Great potential: How large-scale heat pumps can make green heat available for buildings and industry

Berlin, 19 December 2023. Germany has more CO₂-free environmental and waste heat available than the total demand for buildings and industrial process heat up to 200 °C in the country. By using heat pumps, Germany can tap into a CO₂-free resources amounting to around 1 500 terawatt hours, not including ambient air, according to a study by Agora Energiewende. The study finds that a range of heat sources can be utilised, including near-surface and deep geothermal energy, lake and river water, industrial waste heat, waste water, coal mines and data centres. Current annual heat demand for temperatures up to 200 °C totals just over 1 000 terawatt hours.

"Germany has more environmental and waste heat sources than we need to meet the entire heat demand for temperatures up to 200 °C," says Simon Müller, Director Germany at Agora Energiewende. "With large-scale heat pumps, these heat sources can be widely used for district heating and industry." Large-scale heat pumps can already provide the temperatures required in district heating, usually between 90 °C and 110 °C, as well as process heat up to 200 °C, which accounts for at least a third of the industrial process heat demand. However, at 60 megawatts of installed capacity, the share of large-scale heat pumps in Germany is still negligible.

By 2045, large-scale heat pumps could provide over 70 percent of district heating in Germany and largely replace fossil gas, according to the long-term scenarios commissioned by the Federal Ministry for Economic Affairs and Climate Action. This would require an average annual expansion of four gigawatts of new large-scale heat pump capacity by 2045. The Agora study identifies three prerequisites for a rapid roll-out of large-scale heat pumps: a clear expansion path based on binding municipal heat planning, the elimination of price disadvantages compared to fossil fuels and a strategic expansion of heat pump supply, for example through the standardisation of production processes.

In Scandinavian countries, large-scale heat pumps have been on the rise for some time and already supply large areas of residential neighbourhoods with climate-neutral heat. "In Germany, large-scale heat pumps are still a niche product, but the number of enquiries received by manufacturers is increasing rapidly," says Müller. In addition to the two pioneers - Norway with a share of large-scale heat pumps in district heating supply of around 13 per cent and Sweden with a share of over 8 per cent - Finland, Denmark and France are also above the European average of 1.2 per cent. "By 2045, more than a quarter of homes in Germany should be heated with green district heating. This requires effective heat planning by municipalities as well as a regulatory framework for district heating that ensures an attractive and favourable offer for customers,” says Müller.

Large-scale heat pump projects must also become more attractive for district heating operators compared to solutions based on fossil fuels. Currently, there are still disadvantages in terms of funding for large electricity-driven heat pumps compared to fossil-fuelled combined heat and power plants. Furthermore, in some cases, large-scale heat pumps that run on fossil waste heat - for example of gas-fuelled combined heat and power plants - are subsidised, which creates new fossil lock-ins.

“By reforming the Combined Heat and Power Act and increasing the funding programme for district heating, this imbalance can be corrected and the heating transition accelerated" says Müller. This is urgently needed, as heat generation up to 200 °C for buildings and industry currently still accounts for over three quarters of German natural gas consumption and is responsible for over a quarter of the country’s greenhouse gas emissions. "Germany has little more than 20 years left to reach climate neutrality. That's why we urgently need incentives for green heating solutions instead of blocking the ramp-up with uncoordinated subsidy systems," says Müller.

To provide manufacturers with planning security, a clear ramp-up path is necessary. That ensures a stable /growing demand and will also allow to move away from customised products towards industrial standards. This is crucial for the industry’s competitiveness: "With a cleverly coordinated mix of instruments, Germany can position itself as a leading producer of large-scale heat pumps and strengthen European manufacturing capacities for climate-friendly technologies."

The study "The roll-out of large-scale heat pumps in Germany: Strategies for the market ramp-up in district heating and industry" was commissioned by Agora Energiewende and prepared by Fraunhofer IEG. It was first published in June 2023 and is now available in English. The 140-page study comprehensively analyses the current market status and potential of large-scale heat pumps with a particular focus on the ramp-up in district heating. The publication is available for free in German and English at www.agora-energiewende.de