Case study: Electrification & heat pumps — a city or utility pilot and the results so far

When Helsinki announced its plan to phase out coal-fired district heating by 2029, the city committed to replacing roughly 56% of its annual heating demand with heat pump systems drawing energy from seawater, wastewater, and ambient air. By mid-2025, the first 6 large-scale heat pumps installed at the Katri Vala heating and cooling plant were delivering 420 GWh of clean heat annually, displacing approximately 140,000 tonnes of CO2 per year. The results from Helsinki, alongside parallel pilots in Vienna and the UK's Clean Heat Market Mechanism, offer concrete lessons about what works, what breaks, and what other cities should expect when electrifying heating at scale.

Why It Matters

Buildings account for approximately 36% of final energy consumption and 40% of energy-related CO2 emissions across Europe, according to the European Commission's 2024 building stock assessment. Heating and hot water represent the largest share of that energy use, with gas boilers and district heating fuelled by fossil sources still serving the majority of European homes and commercial buildings. The EU's REPowerEU plan targets 60 million heat pump installations by 2030, roughly tripling the installed base from the 2023 level of 20 million units (European Heat Pump Association, 2025).

City and utility-scale pilots are critical because they test the integration of heat pumps into existing energy infrastructure at a scale that reveals grid constraints, installer workforce gaps, and building-level compatibility issues that do not appear in individual household installations. Municipal heating systems also serve as anchor demand sources that can justify the capital investment in large-scale heat pump infrastructure, creating cost curves that inform national policy.

The financial stakes are substantial. The European Investment Bank estimates that the continent requires EUR 275 billion in cumulative heat pump investment through 2030 to meet its decarbonization targets, with payback periods ranging from 5 to 15 years depending on electricity prices, heat pump efficiency, and the cost of the fossil fuel being displaced (EIB, 2024).

Key Concepts

Coefficient of Performance (COP): The ratio of heat output to electrical energy input. Modern air-source heat pumps achieve seasonal COPs of 2.5 to 3.5, while ground-source and water-source systems reach 3.5 to 5.0. Higher COPs mean less electricity consumed per unit of heat delivered.

District heating integration: Large-scale heat pumps can feed into district heating networks, replacing centralized fossil boilers. This approach is particularly effective in Nordic and Central European cities with existing district heating infrastructure, as it avoids the need for individual building-level retrofits.

Peak load management: Heat pumps sized to meet 100% of peak winter demand require significantly higher electrical capacity than systems designed for base load with gas backup for peaks. Most city-scale pilots use heat pumps for 60 to 80% of annual heat demand, retaining peak backup capacity.

Thermal storage: Hot water tanks and underground thermal energy storage allow heat pumps to operate during periods of low electricity prices or high renewable generation, decoupling heat production from heat demand.

What's Working

Helsinki: Seawater and Wastewater Heat Pumps at Scale

Helsinki Energy (Helen Oy) operates one of Europe's most advanced large-scale heat pump installations. The Katri Vala plant uses 6 heat pumps with a combined capacity of 155 MW thermal, extracting heat from purified wastewater at 12 to 20 degrees Celsius and from seawater through a separate intake system. The plant achieved an annual COP of 3.3 in 2024, delivering 420 GWh of district heating and 80 GWh of district cooling simultaneously, since the cooling byproduct serves Helsinki's growing data center and commercial cooling demand.

The economics are favourable. Helen Oy reports a levelized cost of heat of EUR 35 to 42 per MWh from the Katri Vala heat pumps, compared to EUR 55 to 70 per MWh from the coal-fired Hanasaari plant it is replacing (Helen Oy, 2025). The capital investment of EUR 200 million for the heat pump installation is projected to achieve payback within 8 years based on fuel cost savings and EU Emissions Trading System carbon price avoidance at EUR 65 to 90 per tonne.

A critical success factor has been Helsinki's existing district heating network, which serves 93% of the city's buildings. The heat pumps feed directly into this network without requiring any modifications at the building level, eliminating the consumer adoption barrier that slows residential heat pump deployment in markets without district heating.

Vienna: Integrating Heat Pumps into an Existing Gas-Dominated System

Wien Energie launched its "Vienna Heat Pump Offensive" in 2022, targeting 150,000 heat pump installations across the city by 2030, combining building-level air-source heat pumps with large-scale geothermal and wastewater heat pump plants. The flagship Spittelau wastewater heat pump plant, commissioned in late 2023, has a capacity of 55 MW and delivers heat to approximately 25,000 apartments through the district heating network.

The Vienna pilot revealed the importance of grid reinforcement. Wien Energie found that adding heat pumps to 30% of buildings on a typical residential distribution feeder required transformer upgrades costing EUR 50,000 to 120,000 per feeder, a cost not borne by the heat pump owner but by the distribution system operator. Wien Netz, the grid operator, allocated EUR 180 million for 2024 to 2027 grid reinforcement specifically to accommodate heat pump load growth, representing a 25% increase in its baseline capital expenditure program (Wien Energie, 2024).

Wien Energie's data shows that building-level air-source heat pumps installed in pre-1980 apartment buildings without envelope upgrades achieved seasonal COPs of only 2.1 to 2.5, compared to 3.0 to 3.5 in buildings constructed after 2000 or those with insulation retrofits. This performance gap translates to a 40 to 65% increase in electricity consumption per unit of heat, making the economics marginal in poorly insulated buildings at current Austrian electricity prices.

UK Clean Heat Market Mechanism: Manufacturer-Led Deployment

The UK's Clean Heat Market Mechanism (CHMM), launched in April 2025, requires boiler manufacturers to ensure that a rising percentage of their heating appliance sales are heat pumps or face financial penalties. The first-year target of 6% heat pump share (approximately 120,000 units) drove a measurable acceleration in installer training and supply chain development.

The Boiler Upgrade Scheme (BUS), which provides GBP 7,500 grants for air-source heat pumps and GBP 5,000 for biomass boilers, supported 42,000 installations in the 12 months ending March 2025, a 65% increase over the prior year (UK Department for Energy Security and Net Zero, 2025). The average installed cost of a residential air-source heat pump in the UK fell from GBP 12,500 in 2022 to GBP 10,800 in 2025, driven by increased competition among manufacturers including Daikin, Mitsubishi Electric, Vaillant, and Samsung, and a growing installer base that reached 6,200 MCS-certified heat pump installers by early 2025.

What's Not Working

Installer workforce constraints: Despite training investments, Europe faces an estimated shortage of 200,000 qualified heat pump installers as of 2025 (European Heat Pump Association, 2025). In the UK, the average wait time for a heat pump installation grew from 6 weeks in 2023 to 10 weeks in 2025 as demand outpaced installer capacity. Germany's Federal Association of Energy and Water Industries reports that only 55% of heating engineers completing heat pump training modules pass the practical assessment on their first attempt, pointing to inadequate hands-on training infrastructure.

Cold climate performance degradation: Air-source heat pumps experience significant COP reduction at ambient temperatures below minus 7 degrees Celsius. Helsinki's building-level air-source heat pump pilot recorded COP drops to 1.8 to 2.2 during the coldest winter weeks, roughly 40% below rated performance. This seasonal performance variation creates peak electricity demand precisely when wind and solar generation are at their lowest in Nordic countries, requiring either backup heating systems or massive thermal storage investment.

Consumer noise complaints: Heat pump outdoor units generate noise levels of 40 to 55 dB(A) at 1 metre distance. Dense urban environments in Vienna and London have generated significant noise complaints, with Wien Energie reporting that 14% of building-level installations required post-installation acoustic remediation costing EUR 800 to 2,500 per unit. The UK's permitted development rights for heat pumps include a 42 dB(A) limit at the nearest neighbour's window, a threshold that some models exceed when operating at full capacity during cold snaps.

Electricity price sensitivity: Heat pump operating economics depend heavily on the ratio of electricity to gas prices. In countries where electricity is 3 to 4 times the price of gas per kWh (as in Germany and parts of Central Europe), heat pumps with COPs below 3.0 offer no operating cost savings over gas boilers, undermining the consumer value proposition. The European Heat Pump Association has called for reduced electricity taxes and levies to improve the price ratio, but progress has been uneven across EU member states.

Key Players

Established Companies

• Daikin Industries: Global leader in heat pump manufacturing with 25% European market share by units sold in 2024
• Viessmann (Carrier Global): Major European heating manufacturer producing residential and commercial heat pumps across 6 European factories
• Mitsubishi Electric: Supplies air-source and hybrid heat pump systems widely deployed in UK, Scandinavian, and French markets
• Helen Oy: Helsinki's municipal energy company operating one of Europe's largest district heating heat pump installations
• Wien Energie: Vienna's utility company leading the city's large-scale heat pump integration program

Startups and Emerging Players

• Aira (Sweden): Raised EUR 100 million in 2024, offering vertically integrated heat pump sales, installation, and financing in 6 European markets
• Octopus Energy (UK): Launched heat pump installation services with a target of 1 million installations by 2030, leveraging its 7 million customer base
• 1KOMMA5 (Germany): Raised EUR 430 million to date, offering integrated solar, battery, and heat pump packages with dynamic electricity tariff optimization

Investors and Funders

• European Investment Bank: Committed EUR 2.3 billion in heat pump and building electrification financing from 2023 to 2025
• Breakthrough Energy Ventures: Invested in next-generation heat pump technology companies including Gradient and Quilt
• European Commission: Provides funding through the Innovation Fund and REPowerEU allocations for heat pump manufacturing scale-up

KPI Benchmarks

KPI	Helsinki District HP	Vienna Building-Level	UK Residential ASHP	Target (2030)
Seasonal COP	3.3	2.1-3.5	2.8-3.2	3.5+
Installed Cost (EUR/kW)	800-1,200	1,500-2,200	1,800-2,500	1,000-1,500
CO2 Reduction vs Gas	75-85%	45-70%	55-65%	80%+
Payback Period (years)	6-8	8-15	7-12	5-8
Maintenance Cost (EUR/yr)	15,000-25,000	150-300	100-250	Stable
System Lifetime (years)	25-30	15-20	15-20	20+

Action Checklist

• Conduct building stock assessment to identify heat pump-ready buildings (post-2000 construction or insulated stock) versus those requiring envelope upgrades before heat pump installation
• Model distribution grid capacity at feeder level to quantify transformer and cable upgrades needed for projected heat pump adoption rates
• Establish installer training partnerships with manufacturers to build certified workforce capacity ahead of deployment targets
• Negotiate thermal storage integration with heat pump sizing to reduce peak electrical demand by 20 to 40%
• Implement acoustic assessment protocols for dense urban installations to prevent post-installation noise complaints
• Design tariff structures or time-of-use pricing that incentivize heat pump operation during periods of high renewable generation
• Develop hybrid operating strategies for cold climate deployments, using heat pumps as base load with gas or electric resistance backup below minus 5 to minus 10 degrees Celsius
• Create monitoring dashboards tracking seasonal COP, electricity consumption, and CO2 displacement across the installed base to validate performance claims

FAQ

Q: What COP should cities expect from large-scale heat pump deployments in real operating conditions? A: Real-world seasonal COPs consistently fall below manufacturer rated performance. District-scale water-source and wastewater-source heat pumps achieve seasonal COPs of 3.0 to 3.5, while building-level air-source systems typically deliver 2.5 to 3.2 depending on climate zone and building insulation quality. Helsinki's district-scale results (COP 3.3) represent a best-case scenario enabled by relatively warm wastewater as a heat source. Cities should plan electrical capacity and operating budgets based on COPs 15 to 25% below rated values.

Q: How much does grid reinforcement add to the total cost of heat pump deployment? A: Wien Energie's experience suggests grid reinforcement costs of EUR 500 to 1,500 per heat pump installed, depending on existing grid capacity and the density of heat pump adoption. For a city targeting 100,000 heat pump installations, this translates to EUR 50 million to 150 million in distribution grid investment. These costs are typically socialized across all electricity consumers through network charges rather than borne by individual heat pump adopters, which improves consumer economics but creates equity and cost allocation challenges.

Q: Can heat pumps work effectively in poorly insulated buildings without envelope upgrades? A: Heat pumps can physically operate in poorly insulated buildings, but performance suffers significantly. Vienna's data shows COPs of 2.1 to 2.5 in pre-1980 buildings without insulation, versus 3.0 to 3.5 in well-insulated stock. At a COP of 2.2 and typical European electricity prices of EUR 0.25 to 0.35 per kWh, running costs are EUR 0.11 to 0.16 per kWh of heat, which is comparable to or higher than gas heating at EUR 0.08 to 0.12 per kWh. The recommendation from both Helsinki and Vienna is to combine heat pump installation with at least basic envelope improvements (loft insulation, window upgrades, draught proofing) to ensure COPs above 2.8.

Q: What role does thermal storage play in making city-scale heat pump deployment viable? A: Thermal storage is essential for managing peak demand and optimizing electricity costs. Helsinki's Mustikkamaa underground cavern stores 260,000 cubic metres of hot water, allowing the Katri Vala heat pumps to run at steady output rather than cycling to match demand. This reduces peak electrical demand by approximately 30% and allows the heat pumps to preferentially operate during hours of low electricity prices. Wien Energie estimates that adding 500 cubic metre thermal storage tanks to large apartment blocks reduces the required heat pump capacity by 15 to 20%, saving EUR 200 to 400 per dwelling in equipment costs.

Sources

• European Heat Pump Association. (2025). European Heat Pump Market and Statistics Report 2025. Brussels: EHPA.
• European Investment Bank. (2024). Investment Report 2024/2025: Building Electrification and the Energy Transition. Luxembourg: EIB.
• Helen Oy. (2025). Helsinki District Heating Decarbonisation: Annual Performance Report 2024. Helsinki: Helen Oy.
• Wien Energie. (2024). Vienna Heat Pump Integration: Grid Impact Assessment and Deployment Outcomes. Vienna: Wien Energie GmbH.
• UK Department for Energy Security and Net Zero. (2025). Clean Heat Market Mechanism: First Year Review. London: DESNZ.
• European Commission. (2024). EU Building Stock Observatory: Energy Performance and Renovation Progress Report. Brussels: European Commission.
• International Energy Agency. (2025). The Future of Heat Pumps: World Energy Outlook Special Report Update. Paris: IEA.
• Aira. (2024). Series B Funding Announcement and European Market Expansion Plan. Stockholm: Aira Climate AB.