Slump in sales and uncertainty: heat pump manufacturers suffer after dispute over heating law and building energy law (GEG)

Heat pump manufacturers are facing a crisis: unclear future and rising prices are slowing down the market

After the dispute over the planned heating law, heat pump manufacturers are complaining about a drop in sales and deeply unsettled consumers. The disputes within the traffic light coalition over the design of the Building Energy Act (GEG) were settled in June. The Greens had originally sought stricter regulations on the heat transition and the installation of climate-friendly heating systems, but were unable to implement any further regulations.

But then the vote in the Bundestag failed, which was brought about by the Federal Constitutional Court through an urgent application by Thomas Heilmann, a member of the CDU/CSU faction in the German Bundestag. The argument: Due to the short deliberation time, MPs could not spend long enough on the heating law to point out weaknesses and introduce changes. “The traffic light is ruining the heating transition with a last-minute legislative package and an unconstitutional procedure,” Heilmann stated, not incorrectly.

The uncertain future of energy prices further exacerbates the problems faced by heat pump manufacturers. If gas becomes cheaper again but electricity remains expensive, many people will decide to install gas heaters instead of heat pumps. Real support for the heat pump requires an appropriate price ratio, which should not be much greater than a factor of 2.5. Ongoing inflation continues to put a strain on citizens' wallets. Although energy prices have recently fallen sharply, the prices for oil, gas and electricity remain at a comparatively high level. According to the Federal Association of Consumer Organizations (VZBV), prices for heating systems in Germany have also risen dramatically in the last two years.

Demand for oil and gas heating is increasing, while sales of heat pumps have fallen dramatically. In anticipation of the planned legal requirements, manufacturers have already invested five billion euros in order to be able to deliver and install around 500,000 new heat pumps per year from 2024. Due to the current political situation, this process is now being slowed down.

The schedule stipulates that the municipalities will first develop municipal heat planning for existing buildings by 2028 at the latest. Only then does the regulation take effect that new heating systems must be powered by 65 percent renewable energy. This unclear future and the lack of planning security mean that industry and trade are having difficulties. The announcement that people over 80 do not have to change their heating system means that some consumers are now doing nothing at all, while others are quickly replacing their old gas or oil heating system.

Part of the price increase reflects the increase in raw material and energy costs. A month ago it was reported about the collapse in the housing construction market, which was also driven by the Building Energy Act (GEG) by Climate Protection Minister Robert Habeck, also known as the Heating Act.

Solar/photovoltaics: Residential construction market crisis – Does the slump in building permits have an impact on the photovoltaics industry?

The uncertainty and rising prices have caused orders for heat pumps to fall dramatically. On average, prices for heating systems rose by around 25 percent in 2021 and 28 percent in 2022. Air-water heat pumps increased in price from an average of 20,000 euros in 2021 to 31,000 euros this year. During the same period, the prices for pellet heating rose from 27,000 to 37,000 euros, and the installation of a gas floor heating rose from 6,000 to 10,000 euros.

The uncertainty due to the Federal Constitutional Court temporarily stopping the adoption of the GEG has led to a collapse in orders for heat pumps. According to the Federal Office of Economics and Export Control, the number of applications for heat pumps in existing buildings has fallen significantly this year. While 20,000 such heating systems were installed every month last year, this year the number is only 7,000 to 8,000 per month.

The decline in orders in the heat pump market is comparable to that in the solar system market for new buildings, which averages 80 percent. Although there is still interest, hardly any concrete deals are being made at the moment. Potential customers wait and hope for better funding. The federal government originally intended to first pass the heating law and only then commit to specific support measures.

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The decline in orders for heat pumps also has an impact on the solar system market, although they are not directly linked. However, there are some potential impacts that the decline in heat pumps could have on the solar energy market.

First of all, it is important to note that both heat pumps and solar systems are often viewed as part of a holistic approach to using renewable energy in buildings. Many homeowners and builders who are considering using renewable energy in their buildings often consider installing both a heat pump and a solar system. These two technologies complement each other well because the solar system can provide the electricity to operate the heat pump.

However, the decline in orders for heat pumps could result in potential customers shelving their plans to install renewable energy in their buildings. If consumers wait due to the uncertainty and lack of planning security in the heat pump market, this could also affect the solar system market. Interest in solar may also decline as customers may wait for a better time to make their renewable energy investments.

Another possible impact of the decline in orders for heat pumps on the solar systems market concerns general market dynamics and competition. If demand for heat pumps declines, solar system manufacturers and installers could see increased competition for customers. This could lead to downward pressure on prices and an overall slowdown in the solar equipment market as the industry tries to convince customers to switch to other technologies.

However, it is also possible that the decline in orders for heat pumps will not have a significant impact on the solar system market. The two markets could exist independently of each other, and those wishing to invest in renewable energy could continue to choose solar systems regardless of developments in the heat pump market. There are also other factors that can influence the solar energy market, such as government support programs, environmental regulations and the general acceptance of renewable energy in society.

➡️ The decline in orders for heat pumps can potentially impact the solar energy systems market, but the exact impact depends on various factors. It is important to consider market dynamics and the interactions between different renewable energy technologies in order to obtain a comprehensive picture and better assess future developments in both markets.

There are also other important factors that can influence the solar energy market, such as government support programs, environmental regulations and the general acceptance of renewable energy in society. However, the current challenge is that these points are often treated by politicians in a party-political and ideological manner, instead of comprehensively educating citizens and convincingly presenting the added value of renewable energies.

1. State funding programs

Political support and financial incentives for the expansion of renewable energy play a crucial role in promoting the solar energy market. Government support programs can make investments easier and improve the profitability of solar systems. However, it is important that these programs are transparent, well-designed and stable in the long term in order to create trust and planning security for consumers and companies.

2. Environmental regulations

Environmental regulations and policies influence the demand for renewable energy, including solar. If governments introduce strict environmental regulations that limit the use of fossil fuels and encourage the switch to renewable energy, this can positively influence the solar energy market. It is important that these requirements are clearly defined and reliable in the long term to ensure a sustainable investment in solar energy.

3. General acceptance of renewable energy

Public acceptance and awareness of renewable energy is having a strong impact on the solar energy market. When society positively perceives renewable energy and understands its benefits, consumers' willingness to invest in solar systems increases. A broad educational campaign and information events can help to improve acceptance and understanding of renewable energies.

➡️ Unfortunately, in the political landscape it is sometimes the case that renewable energies and their support become a party-political issue. The ideology of particular parties can lead to different approaches and priorities, which can lead to uncertainty and inconsistency in policies and funding programs. This can have a negative impact on the solar equipment market as it makes it difficult for consumers to receive a clear and coherent message.

➡️ It is important that political decision-makers strive for non-partisan solutions and conduct comprehensive education in order to make the added value of renewable energies for society transparent. The promotion of renewable energies should not be based on political ideologies, but on scientific findings and the conviction that a sustainable energy supply is in the interest of all citizens.

➡️ If politicians shift the focus away from partisan ideologies towards value-added, informed and convincing arguments for renewable energy, this can have a positive impact on the solar energy market. It would increase consumer confidence, encourage investment and increase demand for solar energy, ultimately leading to a more sustainable and cleaner energy future.

In times of unclear market conditions and a lack of planning security, it is important for consumers to make well-informed decisions when purchasing a heat pump and/or solar system. Here are 10 tips that can help consumers take the right steps in this situation:

1. Research thoroughly

Find out about the current developments in the market for heat pumps and solar systems. Read professional magazines, online resources, and attend information sessions to stay up to date.

2. Consult experts

Seek advice from professionals such as energy consultants, installers or manufacturers. They can provide you with key insights and recommendations based on their experience and expertise.

3. Get multiple quotes

Compare not only the prices, but also the services offered by different providers. Pay attention to the quality of the products, the service and the warranty conditions.

4. Check funding opportunities

Find out about government funding programs and incentives for purchasing heat pumps and solar systems. These can help reduce costs and improve return on investment.

5. Consider long-term costs and savings

Consider not just the purchase price, but also the long-term operating costs and potential savings. An energetically efficient heat pump or solar system can lead to significant cost savings in the long term.

6. Pay attention to quality and reliability

Make sure that the heat pump or solar system you choose comes from a reputable manufacturer and meets high quality standards. Reliability and durability are crucial factors for a long-term profitable investment.

7. Check suitability for your building

Get professional energy advice to determine whether a heat pump or solar system is right for your building. It is important to consider the specific needs and characteristics of your building.

8. Consider your individual needs

Think about your own preferences and needs. Which type of heating or energy generation suits you and your living conditions best? Also consider the environmental impact and choose a technology that aligns with your values.

9. Plan for the long term

Consider purchasing a heat pump or solar system as a long-term investment. Think beyond the next 10 to 20 years and plan accordingly. Consider possible future developments regarding laws, technology and energy prices.

10. Don't be pressured into making hasty decisions

Even if the market situation is uncertain, it is important not to make hasty decisions. Make sure you take enough time to examine and weigh up the different options. It is better to make an informed and well-thought-out decision than to act impulsively.

➡️ If consumers follow these 10 tips, they can maximize their chances of making a good investment in a heat pump and/or solar system, even in times of unclear market conditions and a lack of planning security. Thorough research, expert advice and careful evaluation of the various options are key to making an informed decision that will be beneficial in the long term.

In times of unclear market conditions and a lack of planning security, it is important for electrical companies, installers and solar engineers to behave appropriately and take the right steps when purchasing a heat pump and/or solar system. Here are 10 tips that can help you act correctly in this situation:

1. Keep up to date with current developments

Follow industry news, trade publications and online resources to stay informed about the latest trends, regulatory requirements and funding programs.

2. Build a strong network

Network with other professionals in the industry, such as manufacturers, distributors and colleagues. A strong network allows you to share information, learn from best practices and discover potential business opportunities.

3. Follow the development of the legal framework

Pay attention to how the legal requirements for heat pumps and solar systems develop. Governments may introduce new policies or adjust existing regulations, which may impact the market.

4. Offer comprehensive consulting services

Inform your customers about the advantages and disadvantages of heat pumps and solar systems, explain to them about possible funding programs and explain how they can benefit from the various technologies. By providing comprehensive advice, you will gain the trust of your customers and support them in making informed decisions.

5. Keep an eye on costs

Heat pumps and solar systems can have different costs, from purchase to installation and maintenance. Carefully analyze the cost structure and offer your customers transparent and competitive prices.

6. Build expertise

Invest in employee education and training to ensure you have the most up-to-date knowledge and technology related to heat pumps and solar systems. This allows you to provide high quality services and satisfy your customers.

7. Collaborate with other professionals

Collaborating with other electrical contractors, plumbers, and solar installers can help you increase demand, share resources, and work together on larger projects. Joint efforts can strengthen success in an uncertain market.

8. Diversify your service offering

Consider expanding your service offering to include other renewable energy technologies or energy efficiency measures. This can help you diversify your business opportunities and adapt to changing market conditions.

9. Build customer relationships on trust

Customer relationships are crucial, especially in an uncertain market situation. Strive to provide excellent customer service, ensure you keep your promises, and respond professionally to customer inquiries and complaints.

10. Stay open to innovation

Renewable energy technology is constantly evolving. Stay open to new products, technologies and business models emerging on the market. By staying innovative, you can strengthen your competitiveness and take advantage of new opportunities.

➡️ If electrical companies, installers and solar engineers follow these 10 tips, they can position themselves better in an unclear market situation and a lack of planning security. Through comprehensive information, expertise, collaboration and a strong focus on customer satisfaction, you can increase your success and confidently meet the challenges of the market.

Does the slump in building permits in the residential construction market have an impact on the photovoltaics industry? – Image: Xpert.Digital / moreimages|Shutterstock.com

A short survey we recently conducted among solar installers shows that demand for solar systems for single- and multi-family homes is stagnating and that customers' purchasing behavior is cautious. Many potential customers are postponing offers that have already been made to a later date, which will lead to increased price pressure and intensified competition in the industry.

The slump in building permits in the residential construction market has a direct impact on solar installers, as the installation of solar systems often goes hand in hand with new buildings or renovations. The fact that demand for single- and multi-family homes is stagnating has a direct impact on solar installers' installation orders and sales.

More about it here:

• Solar/photovoltaics: Residential construction market crisis – Does the slump in building permits have an impact on the photovoltaics industry?