Speaker 1: With Laurent segle And from London and Gerard Read from Berlin.
Speaker 1: This is redefining energy. Today. On redefining Energy, we're going
Speaker 1: to talk about our rise of heat pumps.
Speaker 2: Or yeah, heat pumps they rise again. But first award
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Speaker 2: But let's go back to heat pumps.
Speaker 3: Well, look, if we talk about the electrification of our
Speaker 3: world to one area of whether the challenge is here
Speaker 3: it's just retrofitting heat. But the good news is we
Speaker 3: do have something called heat pumps and they're incredibly.
Speaker 1: Efficient and from a fuel point of view, very low cost.
Speaker 2: It's really part of the European strategy to decarbonize. There
Speaker 2: is one of the EU plan. I mean they'll get
Speaker 2: so much plan, but basically they wanted to have sixty
Speaker 2: million heat pumps installed by two thirty and at the
Speaker 2: end of two twenty five we were at thirty million,
Speaker 2: so that's pretty good.
Speaker 1: But there's a long way to goo, my friend, thirty
Speaker 1: million over the next four or five years. That's a lot, right, Yeah,
Speaker 1: that's a lot. In order to talk about heat pumps,
Speaker 1: how the market is going, the innovation, we brought somebody
Speaker 1: who really know something about it. Yeah. So Paul Kenny
Speaker 1: is the Director General of the European Heat Pump Association.
Speaker 1: Obviously that's the representative body of those involved in heat
Speaker 1: pop manufacturing, installing, etcetera, etcetera, right across Europe. And it's
Speaker 1: another irish Man, so we have a lot of Irish
Speaker 1: Man always invited. Chardy, is there any connection, There's no connections.
Speaker 1: It's just potluck, just pot luck.
Speaker 2: So let's bring Paul on the show.
Speaker 1: Paul really looking forward to this podcast.
Speaker 4: Thanks for coming on, Thanks very much for having me.
Speaker 2: Paul. First question, very simple, your association. What does he do?
Speaker 4: So the European Heap and Association is a sexual association,
Speaker 4: so it represents the full value chain R and D
Speaker 4: test centers, component manufacturers, heap manufacturers, so that the full
Speaker 4: supply chain, even utilities as well. The idea is behind
Speaker 4: that wider than just a manufacturers association. It represents enough
Speaker 4: of the industry that has a stake in seeing heat
Speaker 4: pumps roll out across Europe, and we advocate for our
Speaker 4: policies that support the deployment of heat pumps, whether that's
Speaker 4: product policy, energy policy, taxation policy.
Speaker 2: To drive the market must have been very recent. Busiers
Speaker 2: you are increa to twenty two to twenty three to
Speaker 2: twenty four were weaker, but scenes that to twenty five
Speaker 2: you'll get a significant rebound. So how do you explain
Speaker 2: what was up in the.
Speaker 4: Bus three four years twenty ten to twenty twenty one
Speaker 4: sixteen percent compound annual growth rate. That's a reasonably good
Speaker 4: growth rate, nice and stable, nice and predictable and good
Speaker 4: to expand production. So on twenty two is the war
Speaker 4: in Ukraine. Gas prices went bananas. A lot of electricity
Speaker 4: prices were hedged, so they didn't quite follow as quickly.
Speaker 4: So electricity companies, by their gas won two years in advance.
Speaker 4: So what we saw in twenty two was this really
Speaker 4: strong narrative to say get off gas as quickly as
Speaker 4: you can. We mightn't have enough gas in Europe, and
Speaker 4: we saw a huge increase in the orders for heat
Speaker 4: pumps the installations in Europe back half of twenty three.
Speaker 4: The electricity price started to go up with all of
Speaker 4: that high gas prices, and what happened then was the
Speaker 4: gas price started to come down, came out of the narrative.
Speaker 4: We had a full strategic store of gas and it
Speaker 4: was much more difficult to ship heat pumps, and gas
Speaker 4: prices are down and electricity prices are up. Second thing
Speaker 4: is important in all of the numbers, there was a
Speaker 4: lot of orders in twenty two in the beginning of
Speaker 4: twenty three that were duplicate orders, so an installer has
Speaker 4: customers for one hundred heat pumps, and the supply chain
Speaker 4: was still ramping up for those very large increase in orders,
Speaker 4: and we saw multiple orders that went into stock when
Speaker 4: all of the manufacturers were able to catch up with orders,
Speaker 4: so that stock had to wash out in late twenty
Speaker 4: three twenty four. Pretty much it's washed out now. And
Speaker 4: what we see so Germany, one of the bigger markets,
Speaker 4: we have for the first time seen heat pumps overtake
Speaker 4: gas boilers, so they're the number one heating technology in Germany.
Speaker 4: So what we saw in the first half of twenty
Speaker 4: twenty five is a nine percent growth rate. We don't
Speaker 4: have the final numbers for the end of twenty five
Speaker 4: just yet, but we expect to see most European markets
Speaker 4: will deliver end of your performance back in growth, which
Speaker 4: is very positive. We had four markets in twenty four
Speaker 4: in growth. We'll see a lot more in twenty five.
Speaker 1: So bol can I jump in there and just ask you,
Speaker 1: just talk a little bit about what is driving demand
Speaker 1: across Europe for heat pump A.
Speaker 2: Couple of things.
Speaker 4: The last commission passed I think nineteen pieces of legislation,
Speaker 4: the Clean Deal or the Green Deal, So governments are
Speaker 4: really from a climate and energy perspective incentivized through European regulation. Second,
Speaker 4: Europe's problem in competitiveness is gas. Europe's problem in climate
Speaker 4: is gas. Europe's problem in security is gas. We see
Speaker 4: a very clear driver from we say, the civil servants
Speaker 4: and the people who are outside of the wave of
Speaker 4: politics that's going around focused on delivering a transition away
Speaker 4: from gas. The European government's spent six hundred and eighty billion,
Speaker 4: according to Brugel, between twenty two and twenty four on
Speaker 4: soies for consumers for their bills, but effectively money that
Speaker 4: was exported to Russia, to Qatar, to the US and
Speaker 4: to Norway and all of those ministries for finance. They
Speaker 4: want to make sure that that doesn't happen again. They
Speaker 4: want to ensure away from high price spikes. And I
Speaker 4: think when in twenty two when the gas price card
Speaker 4: was played by Putin to try and really destabilize European
Speaker 4: governments and push on this war. He can only play
Speaker 4: that once. That's the nineteen seventy three oil crisis in gas,
Speaker 4: and now everyone is trying to drive away. So what's
Speaker 4: driving market sales is in countries where electricity is competitive
Speaker 4: with gas, we see lots of heat pump deployments. So
Speaker 4: the Scandinavian countries traditionally cheap electricity, traditionally high carbon taxation,
Speaker 4: and they've been really solid heat pump markets for many years.
Speaker 4: France has relatively cheap electricity, real solid heat pump market
Speaker 4: for many years as well. Cooling is driving, particularly in
Speaker 4: the southern European countries, is really driving heat pump deployment,
Speaker 4: and air to air heat pump in Europe is a
Speaker 4: heat pump. It can heat and cool. Obviously, cooling needs
Speaker 4: are increasing with climate change and climate adaptation, so they're
Speaker 4: kind of the key drivers. Obviously, governments are supporting subsidizing
Speaker 4: heat pumps in various different ways with various different levels
Speaker 4: of success and competence, and that's also really driving that.
Speaker 4: There's a number of different drivers, but ultimately the solution
Speaker 4: to all of these things is a competitive heat pump
Speaker 4: market with large amounts of deployment.
Speaker 2: Well, as you have described going up and down and
Speaker 2: you are in direct contact with the supply chain the installer.
Speaker 2: What are the positive innovation you've seen Recently.
Speaker 4: We switch refrigerant from particularly from monoblocks for single family
Speaker 4: houses from R thirty two and our four ten a
Speaker 4: before that, to a lot of propane in R to ninety.
Speaker 4: That's delivering a higher temperature, slightly larger devices, and slightly
Speaker 4: higher costs, but that's delivering higher temperatures at a higher efficiency.
Speaker 4: So that innovation is helping the transition from high temperature
Speaker 4: heating systems into heat pumps. The second big innovation that
Speaker 4: we see in the market is really designed for installation.
Speaker 4: So before maybe ten years ago, you bought the heat
Speaker 4: pump and you bought the circulation pump, and you about
Speaker 4: the feet, and you bought the sensors. You know, they
Speaker 4: all came different. Now what we're seeing is a lot
Speaker 4: easier to install. If you go to a trade show,
Speaker 4: all of the manufacturers are displaying the innovation they've done
Speaker 4: to try and make this better, faster, quicker installation, easier installation.
Speaker 4: And I think the third thing that we've seen from
Speaker 4: an innovation point of view not necessarily really really new,
Speaker 4: but what we're seeing is deployment in the market is
Speaker 4: around flexibility. So whether it's through a home energy management
Speaker 4: system or directly into the heat pumps API, the ability
Speaker 4: where the market signals are there the LIKESI scan and AVIA,
Speaker 4: the UK via Octopus and so on. Where a heat
Speaker 4: pump if it only needs to run for five hours
Speaker 4: a day because it's very mild, or ten hours a
Speaker 4: day because it's somewhat colder, that it starts to use
Speaker 4: energy at those low electricity prices. For me, that particular
Speaker 4: innovation is the one that is going to really drive
Speaker 4: heat pump sales because it will drive down your electricity
Speaker 4: bill for running your heat pump and make it really
Speaker 4: much more competitive versus the incumbent fossil technology.
Speaker 2: So that's the older smart almost that domain.
Speaker 4: It's a little bit more advanced than that. It's reading
Speaker 4: outside temperature, predicting how much energy you need to use
Speaker 4: in your house, and then scheduling the heat pump demand.
Speaker 4: It's almost more a smart meter coupled with slightly smarter devices.
Speaker 4: But this technology is not necessarily new. It switches that
Speaker 4: look at energy prices and so on, but the algorithms
Speaker 4: and the aggregators are there. They're very active in Scandinavia
Speaker 4: to said, and there's others in other countries. But some
Speaker 4: countries have really strong regulation, strong regulators and good technology
Speaker 4: rolled out. Smart meterings so on. In other countries are behind,
Speaker 4: so we don't have huge amount of smart meters in
Speaker 4: Germany as an example, and that restricts that ability to use.
Speaker 4: You talk all the time about negative prices and the
Speaker 4: electricity system. I hear it, but like those negative prices
Speaker 4: should be passed through to customers. If you increase demand
Speaker 4: at times of large amounts of generation, you get less
Speaker 4: hours of negative pricing and less negative pricing, which obviously
Speaker 4: is great for renewable deployment because you're not eating your own.
Speaker 2: Lunch, and what about the buttlenecks that, in your opinion,
Speaker 2: are the most urgent to resolve.
Speaker 4: When we think about the bottlenecks of heap on deployment,
Speaker 4: you've probably got the biggest one is the electricity to
Speaker 4: gas price ratio, and that is driven by a number
Speaker 4: of different things. First of all, some government's tax electricity
Speaker 4: far more than the tax gas. Obviously, if you want
Speaker 4: someone to use a lot of something, you don't tax
Speaker 4: it a lot. And if you like cigarettes, if you
Speaker 4: want people to not use them, you tax them out.
Speaker 4: So right now, we have some countries that tax electricity
Speaker 4: six times more than gas. Then we've produced a paper recently.
Speaker 4: It's you can get on our website and LinkedIn and whatever.
Speaker 4: It's really trying to correlate the electricity to gas price
Speaker 4: ratio with the taxation ratio. So how much governments actually
Speaker 4: tax and levy electricity. Now, what's good about this is
Speaker 4: there are choices. This is in then electricity market, this
Speaker 4: is the pastor costs. On top of that, there are
Speaker 4: choices that governments can make, and some of those choices.
Speaker 4: We've been pushing this quite hard, and now there's others
Speaker 4: on board, including the Commission writing to government saying you
Speaker 4: need to shift your taxation from electricity to gas to
Speaker 4: encourage people to use electricity, which is clean, indigenous, more secure.
Speaker 4: And as an example, late last year we saw a
Speaker 4: number of different countries. So Belgium announced a tax increase
Speaker 4: in gas funded by a tax decrease in electricity in
Speaker 4: the UK budget. At the November twenty twenty five they
Speaker 4: announced a shift of the renewable electricity subsidies off the
Speaker 4: electricity bill and into the exchequer finance. Denmark announced a
Speaker 4: tax break for electricity use for home heating via a
Speaker 4: heat pump. Germany has using their Climate Fund. They announced
Speaker 4: that in twenty five to fund the transmission system costs,
Speaker 4: and there's further discussions that maybe they'll further bring down
Speaker 4: the price of electricity through different mechanisms. So one by one,
Speaker 4: as we engage with European governments and as our national
Speaker 4: associations engage with European governments trying to push them to
Speaker 4: make these decisions, we see those decisions are getting made.
Speaker 4: And that's probably if you talk about the barrier to
Speaker 4: heat pump deployment, that's the number one economics one O one.
Speaker 4: If something is cheap, people will use it. If something
Speaker 4: is expensive, people will look for the alternative. The second
Speaker 4: one I think was a big issue in twenty two
Speaker 4: in Germany, which was the capacity of installers. It is
Speaker 4: an issue across Europe, but it is coming down and
Speaker 4: down and down, and as the technology becomes more competitive
Speaker 4: from a running cost point of view, more installers are
Speaker 4: coming into the market and there's lots of initiatives across
Speaker 4: Europe to drive up the number of installers, and that
Speaker 4: will obviously bring competition into the installer market, which is
Speaker 4: one of the key challenges to deployment, the high cost
Speaker 4: of installation.
Speaker 1: Can I ask a little bit about sort of coupling
Speaker 1: key pumps with other technologies, in other words, putting in solar,
Speaker 1: putting in batteries, putting in some hot water storage. What's
Speaker 1: your view in and around all of this.
Speaker 4: It's something that we see a lot of installers doing.
Speaker 4: So they go to a homeowner and they say, look,
Speaker 4: we'll come to your house, we'll put in a PV system,
Speaker 4: and we'll put in your heat pump, put an EV
Speaker 4: charger and so on. And that's a really good angle
Speaker 4: from an installer market perspective, because if you're a householder
Speaker 4: and you put in three four, five six kilo, what's
Speaker 4: the PV. It's all going on to the grid unless
Speaker 4: you have a device to be an electric car or
Speaker 4: heat pump. That's something we see a lot of very
Speaker 4: supportive of it. There's complementary technologies like in particular PV.
Speaker 4: From a battery point of view, what I would really
Speaker 4: like to see is heat pumps playing the market on
Speaker 4: their own. So does it make sense to charge up
Speaker 4: a battery to run your heat pump in four hours
Speaker 4: time with the rentra efficiency of give or take eighty
Speaker 4: eighty two percent and lose that twenty percent of electricity
Speaker 4: to run your heat pump, I e. Make your heat
Speaker 4: pump twenty percent less efficient. Maybe it does if the
Speaker 4: electricity price ratio is big enough between middle of the
Speaker 4: night and during the day or whenever it is cheap
Speaker 4: and expensive. But I think what's much more important to
Speaker 4: do is pre charge and preheat your house, use the
Speaker 4: building itself, use your hot water storage to really drive
Speaker 4: on the ability to be flexible. It's something that I've
Speaker 4: done at home in my own house since twenty fifteen,
Speaker 4: which is preheat the house and cheap night rate electricity
Speaker 4: and then let it come down a little bit over
Speaker 4: the day, and when you switch from day to night,
Speaker 4: go back up again with your heat pump operation. And
Speaker 4: most houses that are reasonably well insulated, you're not going
Speaker 4: to notice the degree most of the year around, unless
Speaker 4: it's very very cold or a very poor performance house.
Speaker 4: In effect, the thermal storage of the home is far
Speaker 4: more cost effective than the electricity storage of a battery.
Speaker 2: I'd like to switch on industrial heat pumps because there
Speaker 2: is this view that in the industry half of the
Speaker 2: gas is used for say above two hundred three hundred
Speaker 2: sea temperature, where you know it's technology very difficult to
Speaker 2: replace gas, but below the threshold, say two hundred C
Speaker 2: or three hundred CE, industrial heat pumps starts to provide
Speaker 2: excelling solutions. So what's your view on this.
Speaker 4: When gas prices were very cheap, companies just wasted the heat,
Speaker 4: they didn't bother recovering, and it was cheaper just to
Speaker 4: burn new gas and let the heat go up into
Speaker 4: the atmosphere. But what we're seeing now with gas prices
Speaker 4: at thirty euros a mega with our wholesale and obviously
Speaker 4: to companies it's at different levels it's different amounts, but
Speaker 4: are manufacturers who traditionally produce chillers now they have heat
Speaker 4: recovery and all of those chillers, it's a relatively easy
Speaker 4: technology to recover that heat. So what we see now
Speaker 4: is a really strong interest in lots of the things
Speaker 4: like biopharma food. If you consider every kind of food
Speaker 4: that's produced is heated up over one hundred degrees or
Speaker 4: two hundred degrees and then cool down again. Beer is
Speaker 4: made by you cook your ingredients and then you cool
Speaker 4: it down so it can ferment. So you heat and cool,
Speaker 4: heat and cool, and heat pumps just provide a lovely
Speaker 4: technology where you can pull out that heat and supply
Speaker 4: it back in at the beginning of the process. So
Speaker 4: we have a lot of ongoing work with paper and
Speaker 4: pulp industry, food and drink industry, the chemicals industry was
Speaker 4: starting individual companies waste order treatment so on, and they're
Speaker 4: coming to us to see how that they can support
Speaker 4: their industry at a wide scale to try and absorb
Speaker 4: the technology. Europe is funding a lot of innovation in
Speaker 4: the space to see the first deployment getting subsidized, and
Speaker 4: then obviously spend some time making sure everyone knows about it,
Speaker 4: so it's a massive opportunity. We're at the very very
Speaker 4: bottom of the s curve of technology deployment. The single
Speaker 4: biggest barrier in industrial heat pumps is literally knowledge by
Speaker 4: the engineers in factories to see I have a huge opportunity,
Speaker 4: and where you have waste heat and heat demand under
Speaker 4: two hundred degrees, you probably have a very good business case.
Speaker 4: And in particular where electricity is cost effective, so that
Speaker 4: the Nordic countries, Iberia, France and so on. We are
Speaker 4: seeing a lot of deployment of industrial heat pumps. However,
Speaker 4: five years ago this wasn't the market, the market with
Speaker 4: chillers to waste heat. So it's a nascent industry, but
Speaker 4: it has massive potential. We are seeing a lot of
Speaker 4: deployment start now though we are our members are all
Speaker 4: busy in the business development phase and deployment phase now,
Speaker 4: and we see new factories opening for industrial heat pumps
Speaker 4: around Europe.
Speaker 1: By the way, I know you might think this is
Speaker 1: a mad question, but I would have thought the biggest
Speaker 1: market for heat pumps is actually electric cars.
Speaker 2: You're probably right.
Speaker 4: It's not something that we as an association to deal
Speaker 4: with those sub killwatt heat punts in tumble dryers or
Speaker 4: cars or whatever it is. But yeah, absolutely you're seen
Speaker 4: and deployed everywhere. We don't deal with fridges, but everyone
Speaker 4: has a fridge in their house and that's the heat pots.
Speaker 4: It's all technology, it's one hundred and fifty years old
Speaker 4: and it's in everyone's house in one way or another.
Speaker 2: We won't be a very seious energy podcast if we
Speaker 2: didn't talk about that. That center us what it's more
Speaker 2: on the cooling side, can you explain a bit what
Speaker 2: you've seen the past eighteen months.
Speaker 4: Obviously there's a big rush to build data centers and
Speaker 4: they all need to be cooled, and we see a
Speaker 4: variety of different cooling technologies and data centers, right to
Speaker 4: the unchipped liquid cooling that we see kind of in
Speaker 4: the newer ones. What's really interesting about this, and you know,
Speaker 4: the market of chillers for data centers is a lot
Speaker 4: of our members and we talk regularly with them about it.
Speaker 4: But that weighs heat. If you're talking about the earlier
Speaker 4: technology for cooling data centers, which was just air flowing
Speaker 4: through the server racks, that air comes out at thirty
Speaker 4: thirty five degrees relatively low high volume air. You need
Speaker 4: to extract heat from that. It's very doable. It's a
Speaker 4: great source of waste heat. But as you progress through
Speaker 4: the technology options of cooling data centers, your liquid on
Speaker 4: chip cooling comes back at fifty five degrees so much easier. So,
Speaker 4: if you know the laws of physics around heat pumps,
Speaker 4: the lower the temperature lift you need to get to
Speaker 4: produce your heat, the higher the coefficient performance. So you
Speaker 4: might have had a coefficient performance of three or three
Speaker 4: times more heat comes out than you put in electricity.
Speaker 4: But at fifty five degrees waste heat to go into
Speaker 4: a district heating center, it brings that right up, so
Speaker 4: you end up with a larger and larger amount of
Speaker 4: heat from your data center for the same amount of
Speaker 4: electricity to transport and upgrade the heat temperature. The Commission
Speaker 4: is due to publish in Q one twenty six Electrification
Speaker 4: and Heating and Cooling Strategy. They held a workshop at
Speaker 4: the end of twenty five with the data center industry
Speaker 4: with the waste heat industry to see how they could
Speaker 4: really tap in to that for producing district heating and
Speaker 4: to try and an increase the amount of waste heat that
Speaker 4: comes from data centers and what are the policy leaders
Speaker 4: they need to do to drive that on.
Speaker 2: But part of the energy security package, there's also a
Speaker 2: lot of debates around supply chain, around technology not done
Speaker 2: in Europe, what's happening there.
Speaker 4: It's interesting a big debate in Brussels in twenty twenty
Speaker 4: five and it will continue into twenty six and onwards.
Speaker 4: Is the European preference or made an EU for public
Speaker 4: procurement and particularly subsidies. Now most heat pumps deployed air
Speaker 4: to water heat pumps are made in Europe, some of
Speaker 4: the components are not, and some of the components are global.
Speaker 4: This is a very globalized supply chain, like the automotive
Speaker 4: supply chain. One of the things that's really important to
Speaker 4: know though, is if you deploy a heat pump, you
Speaker 4: offset maybe ten to fifteen thousand euros and wholesale gas
Speaker 4: imports into the Union. And a heat pump is far
Speaker 4: smaller in price in terms of the actual cost per unit.
Speaker 4: So any heat pump deployed, even if it's not made
Speaker 4: in Europe, is very very beneficial to European competitives and
Speaker 4: European economy. However, most are actually made in Europe. The
Speaker 4: value chain is in Europe, the designers are in Europe,
Speaker 4: the installers are in Europe, and particularly the value ad
Speaker 4: is in Europe. But what we worry a little bit
Speaker 4: about is we're just going to throw trade out the
Speaker 4: window because we have a political necessity to say we
Speaker 4: can make everything in Europe. Yes we can, but it's
Speaker 4: not necessarily sensible to make everything in Europe. We don't
Speaker 4: have the workers and the supply chains right now for
Speaker 4: everything to be made in Europe. So we should value
Speaker 4: AD and add the highest value components and the final
Speaker 4: assembly for sure in Europe.
Speaker 1: Honestly, looking at you say that, Well, the biggest players
Speaker 1: in the world are all Japanese in South Korean in
Speaker 1: terms of air conditioning players and stuff.
Speaker 4: Like that, right for sure, but they all make in Europe.
Speaker 4: Like it's Japan and Europe. Ofol was you make Japanese
Speaker 4: cars in Europe, you make Japanese heat pumps in Europe.
Speaker 4: It's not necessarily on the basis of we will make everything,
Speaker 4: you know, And I think we need to trade with
Speaker 4: our friends for sure, particularly where there's like minded values.
Speaker 1: Very good, Paul.
Speaker 5: The other thing that I'd just like to talk about
Speaker 5: is the role of flexibility. I think myself and larn
Speaker 5: are very clear in our heads that the way to
Speaker 5: having a modern energy system and low cost system is
Speaker 5: you have to make it as flexible as possible.
Speaker 1: We'd love to hear your views and how that fits
Speaker 1: into the whole heat pump industry.
Speaker 4: It's something that it's very clear there are parts of
Speaker 4: European industry, there are some householders and others that won't
Speaker 4: be flexible. But the more others that can be flexible
Speaker 4: or flexible, the lower costs for everyone. And I think
Speaker 4: that's a really important principle what we see as the
Speaker 4: slowness of European governments to implement the twenty nineteen Energy
Speaker 4: Markets Directive to really allow for all of that flexibility.
Speaker 4: It's coming and more countries will add dynamic market tarifs
Speaker 4: in twenty twenty six. However, if you take the overall
Speaker 4: cost of the energy bill, it's becoming less and less
Speaker 4: wholesale market or the energy market. So it's maybe sixty
Speaker 4: percent of cost, but it's trending downwards as a percentage
Speaker 4: of the electricity bill. And what we now need to
Speaker 4: see is a focus on those non commodity costs, even
Speaker 4: the pass through costs, the network charges, the capacity markets,
Speaker 4: the curtailment the renewable obligations to be used in a
Speaker 4: way that really incentivizes the full flexibility pricing to go
Speaker 4: to the customers that can be flexible. What does that
Speaker 4: actually mean? So Germany have talked about a capacity market
Speaker 4: for new gas fire power plants. When I was in
Speaker 4: government in Ireland, we had a significant challenge of bringing
Speaker 4: all power plants off the bars while demand, particularly from
Speaker 4: data centers, heat pumps and evs was rising, and we
Speaker 4: needed to come up with a capacity market to deliver
Speaker 4: this peak power for a very small amount of time. Now,
Speaker 4: if we go and build power plants that are used
Speaker 4: twenty hours, which is what some of these power plants
Speaker 4: were used in one year, or thirty hours a year
Speaker 4: or one hundred hours a year, it's going to be
Speaker 4: really expensive. And what we need to do is take
Speaker 4: that capacity market cost and layer it on to when
Speaker 4: you're using it, so there's a very strong price signal
Speaker 4: for anyone who can be flexible not to use power
Speaker 4: at the worst possible time when it's not available, and conversely,
Speaker 4: when you have abundant available renewables to really ramp up demand,
Speaker 4: and heat pumps can really take that cheap energy and
Speaker 4: pre charge homes, pre charge water, pre charge industry where
Speaker 4: they can be lots of storage. And in particular when
Speaker 4: we deploy large heat pumps and district heating, if the
Speaker 4: price signals are there, they can deploy large amounts of
Speaker 4: thermal storage, which is super cheap, particularly at the volumes
Speaker 4: of district heating, and that blows out of the water.
Speaker 4: The idea that you can't be flexible, particularly in some
Speaker 4: of those markets. The ev market is obviously going to
Speaker 4: be the same, and if we can get vehicle to
Speaker 4: grid deploy it as well as that, you can really
Speaker 4: flex demand. But if we just have the energy market
Speaker 4: and everything else is fixed, and the energy market becomes
Speaker 4: a smaller and smaller portion of your bill, we're not
Speaker 4: going to achieve what we need to achieve. An ACER,
Speaker 4: the European Regulator Group, they've published papers in twenty twenty
Speaker 4: five and as did the Commission to talk about how
Speaker 4: we drive on this flexible and dynamic network and non
Speaker 4: commodity cost flexibility.
Speaker 1: So Paul, maybe just as a last question, give us
Speaker 1: a sort of view of how you see the next
Speaker 1: few years in terms of the heat pump market, and
Speaker 1: also build into that air condition if you can as well, right,
Speaker 1: because I think more and more people are going to
Speaker 1: require cooling.
Speaker 5: Just because it's very clear, and continent of Europe areer
Speaker 5: and even in the north of Europe it's getting very
Speaker 5: warm in the summers.
Speaker 4: Right, My maybe slightly optimistic perspective is cooling is going
Speaker 4: to drive heat pump adoption. Energy security is going to
Speaker 4: drive heat pump adoption. Competitiveness is going to drive heat
Speaker 4: pump adoption. Air to water heat pumps can do cool
Speaker 4: as well, particularly underfloor heating or fan coils, and we
Speaker 4: will see more and more of that deployed. But particularly
Speaker 4: you're right, air to air heating systems, air to air
Speaker 4: cooling systems I have when in the House of Rent
Speaker 4: in Brussels. We'll see a lot of those deployed. What
Speaker 4: will the market look like at the end of twenty
Speaker 4: twenty five, somewhere between two point five two point six
Speaker 4: million heat pumps. I think we will see with the
Speaker 4: measures that we talked about earlier that governments were taken
Speaker 4: to encourage electrification heat, I think we'll see between a
Speaker 4: ten and twenty percent growth for the next five years.
Speaker 4: I don't think we'll see a big spike that happened
Speaker 4: in twenty two because that was driven by something that
Speaker 4: was fake. It wasn't systemic, it wasn't real, it wasn't
Speaker 4: long term. But as we see the long term changes
Speaker 4: to the market, particularly in energy prices, we will see
Speaker 4: a deployment. I think we'll hit fifty million heatpumps deployed
Speaker 4: a quarter of European homes by twenty thirty. Europe had
Speaker 4: a target at sixty million. We might get closer to that.
Speaker 4: We also see industrial heat pumps really take off. I
Speaker 4: think from a competitiveness point interview, industry is under pressure competitiveness.
Speaker 4: Technology that's four times more efficient than its alternative, we'll
Speaker 4: really deploy at scale, and we'll see district heating regulated
Speaker 4: into a lot of district heating to convert from fossil
Speaker 4: heat to clean heat. We'll see that drive heatpump adoption
Speaker 4: as well. So I'd quite positive over the next five years.
Speaker 2: Well, but it's great to start the year with a
Speaker 2: positive message. You're very busy man, but a very happy man.
Speaker 2: I have a suggestion because I think that the name
Speaker 2: of the association is a bit too much nineteen seventies,
Speaker 2: so maybe you call it cooling and heating Europe cheh,
Speaker 2: make it a bit revolutionary.
Speaker 4: I would somewhat disagree with some of my members who
Speaker 4: love our an am heat froms Europe or something like
Speaker 4: that should really be what we are called, because that's
Speaker 4: what we do. Been great having you on the show, Paul,
Speaker 4: and thank you very much for having me on the show.
Speaker 4: I listened to it all the time, so it's great
Speaker 4: to actually be here in person.
Speaker 1: Laurent. You know I use heat pumps. I think promoting
Speaker 1: hip pomps. I'm a believer. How are you well here?
Speaker 2: I'm referring to the biggest expert you need pumps in
Speaker 2: your op and that's our friend Jan Roseno, who is
Speaker 2: Professor of Energy and climent Policy at Oxford University, and
Speaker 2: by the way, we're going to be visiting him on
Speaker 2: the twenty fifth of February. He says, the main orderer
Speaker 2: is the price of ratio gas to electricity. So in
Speaker 2: countries where the ratio is positive, quite naturally heat pumps
Speaker 2: get developed. But if gas is super cheap and electricitist
Speaker 2: is taxed a lot. That's where the main orders are.
Speaker 2: So it really depends on the conditions.
Speaker 1: Yeah, it's an interesting thing because if you go to
Speaker 1: the nord X, electricity generally as a low price, which
Speaker 1: means guess what, they're all hitting electricity in hat pomps.
Speaker 1: But then when you go to the areas where you
Speaker 1: have more expensive electricity chake the case of Germany, then
Speaker 1: you've got less hitt pumps. This is the the biggest channel.
Speaker 3: And I think we're in a world around correct me
Speaker 3: if I'm wrong, where people don't want to see gas
Speaker 3: prices going up. I think the alternative is you have
Speaker 3: to make electricity cheaper.
Speaker 2: Yeah. There was also a part which I thought was
Speaker 2: very interesting was the rapid rise of industrial heat pumps
Speaker 2: and that could be a major decobanization too for any
Speaker 2: sector that requires heat. I would say Bilow two hundred.
Speaker 4: See.
Speaker 1: Yeah, and let's be really clear in that if you're
Speaker 1: heavy industry across Europe, you're basically paying very low prices
Speaker 1: as it is, so you know, the ratio from electricity
Speaker 1: gas it's in the money in a heavy industry, but
Speaker 1: requires you obviously to re equip your plans, probably to
Speaker 1: change earthy processes internally, etcetera, etcetera, And Europe really needs
Speaker 1: to do and I think we need to reindustrialize anyway.
Speaker 1: But what you're doing is you need to get industry,
Speaker 1: our own industry to reinvest in our countries. That means
Speaker 1: putting I'm not going to call them subsidies, but just
Speaker 1: put them in support mechanisms, incentivized and term reinvests. You know.
Speaker 2: Yeah, I don't know what to do with the cement
Speaker 2: or still sector, but when it comes to hospital, food processing, pharmaceuticals,
Speaker 2: all this can be electrified.
Speaker 1: Pretty fast, exactly exactly A.
Speaker 2: Few things before we go. In terms of planning, we'll
Speaker 2: be together invited by Jan Roseno in Oxford the twenty
Speaker 2: fifth of February. Charge you're going to Davos this week.
Speaker 1: I am absolutely yeah, looking forward to that.
Speaker 2: We are in partnership with International Energy Week the tends
Speaker 2: to the twelfth of February. You're also going to e World.
Speaker 2: We are going together to the Munich Security Conference the
Speaker 2: twelve and thirteen of feb We're very busy, we sure do,
Speaker 2: with a lot to do in the next few weeks.
Speaker 2: So yeah, and two fish Ty episode on Heat Pump.
Speaker 2: I have wrote well with the help of AI of course,
Speaker 2: a song song on heat pumps because we need to
Speaker 2: present a very positive and fun view of that industry.
Speaker 2: You already I'm gonna sing, go for it. Heat Bump,
Speaker 2: Heat bump, You owe my heat bump, and you can
Speaker 2: warm me up when the winter score is on heat Bump,
Speaker 2: Heat bump, you owe my heat bump, and baby, you
Speaker 2: can switch me on.
Speaker 1: Well, I'm glad you swang rather than me, because otherwise
Speaker 1: we'd have no more listeners.
Speaker 2: Okay, my friend God, have a great day. Talk to
Speaker 2: you next week, look forward.
Speaker 4: Thank you for listening to Redefining Energy.
Speaker 1: Don't forget to rate the show and subscribe on Apple Podcast, Spotify,
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