Summary
Adveco presents research providing an overview of the UK’s commercial water heating market, establishing the baseline against which all future decarbonisation efforts will be measured. Part five consider the barriers to commercial adoption of sustainable water heating and plausible future scenarios for the UK commercial water heating market, considering different technological pathways and the impact of policy and market forces through to the 2050 net-zero deadline…
Adveco presents research providing a data-driven overview of the UK’s commercial heating market, establishing the baseline against which all future decarbonisation efforts will be measured. In part five of this research series, we consider the barriers to commercial adoption of sustainable water heating and plausible future scenarios for the UK commercial water heating market, considering different technological pathways and the impact of policy and market forces through to the 2050 net-zero deadline…
Market Drivers
The recent surge in commercial adoption of low-carbon technologies is a result of several powerful, interconnected drivers. The most direct catalyst has been policy and regulatory clarity. Planning reforms introduced in 2024 simplified the process for installing external heat pump units, removing a key source of uncertainty for property owners.42 This was coupled with financial support from the Boiler Upgrade Scheme and the Industrial Energy Transformation Fund, which have been instrumental in helping businesses overcome the high upfront capital costs of these systems.34
Economic factors are also a primary motivator. The volatility of energy costs has made long-term efficiency a top priority for businesses, and heat pumps offer a compelling value proposition. A heat pump can deliver a seasonal efficiency (SCOP) of 280-320%, providing nearly three units of heat for every unit of electricity, a stark contrast to a conventional gas boiler’s efficiency of 85-90%.42 This translates into lower running costs and substantial long-term savings. Furthermore, corporate sustainability objectives and environmental, social, and governance (ESG) targets are increasingly non-negotiable for organisations. Installing these technologies allows businesses to meet their emissions reduction targets and showcase a visible commitment to sustainability. 42
Persistent Barriers
Despite the positive momentum, significant barriers continue to impede widespread commercial adoption. The high upfront cost of a heat pump installation remains a major hurdle. Even with the £7,500 government grant, the cost of commercial air source heat pumps in the UK varies significantly, ranging from around £5,000 to over £20,000 per kilowatt (kW) of heating capacity. For small to medium-sized commercial spaces, the total installed cost typically falls between £6,000 and £18,000. However, for larger systems or complex installations, the price can scale well beyond this range, especially when multiple units are required.43 This capital outlay, coupled with a general lack of business awareness, means that many commercial entities are not fully exploring these options.
Another critical bottleneck is the shortage of a skilled workforce. A survey found that only 31% of heating engineers were currently installing heat pumps, and a lack of skilled installers was cited as a key barrier to uptake.44 While the number of individuals completing a heat pump training qualification increased by 15% in 2024, this growth rate is not sufficient to meet the government’s target of 600,000 installations per year by 2028.45 This supply-side constraint means that businesses are often not presented with renewable heating solutions when their existing fossil fuel boiler breaks down, and they instead opt for a quick like-for-like replacement.39
Skilled installation is also a critical safety issue as hot water systems remain complex and challenging. The industry has a long history of certification for gas safety protocols, but this has not yet extended to potentially explosive refrigerants (such as R290) deployed in the latest generation high-temperature heat pumps and concerns over electrical connections of PV systems, which has the potential for ignition of fire.24 To mitigate these risks, stringent safety measures and regulations are crucial. Installation and maintenance of R290 heat pumps and solar PV must be carried out only by highly trained and certified professionals who understand the specific handling requirements of these technologies.
Addressing this skills gap is paramount to ensuring the continued and safe accelerated growth of the market.
Baseline Scenario: Market Evolution by Current Momentum
This scenario assumes a continuation of current trends without any significant acceleration of policy or market forces. The key assumption is that the existing replacement cycle for gas boilers continues to dominate, with condensing models entrenching the fossil fuel infrastructure.1 ASHP adoption would continue to grow at its current pace, but would remain a niche solution for a specific segment of early adopters. The projected outcome is that the market would fall far short of the government’s ambitions. The UK’s target of 600,000 heat pumps per year by 2028 would not be met 3, and the 2035 phase-out target for gas boilers would likely require significant, disruptive, and costly retrofits to meet the 2050 net-zero goal.45 This scenario demonstrates the inadequacy of a purely market-led transition. The inertia of the installed gas boiler space is so significant that organic change, even with current incentives, will not be sufficient to meet the UK’s legal carbon budgets.
Accelerated Electrification Scenario: High Heat Pump and Heat Network Adoption
This scenario models the market’s trajectory if the government successfully implements its stated policy ambitions. The key assumptions are that the Future Buildings Standard is successfully implemented, creating a 100% low-carbon new-build market.30 The 600,000 heat pump target by 2028 is met, and the market continues to grow towards 1.9 million installations per year by 2035.3 Concurrently, there is a significant expansion of heat networks, growing from 2% to 18% of the heat supply by 2050.29 The success of this scenario is entirely dependent on policy execution and public/commercial acceptance. The causal relationship is that the Future Buildings Standard creates a guaranteed market, which in turn signals to the supply chain (e.g., manufacturers, installers) to invest and scale up. This scaling then drives down costs, making heat pumps more competitive and accelerating their adoption in the retrofit market. 30 This would significantly reduce the sector’s reliance on natural gas and align the UK with its 2050 net-zero target. The decarbonisation of the electricity grid is a crucial prerequisite for this to be a true decarbonisation pathway. 3
The Role of Hydrogen and Hybrid Systems
This third scenario explores a potential alternative pathway and its implications. The key assumption is that hydrogen is successfully trialled and proves to be a viable, safe, and cost-effective alternative to natural gas4. With Infrastructure challenges overcome, the existing gas grid is repurposed. This would provide a viable decarbonisation pathway for hard-to-decarbonise commercial and industrial sectors, particularly those that require high-temperature process heat that is not easily provided by heat pumps. The ongoing debate about hydrogen is a major source of market uncertainty, as a delayed or negative decision on its role could create significant policy risk. The most likely future, however, is a hybrid approach, where each technology addresses its specific, high-value application, rather than a single technology replacing all others.32 For example, hydrogen could be a transitional fuel for “harder-to-decarbonise sectors,” while heat pumps become the standard for the vast majority of other applications. 32
In the final part of this research series, we wrap up with key insights and recommendations for property developers and owners, policy makers and government, as we consider what is still required to take UK commercial water heating to net-zero status by 2050…
Read Part 1 | Part 2 | Part 3 | Part 4 |
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