5/31/2021

Academic journal: Heat Pumps Are a Profitable Investment Even Without Subsidies

A study by Aalto University shows that heat pumps are a highly profitable investment, paying for themselves in about ten years without subsidies. The study suggests that encouraging the adoption of heat pumps through guidance, rather than subsidies, would be more effective, as they can significantly reduce emissions and heating costs.

Purchasing a heat pump is a financially sound solution that pays for itself in about ten years. According to Jussi Vimpari, a visiting researcher at Aalto University, the best way to promote heat pump adoption is through advice rather than investment subsidies.

Read the news from Aalto University on the article release (FI)

Heat Pumps and Emissions Reduction

Up to a fifth of a Finnish household’s emissions come from heating, primarily due to the use of fossil fuels. For example, in Helsinki, more than half of the district heating is produced by burning coal. Electrifying heating is crucial, as electricity can be produced cleanly, and heat pumps play a key role here. The International Energy Agency (IEA) predicts that by 2045, half of all heating will be powered by heat pumps.

Research Findings

Vimpari’s research, published in Environmental Research Letters, explored whether cities aiming for energy efficiency and carbon neutrality should provide subsidies for heat pump investments. The study compared prices, rents, and heating systems in residential buildings across eight major Finnish cities, examining their impact on emissions and heating costs.

According to the study, on average, 9% of household income went toward heating, but after installing a heat pump, this figure dropped to about 4%. The average investment cost per resident was €3,800, with a payback period of just over ten years based on heating cost savings.

Link to the research paper

Subsidies or Guidance?

Vimpari emphasizes that heat pumps are an extremely energy-efficient and cost-effective heating method, providing up to four units of heat for every unit of electricity consumed. For this reason, he suggests reconsidering whether subsidies for heat pump purchases are truly necessary. Instead, resources might be better allocated to providing information and free guidance, especially for housing cooperatives.

Challenges in the Housing Market

Finland’s housing market is divided: in areas with population growth, prices are rising, and competition for housing is fierce, while in areas with population decline, prices are stagnant or falling. This also affects the willingness to invest in greener heating systems. In higher-priced areas, the cost of a heat pump might be less than 1% of a home’s value, whereas in lower-priced areas, it could exceed 10%. Vimpari suggests that any potential subsidies should be targeted at these more economically challenged areas.

Maximizing Emission Reductions

According to Vimpari’s analysis, a heat pump can reduce heating-related CO2 emissions by more than 80%. Since heating accounts for one-fifth of a Finn’s emissions, installing a heat pump is one of the most impactful actions individuals can take to reduce their carbon footprint.

Future Goals

Finland aims to be carbon neutral by 2035. To achieve this, cities must find sustainable heating solutions. Finland’s heating emissions are more than double those of Sweden, where heat pump adoption was accelerated in the 1990s through oil taxation. It’s time for Finland to take significant steps toward sustainable heating as well.

A heat pump is an investment that not only reduces costs in the long run but also significantly lowers environmental impact. Therefore, promoting its adoption through information and guidance is essential, enabling more Finns to make climate-friendly choices.

Disclaimer: The author of the study, Jussi Vimpari, is the CEO of Apex Heat.