Renewables 2022

Renewable heat

Recent trends and policy update

Heating is the world’s largest energy end use, accounting for almost half of global final energy consumption. Industrial processes are responsible for 53% of the final energy consumed for heat, while another 44% is used in buildings for space and water heating and, to a lesser extent, cooking. The remainder is used in agriculture, primarily for greenhouse heating. The heating sector is largely dominated by fossil fuels, with renewable energy sources meeting less than one-quarter of global heat demand in 2021 (and the traditional use of biomass makes up half this amount).

With the global economy rebounding in 2021, heat consumption increased by 4% year-on-year, exceeding the pre-pandemic level and reaching a record-high 219 EJ. Excluding the traditional use of biomass, modern renewables1 fuelled just 13% of this growth, leaving the share of modern renewables in global heat consumption almost unchanged from the previous year’s 11%.

Modern bioenergy made the largest contribution to the increase in renewable heat consumption, owing essentially to rebounding activity in industry, followed by renewable electricity as heat pump deployment in the buildings and industry sectors accelerated. Annual heat-related CO2 emissions rose by almost 0.6 Gt CO2 to 14.1 Gt CO2, representing 39% of global energy-related CO2 emissions.

The rise in policy attention renewable heat is gaining worldwide is due not only to environmental considerations but to acute energy security concerns in the context of the current global energy crisis. Major recent heat-related policy updates include the US Inflation Reduction Act passed in August 2022, which allocates an estimated USD 22 billion (out of an estimated USD 369 billion for overall energy and climate change spending) for home energy supply improvements. The bill includes substantial rebates (of up to USD 8 000 for a space heating heat pump for low- and moderate-income households) and ten years of consumer tax credit
(30%, or up to USD 2 000) for heat pumps, geothermal heating and electric heating appliances (e.g. stoves and clothes dryers) as well as high-efficiency biomass stoves and boilers.

Outlook to 2027

Given the policy landscape as of September 2022, global heat consumption – excluding ambient heat harnessed by heat pumps – is projected to grow almost 14 EJ (+6%) during 2022-2027. Increasing industrial activity drives this trend, with China and India together representing 60% of industrial heat demand growth, while energy efficiency improvements allow building heat consumption to decline 4% globally. The traditional use of biomass is anticipated to decline by more than 3 EJ (‑13%) over the outlook period, mostly in China and India, owing in part to the deployment of improved biomass cookstoves.

Modern renewable heat consumption is expected to increase by almost one-third during 2022-2027, raising the modern use of renewables in heat from 11.4% to 14% by 2027. In both the industry and buildings sectors, using renewable electricity for heating contributes the most to renewable heat uptake over the outlook period, owing to the combination of greater use of electricity for heating, including through heat pumps, and rising shares of renewables in the power sector.

Nevertheless, renewable heat developments are insufficient to contain fossil fuel-based heat consumption, which expands in industry and leads to a 7% (+1 Gt CO2) growth in total annual heat-related CO2 emissions by 2027. For comparison, to align with the IEA Net Zero Emissions by 2050 Scenario, renewable heat consumption would have to advance 2.4 times more quickly, and wide-scale behavioural change and much larger energy and material efficiency improvements would be required to reduce heat demand in both buildings and industry.

Electrification of thermal processes gains traction, but demand growth outpaces renewable heat progress

Annual industrial heat consumption is projected to rise 17 EJ during 2022-2027, with chemical manufacturing contributing the most to this increase. Renewable energy sources are expected to fuel only one-quarter of this growth, with their share in industrial heat demand rising to 13% by 2027, less than a two-percentage-point increase from 2022. Thus, decarbonising industry will require greater renewable heat uptake and significantly faster energy and material efficiency improvements.

China, which accounts for more than 40% of industrial heat demand growth, also makes the most progress in renewable heat consumption, followed by the European Union, India and the United States. Together, these regions are responsible for two-thirds of renewable heat developments in industry over the outlook period. 

Global increase in renewable energy consumption and share of total heat demand in buildings and industry, 2010-2027

Open

Renewable electricity becomes the largest contributor to renewable heat progress in industry globally, accounting for three-quarters of growth. The acceleration of process heat electrification is the main driver globally, with electricity being used to produce 9% of industrial heat consumed by 2027, up from less than 4% in 2021. Most electricity demand growth comes from both greater reliance on heat pumps and direct electricity use in non-energy-intensive industries and chemical production, and to a lesser extent from the expansion of scrap steel recycling using electric arc furnaces. After China, the largest increases in renewable electricity use for process heat are expected in the European Union, the United States and India. Together, these four regions account for three-quarters of global developments.

Heat pump market expansion and the rollout of improved biomass stoves boost modern renewable heat use in buildings

Although building stocks are expanding worldwide, global consumption of heat in buildings (excluding ambient heat) is projected to drop 3.6 EJ during 2022-2027. This decline results mostly from a decrease in the inefficient traditional use of biomass (especially in China and India), efficiency improvements to buildings and heating appliances, and the deployment of heat pumps. China and the European Union demonstrate the largest absolute reduction in building heat consumption, together accounting for more than 80% of the total, followed by Russia, the United States and India.

Over the same period, the modern use of renewable heat in buildings is anticipated to grow almost 30% (+3.2 EJ) globally, with its share in total heat consumption rising from 12% in 2021 to near 16% by 2027 – excluding ambient heat. China alone is responsible for one-third of this growth, while sub-Saharan Africa, the European Union and the United States together contribute almost 40%.

Change in renewable heat consumption in industry and buildings and share of renewables in selected regions, 2022-2027

Open

Almost half the growth in renewable heat use in buildings globally is expected to result from a stronger renewable electricity presence as the share of renewables in power generation expands and electric heat pump deployment accelerates. China, the European Union and the United States together account for two-thirds of the 1.6‑EJ increase in the use of renewable electricity for thermal purposes in buildings over the outlook period.

In 2021, the European Union registered record 34% growth in heat pump sales, with France, Italy, Germany, Spain and Sweden leading in unit sales, bringing total units in operation in Europe by the end of the year to an estimated 17 million. Heat pump uptake gained further traction in the first half of 2022, with sales up one-quarter in Germany, 80% in Finland, 96% in Poland and 114% in Italy (for hydronic heat pumps).

In addition to high gas prices and growing consumer willingness to reduce dependency on Russian gas, policy support for electric heat pumps in the European Union and the United States is expected to significantly boost deployment in these markets. However, strategic co‑ordination and robust, diversified supply chains for components, as well as job-training programmes, will be needed to avoid bottlenecks and secure the skilled manufacturing and installation labourers needed to enable rapid market expansion.

References

  1. In this report, “modern renewable energy” excludes traditional uses of biomass. Modern renewable heat covers the direct and indirect (e.g. through district heating) final consumption of bioenergy, solar thermal and geothermal energy, as well as renewable electricity for heat based on an estimate of the amount of electricity used for heat production (including through heat pumps) and on the share of renewables in electricity generation. Although credited as a renewable heat source, ambient heat harnessed by heat pumps is not considered in this report due to data insufficiency, especially for the industry sector. For the sake of simplicity, “modern renewables” is shortened to “renewables” in the remainder of this report.