This is the first report in a new series of three unique studies covering the emerging UK microgeneration industry. Other reports cover Solar Photovoltaic and Thermal Products and the Biomass Market.

Heat pumps are used to heat buildings and water in the commercial, industrial and residential sectors in the UK. In many European countries, heat pumps have been an accepted system and technology in all three sectors for 2 -3 decades and in some of these countries statistics are more easily available than in the UK where they are virtually non existent.

In the UK, the market for Heat Pumps is underdeveloped and, as part of the new renewable heat strategy needed to reduce energy usage and costs, it is currently unable to compete financially with many alternative sources. The government’s target of 15% of energy to be derived from renewables by 2020 assumes significant growth of ground and air source heat pumps in order to meet this commitment.

The market value for both ground and air source heat pumps into the residential, commercial, public and industrial sectors is estimated at about £52m in 2010, which when added to installation costs of about £13m, gives an overall estimate of around £65m. A further breakdown of the value in each sector is detailed in the report.

Despite wide acceptance in some European markets, volume production is still relatively low. Most leading players are parts of major groups involved in the heating industry, with international operations. In the medium term, capacity will need to increase - not only in terms of production, but also in terms of installation capacity which could be  a significant issue for other renewable technologies as well as heat pumps. In addition, there will almost certainly be a requirement to improve the technology as the market matures.

These targets are ambitious and will require significant government funding support to achieve. Given the outcome of the Election and the objectives of reducing public spending, the actual commitment levels will undoubtedly become clearer over the rest of 2010 as spending plans are announced. However, the Coalition partners have made strong commitments to reducing carbon emissions and therefore substantial support is expected to continue – though the above targets may be subject to some changes.