Lower demand for heat pump heating in Europe

Daikin Europe N.V. announces 18 days of additional temporary technical unemployment between January and March 2024 for all operators at its heat pump factory in Ostend, Belgium. The decision underscores that demand for residential heat pumps throughout the continent continues to fall short of the initial projections for 2024.

The measure is intended to cap the production of heat pumps to newly forecasted levels. Since the spring of 2023, the residential heat pump heating market has been going through a slowdown in demand. Previously in September 2023, Daikin had already announced for its Ostend manufacturing site not to prolong its temporary contracts and had installed 12 days of temporary unemployment until the end of 2023 for factory operators with a permanent contract.

Based on the current market situation and analysis of economic indicators, Daikin does not expect a significant demand increase in 2024. Heat pumps are low-carbon alternatives for gas heating. They are an important solution to achieve the EU Green Deal’s carbon neutrality ambitions. Though the market for heat pumps grew tremendously in previous years, in recent months several converging factors have put a stop on the growth in demand in Europe:

• Traditional heating with fossil fuel has regained financial attractiveness due to sharp drop in gas prices.
• Several European governments have scaled back supportive measures for heat pumps in 2023.
• The European Commission postponed its heat pump action plan until after the 2024 elections.
• High inflation and higher interest rates result in current and prospective homeowners delaying their investments.

In response to the positive policy recognition of the heat pump technology and the rapidly growing demand in 2022 and prior years, Daikin invested in its European heat pump capacity, and is investing 300 million euro in a new residential heat pump factory in Łódź, Poland. The site is currently under construction and is set to open in the autumn of 2024. Daikin calls on all actors to continue to address barriers that slow down the transition to low carbon heating, such as the price ratio of gas versus electricity. A level playing field for the technology is needed to phase out fossil fuel heating.

“The clean energy transition is an effort, we as society must make, one way or another. It will benefit society as a whole, create sustainable jobs and reduce dependency on fossil fuels. Even if today we go through a slowdown in demand, we believe in heat pumps as key technology for low carbon heating and cooling of buildings, and remain ambitious for the future,” says Toshitaka Tsubouchi, President of Daikin Europe N.V.