A solar water heating system

Why is heating important?

Space and water heating account for almost half of global energy use in buildings. Keeping homes warm in winter and providing hot water for sanitary needs are essential energy services. Worldwide, around 40% of households require space heating during part of the year, with heating being a major component of home energy expenditure, in particular in colder climates.

What is the role of heating in clean energy transitions?

Nearly two thirds of heating energy use still rely on fossil fuels. However, efficient and low-carbon heating technologies are on the rise. Sales of heat pumps, a central technology for decarbonising heat, continue to grow at record levels, in particular in North America and Europe. Although heat pumps and other clean heating options are readily available and mature, significantly faster rates of deployment are needed to get on track with the Net Zero Emissions by 2050 Scenario.

Where do we need to go?

In the Net Zero Emissions by 2050 Scenario, the combined effects of a rapid scale-up of efficiency improvements of building envelopes, fuel and technology shifting, and power sector decarbonisation cut buildings’ heating-related emissions by half by the end of this decade. These measures reduce the average global energy intensity of heating by around 4% annually through to 2030, double the rate achieved last decade.

Space and water heating account for almost half of global energy use in buildings. Keeping homes warm in winter and providing hot water for sanitary needs are essential energy services. Worldwide, around 40% of households require space heating during part of the year, with heating being a major component of home energy expenditure, in particular in colder climates.

Nearly two thirds of heating energy use still rely on fossil fuels. However, efficient and low-carbon heating technologies are on the rise. Sales of heat pumps, a central technology for decarbonising heat, continue to grow at record levels, in particular in North America and Europe. Although heat pumps and other clean heating options are readily available and mature, significantly faster rates of deployment are needed to get on track with the Net Zero Emissions by 2050 Scenario.

In the Net Zero Emissions by 2050 Scenario, the combined effects of a rapid scale-up of efficiency improvements of building envelopes, fuel and technology shifting, and power sector decarbonisation cut buildings’ heating-related emissions by half by the end of this decade. These measures reduce the average global energy intensity of heating by around 4% annually through to 2030, double the rate achieved last decade.

Latest findings

The energy crisis has marked a turning point for residential gas demand in Europe

Heating is a significant driver of global energy demand, both in buildings and in industry, and is an important component of energy expenditure for households, especially in colder climates. Many households use natural gas to warm their homes, provide hot water and to cook. Residential and commercial gas demand dropped by more than 15% in 2022 compared to the year before. While 40% of the decline in residential and commercial demand in Europe can be attributed to weather-related factors (reduced space heating needs due to a mild winter), a substantial part was achieved through various gas-saving measures.

The IEA’s Outlooks for gas markets and investment report estimates that gas demand in buildings is expected to decline by 65 bcm in advanced economies from 2021 to 2030 thanks to a swift acceleration of efficiency improvements and widespread adoption of heat pumps.

Residential natural gas demand, World, 2021

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Global heat pump sales continue double-digit growth

Global sales of heat pumps grew by 11% in 2022, according to the latest IEA analysis, marking a second year of double-digit growth for the central technology in the world’s transition to secure and sustainable heating. Increased policy support and incentives for heat pumps in light of high natural gas prices and efforts to reduce greenhouse gas emissions were key drivers behind the strong uptake.

In Europe, heat pumps enjoyed a record year, with sales growing by nearly 40%. In particular, sales of air-to-water models, which are compatible with typical radiators and underfloor heating systems, jumped by almost 50% in Europe. In the United States, heat pump purchases exceeded those of gas furnaces, while in China, the world’s largest heat pump market, sales remained stable.

Annual growth in sales of heat pumps in buildings worldwide and in selected markets, 2021 and 2022

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Heat pumps are a proven way to provide secure and sustainable heating

Heat pumps, powered by low-emissions electricity, are the central technology in the global transition to secure and sustainable heating. The Future of Heat Pumps, a special report in the IEA’s World Energy Outlook series, provides an outlook for heat pumps, identifying key opportunities to accelerate their deployment. It also highlights the major barriers and policy solutions, and explores the implications of an accelerated uptake of heat pumps for energy security, consumers’ energy bills, employment and efforts to tackle climate change.

Around 10% of space heating needs globally were met by heat pumps in 2021, but the pace of installation is growing rapidly with sales at record levels. Government policy support is needed, though, to help consumers overcome heat pumps’ higher upfront costs relative to alternatives. Financial incentives for heat pumps are already available in over 30 countries, which together cover more than 70% of heating demand today. The IEA estimates heat pumps globally have the potential to reduce global carbon dioxide (CO2) emissions by at least 500 million tonnes in 2030 – equal to the annual CO2 emissions of all cars in Europe today.

Heat pump capacity in buildings by country and region in the Announced Pledges Scenario, 2021-2030

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Explore the economics of different residential heating systems

This interactive calculation tool allows users to explore and compare the economics of different residential heating systems, in terms of cumulative discounted cash flow and levelized cost of heating (LCOH). Default parameter values are provided for information. Default values for heat demand are based on IEA energy efficiency indicators, default fuel price assumptions are based on IEA energy prices datasets. Please note that significant variations exist for every parameter across building stocks, making each residential heating installation a specific case.

Levelized cost of heating (LCOH) for consumers, for selected space and water heating technologies and countries

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Home heating technologies

Consumers have a variety of options for hot water and space heating in their homes. Though market shares of fossil fuel-based heating systems continue to decline, gas boilers and furnaces continue to dominate sales in a range of heating markets. Clean alternatives therefore need to be deployed much more rapidly.

Heat pumps, powered by low-emissions electricity, are the central technology in the global transition to secure and sustainable heating. Around 10% of space heating needs globally were met by heat pumps in 2021, but the pace of installation is growing rapidly with sales at record levels.

Government policy support is needed, though, to help consumers overcome heat pumps’ higher upfront costs relative to alternatives. Financial incentives for heat pumps are already available in over 30 countries, which together cover more than 70% of heating demand today.

The IEA estimates heat pumps globally have the potential to reduce global carbon dioxide (CO2) emissions by at least 500 million tonnes in 2030 – equal to the annual CO2 emissions of all cars in Europe today. Other sustainable heating technologies include solar thermal heaters and district heating based on low-carbon sources. A comparison of home heating options is presented below; estimated energy savings are based on average heating needs, appliance efficiency, and utility prices in well-insulated homes. Contractors can offer customised estimates.

Air-to-water heat pumps use heat from outside air to heat water for radiators or underfloor heating.

They are 3-4 times more energy-efficient than fuel-based or electric resistance systems. This is because they move heat in and out of buildings instead of generating it.

Air-to-water heat pumps are usually connected to a tank that provides hot water for heat distribution systems, bathrooms, and kitchens. Some models also provide space cooling. They run on electricity, and when installed in well-insulated homes they can achieve significant energy bill savings – for example, up to 35% in Germany or up to 50% in France compared to gas boilers. Their average lifespan before replacement is 15-18 years.

Ground source heat pumps use heat from the outside ground to heat water for radiators or underfloor heating. In North America, the heat is often distributed through forced-air systems.

They are 4-5 times more energy-efficient than fuel-based or electric resistance systems. This is because they move heat in and out of buildings instead of generating it. Ground source heat pumps, as well as water source heat pumps that absorb heat energy from a nearby river, lake or pond, or from groundwater, are also more energy-efficient than air-source heat pumps as ground and water temperatures stay relatively stable compared with outdoor air temperatures.

Ground source heat pumps are usually connected to a tank for hot water for heat distribution systems, bathrooms, and kitchens. Some models also provide space cooling. They run on electricity, and when installed in well-insulated homes they can achieve significant energy bill savings – for example, up to 45% in Germany or up to 60% in France compared to gas boilers. Their average lifespan before replacement is 20-25 years but the loops that absorb heat from the ground can last for more than 50 years.

Air-to-air heat pumps use heat from the outside air to heat your home through in-room blowers or vents.

They are 3-4 times more energy-efficient than fuel-based or electric resistance systems. This is because they move heat in and out of buildings instead of generating it.

Air-to-air heat pumps are ideal for homes without radiators or underfloor heating, and they can also provide space cooling. Some models can be combined with water tanks to provide hot water for bathrooms and kitchens. In other cases, separate hot water solutions such as an electric heater may be needed. Air-to-air heat pumps run on electricity, and when installed in well-insulated homes they can achieve significant energy bill savings – for example, up 35% in Germany or up to 50% in France compared to gas boilers. Their average lifespan before replacement is 12-15 years.

Solar thermal heaters use solar collectors on the roof to produce hot water.

While this hot water is mainly used in bathrooms and kitchens, it can also contribute to meeting space heating needs if combined with other heating systems such as heat pumps. This way they can lower the energy cost of the system with which they are combined and have a lifespan of 15-20 years.

Heat networks, available in some areas, are centralised systems distributing heat through underground pipes.

District energy networks transfer heat to your radiators or underfloor systems and might also provide hot water for bathrooms and kitchens. Some systems can also cool connected homes. They run on various energy sources such as combined heat and power plants or large-scale heat pumps, depending on the network. In well-insulated homes they can achieve significant energy bill savings – for example, up to 25% in France compared to gas boilers. District heating networks have a lifespan of about 20-25 years, though the lifetime of the pipe network can exceed 30 years.

Biomass boilers burn wood pellets, chips, or logs to heat water.

This water then provides heat to radiators or underfloor systems. In addition to biomass boilers, there are other biomass heating systems such as stoves that heat a single room and that can be combined with a boiler for hot water for bathrooms and kitchens. Biomass heating systems can also be used in combination with solar thermal heaters or heat pumps. When installed in well-insulated homes, they can achieve significant energy bill savings – for example, up to 40% in France compared to gas boilers. They have a lifespan of 20-25 years.

Electric radiators are standalone units that generate heat by passing an electric current through a resistor.

Households using electric radiators for space heating also need a hot water system such as a heat pump or electric water heater. Energy bills are typically higher than for other technologies, and their lifespan is shorter at about 10-12 years.

Gas boilers burn natural gas to provide heat water for radiators or underfloor systems. Gas furnaces, common in North America, distribute heat through forced-air systems.

Gas boilers also provide hot water for daily home use. Across Europe, nine countries have implemented or announced bans on installations of boilers that run exclusively on natural gas, while sub-national bans on gas fuelled heating systems have also been implemented in North America and China. Gas boilers and furnaces consume significantly more energy than low-emitting systems such as heat pumps, and they have a lifespan of 15-17 years.

Tracking Heating

More efforts needed

Almost half of energy demand in buildings was used for space and water heating in 2022, leading to around 2 400 Mt of direct CO2 emissions and 1 700 Mt of indirect CO2 emissions, similar levels to the previous year. The role of efficient and low-carbon heating technologies continues to grow, but fossil fuels still meet over 60% of heating energy demand. The global energy crisis and its related risks to heating energy security and affordability are providing unprecedented momentum for a transition away from fossil fuel-based heating, particularly in Europe. The technologies needed to decarbonise heating are readily available and mature, but significantly faster rates of deployment are needed to get on track with the Net Zero Emissions by 2050 (NZE) Scenario.

Strengthened policy targets and financial incentives are supporting the transition towards clean heating in an increasing number of countries

Countries and regions making notable progress in decarbonising heating include: 

  • Heat pump sales in Europe enjoyed a record year, with sales growing by nearly 40%, reaching around 3 million installations and supporting the steep reduction in natural gas demand in 2022. The REPowerEU plan, published in May 2022, aims to reduce dependency on Russian gas, and proposes the cumulative installation of 10 million new hydronic heat pumps in the next 5 years and 30 million units in the buildings sector by 2030.   
  • In the United States, renewable heat development is supported by the Inflation Reduction Act (IRA) passed in August 2022, which allocates an estimated USD 22 billion for home energy supply improvements. The bill includes substantial rebates and ten years of consumer tax credits for heat pumps, geothermal heating and electric heating appliances (e.g. stoves and clothes dryers) as well as high-efficiency biomass stoves and boilers. 
  • The targets of China’s 14th Five-Year Energy Plan to 2025, released in March 2022, include a 20% non-fossil-fuel share in the energy mix by 2025 and 60 Mtce of non-electric use of renewables.  
  • In Chile, the 2021 National Heat and Cold Strategy targets 40% GHG emissions reductions in the heating and cooling sector by 2030 and 65% by 2050, and aims for 45% sustainable energy in heating and cooling by 2030 and 80% by 2050.  
  • Several countries, including France, Denmark, Canada, the United Kingdom, Luxembourg, Austria and Malta, have since 2021 implemented new financial incentives for renewable heating and cooling, or have extended or enhanced existing incentives.

While emissions from space and water heating in buildings remained flat from 2021 to 2022, large reductions are needed to get on track with the NZE Scenario

CO2 emissions from buildings space and water heating by fuel in the Net Zero Scenario, 2010-2030

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In 2022, emissions from space and water heating in buildings were around 4.2 Gt CO2, comprising around 2.4 Gt CO2 in direct emissions from fuel combustion in buildings, and almost 1.7 Gt CO2 in indirect emissions from off-site electricity and heat production. Space and water heating emissions account for over 80% of direct CO2 emissions in the buildings sector.

The CO2 intensity of heated residential buildings per unit of floor area has declined by more than one-third between 2000 and 2022. These improvements are largely thanks to the implementation of more stringent building energy codes, as well as shifts away from the most inefficient fossil fuel boilers towards heat pumps and renewable heating equipment. 

Heating emissions in 2022 were very similar to the previous year's, in a positive contrast to the emissions growth seen from 2020 to 2021. Yet, aligning with the NZE Scenario will require rapid emissions reductions, with direct emissions from heating approximately halving to less than 1.2 Mt CO2 by 2030. In the NZE Scenario, the CO2 intensity of heated dwellings declines by around 6% per year between now and 2030, compared with 2% average annual reductions from 2000 to 2022.

Fossil fuels account for 63% of global energy use for buildings-related heating, a decrease of only 4 percentage points since 2010

Buildings-related energy demand for heating and share by fuel in the Net Zero Scenario, 2022-2030

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Natural gas is currently the largest energy source for heat in buildings globally, accounting for 42% of heating energy demand in 2022. The share of natural gas in the heating mix in 2022 was more than 60% in the United States, around 40% in the European Union and 20% in China. In China direct use of coal accounts for around 18% of energy demand for heating in buildings – a share that has nonetheless almost halved in the last five years – in addition to indirect uses through district heating networks for which coal is the dominant energy source, accounting for over 80% of the fuel mix. District heat is especially important in China and across Eurasia, where it supplies around one-third of total heat consumption in buildings. Oil represents 15% of energy use for heating globally, mostly for water heating in countries with lower space heating needs, such as Indonesia, Mexico and Chile.

Rapid changes are needed to get on track with the NZE Scenario, in which the share of fossil fuels in the heating mix drops from 63% today to around 45% in 2030, driven by improvements in energy efficiency and shifts to electric, renewable and other low-emission heating technologies. The share of electricity in the heating mix rises from 15% in 2022 to 20% in 2030, while the direct use of modern renewable energy expands from 11% in 2022 to 20% in 2030. The share of district heat increases from 11% to 14%, while the fuels used to produce heat are increasingly low-emission.

In the NZE Scenario, buildings-related energy demand for heating decreases by around 25% by 2030, despite projected growth in key activity metrics

Driven by population growth and the evolution of living standards, the heated residential floor area – one of the main determinants of heat demand for residential buildings – has increased by almost 25% since 2010, while economic value added by the services sector has increased more than 40% over this period. Despite simultaneous progress in energy efficiency, energy demand for heating in buildings increased by around 10% over the same period.  

In the NZE Scenario, the heated residential floor area increases by 9% between 2022 and 2030, while the economic value added by the services sector rises by 30%. Despite this continued growth in building activity, drastic improvements in the energy efficiency of building envelopes, shifts to more efficient technologies and substantial changes in consumer behaviour together allow for a 25% decline in energy demand for heating over the same period.

The adoption of clean heating technologies requires a step-change to align with the NZE Scenario, reaching 100% of sales before 2030

Large-scale deployment of low-carbon high-efficiency heating technologies, combined with efficiency improvements in building envelopes, changes in heating behaviours, and power sector decarbonisation reduce buildings’ heating-related emissions by around 50% by 2030 in the NZE Scenario. 

Heat pumps are a central pillar in both improving efficiency and reducing emissions. In 2022 more than 1 000 GW of heat pump capacity were in operation for space (and/or water) heating. Global sales of heat pumps grew by 11% in 2022, marking a second year of double-digit growth. Despite this, in the NZE Scenario deployment of clean heating technologies occurs even more rapidly, reaching 100% of sales before 2030. While district heating networks met more than 10% of global heat demand in buildings in 2022, there is still massive untapped potential for decarbonisation, with renewables meeting less than 10% of district energy supply globally.

Modern renewable energy use for buildings-related heating and share of total heat consumption in buildings in selected countries and regions, 2011-2022

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Global modern renewable energy use for buildings-related heating and share of total heat consumption in buildings in the Net Zero Scenario, 2011-2030 

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In the NZE Scenario, electrification and innovative smart heating control systems allow for optimised heating, reducing emissions and strain on electricity grids

Electrification of space and water heating, one of the key decarbonisation measures of the NZE Scenario, is receiving increasing support through regulatory updates and technological innovation. Innovative electric-ready and demand response requirements are being included in updates to building energy codes in various countries. By shifting electricity use for heating in time, demand response can reduce consumer electricity bills, reduce CO2 emissions and provide valuable flexibility services to electricity systems. 

Some countries are already implementing demand response programmes for electric heating at little or no cost to consumers. For example, Voltalis in France is offering zero-cost installation of new demand response devices to existing electric heating appliances (without a need to change the heater) in residential dwellings. Since September 2020 the company has equipped more than one million appliances and estimated that households were able to achieve 12% savings without compromising thermal comfort. In Germany, the ViFlex project is testing the operation of groups of heat pumps as “virtual power plants”, providing benefits to both consumers and utilities.

The deployment of low-carbon heat technologies goes hand-in-hand with improvements to building envelopes

Certain low-carbon heating technologies, such as solar thermal and heat pumps, operate more effectively and efficiently at low-output temperatures. Therefore, high-performance building envelopes, as well as appropriate heat distribution and control systems in buildings, are key to enabling rapid and cost-effective deployment of heat pumps and low-carbon heat technologies in buildings.  

Progress in improving the energy efficiency performance of building envelopes needs to accelerate to be in step with the NZE Scenario.

Policies to favour clean heating solutions are being strengthened as a result of the current energy crisis

Motivated by geopolitical, energy affordability and emission reduction concerns, many governments have been strengthening policies to reduce reliance on fossil fuels for heating. Regulations to support the uptake of clean heating technologies and regulations to restrict the use of fossil fuel-based technologies are the primary policy levers used to decarbonise heating energy use. Recent policy action remains concentrated in Europe and the United States, and policies are not yet sufficient to align these regions – let alone the world – with the NZE Scenario milestones. 

Finland, for instance, launched a loan guarantee programme in 2022 to financially support small and medium-sized businesses, households and housing companies that invest in clean technologies such as heating upgrades that allow for the use of renewable energy sources like geothermal heat, wind or solar energy. Since 2022, Lithuania has offered financial assistance to households to replace fossil fuel boilers with non-polluting alternatives such as heat pumps or efficient biofuel boilers. Similarly, Poland has introduced subsidies for replacing fossil fuel-based heating systems. In the United States, the IRA offers tax credits for a range of energy efficiency measures in buildings, including heat pump installations. Meanwhile, China's 2022 building energy efficiency regulation provides guidelines for incorporating ground-source and air-source heat pumps, among other energy efficiency measures. 

Bans and restrictions on certain fossil fuel technologies, notably oil- and/or gas-fired boilers, are becoming increasingly prevalent. France announced bans in 2020 and 2021, as did Sweden, Slovenia and the United Kingdom. Additional bans have been introduced at the municipal and state level, including several city-level bans in the United States. Such regulatory measures are in most cases directed at new building construction, yet decarbonising the full building stock will also require the replacement of fossil fuel-fired boilers in existing buildings.  

Heating technologies in buildings are increasingly covered by Minimum Energy Performance Standards (MEPS) and energy efficiency labels. Coverage of MEPS and labels has doubled globally for both space and water heating between 2010 and 2022.

Residential space heating and water heating consumption covered by minimum energy performance standards, 2000-2022

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Residential space heating and water heating consumption covered by mandatory labels, 2000-2022

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International collaboration on heating has been accelerated by the ongoing energy crisis, which was further aggravated by Russia's invasion of Ukraine

In Europe, where in 2021 more than 40% of natural gas was imported from Russia, the REPowerEU strategy released in May 2022, aimed at “rapidly reducing the dependence on Russian fossil fuels by fast forwarding the clean transition and joining forces to achieve a more resilient energy system and a true Energy Union”. The EU Save Energy Communication, issued the same day, developed specific recommendations to advance energy efficiency across the bloc. This policy support (combined with a relatively mild winter), contributed to the European Union’s natural gas demand declining by 55 bcm, or 13%, over the course of 2022, its steepest drop in history. 

Additionally, the United Kingdom and the GlobalABC initiated the multi-stakeholder Clean Heat Forum in late 2021 to accelerate heating decarbonisation in buildings.

Many manufacturers are expanding the production of clean heating systems, particularly in Europe

The European heat pump market, in particular, is gaining momentum, with heat pump sales growing by more than 40% in 2022.  

Thirteen manufacturers of heat pumps in Germany, Poland, Belgium, the Republic of Türkiye, the United Kingdom, France, Sweden, Slovakia and the Czech Republic have since 2021 made concrete announcements of expansion plans, adding up to more than USD 2.5 billion in investments over the coming years. 

In April 2023, Carrier Global Corporation, an American heating, ventilation and air conditioning corporation, acquired Viessmann Climate Solutions, a German manufacturer of heating and refrigeration systems, for EUR 12 billion in cash and stock, aiming to position itself as a market leader in Europe.

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The Future of Heat Pumps

Heat pumps, powered by low-emissions electricity, are the central technology in the global transition to secure and sustainable heating. The Future of Heat Pumps, a special report in the IEA’s World Energy Outlook series, provides an outlook for heat pumps, identifying key opportunities to accelerate their deployment. It also highlights the major barriers and policy solutions, and explores the implications of an accelerated uptake of heat pumps for energy security, consumers’ energy bills, employment and efforts to tackle climate change.