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.
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 Three, we assess the adoption of heat pumps and solar technologies, and consider emerging complementary technologies…
Air Source Heat Pumps (ASHPs)
ASHPs are presented as a cornerstone of the UK’s decarbonisation strategy 15, but their adoption is a complex narrative of rapid growth from a small base. The market is growing quickly, with UK heat pump installations experiencing a 40% increase in 2024 and a 20% increase in 2023.16 However, these high-percentage growth rates can be deceptive. Despite this momentum, heat pumps remain a small fraction of the market. Data indicates that gas boilers are installed at a rate of 1.7 million units per year, which is roughly 45 times the number of heat pumps sold annually.17 The European commercial air-to-water heat pump market was valued at £2,067 million in 2023 and is projected to grow at a CAGR of 21.4% 18, a growth trajectory that is being fuelled by stringent building energy performance standards and mounting measures to reduce dependency on fossil fuels.19
The primary impediment to wider adoption is the significant upfront cost. While domestic heat pump systems can range from £5,000 to £18,000, the figure “skyrockets with commercial systems”.16 This significant cost differential makes a compelling business case for heat pump installation more likely for “successful commercial enterprises” with sufficient capital, rather than a mainstream, accessible solution for the entire sector. 16 Despite these barriers, ASHPs are being successfully deployed in high-demand commercial environments like restaurants, leisure centres and hotels, providing both space and water heating for facilities.
Solar Thermal and Photovoltaic (PV) Heating
The story of solar energy in the UK is a tale of two technologies with vastly different market trajectories. While solar energy is gaining popularity, particularly in the form of photovoltaic (PV) panels, the market for solar thermal has seen a sharp contraction. Data reveals that solar thermal installations nearly halved from 615 to 311 in 2023 alone.17 This contrasts starkly with the booming solar PV market, which saw a post-subsidy record of 189,826 domestic installations in 2023. 17 The UK government’s Department for Energy Security and Net Zero (DESNZ) recorded 1.2 GW of new installed solar capacity in 2024, bringing the total to 17.6 GW.21 In the first six months of 2025 alone, there were a record 123,000 certified solar panel installations, which MCS data shows were the top technology contributing to the overall market boom.22 There are now over 1.5 million homes with solar panels 20, and total UK solar capacity has reached 19 GW in 2025. 20 Commercial premises contribute a significant 20% of the UK’s new solar deployment, representing a major source of on-site clean energy. 16
The decline of solar thermal can be attributed to a loss in manufacturer/suppliers in the past decade, and by comparing its value proposition to that of solar PV. A solar PV system generates electricity, a versatile form of energy that can be used to power a heat pump, an electric immersion heater, or other building services, providing a more comprehensive and flexible decarbonisation solution. It also reduces a building’s overall electricity bill, and in some cases, can generate revenue through export schemes.23 This makes solar thermal, with its specific hot water application, at face value a less attractive investment, despite its advantages over PV when deployed correctly for the provision of domestic hot water (DHW) supply. Solar thermal systems are more efficient than PV at generating hot water, meaning fewer collectors are required, simplifying installation and addressing roof space demands. The technology is also intrinsically safe, whilst concerns exist relating to poor PV installation. 24
The application of solar thermal pre-heat is also a well-established means of reducing the energy demands of domestic hot water (DHW) applications, offsetting operational costs and actively cutting carbon. As buildings transition to all-electric water heating to further address decarbonisation, the integration of solar thermal with more costly-to-operate electric DHW applications is even more advantageous, cutting carbon emissions and costs for a faster return on investment. 25
Non-Domestic Solar Installation Landscape
The data landscape for commercial solar thermal systems is characterised by a significant statistical void. While the Microgeneration Certification Scheme (MCS) confirms that solar thermal is an accredited technology and that an MCS certificate qualifies installers to offer financial incentives 26, there are no publicly available, recent macro-level statistics on its commercial adoption. This absence of dedicated data is a significant finding. It is contrasted by the abundance of data for solar photovoltaic (PV) systems.
The lack of specific data for solar thermal suggests a minimal market share, as its adoption is likely highly specialised and is being overshadowed by the more versatile proposition of solar PV. For most commercial entities, the ability to generate electricity from solar PV offers multiple benefits, including powering the building, charging electric vehicles, and generating revenue by exporting excess energy back to the grid via smart tariffs.27 This broad utility and financial appeal of solar PV make it the dominant choice over solar thermal, which is limited to the generation of hot water.20
Role and Applications of Solar Thermal
Despite the absence of macro-level statistics, solar thermal systems are still deployed in specific non-domestic applications where there is a consistent and high demand for hot water. Case studies from industry players highlight the technology’s value proposition in settings like leisure/spa pools and commercial facilities.28 A solar thermal system can provide approximately a third of a building’s hot water needs and help reduce carbon dioxide emissions. 26 For businesses with significant water heating costs, such as those in the hospitality, healthcare, or leisure sectors, solar thermal remains a valuable means to lower operational expenses and contribute to sustainability targets, despite the market preference for solar PV.
Emerging and Complementary Technologies
The future of commercial water heating will not be a simple two-way choice between gas and heat pumps. Other technologies will play a crucial, complementary role. Heat networks (district heating) are a vital piece of the puzzle, with over 14,000 networks in the UK serving around 480,000 consumers.29 The Climate Change Committee (CCC) estimates they could provide 18% of the UK’s heat by 2050, up from 2% today, and they are seen as the preferred solution for providing heating and hot water to multi-storey buildings and dense urban areas. 30
Industrial waste heat recovery (WHR) is another high-potential, niche solution for energy-intensive industries. The economic potential for WHR is estimated at 7-8 TWh/yr, representing 2.4% of overall UK industrial heat energy use and offering significant energy cost and CO² savings.31 These technologies are not alternatives to heat pumps but are sector-specific solutions that address particular challenges. Heat networks, for example, solve the problem of dense urban heat demand and are often integrated with heat pumps or waste heat. 30 Waste Heat Recovery, similarly, addresses the unique, high-temperature demands of the industrial sector, which is a different problem set from general commercial water heating. Finally, hydrogen is being considered as a potential alternative, especially for harder-to-decarbonise sectors, though a formal decision on its large-scale role in heating is not expected until at least 2026, creating market uncertainty.32
In part four of this research, we turn attention to the profound impact of past, current, and planned legislation on the commercial water heating market, identifying key policy changes and future market inflection points…
Read Part 1 | Part 2 | Part 3 | Part 4 | Part 5 |
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