Sustainability Atlas
Clean Energy·13 min read··...

Interview: practitioners on electrification & heat pumps

from pilots to scale: the operational playbook. Focus on a leading company's implementation and lessons learned.

In 2024, heat pumps outsold gas furnaces in the United States by 30%, marking a watershed moment in building electrification (IEA, 2025). The global heat pump market reached approximately $86.5 billion, with projections suggesting it could exceed $148 billion by 2030 at a compound annual growth rate of 9.5% (Grand View Research, 2024). Despite a challenging first half of 2024 that saw European sales decline by 22%, the second half witnessed a robust recovery—U.S. sales surged 15% year-over-year, and early 2025 data shows European markets rebounding with 9% growth. These figures underscore a fundamental shift: electrification of heating is no longer an emerging trend but a mainstream decarbonization strategy reshaping how practitioners approach building operations, supply chain management, and long-term climate targets.

Why It Matters

Building heating accounts for approximately 10% of global CO2 emissions and remains one of the most stubborn sectors to decarbonize. In Europe alone, 130 million fossil fuel boilers continue to operate, representing both a massive emissions liability and a €150 billion market opportunity for heat pump deployment by 2030 (Aira Group, 2024). The International Energy Agency estimates that tripling heat pump installations globally by 2030 is essential to achieving net-zero trajectories.

For sustainability leads, electrification through heat pumps offers a compelling value proposition: modern air-source heat pumps deliver 3 to 4 units of thermal energy for every unit of electricity consumed, translating to coefficient of performance (COP) ratings between 3.0 and 5.0 depending on ambient conditions (European Heat Pump Association, 2025). This thermodynamic efficiency advantage over combustion-based heating—which caps at theoretical maximums below 100%—makes heat pumps the cornerstone technology for decarbonizing heating in both residential and commercial applications.

Beyond emissions reduction, heat pump adoption creates supply chain resilience benefits. Organizations transitioning to electric heating reduce exposure to volatile natural gas prices and geopolitical supply disruptions that plagued European energy markets in 2022-2023. The technology also enables integration with on-site renewable generation and battery storage, creating pathways to fully electrified, grid-interactive buildings.

Key Concepts

Understanding electrification and heat pump deployment requires familiarity with several technical and economic fundamentals that practitioners consistently emphasize in implementation planning.

Coefficient of Performance (COP) measures heat pump efficiency as the ratio of thermal output to electrical input. A COP of 4.0 means the system delivers four kilowatts of heating for every kilowatt of electricity consumed. Seasonal COP (SCOP) averages this metric across annual operating conditions, providing more realistic efficiency expectations. Modern cold-climate heat pumps now achieve SCOPs above 3.0 even in temperatures below -15°C.

Air-source versus ground-source systems represent the primary technology decision. Air-source heat pumps (ASHPs) dominate the market at 83-85% share due to lower installation costs and simpler retrofitting. Ground-source heat pumps (GSHPs) offer higher efficiency and consistent performance but require significant excavation or borehole drilling, limiting applications to new construction or sites with adequate land.

Refrigerant transition has emerged as a critical sustainability consideration. The industry is shifting from hydrofluorocarbon refrigerants toward lower-global-warming-potential alternatives, particularly R290 (propane). Leading manufacturers including Bosch and NIBE now offer R290-based systems that reduce refrigerant climate impact by over 99% compared to legacy R410A systems.

Grid integration and demand response capability distinguishes advanced heat pump deployments. Variable-speed compressors with smart controls can modulate consumption in response to grid signals, shifting heating loads to periods of high renewable generation or low electricity prices. This flexibility creates value for utilities while reducing operating costs for building owners.

Heat Pump KPIs by SectorResidentialCommercialIndustrial
Typical COP Range3.0 – 4.53.5 – 5.02.5 – 4.0
Installation Cost ($/kW)$1,500 – $3,000$800 – $2,000$500 – $1,500
Payback Period (years)5 – 123 – 82 – 6
CO2 Reduction (%) vs. Gas50% – 80%40% – 70%30% – 60%
Maintenance Cost ($/year)$150 – $400$500 – $2,000$2,000 – $10,000
Expected Lifespan (years)15 – 2515 – 2020 – 30

What's Working

Vertically Integrated Business Models

The subscription and monthly payment models pioneered by companies like Aira and Kelvin have dramatically reduced adoption barriers. Aira's approach—combining manufacturing, installation, and ongoing service into a single monthly fee—removes upfront capital requirements that historically constrained residential adoption. This model has enabled Aira to achieve installations across Germany, Italy, and the United Kingdom while operating a manufacturing facility in Poland with 500,000-unit annual capacity.

Cold-Climate Technology Advances

The technical limitation of heat pump performance in cold climates has largely been solved. Mitsubishi Electric's Hyper-Heating systems and comparable offerings from Daikin now maintain rated capacity down to -25°C. The U.S. Department of Energy's Cold Climate Heat Pump Technology Challenge, completed in September 2024, validated that modern systems deliver reliable performance across all U.S. climate zones. Carrier completed this challenge and initiated production at its Tennessee manufacturing facility, signaling mainstream adoption of cold-climate capability.

Software-First Product Development

Quilt's AI-powered heat pumps demonstrate how software integration transforms hardware products. Over-the-air updates have improved installed system performance by 20% without physical modifications, enabling continuous optimization of efficiency and comfort. This approach—treating heat pumps as connected devices rather than static appliances—creates ongoing value and differentiates offerings in a competitive market.

Regulatory Tailwinds

The U.S. Inflation Reduction Act provides tax credits up to $2,000 for heat pump installations plus additional incentives through state programs. Germany's renewed heating law mandates that new heating systems incorporate at least 65% renewable energy, effectively requiring heat pump or hybrid system installation. France has committed to producing one million heat pumps annually domestically. These policy frameworks create predictable demand signals that justify manufacturing investments.

What's Not Working

Skilled Installer Shortages

Despite technology readiness, workforce constraints remain the primary bottleneck. The European Heat Pump Association estimates that heat pump installation capacity must double by 2030 to meet policy targets, requiring hundreds of thousands of additional trained technicians. Current training pipelines are insufficient, creating labor cost inflation and extended installation timelines that undermine project economics.

Policy Uncertainty and Subsidy Volatility

Germany's 2024 experience demonstrates how political uncertainty devastates markets. Prolonged debates over heating legislation and subsidy structure contributed to a near-50% decline in German heat pump sales during 2024. Practitioners consistently report that stable, long-term policy frameworks matter more than subsidy levels—unpredictable changes freeze purchasing decisions and investment planning.

Electricity-to-Gas Price Ratios

In markets where electricity prices significantly exceed natural gas prices, heat pump economics face headwinds despite efficiency advantages. A COP of 4.0 means the electricity price must be no more than four times the gas price to break even on operating costs. Some European markets in 2024 experienced price ratios exceeding this threshold, particularly for customers without access to time-of-use tariffs or renewable generation.

Building Stock Suitability

Approximately 15-20% of existing buildings require significant envelope upgrades before heat pump installation becomes practical or economical. Poorly insulated buildings demand higher-temperature heating outputs that reduce heat pump efficiency and may necessitate ground-source systems with corresponding cost implications. Practitioners report that honest building assessment early in project development prevents costly retrofitting failures.

Key Players

Established Leaders

Daikin Industries (Japan) commands global market leadership with comprehensive residential and commercial portfolios. The company expanded European manufacturing capacity to one million water heat pumps annually by 2025 and has installed 1.2 million water heat pumps in Europe since 2006. Daikin's Altherma 4 platform, launched in 2024, represents current state-of-the-art residential technology.

Mitsubishi Electric (Japan) pioneered ductless mini-split technology in 1959 and maintains peak efficiency ratings of 33.1 SEER. The company's Hyper-Heating systems deliver reliable cold-climate performance and the Kumo Cloud platform enables sophisticated smart controls.

Carrier (USA) brings legacy HVAC expertise to heat pump markets and maintains a portfolio of over 75 brands globally including Bryant and CIAT. Named to TIME's World's Best Companies list for 2024, Carrier completed DOE cold-climate certification and expanded domestic manufacturing.

Bosch (Germany) leads European manufacturing with strong sustainability credentials, including early adoption of R290 refrigerant technology. A joint venture with Midea since 2015 provides access to Asian manufacturing scale.

NIBE (Sweden) specializes in ground-source heat pumps with the highest efficiency ratings in the category. The company's S1256 and S1156 models introduced in 2024 represent current ground-source technology benchmarks.

Emerging Startups

Aira (Sweden) has raised approximately €270 million including €145 million Series B in January 2024 and €63 million extension in October 2024. Backed by Temasek, Kinnevik, and Altor, Aira operates a Polish manufacturing plant producing 500,000 units annually and deploys through a subscription model across Germany, Italy, and the UK.

Quilt (USA) raised $62 million including $33 million Series A in April 2024 and $20 million Series B in December 2025. Backed by Energy Impact Partners and Galvanize, Quilt has installed nearly 1,000 AI-powered ductless heat pumps across 16 U.S. states and 5 Canadian provinces.

AtmosZero (USA) targets industrial decarbonization with its "Boiler 2.0" high-temperature heat pump technology, which uses 50% less electricity than traditional electric boilers. The company has piloted installations at facilities including New Belgium Brewing in Fort Collins, Colorado.

Key Investors

Energy Impact Partners invests across the clean energy transition and has backed multiple heat pump ventures including Quilt. Temasek (Singapore) and Kinnevik (Sweden) have led major rounds in Aira. Lowercarbon Capital and MCJ Collective actively invest in electrification technologies. Government programs including the New England Heat Pump Accelerator (a $450 million EPA grant announced July 2024) and DOE's Commercial HVAC Accelerator provide public capital for market development.

Examples

1. City of Copenhagen District Heating Integration

Copenhagen's district heating system has integrated large-scale heat pumps using seawater as a heat source, providing carbon-neutral heating to over 100,000 households. The system demonstrates how heat pumps scale beyond building-level applications to district infrastructure, achieving system COPs above 4.0 while utilizing waste heat from data centers and industrial facilities. Copenhagen's approach has become a reference model for other Nordic cities transitioning away from biomass and waste incineration.

2. Redevco Portfolio Decarbonization

European commercial real estate investor Redevco has systematically electrified heating across its €9 billion portfolio, replacing gas boilers with air-source and ground-source heat pumps in retail and mixed-use properties. The program combines heat pump installation with building envelope improvements and rooftop solar, targeting net-zero operational carbon by 2040. Redevco reports that electrified buildings command rental premiums and higher occupancy rates, demonstrating how decarbonization aligns with commercial objectives.

3. New Belgium Brewing Industrial Heat Pump Pilot

New Belgium Brewing partnered with AtmosZero to pilot high-temperature heat pump technology for brewing processes at its Fort Collins facility. The installation replaces natural gas boilers for process heat up to 165°C, demonstrating heat pump viability in food and beverage manufacturing. Early results show 50% energy consumption reduction compared to conventional electric resistance heating, validating the economic case for industrial electrification in energy-intensive sectors.

Action Checklist

  • Conduct building-by-building heating load and envelope assessment to identify heat pump candidates and buildings requiring insulation upgrades before electrification
  • Model electricity-to-gas price scenarios across 10-year planning horizons to validate heat pump economics under various energy market conditions
  • Evaluate time-of-use electricity tariffs and demand response program availability to optimize heat pump operating costs and grid integration value
  • Establish relationships with multiple certified installers early to mitigate workforce availability constraints during peak installation seasons
  • Integrate heat pump deployment into broader electrification roadmaps including EV charging, solar generation, and battery storage for whole-building optimization
  • Specify equipment with verified cold-climate performance ratings and low-GWP refrigerants (R290 or equivalent) to align with evolving regulations
  • Develop monitoring and verification protocols to track actual versus predicted performance and identify optimization opportunities

FAQ

Q: How do heat pumps perform in extreme cold climates, and what temperatures are the practical limits?

A: Modern cold-climate heat pumps maintain rated heating capacity down to approximately -25°C, with continued operation at reduced capacity below that threshold. Systems from Mitsubishi Electric, Daikin, and Carrier have completed DOE cold-climate certification demonstrating reliable performance across all U.S. climate zones. Ground-source systems provide consistent performance regardless of ambient temperature since soil temperatures remain stable year-round. The key consideration is proper system sizing—cold-climate applications require larger capacity than moderate climates to avoid supplemental resistance heating.

Q: What is the typical payback period for commercial heat pump installations versus residential?

A: Commercial installations typically achieve payback in 3-8 years compared to 5-12 years for residential systems. Commercial buildings benefit from larger system sizes that reduce per-unit costs, more consistent operating hours that maximize efficiency gains, and access to demand response revenues. Payback calculations depend heavily on local electricity and gas prices, available incentives, and baseline system efficiency. Projects replacing aging, inefficient boilers show faster returns than those replacing newer gas equipment.

Q: How should organizations prioritize buildings in a multi-site heat pump deployment program?

A: Practitioners recommend prioritizing based on three factors: building suitability (adequate insulation and electrical capacity), equipment replacement timing (targeting buildings with aging boilers approaching end-of-life), and demonstration value (selecting high-visibility sites that build organizational confidence and capability). Avoid starting with the most challenging buildings—early wins establish installation relationships and operational familiarity that improve later deployments. Some organizations use a "low-hanging fruit first" approach while simultaneously upgrading envelope performance on more difficult buildings for later phases.

Q: What maintenance requirements differ between heat pumps and conventional gas heating systems?

A: Heat pumps generally require less maintenance than combustion systems—there is no burner cleaning, combustion analysis, or flue inspection. Annual maintenance includes filter replacement, refrigerant charge verification, coil cleaning, and controls calibration. Outdoor units require clearance maintenance for air-source systems. Expected maintenance costs range from $150-400 annually for residential systems and $500-2,000 for commercial installations. Ground-source systems have lower maintenance requirements since the ground loop requires minimal attention once installed.

Q: How do refrigerant regulations affect heat pump technology selection and long-term planning?

A: F-gas regulations in Europe and similar frameworks globally are phasing down high-GWP refrigerants including R410A (GWP of 2,088). Organizations installing new systems should specify equipment using R290 (propane, GWP of 3), R32 (GWP of 675), or CO2 (R744, GWP of 1) to avoid future refrigerant availability constraints and regulatory compliance costs. While R290 systems are increasingly available from manufacturers including Bosch, NIBE, and Vaillant, charge size limitations for flammable refrigerants require design consideration in some applications.

Sources

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