Executive summary

Electrifying heating and cooling is a central pillar of decarbonisation in the Asia‑Pacific region. Yet many households and businesses remain unsure about heat pumps, often citing myths about cost, performance and suitability for local climates. Heat pumps transfer ambient heat instead of generating it, delivering three to four units of heat for every unit of electricity consumed. In China, the world’s largest market, heat pump sales grew by about 12 percent in 2023 and now represent roughly 8 percent of new heating equipment. Payback periods can be as short as six years when paired with rooftop solar. This article busts common myths, highlights success stories in Asia‑Pacific and provides a practical framework and checklist for choosing and installing heat pumps.

Why it matters

Heating and cooling represent a large share of energy demand in Asia‑Pacific. Rapid urbanisation and rising living standards are driving demand for space conditioning. Heat pumps are uniquely efficient because they move heat rather than generate it. On average they deliver three to four units of thermal energy per unit of electricity. This efficiency translates to lower operating costs and reduced emissions, especially when coupled with renewable electricity.

Asia‑Pacific markets are growing quickly but adoption is uneven. China is the world’s largest market; heat pumps sold in 2023 grew by around 12 percent and represent approximately 8 percent of heating equipment sales. In Australia, sales of single‑split heat pump systems were expected to reach 1.37 million units in 2023, up from 1.32 million the previous year. New Zealand sold about 241,000 units in 2023, more than double the level of a decade earlier. These numbers show that heat pumps are gaining traction across different climates and economic contexts.

Policy support is emerging but still nascent. China’s first national heat pump action plan, released in April 2025, calls for expansion of production, technology improvement and integrated planning across the heat and electricity sectors. The plan encourages the development of intelligent control systems, thermal storage and demand response to ensure that large‑scale heat pump adoption supports grid stability. It also acknowledges high upfront costs and highlights financing mechanisms and tax credits to support deployment. However, the plan does not fully address fossil‑fuel cost distortions or provide detailed targets, and other Asia‑Pacific countries have yet to publish comparable strategies.

Myth versus reality

Myth 1: “Heat pumps don’t work in hot or tropical climates”

Reality: Heat pumps are reversible systems that provide both heating and cooling. The technology is widely adopted in countries with warm climates because the same unit can cool in summer and heat in winter. Heat pump sales in Australia reached about 1.37 million units in 2023, demonstrating strong uptake in a warm country. Single‑split heat pumps dominate because they deliver air‑conditioning and heating in one system. The ability to reverse the refrigeration cycle means heat pumps can extract heat from indoor air and move it outside, acting like an air conditioner. Conversely, they can draw heat from the outdoor air even when ambient temperatures are low, providing space heating.

Myth 2: “Heat pumps are too expensive and have long payback periods”

Reality: While heat pumps typically require higher upfront capital than gas or electric resistance heaters, their high efficiency reduces operating costs. In many parts of China, adding a heat pump to a home with rooftop solar yields a payback period of around six years. Payback depends on local energy prices: households that face high fossil gas prices and low electricity prices see the shortest payback. China’s national action plan recognises high upfront costs and includes financing mechanisms and tax credits to make heat pumps more affordable. As manufacturing scales and local production grows, costs are expected to decline further.

Myth 3: “Heat pumps don’t work in cold climates”

Reality: Modern heat pumps are engineered to operate efficiently in low temperatures. They concentrate heat from cold ambient air and can achieve seasonal performance factors comparable to or better than gas boilers. Heat pumps are widely used in Nordic countries, which experience sub‑zero winters. Manufacturers offer cold‑climate models with improved compressors and refrigerants that maintain heating capacity at low temperatures. Hybrid systems that combine a heat pump with a backup heater can provide reliability in extreme conditions.

Myth 4: “Heat pumps are only suitable for small homes”

Reality: Heat pumps scale from small residential units to large industrial and district‑heating systems. Commercial air‑to‑water and water‑source heat pumps can provide high output temperatures and large capacities. For example, the Esbjerg seawater heat pump in Denmark uses CO₂‑based units to provide 70 megawatts of heating capacity, delivering 280,000 megawatt‑hours annually to 25,000 households and avoiding around 120,000 tonnes of CO₂ each year. Although this example is European, it demonstrates that heat pumps can replace large fossil boilers. Similar systems using river water, geothermal sources or industrial waste heat are being explored in Asia‑Pacific to decarbonise district heating and industrial processes.

Myth 5: “Heat pumps use harmful refrigerants and aren’t environmentally friendly”

Reality: Early heat pumps relied on high‑global‑warming‑potential refrigerants (for example, hydrofluorocarbons), but the industry is rapidly transitioning to low‑GWP alternatives. Natural refrigerants such as CO₂, propane and ammonia are increasingly used in residential and commercial heat pumps, and regulatory frameworks are pushing for their adoption. The Esbjerg plant mentioned above uses CO₂ as the working fluid. Manufacturers in Asia‑Pacific are investing in models that use natural refrigerants to meet international F‑gas reduction commitments. Furthermore, the high efficiency of heat pumps means that their lifetime emissions are significantly lower than those of fossil heating systems, even when powered by a moderately carbon‑intensive grid.

What’s working

• Rapid market growth in leading countries: China’s heat pump sales grew 12 percent in 2023, and the country has become the world’s largest market for air‑source heat pumps. Payback periods of around six years when paired with rooftop PV are driving adoption.
• Broad adoption across climates: Australia sold about 1.37 million units in 2023, while New Zealand sold approximately 241,000 units (more than double the level a decade earlier). These figures demonstrate that heat pumps are viable in both warm and temperate climates.
• Efficiency and versatility: Heat pumps deliver three to four units of heat per unit of electricity and can also provide cooling. This flexibility makes them attractive in regions with both heating and cooling seasons.
• Policy direction: China’s national action plan calls for expanding heat pump production, improving technology and integrating heat and electricity planning. It highlights the need for intelligent controls, thermal storage and demand response to manage grid impacts.
• Financing and incentives: The Chinese plan acknowledges high upfront costs and proposes financing mechanisms and tax credits. Some regional governments in Asia provide subsidies or grants for heat pump installations, and manufacturers are offering innovative financing models.

What isn’t working

• Upfront cost and access to financing: Although payback can be short, the initial investment remains a barrier for many households and small businesses. Affordable financing options are limited in parts of Asia‑Pacific.
• Policy gaps and uncertainty: Outside China, few Asia‑Pacific countries have comprehensive heat pump strategies. China’s plan itself lacks quantitative targets and does not address cost distortions such as fossil fuel subsidies or absent carbon pricing.
• Grid integration challenges: Large‑scale adoption may strain electricity grids if not managed properly. The Chinese plan hints at intelligent control systems and thermal storage, but details on implementation are limited.
• Workforce and awareness: Scaling installation requires trained technicians. While Europe has estimated a need for hundreds of thousands of installers, the Asia‑Pacific labour market faces similar constraints. Myths about performance and cost persist, slowing adoption.
• Environmental compliance: Regulations on refrigerants differ across countries; delays in adopting natural refrigerant standards can lock in higher‑GWP gases. Coordinated policy is needed to accelerate the transition.

A quick framework for choosing and deploying heat pumps

Use the following seven‑step framework to evaluate and implement heat pump projects:

1. Assess demand and building characteristics. Conduct an energy audit to determine heating and cooling loads, insulation levels and building geometry.
2. Understand policy and incentives. Identify national and local incentives, rebates or tax credits. Investigate financing programmes and manufacturer offerings.
3. Select the right technology. Choose between air‑source, ground‑source or water‑source heat pumps based on climate, space constraints and desired output temperature. For industrial applications, consider high‑temperature or hybrid systems.
4. Evaluate performance metrics. Compare seasonal coefficient of performance (SCOP) and heating capacity at low ambient temperatures. Opt for systems using natural refrigerants where available.
5. Plan integration with renewables. Pair heat pumps with rooftop solar or community renewable energy to reduce operating costs and emissions. Consider thermal storage to shift consumption away from peak hours.
6. Prepare for installation and maintenance. Engage certified installers, plan for electrical upgrades if necessary and schedule regular maintenance to maintain efficiency.
7. Monitor and optimise. Use smart controls to monitor performance, participate in demand response programmes and adjust settings to optimise comfort and efficiency.

Fast‑moving segments to watch

• PV‑heat pump combinations: Integrated packages that bundle rooftop solar, batteries and heat pumps are emerging, reducing payback times and providing resilience.
• Cold‑climate innovations: Manufacturers are developing compressors and refrigerants that maintain high efficiency at low temperatures, enabling deployment in mountainous and northern regions.
• Natural‑refrigerant models: Adoption of CO₂, propane and ammonia reduces global warming potential and aligns with international F‑gas reduction commitments.
• Industrial and district heat pumps: Large‑scale water‑source and geothermal systems are being deployed for district heating and industrial processes, often leveraging waste heat.
• Smart demand response: Intelligent heat pumps that participate in demand response and frequency regulation can provide grid services and earn revenue.

Action checklist for households and businesses

• Audit your building’s energy demand and insulation.
• Check available incentives and financing options.
• Determine whether an air‑source, ground‑source or water‑source heat pump best suits your climate and space.
• Ask suppliers about COP/SCOP ratings at your climate conditions and the type of refrigerant used.
• Consider pairing the system with rooftop solar or joining a renewable energy community.
• Choose an experienced, certified installer and request references.
• Plan for regular maintenance and monitor energy use to ensure savings.

FAQ

Do heat pumps work in tropical climates?
Yes. Heat pumps are reversible devices that provide both cooling and heating. They are popular in Australia and Southeast Asia because they can replace separate air conditioners and heaters.

Are heat pumps expensive to run?
Heat pumps are typically cheaper to run than gas or electric resistance heaters because they move heat rather than generate it. Payback periods depend on local energy prices; they can be around six years when paired with rooftop solar in parts of China.

Can heat pumps operate in cold climates?
Modern heat pumps are designed for cold conditions and are widely used in the Nordic countries. Hybrid systems or high‑temperature models can ensure comfort even during severe cold spells.

Do heat pumps use harmful refrigerants?
The industry is transitioning to natural refrigerants such as CO₂, propane and ammonia, which have low global warming potential. Many new models in Asia‑Pacific already use these refrigerants.

What support is available in Asia‑Pacific?
China’s national heat pump action plan calls for expanding production, improving technology and developing financing mechanisms. Other countries provide subsidies or grants for heat pumps; check local policies and programmes.

Sources

• REN21. (2024). Renewables 2024 Global Status Report: Market and Industry Trends – Heat Pumps. REN21 Secretariat.
• Regulatory Assistance Project. (2025). Making Sense of China's New Heat Pump Strategy. Regulatory Assistance Project.
• State of Green. (2024). Esbjerg Seawater Heat Pump Case Study. State of Green.