The economic case for heat pumps in Poland

There is a strong economic case for owning and operating heat pumps in Poland, despite high upfront costs, according to RAP. In a new report, “Cleaning up heat: The changing economics for heat pumps in Poland,” the non-governmental organization shows that heat pumps are particularly economically competitive amid current high prices for fossil fuels.

The capex and opex for heat pumps are still higher than for fossil-based heating technologies in Poland. Prior to this year's energy price surge, the total cost of ownership (TOC) for air-to-water heat pumps was estimated at €8,000, according to the report. Coal stoves cost around €1,500, while gas boilers came in at €3,000.

“In terms of operating costs, heat pumps were almost on par with fossil technologies,” said RAP. “According to 2021 prices, operating a heat pump cost around €12,500 over its lifetime compared to a coal stove at €11,700 and a gas boiler at €11,500.”

However, RAP’s analysis shows that running costs for heat pumps are considerably inferior to coal and gas technologies in high heating-fuel price scenarios, compensating for their higher upfront cost.

“A doubling and tripling of the price of residential coal … leads to a TCO increase of 82% and 164%, respectively,” said RAP. “Increasing household gas prices from 2021 to 2022 levels raises the TCO by 12%, while a 50% increase in the gas price corresponds to a 38% increase in TCO.”

The report also studies the effects of Poland’s block tariff on electricity for households. It currently freezes prices for electricity consumption up to 2,000 kWh at 2022 levels and charges a higher rate for usage above this limit. Given that 2,000 kWh is the average Polish household demand for non-heating uses, “all electricity used by heat pumps would be subject to higher retail prices, although still capped below their market value,” said RAP.

Under a scenario involving high electricity retail prices of €189/MWh, the TCO for heat pumps is more competitive than for coal furnaces, but still €4,200 more expensive than gas boilers.

RAP suggests raising the block tariff to 5,000 kWh, which would cover 80% of the electricity use of heat pumps. Under that scenario, the TCO of a heat pump would be €3,400 more competitive than a coal furnace. The cost different in respect to gas boilers would fall to €2,100.

“Going forward, the key questions around the economics of heat pumps will be the relative volatility of fossil fuels versus electricity prices and government policies incentivizing clean heating solutions,” said RAP.

Poland was reportedly Europe's fastest-growing market for heat pumps in 2021. Sales rose by 67% from 2020, with more than 93,00 units sold, according to the report. In the first half of 2022, the Polish heat pump market grew by 86% year on year.