Geothermal Heat Pumps Market

Market Overview

The global geothermal heat pumps market size was valued at USD 10,517.2 million in 2021 and is expected to reach a valuation of USD 19,416 million by 2030. The growth at a CAGR of 7% during the forecast period (2022–2030).

A geothermal heat pump is a building heating/cooling system that adopts a heat pump to transfer heat from or to the ground, taking advantage of the earth's relatively constant temperatures throughout the seasons. Ground source heat pumps (GSHPs) – sometimes known as geothermal heat pumps (GHPs) – are among the most energy-efficient technologies for delivering HVAC and water heating, requiring significantly less energy than a boiler/furnace or resistive electric heaters.

Geothermal heat pumps are the most energy-efficient, ecologically friendly, and cost-effective space cooling systems available, according to the US Environmental Protection Agency (EPA). Geothermal heat pumps can reduce emissions significantly, primarily when used for heating and cooling and when electricity is generated from renewable sources. Geothermal heat pumps have the advantage of concentrating natural heat rather than creating heat through the burning of fossil fuels.

Market Dynamics

Drivers: Increasing Demand for Energy-Efficient Solutions

Globally, rising population and fast industrialization have resulted in tremendous energy demand. Lighting and electrical appliances, cooking, space heating/cooling, water heating, and other energy uses are common in households. The use of fossil fuels such as oil, coal, and natural gas to meet heating needs is increasing, negatively impacting the environment.

Most building furnaces and boilers are powered by fossil fuels, which account for 42% of total greenhouse gas emissions. The demand for energy-efficient solutions and products is forecast to rise as people become more aware of climate change and greenhouse gas emissions.

In the industrial and residential sectors, government restrictions and emission requirements are expected to enhance the choice of energy-saving equipment. A heat pump consumes 1 KW of energy and produces 4 KW of thermal power, equating to a 300% efficiency. According to the IEA, heat pumps reduce carbon dioxide (CO2) consumption, resulting in an annual reduction of 9.17 million tonnes of carbon dioxide emissions across the European Union.

Over the forecast period, the geothermal heat pump market is likely to be driven by rising demand for energy-efficient solutions and a growing carbon footprint worldwide.

Compared to typical heat pumps, geothermal heat pumps use less electricity, lowering utility bills. These systems are also more environmentally beneficial than traditional heat pumps because they do not use fossil fuels. Furthermore, geothermal heat pumps may operate effectively in cold or hot climates due to the earth's constant temperature. Over the forecast period, these factors are likely to increase the demand for geothermal heat pumps.

Drivers: The Rise in Construction Activity

As many older residential properties in developing economies reach the end of their useful lives, new construction fails to keep up with demand. As a result, the sector of improving, maintaining, and maintaining existing homes in the housing market is booming. In addition, the Asia Pacific region's growing demand for infrastructure and property developments is likely to drive up demand for geothermal heat pumps during the forecast period.

Government expenditures on transportation infrastructure are expected to propel the Indonesian construction industry. On the other hand, Malaysia is likely to have difficulties due to the new government's policy of lowering investments in construction projects to reduce the country's debt. Over the forecast period, however, increased demand for inexpensive housing is expected to drive demand for geothermal heat pumps.

Restraints: High Initial Costs

The initial expenditures of a geothermal system are higher than those of traditional boilers, furnaces, or air conditioners. Installation costs, size, efficiency, and furnace type can range from USD 2,000 to USD 6,000 for a new furnace and USD 3,400 to USD 6,000 for a new air conditioner. On the other hand, a geothermal system can cost anywhere from USD 15,000 to USD 50,000, or even more, depending on the system's complexity and size and installation and drilling costs.

Installation costs are accompanied by high labor costs and drilling and excavation costs. To ensure that a heating system functions reliably, fine-tuning and custom manufacture of parts are required during installation; otherwise, the system will likely fail early. The cost of replacing an old heat pump includes removing and disposing of the wiring, ducts, and lines required for the new system to function effectively.

In the industrial sector, the capital funding necessary to establish a new heating system is more than in the residential sector because design, ducting, remote accessibility, and energy efficiency must be considered.

The operation of a geothermal system necessitates the use of power, resulting in high utility bills and a large carbon footprint. Geothermal systems, on the other hand, can be powered by wind or solar energy, making them even more cost-effective and environmentally friendly. Different types of renewable energy used in the residential and commercial sectors can be easily changed from site to site with modest changes. However, the initial expenses will be higher because geothermal heat pumps must be custom-sized, constructed, and installed for each residential or commercial location.

Over the forecast period, the stated factors are expected to impede the growth of the geothermal heat pumps market.

Future Key Opportunities in Geothermal Heat Pumps Market

Increasing Integration of Internet of Things (IoT)

Real-time monitoring, predictive maintenance, and remote diagnostics of components are all possible with Internet of Things (IoT)-based heat pumps. Smart thermostats in the Internet of Things (IoT)-based heat pumps help monitor environmental changes and interact with their water heater equipment. Their designs and operations, however, have not changed. For ease of operation, automation and remote operations have been primary considerations in developing next-generation heat pumps. Heat pumps come with LCD screens and warning lights to make them more user-friendly.

Major market players focus on integrating different technologies into their heat pumps to ensure ease of operation and maintenance. Machine learning and artificial intelligence are also being researched for use in heat pumps to cut electricity usage and improve efficiency. With machine learning and artificial intelligence, heat pumps can evaluate consumers' consumption habits and determine their operational time and duration, removing the need to physically turn them on and off. These factors are anticipated to drive heat pump demand and provide profitable prospects for market players.

Regional Analysis

The global geothermal heat pumps market share has been segregated into North America, Europe, Asia-Pacific, Central, and South America, the Middle East, and Africa.

Supremacy of Asia Pacific Over Others

With a market value of USD 7,780 million by 2030, registering a CAGR of 8%, Asia-Pacific is expected to be the largest market for geothermal heat pumps. Over the forecast period, factors such as rising financial climate, fast industrialization, and globalization are expected to impact market growth positively. A large customer base in the region has increased geothermal heat pump demand.

The availability of substantial skilled labor at a low cost defines Asia-Pacific. Over the forecast period, the rising trend of transferring manufacturing bases to emerging economies, primarily China and India, is expected to influence geothermal heat pump market growth positively.

With an expected market value of USD 5,993 million by 2030, registering a CAGR of 7%, Europe is the second-largest market for geothermal heat pumps. Energy-efficient products are expected to be in high demand throughout Europe. Various government programs are being implemented to lower the region's energy use. Heat pump demand is likely to rise as a result of such activities. The building industry's recovery is expected to boost the market for geothermal heat pumps in Europe.

Segmental Analysis

The global geothermal heat pumps market share has been classified based on the type, application, and regions.

The geothermal heat pumps market has been segmented into closed-loop and open-loop based on type. The closed-loop type segment is expected to dominate the global market, and it is projected to reach USD 17,119 million by 2030, registering a CAGR of 7% during the forecast period.

Water mixed with antifreeze solutions or any other acceptable refrigerant circulates through a pipe buried in the ground in closed-loop geothermal heat pump systems. The fluid within a closed-loop geothermal heat pump system does not need to be replaced regularly because the heat-transferring solution is recirculated in a pressurized conduit. With the benefits and simplicity in operations, the demand for close-loop type geothermal heat pumps is likely to grow over the forecast period.

Based on application, the geothermal heat pumps market has been segmented into residential, commercial, and industrial. The residential application segment is expected to dominate the global market, and it is projected to reach USD 9,706 million by 2030, registering a CAGR of 7% during the forecast period.

The demand for geothermal heat pumps in the residential sector is likely to rise due to rapid urbanization and the rising demand for energy-efficient products. Government programs that encourage the installation of energy-saving technologies and tax refunds are anticipated to drive the market for geothermal heat pumps during the forecast period.

Impact of covid-19

The COVID-19 pandemic has badly impacted both the service and manufacturing industries. The global economy has slowed as most countries have implemented statewide lockdowns to prevent the virus from spreading further. The pandemic has sparked deep recessions, according to the World Bank. It is projected to have a long-term impact on the global economy due to a drop in investments and interruptions in worldwide trade and supply chains.

The suspension of manufacturing activity and the fall in demand for commercial services in 2020 hampered the growth of the geothermal heat pump market. The need for geothermal heat pumps in the residential, commercial, and industrial sectors decreased. The pandemic issue has brought construction and industrial activity to a halt worldwide, limiting demand for geothermal heat pumps.

Due to disturbances in the logistic network, there have been delays in the supply of air conditioners and heat pumps. HVAC production lines in the European Union were halted for several weeks, and new installation projects were postponed. Government support for heat pump makers and distributors, on the other hand, is likely to mitigate the impact of the pandemic crisis on market participants.

Market Recovery Timeline and its Challenges

The post-pandemic phase will be significant for the global geothermal heat pumps market. The recovery can be hindered by supply chain disruptions, which will affect the market dynamics and the prices of the product. Furthermore, distribution and transportation capabilities restrictions, unfavorable financial conditions, and ascended expenses will challenge the global market. Also, limited production, support operations, labor shortages, and constraints for other end-user sectors, suppliers, and vendors may fail to meet the consumer demand. Overall, the recovery will be challenging for the global geothermal heat pumps market.

Recent Developments

• February 2021- Dandelion raised $30 million in Series B financing to install geothermal systems in 10,000 houses each year. The new capital will enable the company to expand its horizons in Massachusetts, Connecticut, and New York, where many residential natural gas or fuel oil heating systems are ready to be replaced with geothermal heat pumps.
• October 2020- A collaboration agreement between Mitsubishi Power Europe and Ochsner Wärmepumpen GmbH to commercialize large-scale heat pump systems. The firms are now working on heat pump solutions for various industrial applications.
• August 2020- In Connecticut, Dandelion Energy debuted its innovative cooling and heating solutions.
• April 2020- After successfully separating from United Technologies, Carrier was spun off as an independent, publicly-traded business.
• January 2019- Techneco, a Dutch specialist, was acquired by BDR Thermea Group. Techneco is a firm established in the Netherlands that manufactures and distributes heat pumps.