Rising CO2 prices could make PV heat pumps cheap choice for German homes

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Fraunhofer ISE has found that heat pumps, alone or combined with PV systems, could soon represent the cheapest technology for residential heating in Germany.

The researchers warned that exclusively considering upfront costs for heat pump could be misleading for homeowners willing to assess their potential savings. They said other crucial factors include future operating costs for gas-condensing boilers using fossil gas, biogas or hydrogen, as well as PV, heating costs, pellet heating prices, and various building efficiency standards.

“When investing in a new heating system, many homeowners primarily look at the investment costs,” the research group said.Instead, all expected costs, especially the energy source price including the CO2 price share, should be taken into account over the life cycle. The ratio of electricity, gas and, if necessary, district heating is particularly important when choosing the most cost-effective heating system.”

Fraunhofer ISE said in its report that the profitability of heat pumps could also depend on the trajectory of CO2 prices in the future.

“From 2027, supply and demand in emissions trading will then determine the CO2 price,” they added, noting that the price cap will then be abolished by the European Union.

The researchers found that in small German buildings, long-distance heat, air-water, and brine-water heat pumps offer more cost-effective heat supply than gas condensing boilers.

“Even in unrenovated apartment buildings, the current government's incentives ensures lower costs for systems with heat pumps than a gas boiler, because both fossil gas, biogas or hydrogen lead to high operating costs over the life cycle,” they stated. “Profitability can then be increased with the installation of a PV system.”

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