KfW Research: Germany Faces Challenges in Heat Pump Adoption Despite Growing Market Demand

KfW Research: Germany Faces Challenges in Heat Pump Adoption Despite Growing Market Demand

(IN BRIEF) The adoption of heat pumps in Germany remains slower compared to other European countries, largely due to the significant electricity-to-gas price ratio. However, recent findings from KfW Research suggest that adjusting these prices could significantly boost the number of heat pumps sold. While Germany ranks lower in overall heat pump sales, there is positive momentum in new housing construction, where heat pumps are now the primary heating technology.

(PRESS RELEASE) FRANKFURT, 20-Feb-2025 — /EuropaWire/ — The adoption of heat pumps in Germany continues to lag behind other European nations, despite increasing interest and market growth. One of the key factors driving this slower uptake is the electricity-to-gas price ratio, which plays a crucial role in determining the economic viability of heat pumps for consumers. This disparity is particularly evident in countries where electricity is significantly more expensive than gas, like Germany.

According to an analysis by KfW Research, the price difference between electricity and gas directly influences the number of heat pumps sold. In Germany, where electricity was around four times more expensive than gas in 2023, reducing the price of electricity or increasing the cost of gas could result in a substantial increase in heat pump sales. Specifically, halving electricity prices or doubling gas prices could nearly double the adoption rate of heat pumps.

“The electricity-to-gas price ratio is a key driver in the adoption of heat pumps,” explained Dr. Johannes Rode, an energy expert at KfW Research. “The challenge is multifaceted. One option is implementing a consistent and increasing carbon price that would raise gas prices. Alternatively, offering attractive electricity rates for heat pump usage could also be effective. It’s important to consider that lower-income households often live in less energy-efficient homes, which means they would benefit from additional measures such as grants or low-interest loans to ensure the energy transition is socially equitable.”

In terms of overall adoption, Europe has seen a significant rise in heat pump sales over the last decade, with sales nearly quadrupling. However, 2023 saw a slight dip in sales compared to previous years. In Germany, 11 heat pumps were sold per 1,000 households in 2023, a figure that lags behind other European countries like Switzerland (17), France (23), Sweden (36), and Norway, where 57 heat pumps were sold per 1,000 households. Germany ranked 17th out of 21 countries analyzed in the study.

The disparity also extends to the existing heat pump installations, where Scandinavian nations once again lead the way. In countries like Norway and Finland, half of all residential buildings are equipped with heat pumps, whereas in Germany, only five percent of homes have made the switch.

Nevertheless, there is a positive trend in new construction in Germany, where heat pumps have become the primary heating solution for newly built homes. In 2023, 72 percent of newly approved detached houses and 52 percent of multi-family residential buildings had heat pumps installed. The trend is even more apparent when looking at the overall heating market. In 2019, only one in ten heating systems sold was a heat pump. By 2023, that ratio had risen to one in four.

To read the full study, visit www.kfw.de/fokus.

Media Contact:

Ms. Nina Luttmer
+49 69 7431 41336
nina.luttmer@kfw.de

SOURCE: KfW Entwicklungsbank GmbH