BSRIA HVAC Market Watch - May 2025 Edition

[edit] Heat Pump Market Outlook: Policy, Performance & Refrigerant Trends for 2025–2028

By BSRIA Market Intelligence Team By BSRIA Market Intelligence Team

[edit] U.S. and Germany Fuel Surging Commercial Heat Pump Market

The commercial heat pump (HP) market in the United States and Germany are set to lead global growth, each projecting a CAGR above 9% by volume through 2029. In the U.S., regulation is a key growth lever—but activity remains state-specific, with California and the Northeast spearheading adoption due to aggressive building decarbonization targets. In Germany, the market continues to scale, driven by a structural shift toward lower-cost electricity, making heat pumps more competitive in commercial retrofit and new build applications.

Meanwhile, the UK commercial segment is poised for long-term expansion, though a temporary 2025 slowdown is expected due to deferred Public Sector Decarbonisation Scheme funding.

Across Europe, air-source heat pumps (ASHPs) dominate commercial installations, though Finland is an outlier, with ground/water (G/W) heat pumps gaining share through district heating schemes.

[edit] Technology Trends: Modular Designs & Next-Gen Refrigerants

The push for low-GWP refrigerants is redefining product development, especially in modular and scalable system architectures:

• Scroll compressors are transitioning rapidly to propane (R290).
• Reciprocating compressors maintain a dual pathway between CO (R744) and R290, depending on application.
• Screw compressors are trending toward R1234ze, particularly in mid-to-large commercial systems.

Modular heat pumps, increasingly necessary for navigating charge limits and A2L/A3 refrigerant classifications, are becoming a standard configuration in both retrofit and new construction.

[edit] Domestic Market Update: Refrigerants, Regulations & Regional Realities

Australia & the U.S.: Heat Pump Growth Driven by Water Heating

Both Australia and the United States continue to focus on domestic water heating as the dominant application for HPs. In Australia, generous incentives for replacing gas water heaters have boosted the CO monobloc market, though cylinder-integrated HPs (CIHPs) hold the largest share. R290-based systems are gaining traction, with reversible propane units expected to support future space heating growth. The U.S. domestic market is similarly water-heating-focused, with a double-digit CAGR projected for all configurations except split and G/W-to-water systems, led by state mandates and federal incentives (e.g., Inflation Reduction Act).

Europe: A Dramatic Year in 2024, but Long-Term Growth Ahead

The European domestic HP sector saw a decline of 27% in 2024 following aggressive growth in 2022–2023. Monobloc systems dropped by 22%, while air-to-water split fell by 37%—partly due to overstocking and a slowdown in three key markets, namely France, Germany and Poland. Cylinder integrated HP for water heating declined 17%, driven by a significant drop in the German sales. Ground/water HPs were down 34%, especially in Germany, Belgium, and the Netherlands.

Despite the contraction, the UK market shows resilience with CIHPs and exhaust air systems gaining share in new-build flats, supported by forward-looking regulations. The conversion of commercial to residential buildings is creating a new retrofit segment in the UK—one that may be mirrored in other European cities with high vacancy rates.

[edit] Key Implications

• Refrigerant flammability classifications (A2L/A3) will increasingly influence system design, site safety, and installer training.
• Modular system architecture will be crucial for navigating charge limits, especially with propane-based solutions.
• Markets like the UK, Finland, and Australia offer unique case studies—from district heating integration to commercial-to-residential repurposing.
• Regulatory timing will continue to play a key role, so HVAC stakeholders must stay closely aligned with local policy updates and fiscal cycles.

This article appears on the BSRIA news site as "HVAC Market Watch | May 2025 Edition" thumbnails from "Market Intelligence - Market Reports - Renewable" and was prepared by the BSRIA Market Intelligence Team.

--BSRIA

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