Heat pumps become more popular, impacting efficiency and the grid
Heat pump technology is expanding rapidly, improving efficiency and sustainability while also pushing the capabilities of the electric grid and putting power generation in the spotlight.
Heat pump insights:
- Despite being on the market for decades, heat pumps have become increasingly popular in recent years for industrial markets.
- Heat pumps offer many energy savings benefits when compared to other traditional HVAC systems.
For a technology that has been in the market for decades, heat pumps have undergone a renaissance during the past several years, with sales expanding in every region worldwide.
While residential heat pumps have garnered considerable attention, the industrial heat pump market is also expected to expand significantly in the coming years. McKinsey predicts an annual growth rate of 15% through the end of the decade.
The key driver of heat pump growth is sustainability. Across the globe, industrial production is responsible for about a third of carbon emissions, with most of those driven by heating demands. In addition, the vast majority is created from fossil fuel sources, creating a significant opportunity for electrified processes. The International Energy Agency (IEA) found that electricity makes up only a 23% share of industrial energy use. It would need to be at 30% by 2030 to keep track with the Net-Zero Emissions scenario.
Research from the nonprofit American Council for an Energy-Efficient Economy found that industrial heat pumps could be used to deliver a significant amount of the process heat needed in a variety of industries, such as food and beverage manufacturing, pulp, paper and chemicals, reducing carbon emissions equal to more than 9 million passenger vehicles. Further development for systems that require temperatures above 200 degrees Celsius would expand the available market.
The generated savings are also significant for the end user, with many payback periods lasting only two or three years. However, the continued availability of lower-cost natural gas has reduced some of the demand for these electrified systems.

Figure 1: Industrial energy consumption by fuel in the Net Zero Scenario, 2000-2030. Credit: IEA (2023), Paris https://www.iea.org/data-and-statistics/charts/industrial-energy-consumption-by-fuel-in-the-net-zero-scenario-2000-2030, Licence: CC BY 4.0
Compared to traditional boiler systems, heat pumps do not require the burning of oil or natural gas to heat buildings. The IEA estimates heat pumps have the potential to reduce global carbon dioxide emissions by up to 500 million tons in 2030 – an amount equivalent to the annual emissions of all cars in Europe. Their expansion is seen as a critical factor in global warming efforts, with many countries in the European Union enacting residential boiler bans set to take hold in the coming years. To reach the net-zero scenario laid out by many agencies, sales of heat pumps will need to nearly quadruple by 2030.
Heat pump technology
As with other heating, ventilation and air conditioning (HVAC) platforms, heat pumps function by manipulating the pressure of a refrigerant to alter its state from a liquid to a gas. Unlike a traditional air conditioning unit, heat pumps are bi-directional. The system can compress the refrigerant outside and cause it to absorb heat from an exterior source to bring it into the building and heat the air or hot water tank through the hydronic loop. It then moves through an expansion valve, where the pressure is reduced and the temperature drops accordingly. This frees the refrigerant up to absorb more heat from its heat source and continue the cycle.
It can also utilize a reversing valve to achieve the opposite – compressing the refrigerant inside the building to serve as a heat sink, cooling that air and transferring the heat energy outside during warmer months.

Figure 2: Heat pump capacity additions by country or region, 2019-2023. Credit IEA (2024), Paris https://www.iea.org/data-and-statistics/charts/heat-pump-capacity-additions-by-country-or-region-2019-2023, Licence: CC BY 4.0
The efficiency of heat pumps is classified by their coefficient of performance (COP), which is a ratio of the amount of heat generated by the system divided by the energy taken in by the system (in this case in the form of electricity). Natural gas condensing boilers generally cannot achieve performance ratings of 110% (COP of 1.1).
While a number of different factors impact the COP of the unit, which can vary daily depending on the outside environment, the latest heat pump designs can deliver COPs in the heating cycle of 4 or 4.5, meaning they are able to generate more than 4 times the amount of energy they consume. Put simply, it is more energy-efficient to move heat energy around using the compressor than to add heat to the air using combustion.
Power generation and grid impacts
The fact that heat pumps are more efficient than fossil fuel-driven systems does not change the fact that their expanded use continues to have wider impacts on the electrical grid and power generation areas.
First, the current electric grid design causes the loss of significant amounts the electricity generated in transmission, meaning that while heat pumps deliver energy savings, some of the net improvement is not fully realized. Data from the U.S. Energy Information Administration determined a rate of 5% of all electricity transmitted and distributed in the United States in 2018 through 2022. In some other countries that ratio is 2-3 times as high.

Figure 3: The heat pump refrigeration cycle can save energy across building types. Courtesy: Sensata Technologies
Second, while the continued expansion of heat pumps at the expense of natural gas or oil-driven systems is a net positive from an environmental perspective, it continue to put more energy requirements onto the electrical grid. Since many heat pump incentive programs focus on lowering the cost of electricity, the combination has created a system of both greater demand and lower cost to supply power. As both of those trends continue, there will be continued emphasis on the need for more local power generation – both to add capacity to the grid and to reduce the amount of energy lost in transmission.
According to IEA data, clean energy deployments continued to increase dramatically in 2023, with the amount of solar power deployed increasing 85% and cutting annual carbon dioxide emissions by around 1.1 billion tons from 2019 through 2023. The capacity of wind energy increased 60% in 2023, cutting 830 million tons of carbon dioxide. Even hydrogen electrolyzers, which are still newer technology, added more than 560 megawatts of capacity in 2023.
The trend of heat pump expansion is likely to continue – even if its trajectory may wobble due to the nature of government incentives around these programs. But the arrow on those movements is likely to continue pointing upward, forcing changes across the energy and heating ecosystems along the way.
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