National Market Repoet
Heat Pumps in the United States: Market Potentials, Challenges and Opportunities
The US heat pump market has been affected by the socioeconomic impacts of the COVID-19 pandemic. However, the US ministration’s electrification goal accelerates the deployment of heat pumps, and the US heat pump market has experienced teady growth since 2010. In 2020, heat pumps surpassed gas furnace shipments for the first time, and the trend maintained through 2022. The heat pump market share is expected to grow as policies, and financial incentives steer the building sector toward carbonization. This paper reviews the US heat pump market trends and discusses the challenges and opp ortunities in the current olicy landscape.
By Mini Malhotra, Zhenning Li, Xiaobing Liu, Melissa Lapsa, Tony Bouza, Edward Vineyard and Brian Fricke, USA
Introduction
The halt in manufacturing and construction activities due to partial or complete lockdown during the COVID-19 pandemic severely impacted the global economy, including the heat pump market, in 2020 [1]. In 2021, the global economic recovery began. However, the growth has been fragile because of the continued pandemic and geopolitical and economic uncertainties [2]. According to the United Nations [3], the economic impacts of the war in Ukraine have had both positive and negative effects on climate action. In particular, countries have an opportunity to address high prices and resource availability concerns by accelerating the adoption of clean energy, which also strengthens the fight against climate change [3]. Specifically, heat pump technologies are receiving unprecedented priority to reduce the use of fossil fuels and vulnerability to supply isruptions in response to the global energy crisis [4].
US Policies and Programs
The Biden administration’s affirmatory response to international climate change agreements, including Paris Climate Accord to limit and resist climate change [5], and the Kigali Amendment to the Montreal Protocol to phase down the consumption and production of hydro-fluorocarbons [6], confirms a commitment toward global clean energy economy. The United States has set forth the goals to reduce greenhouse gas (GHG) emissions by 50%–52% from 2005 levels in 2030, decarbonize the US power sector by 2035, and achieve a net-zero emissions economy by 2050 [7]. Minimizing the emissions from buildings has been a priority to accomplish these goals [8]. Federal investments have been allocated to modernizing and upgrading buildings to be affordable, resilient, accessible, energy-efficient, and electrified [9]. A number of policies have been implemented, and targeted actions have been taken to support heat pump technology research, expand deployment, and address supply chain vulnerabilities. Figure 1 shows a timeline of policies since 2020 that have supported the development and adoption of heat pump–related technologies.
US Heat Pump Shipments
As shown in Figure 2, US heat pump market shipments predominantly comprise air-source heat pumps. More than 96% of air-source heat pumps have a capacity of 19 kW or less [10]. Heat pump water heaters, water loop heat pumps, and ground source heat pumps comprised a little over 7% of heat pump sales in 2022 [11]. Figure 3 shows the annual shipments of air source heat pumps (green) compared with gas and oil furnaces (orange and yellow, respectively) and central air conditioners (blue) since 2001.
Despite the sharp drop in the hipments of all heating and cooling equipment during the 2006–2007 housing market collapse, the share of heat pumps (black dotted) has shown a relatively consistent increasing trend. In 2020, heat pump shipments surpassed that of gas furnaces for the first time, and the trend maintains through 2022, reaching 52.6% in September 2022 year-to-date (YTD). Meanwhile, the heat pump share in the cooling equipment market reached 40.6% in September 2022 YTD [10]. Heat pump water heaters have experienced a dramatic increase in sales due to the National Appliance Energy Conservation Act of 2015, which requires higher energy factor ratings on all residential and some light-duty commercial products, and requires all electric water heaters of over 208 L (55 gallons) to use heat pump water heat- ing technology. Figure 4 shows the sales of water loop heat pumps and heat pump water heaters since 2006 [11]. Water loop heat pumps are typically installed in multifamily buildings, hotels, ormitories, and so on, which may require simultaneous heating and cooling. Water loop heat pump shipments also saw a drop since 2007 due to the housing market collapse and, again, since 2019, as construction activities slowed down due to the COVID-19 pandemic. Figure 5 shows the annual shipments of ground source heat pumps (GSHP) in the last 20 years [17]. It hows a steady increase from 2003 to 2011, first due to increasing natural gas prices and since 2009, when the federal overnment started offering tax rebates for GSHP installations. GSHP shipments were apparently affected when tax credits expired in 2016 but jumped back in 2019 when tax credits were reinstated. The GSHP shipment dropped again in 2020 due to the COVID-19 pandemic and the resulting halt in construction activities and supply chain issues [17]. The low natural gas price during the pandemic may also have contributed to the staggering growth of GSHP applications in the US.
Market Share
The US Energy Information Administration’s (EIA’s) 2020 Residential Energy Consumption Survey estimates that approximately 15% of existing US homes use electric heat pumps as their primary heating source. The heat pump market share is higher in the South, where heat pumps serve one-third of existing homes [13]. The heat pump market share is smaller in the commercial building sector. According to EIA’s 2018 Commercial Building Energy Consumption Survey, only 4.5% of existing US commercial building floor space is served by electric heat pumps [14]. The market share of heat pumps in new single-family
construction has stayed relatively constant since 2012. More than 39% of single-family homes constructed in the United States in 2021 used a heat pump as their primary heating source (Figure 6 top) [15]. An estimated 59% of single-family homes completed in the South in 2021 used a heat pump for heating. The share has remained at 60% or more since 2011 (Figure 6 bottom). In the West, the installation of heat pumps has been ramping up, reaching 17% in 2021, the highest share since 1986. The housing construction, as well as the heat pump share, has declined in the Midwest. The heat pump market share has
fluctuated in the Northeast but stayed at a share of less than 10% [11].