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Heating

Subsector
More efforts needed
A solar water heating system

About this report

Almost half of energy demand for buildings was used for space and water heating in 2021, leading to 2 450 Mt of direct CO2 emissions. The role of efficient and low-carbon heating technologies continues to grow, but fossil fuels still meet over 60% of heating energy demand. Russia’s invasion of Ukraine and related risks to heating energy security and affordability are providing unprecedented momentum for a transition away from fossil fuel-based heating, particularly in Europe. Yet despite the technologies needed for heating decarbonisation being readily available and mature, significantly faster rates of deployment are needed to get on track with the Net Zero Emissions by 2050 Scenario. 

CO2 emissions

In 2021 direct emissions from heating buildings grew by 5.5%, reaching a new high of 2 500 Mt CO2, 80% of direct CO2 emissions in the buildings sector. Despite this increase, CO2 emissions from energy use for heating are only 1.5% above 2010 levels. The per-unit of area CO2 intensity of heated residential buildings declined significantly over the same period, falling by almost 40% between 2000 and 2021. 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 and greater use of heat pumps and renewable heating equipment in the stock.  

Direct CO2 emissions from buildings-related heating by fuel in the Net Zero Scenario, 2010-2030

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Aligning with the Net Zero Scenario milestones would, however, require a rapid acceleration of the rate of improvement, with the CO2 intensity of heated dwellings falling by around 10% per year to 2030 in the scenario, compared with 2% per year between 2000 and 2021. The technologies needed to achieve these reductions are available and mature today, and in many markets are cost-effective.  

Energy

Natural gas is currently the most common fuel used for heating globally, accounting for 42% of heating energy demand, a total of 760 bcm in 2021. The share of natural gas in the heating mix was over 40% in 2021 in the European Union and more than 60% in the United States. In China coal plays a much bigger role than in most other regions, with its direct use accounting for 16% of energy demand for heating in buildings, a share that has nonetheless halved just in the last five years. Gas now meets 20% of heating demand in China. District heat is also especially important in China and notably across Eurasia, where it supplies more than one-third of total heat consumption in buildings. Oil plays a role in many economies with lower space heating needs, where it is used predominantly in the form of LPG for water heating. Globally, oil represents around 15% of the mix

Buildings-related energy demand for heating and share by fuel in the Net Zero Scenario, 2021-2030

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Rapid changes are needed to get on track with the Net Zero Scenario, in which the share of fossil fuels in the heating mix drops from 64% today to 45% in 2030. Use of fossil fuels is driven down 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 2021 to 20% in 2030, while the direct use of modern renewable energy expands from 11% in 2021 to 23% in 2030. The share of district heat stays broadly constant around 12%, while the fuels used to produce heat are increasingly low carbon.  

Activity

Driven by population growth and the evolution of living standards, the heated residential floor area – one of the main determinants of heat demand for buildings – has increased by almost 20% since 2010, while economic value added by the services sector has increased almost 40% over this period. Energy demand for heating in buildings increased by 10% over the same period. In the Net Zero Scenario, the heated residential floor area increases by 12% between 2021 and 2030, while the economic value added by the services sector rises by 35%. Despite this continued growth in building activity, improvements in the energy efficiency of building envelopes, shifts to more efficient technologies and changes in consumer behaviour allow for an almost 30% decline in energy demand for heating over the same period.  

Services value added in the Net Zero Scenario, 2010-2030

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Heated floor area in the Net Zero Scenario, 2010-2030

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Technology deployment

Large-scale deployment of low-carbon high-efficiency heating technologies in the Net Zero Scenario, combined with efficiency improvements in building envelopes, reduces the average global energy intensity of heating by around 4% annually through to 2030. The combined effects of efficiency improvements, fuel and technology shifting and power sector decarbonisation reduce buildings’ heating-related emissions by 50% by 2030. 

Heat pumps are a central pillar in both improving efficiency and reducing emissions. In 2021 more than 190 million heat pump units were in operation for space (and/or water) heating. The global stock of heat pumps has been growing at an average annual rate of 10% over the last five years. The use of bioenergy, solar thermal and geothermal heating continued to expand in 2021 at a rate similar to 2020. District heating networks globally met more than 10% of heat demand in buildings in 2021. In the Net Zero Scenario, deployment of these clean heating technologies occurs even more rapidly, reaching 100% of sales before 2030. 

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

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Modern renewable energy use for buildings-related heating by source, and share of total heat consumption in buildings, 2011-2021

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Innovation

Electrification of space and water heating, one of the key milestones of the Net Zero Scenario, is receiving increasing support via regulatory updates and technological innovation. 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 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 2022 update to the California Building Energy Code strongly incentivises all-electric buildings, including incentives for electric heat pumps for space and water heating and requirements to install automated demand response technology for heating systems, allowing two-way communication using a common, open, industry-led standard, OpenADR.  

Supporting infrastructure

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 enable 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 Net Zero Scenario. 

Policy

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 Net Zero Scenario milestones. 

Financial incentives remain the most common type of policy support to encourage renewable heat uptake globally. The recently legislated Inflation Reduction Act in the United States includes USD 9 billion to help consumers electrify their homes through rebates and energy efficiency promotions, with certain households eligible to access rebates of up to USD 8 000 for heat pump purchases. The bill also provides USD 200 million for “training and education to contractors involved in the installation of home energy efficiency and electrification improvements”. 

In Italy the Superbonus scheme, launched in 2020 and extended in 2022, grants households a 110% tax rebate on the purchase cost of low-carbon heating technologies, as well as the cost of building retrofits. In France subsidies for heat pump and renewable heating equipment were increased in 2022 and can be sufficient to tip the economic balance in favour of low-carbon heating instead of gas or oil boilers from both a total cost of ownership and upfront cost perspective. The New Green Savings Programme in the Czech Republic, extended in 2021, offers citizens support for building retrofits, heating system upgrades, advice and access to energy specialists, including subsidies of up to 50% for apartments and family houses.  

Bans and restrictions on certain fossil fuel technologies, notably oil- and/or gas-fired boilers, are becoming increasingly prevalent. National policies have been legislated or announced in Germany, with a ban to be in place by 2025 announced in 2022, and in France, with bans announced in 2020 and 2021, as well as in 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, while decarbonising the full building stock will also require bans on the replacement of fossil fuel fired boilers in existing buildings. 

Scotland’s ambitious Heat in Buildings Strategy (2021), which supports the target of achieving a zero-emission building stock by 2045, requires phasing out the installation of new fossil fuel boilers and replacement of existing ones. It also links minimum energy performance requirements for buildings to energy performance certification, mandating that all homes achieve a level of energy efficiency at least equivalent to an Energy Performance Certificate “Class C” by 2033.  

Investment

Energy efficiency investment in buildings increased by more than 15% in 2021, reflecting the recovery of construction in Western European countries in particular, as well as continued growth in China and the United States.  

2021 saw an overall increase in venture capital investment; however, this was not concentrated in heating and cooling, where lower activity was recorded compared to the previous year.  

For more information on buildings investment see (link to the buildings page), and for information on energy investment trends visit the IEA World Energy Investment 2022

International collaboration

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

In Europe, where more than 40% of natural gas is imported from Russia, the European Commission released the REPowerEU strategy 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 more specific recommendations to advance energy efficiency across the bloc.  

Additionally, the IEA and the European Commission jointly issued a campaign, Playing my part: How to save money, reduce reliance on Russian energy, support Ukraine and help the planet, outlining a number of key actions that citizens and businesses across countries can take in the short term to reduce gas use for heating without compromising on thermal comfort.  

Outside the European Union, the United Kingdom and the GlobalABC initiated the Clean Heat Forum in late 2021 to provide a platform for all stakeholders and accelerate heating decarbonisation in buildings. 

Private-sector strategies

Viessman, a German company specialising in manufacturing heating equipment, recently announced plans to invest EUR 1 billion over the next three years to extend its heat pump and green climate solutions manufacturing capacity. The investment package includes a EUR 200 million investment to expand heat pump manufacturing facilities in Poland. Daikin has also announced a EUR 300 million investment in a heat pump factory in Poland, building on a EUR 1.2 billion manufacturing investment pipeline out to 2025. 

Clade, a manufacturer based in the United Kingdom, opened a new factory in Leeds in early 2022, increasing production of natural refrigerant heat pumps by 400%. Panasonic increased production of air-to-water heat pumps fourfold between 2019 and 2022 at its facility in the Czech Republic.  

Private-sector actors are expanding manufacturing and deployment of a wide suite of low-carbon heating technologies. In Denmark, a state-of-the-art process control solution is enabling one of the world’s largest solar heating plants to provide a Danish community with low-cost district heating while cutting CO2 emissions by 4 500 tonnes a year.  

Recommendations for policy makers

Getting on track with the Net Zero Scenario requires sales of fossil fuel-fired boilers to be phased out this decade, shifting the heating market to heat pumps, district heating, renewable heat technologies and other emission-free heating solutions. Clear policy targets are required to send the appropriate signals to consumers and market actors. Policy makers must also address economic and non‐economic barriers.  

Fuel-pricing strategies, such as taxes and subsidies that favour fossil fuels, jeopardise market equality for all technologies. Ongoing efforts to implement CO2-based taxes and remove fossil fuel subsidies need to be reinforced. With the same logic, clean heating technologies can gain a favourable market position where governments offer public subsidies, especially for low-income households. 

Minimum energy performance standards (MEPS) and building energy codes are effective policy tools to steer markets towards clean-energy heating technologies and efficient building envelopes. Governments should establish a pathway aligned with the Net Zero Scenario for the continuous update of MEPS and building energy codes. In this context, there is wide scope to improve monitoring, verification and enforcement, as well as untapped potential for collaboration between governments, industry and trade associations to ensure proper equipment installation and maintenance. 

Information and capacity-building programmes can help ensure that people undertaking heating system upgrades and other buildings-related improvements are informed and have sufficient knowledge and skills to undertake building renovation. 

Expanding and improving labelling schemes for heating equipment (e.g. through energy labels) is an effective way for governments to facilitate this. Supporting digitalisation and smart controls encourages energy-efficient behaviour further, by making use of the increasing quantity of building energy data available. 

Recommendations for the private sector

Energy companies can leverage their existing links with customers to increase their knowledge and uptake of clean heating technologies. Companies can help overcome the barrier of upfront costs by adapting their business models, for example offering heat-as-a service over multi-year contracts. Other innovative instruments include guarantees of origin for renewables-based heat as a source of additional revenue for operators. 

As the market for clean heating technologies expands, so will the need to offer products to suit all building types and heating needs. Investing now in new and improved product offerings will accelerate the deployment of clean heating technologies across the diverse global building stock. Example technologies include heat pumps suited to small spaces such as apartments, heaters with thermal storage and demand response capabilities, hybrid heat pump-solar heating systems, or district energy systems providing space heating, water heating and cooling.