Significant potential for heat pumps in China and India

China and India are experiencing rapid economic growth, rising living standards and increasing urbanisation. In response to climate change these increases are for the first time also being accompanied by an emphasis in energy efficiency in buildings and renewable energy, favouring the market for technologies like heat pumps. Below we look at the current market for heat pumps in these two BRIC countries and some incentives spurring investment.

Heat pumps are a viable option for reducing primary energy consumption of heating and cooling, and when using natural refrigerants such as carbon dioxide and hydrocarbons are key climate-friendly technologies. Growing emerging economies such as China and India are increasing demand for energy-saving technologies like heat pumps, which will likely accelerate due to increasing regulations around emissions and efficiency.

Rapid growth in Chinese heat pump market

According to figures published in IEA Heat Pump Centre Newsletter 29, Air-air heat pumps make up 85% of the domestic air conditioning market. Investment in ground-source heat pumps (GSHP) on the other hand, has only recently taken off, rising from nearly zero in 2000, to 139 million m² in 2010, thanks to strong government promotion. The same is true for heat pump water heaters, which account for a small margin, 3.2%, of the total domestic water heater market, but where total sales increased from RMB 300 million (€3.7 million) in 2003 to RMB 3 billion (€3.7 billion) by 2010.

Current government incentives for investment in heat pumps in China

Since 2004 the Chinese government has published a series of policies to promote energy efficiency and an increase in renewable energy supplies. The “State Council Decision on Strengthening Energy Conservation” sets a higher goal for energy efficiencies of buildings and related products, including heat pumps.

For GSHP the Chinese Ministry of Housing and Urban-Rural Development and Ministry of Finance have set up a special subsidy to promote and demonstrate the technology in special projects, cities and towns.

In addition, the Minimum Allowable Values of Energy Efficiency and Energy Efficiency Grades for room air conditioners, variable-speed room air conditioners, and multi-connected air-conditioning (heat pump) units have been increased from a COP (coefficient of performance) of 2.6 to 3.21.

Despite these incentives however, obstacles to further market penetration for heat pumps remain. These include high price, low awareness, a lack of a government subsidy for heat pump water heaters, and a lack of suitably trained installation engineers for variable refrigerant volume (VFV) water source systems.

Energy Performance Guarantees could help infant Indian heat pump market

The December 2011 issue of Cooling India reports on ground source and water source heat pumps, which are still a relatively new technology in India. As with any new technology adoption has been far from instantaneous. However, Energy Performance Guarantees could help overcome the delay in their adoption, reducing the perceived risks of implementing this technology in India.

For example, Apollo Hospitals in Hyderabad required a new HVAC&R solution for their building retrofit. Although initially sceptical about heat pump solutions, the Hospital was offered a water source heat pump (WSHP), backed by an Energy Performance Guarantee. As a result of the Guarantee the HVAC design team would only receive service fees if the heat pump proved more efficient than the benchmark solution, in this case a water-cooled chiller. This shifted the performance risk of the HVAC solution from the buyer to the seller.

The installed water source heat pump proved 43.6% more efficient than the benchmark solution, greatly exceeding the terms of the Energy Performance Guarantee. The WSHP has delivered significant financial benefits to Apollo Hospitals, specifically an immediate project payback and cost savings of 19% in the first full year of operation.

Indian Government financial incentive for investment in heat pumps

In India investment in heat pumps benefits from Accelerated Depreciation and associated Tax Benefits. Investors can take advantage of accelerated depreciation of up to 80% of the project cost.