Impact of Government Subsidies on Heat Pump Adoption in Eastern Europe
- brg_news_room
- 5 days ago
- 4 min read
Government subsidies have been a key policy lever driving heat pump adoption across Europe. In Eastern Europe, where household incomes are generally lower than in western Europe and legacy heating systems remain widespread, financial support has been particularly important in lowering entry barriers. At the same time, energy policies have also played a supportive role, as EU-level legislation such as the Fit for 55 package, the Revised Energy Performance of Buildings Directive (EPBD) and the Renewable Energy Directive (RED III) has encouraged the electrification of heating systems by tightening efficiency standards and promoting renewable-based solutions.
In addition, the sharp increase in natural gas prices in recent years has improved the relative economics of heat pumps, supporting sales growth to some extent, particularly in gas-dependent markets. However, developments over the past few years show that subsidies and energy price dynamics alone do not guarantee stable or sustained market growth. The experience of Eastern European countries demonstrates that policy consistency, administrative capacity, and supply-side readiness play a decisive role in determining outcomes.
Why Subsidies Matter More in Eastern Europe
Eastern Europe entered the heat pump transition later than many Western European markets. A higher reliance on coal, gas and district heating, combined with older building stock and lower insulation levels, has historically limited the economic attractiveness of heat pumps. As a result, upfront system costs remain a major deterrent for households.
To address this, governments across the region have introduced grant schemes, tax incentives and subsidised financing to encourage the replacement of older heating systems. These measures gained urgency following the 2022 energy crisis, as reducing dependence on imported fossil fuels became both an economic and strategic priority.
Country Experiences: Uneven Outcomes
Poland illustrates how subsidy programmes can both stimulate and destabilise the market. The Clean Air programme initially drove strong growth in heat pump installations by supporting the replacement of coal boilers. However, changes to eligibility rules, pauses in approvals and stricter controls introduced during 2024 and 2025 led to a sharp slowdown. This created uncertainty for consumers and installers, highlighting how abrupt policy adjustments can undermine confidence even when long-term decarbonisation objectives remain intact.
In contrast, the Czech Republic has benefited from a more stable policy environment. The New Green Savings programme combines grants for heat pumps with incentives for insulation and building upgrades. This integrated approach has supported more consistent adoption, particularly of air-to-water systems. Even so, the programme has exposed capacity constraints, as installer availability has struggled to keep pace with demand.
Romania provides an example of how renewed financial support can quickly revive market activity. After earlier schemes lost momentum, updated subsidy programmes introduced in 2024 and 2025 offered clearer conditions and higher grant levels, particularly for households combining heat pumps with solar photovoltaics. Application volumes increased noticeably, suggesting that demand exists but is highly sensitive to policy clarity and accessibility.
Market Constraints Beyond Financial Support
While subsidies stimulate demand, they also expose structural weaknesses. Installer shortages remain a significant constraint across much of Eastern Europe, especially outside major urban centres. Rapid demand increases can lead to long waiting times, higher installation costs and uneven quality, which ultimately erode consumer confidence.
Supply chains have faced similar pressures. Manufacturers and distributors struggle to respond efficiently to sudden changes in demand caused by policy revisions. These factors contributed to a decline in heat pump sales across parts of the region in 2024, as subsidies were reduced or restructured and gas prices moderated. The resulting volatility makes long-term planning difficult for both installers and manufacturers.
Industrial and Supply-Side Implications
Despite short-term fluctuations, expectations of long-term growth have encouraged industrial investment in Eastern Europe. While the short-term outlook points to market growth from a much lower base, this has nonetheless supported investment decisions. New manufacturing and assembly facilities announced in recent years, particularly in Poland, reflect confidence that heat pump adoption will gradually recover and converge with Western European levels over the long term, as policy frameworks stabilise, and climate targets tighten.
Local production offers several advantages, including lower logistics costs, improved availability and closer alignment with regional market needs. However, such investments depend on predictable demand. Stop-start subsidy regimes increase risk and may delay further capacity expansion.
Designing Effective Subsidy Frameworks
Experience across Eastern Europe highlights several principles for effective subsidy design. Multi-year programmes with clear timelines are more likely to support sustained growth than short-term or frequently revised schemes. Financial incentives are most effective when combined with measures to expand installer training, improve administrative efficiency and raise consumer awareness.
Targeting also matters. Directing higher support towards households facing the greatest affordability barriers or towards replacing the most polluting heating systems improves both social and environmental outcomes. Subsidies are further strengthened when complemented by building renovation incentives, energy performance standards and electricity pricing structures that improve the operating economics of heat pumps.
Government subsidies have played a critical role in advancing heat pump adoption across Eastern Europe, but their effectiveness has varied widely. Where incentives have been predictable, well-targeted and supported by supply-side measures, adoption has accelerated. Where policies have been inconsistent or administratively burdensome, market momentum has weakened.
For Eastern Europe to achieve a durable transition to low-carbon heating, subsidies must form part of a broader, coordinated strategy. Financial support needs to be aligned with skills development, supply-chain investment and long-term policy certainty. Only then can heat pump adoption move from subsidy-driven growth to a more self-sustaining market trajectory.
Find out more in our latest edition of European HVAC reports.
Source: Parvesh, BRG Research
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