Heat Pump Market Size, Share & Trends Analysis Report By Technology (Air Source, Water Source), By Capacity (Up To 10 kW, 10 To 20 kW), By Operation Type (Electric, Hybrid), By Application, By Region, And Segment Forecasts, 2024 - 2030

Heat Pump Market Size & Trends

The global heat pump market size was estimated at USD 88.7 billion in 2023 and is expected to grow at a compound annual growth rate (CAGR) of 9.4% from 2024 to 2030. Favorable government policies for energy-efficient solutions and lowering carbon footprint are anticipated to boost market growth over the forecast period. Many governments are providing subsidies or incentives and tax credits & rebates for the installation of heat pumps are expected to further fuel the demand for energy-efficient heat pumps, thereby, benefitting the growth of heat pump industry.

According to the U.S. Department of Energy, a 30% tax credit can be claimed for buying a property in the U.S. that has qualified heat pumps installed in connection with an existing or new dwelling unit. Italy's Conto Termico incentive scheme provides grants that cover 30-35% of costs of installing renewable heating systems in buildings. Australia also provides national grants to municipals for heat pump installation. Moreover, heat pump industry is significantly affected by the availability of raw materials, such as metals like iron & steel, adhesives, rubber, chemicals, and plastics. Thus, fluctuations in raw material prices have a direct impact on manufacturing costs, which can limit market growth to some extent.

The temperature of soil in most areas of the U.S. is warmer than air during winters and cooler in summers. Ground source heat pumps use the ground's constant temperature to cool and heat buildings. According to the Environmental Protection Agency (EPA), GHPs are the most cost-effective, environmentally clean, and energy-efficient systems for cooling and heating buildings, including homes, offices, schools, and hospitals, owing to which demand for heat pumps is expected to increase in the U.S. over the forecast period.

The U.S. government has provided personal tax credits and direct incentives on product installation, which encourage the installation of heat pumps. Improving energy efficiency across various industries is one of the major objectives of governments across the world. The rising need for renewable energy sources, along with extensive government support in the form of subsidies, incentives, and other monetary benefits, is projected to fuel market growth over the forecast period. Air Source technology is expected to dominate the market in the U.S. over the forecast period due to rising awareness about adverse effects of greenhouse gas emissions. Furthermore, increasing population along with increasing need for eco-friendly air conditioning in housing sector is expected to drive demand for air-source technology in the U.S.

Fast-paced industrialization along with growing population has resulted in massive energy consumption across the world. According to EIA’s U.S. residential energy consumption survey, heating, cooling, & ventilation accounted for half of total home energy consumption. In 2021, based on total fuel consumption, natural gas accounted for 44%, and fuel oil & propane accounted for a 9.0% share. Furthermore, electricity was the most consumed energy source across the U.S. with households accounting for 47%. Thus, increasing demand for energy-efficient solutions and growing carbon footprints across the globe are expected to drive the market’s growth over the forecast period.

Market Dynamics

As per the International Energy Agency, heat pumps continue to cover only a small portion of domestic heat demand, while fossil fuel-based solutions accounted for roughly half of the global heating equipment sales in 2022, with majority of heat pumps being installed in new buildings. However, various factors including regulatory development, enhanced construction requirements favoring heat pumps in new buildings, and rising air conditioning demand are likely to boost the adoption of heat pump technologies in the coming years.

The global heat pump industry is extremely competitive, relying on technological developments and product improvements. Market players strive to attain application development to gain a competitive advantage. Furthermore, local manufacturers in Asia Pacific pose a considerable threat to the large players, in terms of product quality and price offered to customers, owing to the arability of a highly skilled workforce at low cost and low raw material cost.

Technology Insights

The air-source technology segment dominated the market in 2023 by accounting for a share of over 84.6%. Air source heat pump works through wet central heating systems to heat radiators and provides hot water. Similar to a refrigerator, these pumps absorb heat and transfer it to other mediums. The majority of air-source heat pump integrations involve air-to-air heat pumps, which warm or cool air. Its ability to provide water-heating solutions along with heating and cooling of space is expected to boost demand for air source technology over forecast years. In February 2023, LG introduced an air source heat pump (ASHP) capable of heating 200-270 liters of residential water. The pump has a coefficient of performance (COP) of up to 3.85 and uses R134a as a refrigerant.

The water-source technology segment is expected to witness a CAGR of 8.7% over the forecast period. It is most suitable for those who live near water sources. These pumps provide very high efficiency with a COP of around 5, which means for every unit of electricity it delivers 5 units of heat. Geothermal heat pumps offer higher efficiency than air source heat pumps owing to the advantage of stable temperature of their geothermal subsoil heat source. It is one of the most sustainable and cost-effective solutions available in the market. The growing importance of GSHP in global market owing to its high energy efficiency is expected to drive market growth over the forecast period.

Capacity Insights

The heat pump segment with up to 10-20 kW capacity accounted for a market share of 21.3% in 2023. The growth is attributed to capacity type being suitable for a wide range of uses such as in hotels, swimming pools, factories, restaurants, and schools. The majority of heat pumps in this capacity provide quiet operation, are environment-friendly, offer high efficiency, and have a wide range of hydraulic options and communication protocols. ThermoWise, a heat pump with a 10-20 kW capacity introduced its new product DKRS-200SN4-M2. This particular product is capable of maintaining its temperature at a high 65 degrees Celsius and it widely caters to schools, prisons, and hotels, among others where higher demand for hot water is required.

Operation Type Insights

The electric operation type segment accounted for a revenue share of 86.0% in 2023. An electric heat pump utilizes electricity to transfer heat from a cool space to a warm space. These heat pumps are not only used for heating but also for cooling during the summer season. Owing to the benefits of electric heat pumps such as better air quality, energy efficiency, quiet operation, safer than gas pumps, and others segment demand is expected to showcase lucrative growth.

Hybrid heat pumps guarantee long-term savings by reducing end-users’ monthly energy expenditure. By adopting hybrid heat pumps end-users can also benefit from a tax credit or rebate thereby driving this segment’s growth. Moreover, utilizing a hybrid heat pump reduces carbon footprint as these heat pumps can switch between a gas furnace and a heat pump.

Application Insights

The residential application segment dominated the market in 2023 by accounting for a revenue share of over 86.0%. Rapid urbanization coupled with increasing demand for energy-efficient products is expected to drive demand for heat pumps in residential sector. Favorable government initiatives and tax rebates offered on energy-saving product installation are also expected to propel demand for heat pumps over coming years.

The industrial application segment is expected to witness a CAGR of around 8.0% over the forecast period. Increasing demand for waste heat recovery heat pumps is projected to drive demand over coming years. Heat pumps are used in multiple industrial processes including dehumidification, evaporation processes, distillation, and water heating or cooling applications. Food & beverage, chemical, and petroleum are major end-use sectors of heat pumps that are expected to drive market growth.

A growing focus on energy efficiency coupled with increasing efforts by commercial stakeholders to combat global warming is anticipated to boost demand for heat pumps over the forecast period. Increasing demand for heat pumps on account of various factors, including lower electrical power requirements, low lifecycle costs, eco-friendly aspects, and tax credit incentives, is expected to drive market growth.

Heat pump products are used in commercial facilities like office buildings, hotels, schools, houses of worship, and historic buildings since their variable refrigerant flow heat pump systems enable them to offer cooling zones and heating to other zones simultaneously in a facility. These products can also help achieve carbon neutrality along with providing improved comfort and efficiency.

Regional Insights

Asia Pacific led the market and accounted for 52.6% of the global revenue share in 2023. Asia Pacific is characterized by the availability of large skilled labor at low cost. The rising trend of shifting production bases to emerging economies, mainly China and India, is expected to positively influence market growth over the forecast period. Energy-saving solutions are expected to gain high prominence in countries such as China, Japan, Indonesia, and India.

North America, led by the U.S. and Canada, accounted for a significant share of the global heat pump industry in 2023. Government initiatives and rebates offered to promote the incorporation of energy-saving and environment-friendly technologies are projected to augment demand for advanced heat pumps. Furthermore, increasing carbon emissions and fluctuating energy prices have encouraged consumers to use renewable heating sources, which are expected to boost growth of regional market.

According to a report published by the European Commission in 2020, in Europe, the economic potential of geothermal power comprising enhanced geothermal systems is estimated to be 19 GWe in 2020, 22 GWe in 2030, and 522 GWe in 2050. Geothermal energy has numerous applications including district heating, agriculture, and industrial processes. With two millionsystems installed, ground source heat pumps are the most widely adopted technologies for geothermal energy use in the EU, half of which are found in Sweden and Germany, which is expected to drive the growth of the European heat pump sector in the coming years.

The construction sector of the Middle East & Africa is projected to witness significant growth in coming years owing to the strong support of local governments for infrastructure development. In addition, the region is witnessing new developments in the form of sports facilities, hotels, and restaurants. As construction industry in the Middle East & Africa is growing, demand for sustainable cooling solutions such as heat pumps is expected to increase in the region. This is anticipated to contribute to growth of the Middle East & Africa heat pump industry in the coming years.

Key Companies & Market Share Insights

The manufacturers adopt several strategies, including acquisitions geographical expansions, new joint ventures, product developments, and mergers to enhance market penetration and cater to changing technological requirements of various applications such as residential, commercial, and industrial. For instance, in January 2023, Johnson Controls acquired Hybrid Energy AS. Hybrid Energy's innovative technology will provide customers with fresh, cost-effective solutions while tackling decarbonization and sustainability efforts in Europe and beyond.

Heat Pump Market Report Scope

Global Heat Pump Market Report Segmentation

This report forecasts revenue growth at global, regional & country levels and provides an analysis of the latest industry trends in each of the sub-segments from 2018 to 2030. For this study, Grand View Research has segmented the global heat pump market report based on technology, capacity, operation type, application, and region:

• Technology Outlook (Revenue, USD Billion, 2018 - 2030)

  • Air Source

    • Air to Air

    • Air to Water

  • Water Source

  • Geothermal

• Capacity Outlook (Revenue, USD Billion, 2018 - 2030)

  • Up to 10 kW

  • 10-20 kW

  • 20-50 kW

  • 50-100 kW

  • 100-200 kW

  • Above 200 kW

• Operation Type Outlook (Revenue, USD Billion, 2018 - 2030)

  • Electric

  • Hybrid

• Application Outlook (Revenue, USD Billion, 2018 - 2030)

  • Residential

  • Industrial

  • Commercial

• Region Outlook (Revenue, USD Billion, 2018 - 2030)

  • North America

    • U.S.

    • Canada

    • Mexico

  • Europe

    • Germany

    • France

    • Italy

    • Sweden

    • Norway

    • Spain

    • Finland

  • Asia Pacific

    • China

    • Japan

    • Australia

    • India

    • South Korea

  • Central & South America

    • Brazil

    • Argentina

  • Middle East & Africa

    • UAE

    • Saudi Arabia