Heat pumps are efficient and flexible, using electricity and refrigerants to draw in warm air during winter and cool air when the temperature rises. They are the most efficient form of space heating and could be crucial in decarbonising the consumer energy market. Residential heating accounts for roughly 10% of global energy demand, so heat pump systems could considerably impact energy and fossil fuel demand.

However, geopolitical issues, supply chain concerns and additional building renovations that may be required to ensure system efficiency could all throw a spanner in the works.

‘Heat pumps could be the magic bullet for reducing demand in the residential energy market and help usher in a greener global energy mix – but significant hurdles stand in the way of reaching these demand forecasts, including the war in Ukraine and tighter regulations, both of which are long-term concerns. If the market can adapt to the evolving landscape and find solutions, heat pumps could be commonplace by mid-century,’ says Rystad Energy Senior Analyst Lars Nitter Havro.

One important caveat is that these projections are only likely if the supply chain can support the growth – and that is a big ‘if’. Heat pumps rely on semiconductor chips, and noble gases like neon, krypton and xenon play a key role in the manufacturing process. The global supply of these gases faces significant challenges due to persisting geopolitical tensions in Eastern Europe. The world was facing a well-documented chip shortage before the conflict, but the war in Ukraine has exacerbated the problem.

Ukraine is the global leader in noble gas production, accounting for 50% of global neon, 30% of xenon and 40% of krypton production in 2020, notes Rystad Energy. Russia’s war in Ukraine has placed most of this production in doubt. As a result of Russian offensives in the Black Sea region, Ukraine’s largest air-separation companies, Cryoin Engineering and Ingas, stopped production in Odesa and Mariupol. These companies account for 50–70% of global neon gas production capacity.

Rising electric vehicle demand and other semiconductor-heavy segments have added to the pressure on production lead time.

Heat pump systems also rely on hydrofluorocarbons, classified as F-gases or fluorinated greenhouse gases. These are potent greenhouse gas emitters with a global warming potential up to 25,000 times greater than CO₂, raising questions about how ‘green’ the systems are in practice. There is a real threat of stricter regulation on F-gas emissions, particularly from the European Union (EU), warns Rystad Energy.

Under current regulations, EU member states must phase down production and consumption of F-gases to one-fifth of 2015 levels by 2030. However, newly proposed legislation from the European Commission targets an even more aggressive approach, with a 98% reduction target by 2050, should it become law.

This means that alternatives to F-gases are needed. The most promising options for heat pumps are natural refrigerants such as propane and CO₂. Propane is considered one of the most ecologically compatible refrigerants, and also benefits from thermodynamic properties comparable to existing F-gases. Meanwhile, CO₂ is another good option because it can be sustainably sourced and operates effectively at low ambient temperatures, making heat pumps a potential offtake sector for the growing carbon capture market, comments the market analyst.

However, both these alternatives have drawbacks. Propane poses a risk of flammability when used in pressurised confined spaces, while CO₂ has a lower efficiency in higher temperatures.

To add another hurdle into the mix, heat pump systems, while effective at sub-optimal temperatures, only function correctly in well-insulated buildings. This means additional renovations to improve insulation may be required to ensure efficiency.