[Paper Review] Impact of climate change on the cost-optimal mix of decentralised heat pump and gas boiler technologies in Europe

Smail Kozarcanin, Richard Hanna+3 more|arXiv (Cornell University)|Jul 9, 2019

Climate Change Policy and Economics10 references4 citations

TL;DR

This study assesses how climate change alters the cost-optimal mix of decentralised heat pumps and gas boilers across Europe by modeling space heating demand using heating-degree days (HDD) derived from high-resolution climate data (CMIP5 and EURO-CORDEX). It finds that rising temperatures reduce space heating demand by 16–42% under low to extreme warming scenarios, significantly improving the economic viability of heat pumps, especially in western and southern Europe, while gas boilers remain optimal in colder eastern regions.

ABSTRACT

Residential demands for space heating and hot water account for 31% of the total European energy demand. Space heating is highly dependent on ambient conditions and susceptible to climate change. We adopt a techno-economic standpoint and assess the impact of climate change on decentralised heating demand and the cost-optimal mix of heat pump and gas boiler technologies. Temperature data with high spatial resolution from nine climate models implementing three Representative Concentration Pathways from IPCC are used to estimate climate induced changes in the European demand side for heating. The demand side is modelled by the proxy of heating-degree days. The supply side is modelled by using a screening curve approach to the economics of heat generation. We find that space heating demand decreases by about 16%, 24% and 42% in low, intermediate and extreme global warming scenarios. When considering historic weather data, we find a heterogeneous mix of technologies are cost-optimal, depending on the heating load factor (number of full-load hours per year). Increasing ambient temperatures toward the end-century improve the economic performance of heat pumps in all concentration pathways. Cost optimal technologies broadly correspond to heat markets and policies in Europe, with some exceptions

Motivation & Objective

• To evaluate how 21st-century climate change impacts the cost-optimal mix of decentralised heat pumps and gas boilers across Europe.
• To assess the influence of regional climate variability and long-term temperature trends on heating system economics.
• To examine the alignment between cost-optimal technologies and existing national heat policies in Europe.
• To identify regions where policy intervention may be needed to align technology deployment with cost-optimal and decarbonised outcomes.
• To quantify changes in heating demand and CO2 emissions under different climate scenarios using high-resolution climate data.

Proposed method

• Used high-resolution (0.11° × 0.11°) daily temperature data from nine CMIP5 and EURO-CORDEX climate models under three Representative Concentration Pathways (RCPs).
• Calculated heating-degree days (HDD) as a proxy for space heating demand, with HDD defined as the sum of daily temperature deviations below a 15°C threshold.
• Applied a screening curve approach to model the cost-optimal selection of heat pump and gas boiler technologies based on annual heat load factors (full-load hours).
• Integrated technology-specific costs (installation, fuel, maintenance, operational) and efficiencies (COP for heat pumps, efficiency for boilers) into a grid-cell-level (144 km²) cost-minimisation framework.
• Assessed changes in total residential heating demand and CO2 emissions under future climate scenarios relative to historical (1970–1990) conditions.
• Mapped cost-optimal technologies across Europe under historical and end-of-century climate conditions, assuming unchanged national technology stocks.

Experimental results

Research questions

• RQ1 How does climate change, under different warming scenarios, affect the cost-optimal mix of decentralised heat pumps and gas boilers in Europe?
• RQ2 To what extent do regional climate variations influence the economic performance of heat pump and gas boiler technologies?
• RQ3 How do projected changes in heating demand due to warming temperatures affect CO2 emissions from the residential heating sector?
• RQ4 How well do current national heat policies align with the cost-optimal technology mix under future climate conditions?
• RQ5 In which regions is there a mismatch between cost-optimal technology selection and actual policy-driven deployment?

Key findings

• Space heating demand across Europe is projected to decrease by 16% under a low-warming scenario (RCP 2.6), 24% under an intermediate scenario (RCP 4.5), and 42% under an extreme warming scenario (RCP 8.5).
• The economic performance of heat pumps improves significantly under all climate change scenarios, with cost-optimal deployment becoming more widespread, especially in western and southern Europe.
• Gas boilers remain cost-optimal in colder eastern European regions such as Poland, where they may offer a lower-carbon alternative to coal heating.
• Ground-source heat pumps are identified as cost-optimal in southern Mediterranean countries, despite their traditionally warm climates, indicating potential for wider deployment.
• Despite the cost advantage of heat pumps in many regions, their market penetration remains low in countries like Austria, Switzerland, France, and Germany, suggesting a need for targeted policy support.
• The study reveals a mismatch between cost-optimal technology selection and current national policies, particularly in western Europe, where policy support has not fully aligned with economic potential.