The industrial heat decarbonization sector is at a pivotal moment. Global climate goals demand significant emissions reductions, yet the path to decarbonizing industrial processes remains fraught with challenges. At the heart of this transformation lies a fundamental truth: business models are not static choices but dynamic systems that evolve in response to market needs. For industrial heat pump original equipment manufacturers (OEMs), this evolution is not just about technology — it’s about forging the right partnerships, understanding customer needs, and aligning revenue strategies to scale impact.
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This article explores three business models that represent different stages in the process: technology provider, development solutions provider, and turnkey partner. Industrial heat pump OEMs may choose one model or evolve between them. Each model involves unique activities, partnerships, customer relationships, and revenue models that drive progress. By breaking down these stages, we highlight the flexibility and strategic decisions needed to navigate this transformation successfully.
In the industrial heat decarbonization space, OEMs will mostly likely have to lead the charge in building customer demand — the foundation for any business model. Engineering, procurement, and construction firms (EPCs) and integrators, while crucial partners, are typically technology agnostic and respond to established customer needs. In the absence of widespread demand, it usually falls to OEMs — driven by their mission and innovation — to make direct connections with customers. These early, one on one relationships are the foundation upon which partnerships, market presence, and business models grow. To all proponents of decarbonized, electrified industrial heat: now is the time to help these OEMs build demand.
While this article outlines three distinct models that represent different stages, it’s important to note that these stages are not rigid steps, but flexible paths shaped by market dynamics. Some OEMs may choose to remain specialized technology providers, deepening their collaboration with integrators and EPCs. Others may pursue the turnkey provider model, integrating vertically to deliver comprehensive solutions. Most will chart a course between these bookends, adapting their strategy to meet customer needs and market opportunities.
In the early stage, the OEM's mission is clear: bring innovative technology to market and find its first adopters. This stage is often marked by a lack of customer demand, requiring OEMs to take the initiative in creating awareness and building trust.
Key Activities
Partnerships
Customers
Revenue generation
Critical decisions
As the OEM gains traction, the focus shifts to scaling operations and broadening the customer base. Customer demand starts to grow and success demands on standardizing deployments and reducing costs. At this stage, OEMs must strike a fine balance between expanding in-house capability and cultivating more external partnerships.
Key activities
Partnerships
Customers
Revenue generation
Critical decisions
In the mature stage, the OEM evolves into a market leader, capable of delivering turnkey solutions. This stage is characterized by advanced capabilities, streamlined processes, and robust customer relationships.
Key activities
Partnerships
Customers
Revenue generation
Critical decisions
By starting with direct customer engagement and building from there, OEMs can navigate the complexities of scaling technology, forging partnerships, and creating sustainable revenue models. Whether choosing to specialize or expand into turnkey solutions, the key is to remain adaptable and mission driven.
The industrial heat decarbonization sector is at a pivotal moment, and OEMs are at the forefront of this transformation. By embracing their role as market creators and evolving their business models strategically, they can accelerate the shift to a low-carbon future — one heat pump at a time.
Heat pumps are recognized as a vital technology for phasing out fossil fuels. In China, there is a “Double Carbon Policy” aiming at carbon neutrality by , and deployment of heat pumps is one of the measures. A major accelerator for the global deployment of heat pumps is the China Heat Pump Forum (HPF), which took place in Shanghai in August and brought together more than industry professionals from all over the world. Several international organizations, including the IEA Secretariat, the HPT TCP by IEA, EHPA, HPTCJ, and DBC, highlighted their perspectives on current developments and challenges.
Authors:
Hengyi “Cooper” Zhao, General Secretary of the China Heat Pump Alliance(CHPA)
Frank Gao, Market Director for HVACR for the International Copper Association (ICA).
Harry Schmitz, Director of Strategic Communications with the Kellen Company.
Several prominent global organizations recognize the essential role of heat pumps as part of broader plans to phase down dependence on fossil fuels. Heat pumps support decarbonization, electrification, and energy efficiency. It is now broadly acknowledged by international organizations such as the International Energy Agency (IEA) that the challenge of residential and commercial heating is best met with heat pumps.
China’s “Double Carbon” policy aims for a carbon peak by and carbon neutrality by . Presently, a major challenge is the deployment of heat pumps. Different regions of the world face common hurdles in deploying heat pumps on a massive scale. Chief among these challenges are providing heating in cold climates and the equitability of the deployment of heat pumps.
The China Heat Pump Forum (HPF) is a major accelerator for the global deployment of heat pumps. It is an annual event organized by China Heat Pump Alliance (CHPA) and sponsored by its members. Since its founding 15 years ago, the CHPA has grown from six members to more than 600 members today. For many years, the HPF was a regional event attended mainly by members of the CHPA. Today the HPF is an event of global importance. The HPF brought together more than industry professionals from all over the world. The HPF is a global event that is 100 percent focused on heat pump technology, It brings together big HVACR appliance OEMs and successful startups focused on new heat pump technology as well as policy makers and pioneers in new heat pump technologies from all over the world.
Considering its leading position in heat pump design and production, China is perhaps underrepresented at scientific conferences dedicated to heat pump technology. That is unfortunate because China has much to offer the heat pump community. China is already renowned for new products and manufacturing methods in the fields of solar panels and electric vehicles. The HPF is now a unique event for forming partnerships with the key stakeholders in the global heat pump industry. The HPF is widely recognized as an important event for discourse on the future of heat pumps not only for China but also for the world.
China Leads the Way
China holds a pre-eminent position in the global air-to-water (ATW) heat pump market. According to JARN’s special issue on “The World ATW Heat Pump Market – Update” [1], the ATW market in China grew to 2.47 million units in (Figure 1). China not only manufactures heat pumps for its domestic use but also exports heat pumps, especially to Australia, France, Germany, Italy, the Netherlands, and Spain.
Every year for eight years, from to , ATW heat pump sales in China exceeded the sales in all other countries combined. Meanwhile, sales of heat pumps in Europe caught up with and exceeded sales in Japan, although this growth of heat pumps in Europe slowed in .
Figure 1: The ATW market in China grew to 2.47 million units in . (Courtesy of JARN.)
Spotlight on the Heat Pump Forum in Shanghai
The most recent HPF was held this past summer at the Convention Center in the Songjiang New City International Ecological Business District. This setting was appropriate because Shanghai is living proof of what can be accomplished in a short period of time. The rapid development of Shanghai and indeed all of China is a modern miracle [2].
More than a thousand heat pump professionals espoused the continual improvement and sustainable development of the heat pump industry. (See Figure 2.) Speakers addressed the “hot topics” of markets, policy, and technology in nine specialized sessions:
Figure 2: The China Heat Pump Forum, Plenary conference, Shanghai, China. More than a thousand heat pump professionals espoused the industry’s continual improvement and sustainable development. Speakers addressed the “hot topics” of markets, policy, and technology in the plenary conference and nine specialized sessions.
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To facilitate communications, spoken words were translated in real-time and projected onto screens along with the slideshow presentations. Simultaneous translators provided audio translations through headsets in select sessions as well. Technical papers were printed and bound with many of the abstracts, figure captions and charts translated into English.
CHPA executive general secretary Hengyi Zhao emphasized how heat pump technology is characterized by energy savings, low carbon emissions, and other environmental benefits. According to Zhao, the reason for the rapid replacement of fossil fuels by heat pumps is that they optimize thermal energy production, especially in middle and low-temperature ranges. “Heat pumps are the key to new, high-quality, productive forces in the thermal energy field. The technologies have significant implications for green, low-carbon transitions in heating sectors in China and globally,” says Zhao.(See Figure 3.)
Figure 3: Hengyi (Cooper) Zhao, general secretary of CHPA, presentation for the China heat pump industry annual report of
IEA on the Heat Pump Forum in Shanghai
This year, the International Energy Agency (IEA) published “The Future of Heat Pumps in China.” The 129-page report is the result of collaboration between the IEA and the Tsinghua University Building Energy Research Center (BERC). Created in , the BERC is devoted to the development of energy-efficient and environmentally responsible buildings in China in accordance with national and international energy and environmental targets. Hengyi Zhao (China Heat Pumps Alliance) and ChinaIO especially were acknowledged for their support on data collection and valuable insights. The full report is available for free download from the IEA website [3].
IEA Analysts Chiara Delmastro and Rafael Martinez Gordan reviewed the new report on the second day of the HPF in the session on the International Heat Pump Policy and Market Development Forum. Their presentation on “The Future of Heat Pump in China” covered the highlights of this IEA report of the same name.
Caroline Haglund Stignor, manager of the Heat Pump Centre, the program office of the Technology Collaboration Programme on Heat Pumping Technologies (HPT TCP by IEA), delivered a second IEA presentation titled “The Heat Pump Global Market and Technology Development” in the session on “Heat Pump Export and Refrigerant Substitution Forum” [4]. (See Figure 4.)
Figure 4: Caroline Haglund Stignor described existing IEA Heat Pumping Technology Annexes at the China Heat Pump Forum, Shanghai, China.
What is a Heat Pump?
One topic frequently discussed was the definition of a heat pump, especially in the context of industry statistics. It was noted by several attendees that the definition varies depending on the region of the world. In China, for example, split-type reversible residential appliances are not counted in heat pump statistics, even though the number of units sold is very large. Most split-type room air conditioners can now also provide heating by running them in a reverse cycle. These are not counted as heat pumps in market statistics for China. On the other hand, in the United States and other regions, these reversible split units would be considered heat pumps, which distorts the market statistics.
Air Source Heat Pump (ASHP) technology has greatly improved over the past decade. These systems are more economical than ground source heat pumps (GSHPs), especially with respect to installation costs. The heat collected at the outdoor evaporator of an ASHP can raise the air temperature in space heating with an air-to-air (ATA) HP; or, more commonly in China, it can be used to raise the temperature of water in an air-to-water (ATW) HP.
In recent years, ATW heat pumps have become popular across residential, commercial, industrial, and district heating applications in China. One of the main advantages of such ATW system is that the refrigerant stays in a sealed unit outdoors, and cold or hot water is sent to the building. This enables the use of flammable natural refrigerants such as propane at higher charge levels. ATW hot water output can be used to heat spaces as well as domestic hot water (DHW), which is stored in water tanks and comes in contact with humans. The versatility and environmental friendliness of ATW HPs have led to their high popularity and an accelerated rate of adoption across China’s climate zones. The IEA has provided a detailed schematic of all the major heat pump types and their applications [5].
The European Market
The European Heat Pump Association was represented at the HPF by Mélanie Auvray, Policy Manager, who traveled to Shanghai to present in the session on European Policies and Market Development for Heat Pumps (Figure 5). Also, EHPA’s new President, Patrick Crombez, shared his insights through a special video message [6].
Figure 5: EHPA, Mélanie Auvray, Policy Manager of EHPA, presentation about European Policies and Market Development for Heat Pumps
Auvray attributes the lower numbers in to natural gas prices, electricity prices, high interest rates, political debate, reduced ambition, and uncertain subsidy schemes. EHPA released a four-page manifesto for the European Union in February , stressing these five points:
“Heat Pumps: The Heart of Europe’s Energy Future: EHPA priorities for EU policy -” is the title of the Manifesto, which serves as an excellent executive-level briefing on European heat pump markets and policies. It is available for free download [7].
BDC Represents USA
At the HPF, Panama Bartholomy reviewed the American heat pump markets and policy trends in a well-received presentation [8]. Bartholomy is currently the Executive Director of the Building Decarbonization Coalition (BDC), a cross-sectoral initiative to eliminate greenhouse gas emissions from the built environment. He worked for many years with the California Energy Commission before joining the BDC. Bartholomy concurs that the ATW market has not developed in the USA in part because blown-air furnaces are more prevalent in the USA compared to hydronic systems. He pointed to the importance of legislation at the state level in driving the adoption of heat pumps See Figure 6.
Figure 6: Panama Bartholomy pointed to the importance of legislation at the state level in driving the adoption of heat pumps in the United States.
Natural Refrigerants
Jan Dusek, Co-founder, Group COO, & Head of APAC, ATMOsphere traveled to the HPF to make the case for the use of natural refrigerants. Dusek presented in the session on Heat Pump Exports and Refrigerant Substitution [9]. He described the trend toward natural refrigerants over the past 15 years in parallel with the emergence of the heat pump marketplace. He pointed out the many models of heat pumps on display at the ISH in March . See Figure 5. Many models use ultralow-GWP propane refrigerant in residential heat pumps as well as commercial-sized heat pumps. Dusek also reviewed the success of the R744 residential hot water heat pumps in Japan, commenting on how the cost came down dramatically thanks to competition.
Figure 7: Jan Dusek from ATMOsphere reviewed the success of natural refrigerants in heat pump applications.
A Major New Global Market Report
A highlight of the HPF was the debut of The Global Heat Pump Market Report (). This major global report was jointly produced by the China Heat Pump Alliance (CHPA) and Beijing Zhixindao Sci-Tech Corp., Ltd. (ChinaIOL). The Report is available for free download [10]. (See Figure 8).
Figure 8: A new market report from the CHPA and ChinaIOL debuted at the Heat Pump Forum and is now available for free download [10].
The Global Heat Pump Market Report draws on multiple research projects by both CHPA and ChinaIOL. It embodies the market research data and technical results accumulated over many years by the two parties. It systematically describes the current state of the global heat pump industry, elaborates on trends, and predicts future developments. The report not only sets forth a global policy profile and technical standards but also analyzes local heat pump markets in Asia, Europe, North America, and other regions, focusing on the development of the Chinese market. It is divided into five parts:
Its content is further subdivided into space heating, sanitary hot water, industrial and agricultural drying, upstream components, and industry forecasts. The report reasonably predicts the scale of global demand for heat pumps while focusing on specific markets and applications. The market research encompasses air-source heat pumps for water heaters and heating but excludes heat pump drying products and swimming pool heat pumps. Chinese market research includes household air-to-water heat pumps, VRF with hydronic heating modules, low-temperature air-to-air heat pumps, commercial air-to-water heat pumps, heat pumps, and wall-hung gas boiler 2-in-1 systems, (water) ground source heat pumps, and absorption heat pumps.
The Procurement Process
The HPF would not be complete without the procurement exhibition. Next-generation cold-climate heat pumps from innovative companies boasted good efficiency at ambient temperatures as low as – 36 °C (i.e., – 33 °F).
Manufacturers included Grundfos for water pumps, Highly, Danfoss, and Copeland for compressors, and many others for expansion valves, distributors, pipe connectors, water tanks and much more. A designer could identify economical and reliable suppliers of high-quality products for practically any heat exchanger system design.
More than one hundred companies showcased premium heat pumps and heat pump components in spaces just outside the conference rooms. These companies typically have manufacturing plants on multiple continents. (See Figure 9).
Figure 9: Exhibit Floor at the China Heat Pump Forum.
Conclusion
Today, China is at the center of heat pump research, product development, and manufacturing. The HPF is an annual event that typically draws more than participants from around the globe. Even more participants are expected in as the uptake of heat pumps accelerates globally. There is no question that traditional heating by fossil fuels will be replaced by heat pumps. It is now only a matter of when this will happen. Current models of climate change warn that this transition needs to be scaled up in a matter of years, not decades. Already, we are halfway through the decade of the heat pump, and the transition is just beginning. Anyone involved in decision-making in the HP sector should make plans to attend the Heat Pump Conference [11].
References
https://www.ejarn.com/detail.php?id=
‘Songjiang Plan’ awarded for ‘green development’ concept | Songjiang
3.https://www.iea.org/reports/the-future-of-heat-pumps-in-china/executive-summary
https://www.iea.org/reports/the-future-of-heat-pumps-in-china/schematic-heat-pump-types-and-applications
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