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Buildings

10%

Growth in residential heat demand over 2014-2019

25%

Drop in share of heating from coal in residential heating mix

39%

Current share of natural gas in residential heating mix

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Three countries attracted over half of global electrified heat investment

  • The U.S., Japan and China alone accounted for over half of global investment in electrified heat. Together, these countries attracted 55% of global investment over the past decade, and 53% in 2020 investment. The U.S. is the only major market for electrified heat that has seen investment grow every year over the past decade.

  • Global investment has doubled over the past decade. Capital flows to electrified installations and companies grew at an average rate of 7% per year and jumped 9% from 2019-2020.

The residential heat mix has changed little as demand has grown slightly

  • Total residential heat demand in studied markets grew around 10% 2014-2019. The additional demand was mainly met by natural gas, and to some extent new district heating.

  • Natural gas accounted for the largest share of the global residential heating mix with around 39% in 2019, up from 36% in 2014.

  • Electric heating, the second-largest source, has remained constant at around a quarter of supply. Electricity is used both for traditional electrical heaters and to power heat pumps, but many countries do not report data on heat pump use. Where heat pump data is reported, their use more than doubled over 2014-19.

  • Heating from coal, the most polluting fuel, declined by around 25% from 2014 to 2019, but still represents 4% of the heat mix.

High reliance on natural gas could slow heat decarbonization

  • Natural gas is the main source of heating in a third of the analyzed heating countries, mostly in Europe, North America and Asia-Pacific, where it provides over 50% of residential heat.

  • Low-carbon heating technologies, such as heat pumps, increased their share of residential heat over 2010-2019 but gas heating also grew during this time. A key reason is the low price of gas heating, making it a barrier for electrifying heat. Without subsidies, wide adoption of heat pumps pushes the transition costs largely onto households.

  • Fuel-switching to low-carbon hydrogen is an alternative, but less likely, way of decarbonizing gas heating. Low-carbon hydrogen is likely to first be deployed for industrial purposes, rather than for residential use. To enable residential use of hydrogen, considerable investments would be needed to both individual boilers and gas distribution networks.

European countries and Japan lead residential heat pump growth

  • Across Europe, the U.S., Japan and South Korea, annual heat pump sales have nearly doubled over the past decade. This includes both air- and ground-source units.

  • Norway, Portugal and Japan are estimated to have the highest use of heat pumps, able to meet 15-16% of residential heat demand. However, the share could be even higher, as heat pump usage data is often estimated or underreported.

  • Heat pump uptake usually leads to reduced energy consumption, as a heat pump produces 2-3 times more heat than traditional electric heaters using the same amount of electricity. In very cold countries, such as Canada, the more expensive ground source heat pumps work better but have yet to gain wide popularity.

Clean buildings policies are highly concentrated in developed nations

  • Three quarters of the clean building policies Climatescope tracked were on the books in developed nations. As with the transport sector, a lack of incentives has limited decarbonization of the sector in emerging markets.

  • Low-carbon heat targets or roadmaps are the most popular policy mechanisms among countries surveyed. These are present in 82% of developed nations and in 39% of emerging markets.

  • Grants and loans to purchase heat pumps follow as the second most common policy. The policy is in place in 68% of the developed nations and 21% of the emerging markets.

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Three countries attracted over half of global electrified heat investment
The residential heat mix has changed little as demand has grown slightly

Climatescope 2021

Energy Transition Factbook

This marks the 10th anniversary of Climatescope, BNEF’s annual assessment of energy transition opportunities. For the first time, the project has expanded its scope to include activity not just in clean power but in the decarbonization of the transportation and buildings sectors.

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