Research Consultant at USP Marketing Consultancy
In the last couple of years sustainability has become more important again, especially in the construction and installation industry. During the crisis, the demand for sustainability stagnated somewhat, but there has been an increase again over the last couple of years.
Fossil fuel free
In the installation market sustainability has been an important topic as well, but in recent years a real hype has started around all electric or fossil fuel free HVAC installations. Obviously, the Paris climate accords of 2016 have had a big impact on this trend. In the Netherlands, the reduction of the extraction of gas in Groningen has made the discussion even more relevant. Nowadays, you can’t open an installation sector magazine in the Netherlands without being confronted with all kinds of predictions towards an all-electric installation future.
Drivers and Barriers
They’re are obviously some strong trends (legislation, overall trend towards sustainability, expected increase costs of fossil fuel, improvements in greener technology etc.) behind the shift towards fossil fuel free installations, but there are some barriers as well (lack of qualified labor to actually install these new products, higher initial cost and unclarity who will pay for this, high investments which are needed to change the infrastructure distribution etc.). In my opinion, this will be a very important development, but the key questions is when the market will pivot towards fossil free. Will it be 5 years, 10 years or longer?
Installers perspective
Besides investigating these drivers and barriers, I always find interesting to see things from an installers perspective as well. One of the first things that need to happen is an increasing demand from the end user. In the new Q2 2018 report of the European HVAC monitor we focus on this topic; Shift to fossil fuel free products (Based on 1,000 successful interviews with HVAC installers in 6 European countries).
Amongst other things, we asked the HVAC installers to what degree they are already experiencing a demand for fossil fuel free products from their customers. The results are summarized in the picture above.
Lowest demand in the UK
Installer in the UK clearly experience the lowest demand from their customers towards fossil fuel products. Only 16% of the customers of the HVAC installers are asking for fossil fuel free products. The Nr. 1 product they mention to have the highest potential are solar thermal systems. Surprisingly, they are on the low side when asked how many years it will take before a big shift takes place (a little above a decade) towards alternative energy sources.
Mediocre demand in France & Belgium
In France, about a quarter of the installers customers are asking for fossil fuel free solutions. Unsurprisingly, the Nr. 1 mentioned fossil free products with a good potential for the future are electrical water heaters in combination with a heat pump. Together with installers from Belgium, French installers think the transition to alternative energy sources will take around a decade. The Belgian installers are very much in line with their French counterparts, both in the share of consumers asking for fossil fuel free products (26%) and the Nr 1 product with the highest potential (electrical heaters win combination with heat pumps).
Slightly higher demand in the Netherlands and Germany
In Germany, installers claim that around a third of their customers are asking about fossil fuel free products. What is striking is that German installers predict that the shift towards alternative energy sources will take longer than their European colleagues (well over a decade). The Nr. 1 mentioned fossil fuel free solution with a good potential for the future are also solar thermal systems.
About a third of the customers of Dutch installers are asking for fossil free products. This is second highest of all European countries covered. Their expectancies towards a big shift to alternative energy sources is just a little over a decade. Just like the installers in the UK and Germany, their NR 1 fossil free product with a good potential for the future are solar thermal systems
Highest demand in Poland
Polish installers experience the highest share of customers who are asking for fossil free products. They share the Nr 1 choice of products with the highest potential with their French and Belgium counterparts; Electrical water heaters in combination with a heat pump. They do think that it will take quite some time before a big shift can be seen towards alternative energy sources (second longest in Europe).
The future
Depending on how you look at it, the share of customers already asking for fossil fuel free products in Europe is already quite high (On average close to 30% in Europe). With the increase in attention towards this subject, possible further legislation pushing fossil fuel free products and technologies that are getting better & cheaper, one could expect that the shift towards fossil fuel free products will be upon us relatively soon.
However, if you look at it from a capacity perspective I always wonder how is going to install these increasingly complex installations. There already is a serious quantitative and qualitative labor shortage, especially in Western and Northern Europe, which will only become more severe in the upcoming years. For new build projects, this is less of a problem, but the majority of the transition needs to take place at the existing housing stock. Serious alterations need to made to the installation and distribution. Besides capacity to do the actual work, who is going to pay for this?
If you ask the installer about the transition time they expect for a big shift towards alternative energy sources, most of them mention a time frame of well over a decade. I tend to agree with that assessment. It’s clear that the shift will come, but I think it will take longer than currently anticipated.
In the end, this is actually better for the consumers, installers and manufacturers alike. The extra will be much needed to perfect various techniques, improve ease of installation and lower overall cost of the transition.
Want to read more?
As said, these results are based on the European HVAC installation monitor (quarterly multi-client research, based on 4,000 telephone interviews with HVAC installers annually) . The full Q2 2018 report (theme: shift towards fossil free products) covers many topics, including more details on the information shared above, the role of the electrical installers, manufacturers who are already investing heavily in alternative energy, training and education needs and much more.
In case of any questions on this topic or the report, feel free to contact me at hoogenboom@usp-mc.nl