Economic efficiency of heat pumps
Environmental Action Germany
2023
According to the current draft for the amendment to the Building Energy Act, from January 1, 2024, every newly installed heat generator should be operated with at least 65 percent renewable energy. Heat pumps are already standard in new buildings, while in existing buildings the proportion fitted with heat pumps, is significantly lower.
To shed more light on the potential in existing buildings, Environmental Action Germany (DUH) has commissioned Prognos to create a reliable data base for estimating the economic viability of heat pumps in typical existing buildings that considers different conditions (price level, building type, etc.). The case studies resulting from the calculation have been incorporated into two DUH papers.
The first step in calculating the case studies was to analyse and determine retail prices.
The calculations are conducted for the three time points of 2023, 2030, and 2040, and the respective energy prices are stored over the 15-year lifetime of the plants. All costs are discounted, taking into account interest (2 percent real) and the term (15 a).
Since the building stock in Germany is very diverse, two technical building variants were investigated (a single-family house and a small apartment building, each partially renovated), which are oriented according to the German residential building typology of the Institute for Housing and Environment (IWU). These selected types of buildings are common in the German residential building stock.
Three heat generators are compared for each of the defined model buildings:
The necessary investment costs and assumptions regarding maintenance and operating costs are based on studies and our own estimates. Due to the dynamic development of costs in recent years, the investment costs are calculated on the basis of appropriate indices (e.g., the construction price index) for the year under review (2023), to be determined in the course of the project.
The cost calculation also considered the current nationwide funding for heat pumps. For the years 2030 and 2040, learning curves have been defined for the investment costs. For the calculation, it is assumed that heat pump delivery will be lower in 2030 and 2035 and will be eliminated in 2040.
As a result of the change in energy prices and the continuing availability of subsidies, the cost-effectiveness of heat pumps in moderately renovated apartment buildings has improved significantly compared to the use of fossil-fired heat generators in comparison with previous years. Switching to a heat pump is, under the assumptions made, now more economical than simply replacing a gas boiler. In addition, according to this calculation scenario, the profitability of the heat pump will also improve in the coming years, 2030 and 2040. This improved economic efficiency is mainly due to the fact that in the long term the price of gas is expected to rise due to the rising CO2 price compared to the price of electricity. This coincides with the price forecasts in current studies, such as the long-term scenarios (Fraunhofer ISI et al.) or the short report on the German Buildings Energy Act (GEG) amendment (Ifeu, Prognos et al., 2021).
The biomethane and hydrogen boiler are shown to be significantly more expensive than a heat pump due to the high energy procurement costs. Even with a proportionate admixture, the costs of these variants, which are provided for in the GEG draft as fulfilment options, are around twice as expensive as that of a heat pump.
Heat pump factsheet (PDF in German, DUH)
Cost check for heat supply with hydrogen and biomethane (PDF in German, DUH)
More about our work on the heat and energy efficiency
Project team: Nora Langreder, Frederik Lettow, Nils Thamling, Sven Kreidelmeyer, Hans Dambeck
Last update: 13.06.2023
Project Manager
Principal
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