In this article, we’ll focus on the potential for heat pumps to help reduce building emissions and decarbonize real-estate assets, as well as possible actions stakeholders can consider. There are additional options to decarbonize a building’s energy use, including “greening” power generation with renewables (whether utility scale or on-site), electrification of cooking appliances, energy-efficiency improvements to a building’s envelope, and installation of smart building controls (such as thermostats).

However, heat pumps are not a one-size-fits-all solution (see sidebar, “Are heat pumps a fit?”). Our research suggests that shifting demand, an evolving policy landscape, falling costs in certain markets, and technological improvements have all given heat pumps momentum as a decarbonization lever. Regions that rely on district heating are markets in which decarbonizing central facilities could be more cost-effective than installing individual heat pumps. For some buildings and markets, heat-pump conversion could be significantly expensive compared with other low-emissions options, including hybrid boiler systems in which a fossil-fuel backup turns on when electricity prices spike (in certain cases, the gas distribution system could continue to provide reliability and resiliency in the case of power outages 1 This will require gas-powered heating units to be able to function without electricity, but that should not pose a significant barrier technologically.). However, distribution systems that require high operating temperatures, such as steam, might make less sense for a retrofit. According to McKinsey analysis, heat pumps could constitute approximately 90 percent of new heating unit sales by 2050, compared with 35 percent today.īuildings with forced air or low-temperature hot water distribution, for example, tend to be good candidates for heat-pump retrofits, as they don’t require high operating temperatures. If implemented worldwide, using heat pumps instead of traditional boilers and furnaces could cut global CO 2 emissions by 3 gigatons per year. Today’s models are 2.2 to 4.5 times more efficient than gas furnaces. (A heat pump uses refrigerant and electricity to transfer heat from outdoor air or the ground to the inside of a building, even in colder temperatures). However, electric heat pumps have become an increasingly effective way for buildings to decarbonize due to operating, equipment, and installation costs becoming more competitive in certain markets, as well as developments in heat-pump technology. 1 Thibaut Abergel et al., Tracking buildings 2021, International Energy Agency, November 2021.) These emissions are largely due to the on-site use of fossil fuels such as oil and natural gas.īuilding heat has typically been a challenge to electrify at scale because of the high cost and complexity of converting a wide variety of current heating systems (steam, hot water, forced air, to name a few), as well as the relative cost-effectiveness of fossil-fuel energy sources in most cold weather population centers. (By factoring in emissions from total electric power consumed, energy use by buildings contributes approximately 27 percent of global CO 2 emissions.

Heating and cooking in commercial and residential buildings account for 6 percent of global CO 2 emissions, according to our recent report on the net-zero transition. This article is a collaborative effort by Gustav Bolin, Ann Hewitt, Blake Houghton, Charlie Jersey, and Evan Polymeneas, representing views from McKinsey’s Electric Power & Natural Gas Practice.

Energy efficiency building envelope