European Hydronic Heating Market Faces Challenges Amid Declining Demand

After a significant dip in 2023 the mid-term sales outlook for hydronic space heating appliances in Europe's largest markets is set to be challenging, with significant downturns noted in France, Germany, and Italy. A combination of weakened household purchasing power and rising mortgage rates is adversely affecting consumer demand for discretionary upgrades of traditional oil and gas boilers to energy efficient heat pumps.

In particular, Italy, a market heavily reliant on gas, is suffering from the withdrawal of incentives that had previously spurred growth in air-water and hybrid heat pump installations since 2020. Without adequate incentives, consumers are hesitant to invest in replacing their existing heating systems, despite the availability of the Ecobonus 65% scheme which remains in place. The Italian government is reportedly considering measures to accelerate the energy transition in residential areas, though specific plans have yet to be announced.

Conversely, markets in Poland, the Netherlands, and Spain are expected to see organic growth in 2024, driven by the increased adoption of heat pumps in the new housing and residential replacement segments. However, Poland experienced a dip in manufacturer sales of hydronic heat pumps in 2023, attributed to distributors overstocking in anticipation of continued high demand, which waned as incentive schemes dried up.

The broader European market for boilers is also projected to shrink in the short to mid-term, as EU legislation and national policies restrict boiler installations in new homes and reduce incentives for gas boiler replacements. This regulatory environment underscores a concerted effort to shift from gas to electric heating systems to reduce carbon emissions.

If European governments are to achieve the ambitious targets for CO2 emission reduction that they have adopted, it is likely that new sets of incentives and direct discounts will be introduced, to ease the financial burden on consumers transitioning to electric heating solutions. Without such measures, the recovery and growth of the heating market may be slow in the coming years.

Source: BRG Research