Rollout of Large Heat Pumps in Germany: A Study of Strategies for Improving the District Heating and Industrial Markets

Preface

This study of large heat pumps provides an overview of the current state of the market, the potential of large heat pumps and their application in district heating, and explores the political priorities for the actions needed to deploy them.

The rollout of a large heat pump requires three aspects, which include strategic objectives and incentives from public authorities, technological innovation from manufacturers, and accelerated implementation by district heating providers and industry. This requires a solution-oriented partnership between private companies and the public sector. Against this backdrop, it makes sense to utilize the mission economics concept proposed by Italian-American economist Mariana Mazzacato as a way to boost the growth of the large-scale heat pump market.

This new approach to solving major social tasks is characterized by an active partnership between the private and public sectors, where the state identifies the challenges and problems that need to be addressed without imposing detailed prescriptions and provides the private sector with investment confidence and security. In return, private participants work on goals such as reducing costs or providing attractive products and services to customers. In addition, the state bears the entrepreneurial risk, but also a certain reward. Compiled by Chen Jiaoyun

With this research, we want to contribute to the development of large-scale heat pumps and the great potential of district heating systems to achieve successful heat conversion.

The results of the study showed that:

1. Heating applications below 200 degrees Celsius account for three-quarters of Germany's fossil gas consumption and more than a quarter of greenhouse gas emissions. Currently, fossil fuels dominate the supply of heat to industrial processes, buildings, and district heating systems. Therefore, in order to meet climate goals and reduce the consumption of fossil natural gas, it is essential to shift to climate-neutral options based on renewable energy.
2. In Germany, the entire heat demand of up to 200 degrees Celsius can be met with heat pumps. As part of this, large heat pumps can harness the enormous potential offered by geothermal energy, water bodies and waste heat. By 2045, large heat pumps could provide 70% of the district heating supply, replacing a large part of the fossil natural gas used.
3. Large heat pumps are a proven technology with considerable market potential in Germany. However, in 2023, Germany has only 60 MW of installed capacity. Complex planning and approval processes are slowing down the growth of the market. In addition, the existing fiscal support system under the Combined Heat and Power Act (KWKG), as well as the higher tax burden on electricity than fossil gas, have so far supported gas-based heating options – and these unfavourable incentives must be removed.
4. The rapid acceleration of large heat pumps requires a skillfully coordinated combination of instruments. The most important thing is a clear overall goal, coupled with energy prices that are in line with the transformation and reform of network usage fees. Manufacturers should use the resulting planning certainty to drive innovation and reduce manufacturing costs. Demand could be stimulated by a revised financial support framework and measures to accelerate large-scale heat pump projects for district heating systems.