ECB and cheap gas to blame for heat pump slump, says lobby group

The Brussels lobby group for heat pumps has blamed a 5% slump in 2023 sales on higher interest rates and cheap natural gas, based on a 16-country analysis.

European sales of heat pumps – a key technology to decarbonise the heating sector – saw a 5% slump in 2023, a first for the industry that had previously experienced non-stop growth for more than a decade.

In an analysis covering the biggest European markets, the Brussels representation of the sector – the European Heat Pump Association (EHPA) – found that “cheap gas and expensive bank loans” were the main culprits.

Amid record inflation in the past two years, the European Central Bank has repeatedly hiked interest rates.

Alongside several national particularities – Italy suspended grants, while power prices in Poland and Slovakia spiked – the market had to slump, the lobby group argues.

“It’s not rocket science: if you mess with the policy, it’ll mess with the market,” commented Jozefien Vanbecelaere, head of EU affairs at EHPA.

High interest rates hit sales twice, the report by the lobby group finds: debt-financed heat pumps become less attractive, while new construction of homes – where heat pumps are standard – slows. 

Since September 2023, the ECB’s fixed rate interest has been set to 4.5%. Meanwhile, gas prices at the Dutch TTF benchmark have approached their pre-war levels, sitting comfortable around €30 per MWh for the foreseeable future.

Most EU policies designed to bolster the heat pump industry are either stalled in Brussels, or have been watered down by EU member states. 

The Energy Taxation Directive – which should have addressed the mismatch between power and gas taxation – has not seen meaningful progress since the proposed revamp in 2021. A Belgian push to revitalise the reform stalled in February.

The heat pump action plan – a communication by the European Commission with a long-term perspective that lobby groups could have taken to their respective countries – was taken off the agenda late last year.

On the manufacturing side, the EU’s Net-Zero Industry Act – which includes heat pumps – will be adopted by EU lawmakers on 23 April, although the law is not expected to bolster sales.

[Edited by Alice Taylor]

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