The European heat pump sector faces a complex and challenging landscape in 2025, with varying trends across the continent's major markets. While the United Kingdom emerges as a beacon of growth, countries like Germany and France continue to grapple with declines in sales, largely influenced by political and economic uncertainties.
Germany: A Sharp Decline Amid Uncertainty
Germany’s heat pump market has experienced a dramatic downturn. According to analysts at Jefferies, sales in Germany plummeted by 48% in 2024, following a strong growth surge of 59% in 2023. The boom in 2023 was driven by high natural gas prices, strong government subsidies, and the anticipation of new heating regulations.
However, the situation took a turn as uncertainty around the implementation of the Building Energy Act began to mount. Alongside this, a slowdown in subsidy approvals significantly dampened consumer interest in heat pump installations. Additionally, the potential formation of a grand coalition government has added further complexity to the outlook, with major political parties divided over the future of subsidies and heating regulations.
United Kingdom: A Bright Spot of Growth
In contrast, the UK is positioning itself as a growing market for heat pumps. Despite the broader European downturn, UK sales grew by an impressive 63% in 2024. This surge can largely be attributed to the expansion of government incentives, such as an increase in the Boiler Upgrade Scheme grant from £5,000 to £7,500 per installation. Furthermore, the introduction of zero-interest loans has provided additional support for consumers.
However, while this growth is promising, the UK still faces significant challenges. The government has set an ambitious target of 600,000 heat pump installations annually by 2028, a substantial increase from the 99,000 units installed in 2024. To achieve this goal, the country will need to see a major acceleration in adoption rates.
France: Slowing Demand Amid Subsidy Cuts
France, historically one of Europe’s largest markets for heat pumps, is also experiencing a decline. Sales fell by 24% in 2024, driven primarily by cuts to key subsidy programs, including MaPrimeRénov’. The French government’s decision to cap incentives for hybrid heat pumps and reduce the overall budget for home energy renovations has significantly impacted the market.
The complexity and lack of clarity surrounding these financial incentives have contributed to consumer hesitation, according to Jefferies analysts. This trend is expected to continue in 2025, as the French government’s recently approved budget includes further reductions to MaPrimeRénov’ funding, signaling continued challenges for the market.
A Broader European Downturn
Across Europe, the heat pump sector is struggling, with average sales across key countries declining by 23% in 2024. This decline highlights the sensitivity of the industry to policy changes and broader economic conditions. While European governments remain committed to achieving net-zero targets, the shifting political landscape and evolving subsidy structures are shaping the industry’s short-term trajectory.
The Long-Term Outlook: Policy Stability is Key
Despite the challenges facing the market in the short term, the long-term outlook for heat pumps in Europe remains tied to the continent's decarbonization goals. Analysts at Jefferies emphasize that for the sector to regain momentum, stability in policy and financial support will be critical to restoring consumer confidence and driving adoption.
The recent growth seen in the UK suggests that targeted government intervention can have a significant positive impact on the market. However, the ongoing struggles in Germany and France highlight the risks associated with policy uncertainty. Moving forward, the European heat pump industry will need a steady and supportive policy environment to thrive in the years to come.
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