Four key hurdles for would

Jun 04, 2023

By Nikolaus J. Kurmayer | EURACTIV.com

08-06-2023 (updated: 09-06-2023 )

News Based on facts, either observed and verified directly by the reporter, or reported and verified from knowledgeable sources.

Underwritten / Supported Produced with financial support from an organization or individual, yet not approved by the underwriter before or after publication.

Would-be owners of heat pumps face various hurdles, from permitting to sky-high costs due to electricity being overtaxed. [Shutterstock/ShapikMedia]

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Corrected to say that Denmark banned fossil heating systems in new homes

This article is part of our special report Heat pumps: Gearing up for the boom years.

Consumers looking to switch to heat pumps today face challenges like complicated permits, dubious installers and a tax system that favours gas over electricity.

Europe has big heat pump ambitions. Germany eyes six million installations in the coming years and the EU is betting on tens of millions of them to reduce its dependence on Russian gas.

All of the devices will need to be installed in the homes of consumers, who often miss qualified advice from trained professionals or even risk being faced with dubious installers.

On 31 May, the UK's Customs and Markets Authority rang the alarm. The British’ watchdog said it "will be carrying out further work looking into potential misleading practices in the green heating and insulation sector."

Malignant practices by some vendors and lack of information appeared to be impacting consumers looking to switch to clean heating, the authority said. The UK introduced a generous subsidy scheme to boost the lagging uptake of heat pumps in 2022.

Consumer advocates on the continent sound the alarm, too.

"Consumers are still not being given enough clarity about the heating and cooling systems that they should choose and are not sufficiently supported in this transition," says BEUC, the European consumer organisation.

The consumer group identified four key hurdles for would-be owners of a heat pump: obtaining a permit from the municipality for installing the device, getting a permit to connect it to the grid, the quality of installers, and the fact that electricity remains an unduly taxed form of energy.

To evaluate the shopping experience in Europe, BEUC sent 40 secret would-be buyers of a heat pump into the market in four different EU countries, equipped with a questionnaire to relay their experience at every step of the process.

The shoppers’ experiences in the Czech Republic, Slovenia, Slovakia and Spain varied from "wondrous" to shocking, suggests the report, seen by EURACTIV.

Spain stood out as the worst location, as all undercover shoppers reported an unpleasant experience with their installers, leaving them unsatisfied.

On financing, all but one installer failed to mention that would-be heat pump buyers could apply for state support to help finance the often costly acquisition.

BEUC argues that improved certification schemes for installers – and consumer awareness initiatives may be needed.

Another hurdle facing consumers are municipal governments.

"In some countries, you need a permit for installing the external unit of the heat pump," says Jaume Loffredo, BEUC team leader on energy policy. "That is problematic."

When your heater breaks down in winter, and you want to replace it with a heat pump, "one can't wait for the municipality to give the heads-up."

Similar permitting issues extend to grid connections. Theoretically, devices that consume a lot of energy need to be notified to the grid operators, so they can accommodate for the increased power demand in a given region or neighbourhood.

In late 2022, EU countries passed an emergency law to bypass this requirement for 18 months, but by mid 2024, the exemption will expire.

In Germany, "there are some problems already on connecting heat pumps to the electricity grid because the grid is overloaded," says Loffredo. The German housing company Vonovia explained in May that it was not able to install 70 heat pumps due to a lack of grid capacity.

Perhaps most egregious, though, is the fact that electricity is significantly overtaxed compared to its fossil fuel counterparts.

Italy, Spain, the United Kingdom, Belgium and Germany "overtax electricity – in three cases by more than 200% – and undertax oil and fossil gas while not taxing wood use at all," according to the Regulatory Assistance Project, a green policy think-tank.

"In some countries, if you buy a heat pump, you end up spending more than what you were spending with a gas boiler because electricity tariffs are very high," confirms BEUC's Loffredo.

Given the fact that heat pumps turn 1 kilowatt-hour (kWh) of electricity into up to 4 kWh of heat – compared to regular heaters average of 0.8 kWh per unit of energy – the tax burden difference that results is significant.

One country that has a policy in place to tackle this is Denmark, which banned fossil heating systems in new homes from 2013 and offers a special tax rate for any electricity consumption beyond 4,000 kWh per year – reducing the tax burden of powering a heat pump by about two thirds.

An ongoing reform of the EU's energy taxation directive is currently stuck in gridlock.

Talks to revise the 20-year-old Energy Taxation Directive are moving at a snail's pace amid resistance from EU countries in a matter that requires unanimity among the 27.

As Europe's share of renewable energy increases, sunny and windy periods increasingly result in extremely low electricity prices at times.

Heat pumps can make targeted use of those periods of low prices to heat homes even more cheaply than previously possible, making them a better deal for consumers.

Doing so requires both digital smart meters – that can accurately measure electricity consumption at all times – and a contract that makes such a thing possible.

Much of Europe has already got started on this. In Denmark and Sweden, 100% of households have a smart meter installed. Spain, Italy, France and the Netherlands have a rate above 80%.

In Belgium, Germany, Bulgaria and Slovakia, the share of smart meters is zero.

NIBE, the Swedish heat pump manufacturer, has devised a plan to circumvent this issue. "Heat pumps offer more than traditional heating," its director, Klaus Ackermann, told PV Magazine.

The Swedish company recently partnered with Sonnen, a German company that manages electricity demand as a service provider to ensure grid stability. By aggregating heat pumps, Sonnen can reduce their use in times of peak demand – and turn them on when demand is low.

Some NIBE models are expected to come with this functionality installed already.

"Intelligently integrating power generation and consumption allows customers to enjoy maximum comfort at low costs and with minimal environmental impact", notes Ackermann.

As Europe shuts down its remaining coal power plants and turns away from volatile gas for electricity generation, it is also losing key flexible power supplies that can be switched on at the last minute to keep the lights on during peak hours.

[Edited by Alice Taylor]

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