 60 million units by 2030.
Globally, the International Energy Agency (IEA) projects 600 million units of heat pumps installations in commercial and residential buildings by 2030. A conservative estimate for the market opportunity is at least USD3 trillion in this segment.
Private companies are bullish on future growth, and have announced and invested EUR5 billion worth of investment in factories throughout Europe. In the long term, heat pumps have the potential to replace air conditioners and boilers.
Europe’s cooling needs will only increase
Heat waves in 2025 are expected to break historical records – and this trend is likely to continue over the next four years
Source: United Nations
There is a 98% chance that at least one of these years will be the hottest ever recorded.
In Europe, however, air conditioners remain unpopular. They are often seen as impractical, due to low usage frequency and high energy consumption. As a result, air conditioner adoption in Europe remains low. Data from Euromonitor International’s Passport show that household penetration rates are in the low single digits across Northern Europe, and below 40% even in Southern Europe.
In contrast, Asia has embraced air conditioning, with average household penetration rates exceeding 60%, and surpassing 100% in countries like China, Malaysia and Japan.
With March 2025 already setting temperature records across Europe, the need for effective cooling solutions is growing fast. Heat pumps present a promising alternative. These dual-purpose systems offer both heating in the winter and air conditioning in the summer – making them a smart, energy-efficient choice for a warming world.
Heat pumps offer a unique value proposition. They not only heat the home and can replace a boiler, but they can also provide cooling during hot summer months, thus replacing an air conditioner. Heat pumps are four times more energy efficient than gas and oil boilers. Homes with a heat pump can reduce their energy consumption by 75% compared to a gas-fired boiler, according to the IEA.
With significant heating and cooling needs expected, the European Commission has identified heat pumps as the low-carbon heating and cooling systems of the future, targeting 20 million heat pump units to be installed in the EU by 2026, and 60 million units by 2030. To put this in context, Euromonitor International’s Passport reports air conditioner sales for Western Europe at just under six million units in 2024. The current estimated sales of heat pumps are just above two million units in 14 key markets in Europe, according to the European Heat Pumps Association (EHPA).
Companies announce over EUR5 billion worth of investments
There is rising demand for heat pumps in Europe, partly driven by EU subsidies. This has led to leading heat pump manufacturers, as well as appliance companies, to announce plans for over EUR3 billion worth of investment in Europe.
At IFA 2023, in Berlin, the appliance industry’s largest annual event, many of the leading appliance brands took the opportunity to publicise their significant interest in heat pumps. For the appliance industry, heat pumps appear to be a new, transformative product category, something that does not happen very often. More than EUR5.3 billion will be invested to build up manufacturing capacity.
Across the board, EU subsidies have stimulated take-up, and whilst heat pumps clearly have the potential to be Europe’s low-carbon heating and cooling system of the future, challenges remain in achieving this vision.
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This article was first published in March 2024 and has been updated.