Trend towards decarbonised heating accelerated by COVID-19 pandemicSeptember 2020

BSRIA’s latest studies, published in September 2020, provide the most up-to-date assessment of the impact the COVID-19 pandemic has had on global demand of HVAC and Building Automation and Controls products.

As the extent of the COVID-19 pandemic began to crystallise, a substantial part of the workforce employed in HVAC-related manufacturing in China were ordered to stay in quarantine. As a result, several manufacturing companies could not resume work, new construction projects were at a standstill, and installers were restricted to access sites. While restrictions and the quarantine extended to other countries, delays in the supply of air conditioners and heat pumps piled up during the March-April 2020 period.

Hydronic heating in China

The hydronic heating market in China is partly sustained by the Coal to Gas policy, and this part of the market recovered as soon as the pandemic became controlled and almost all projects have been carried out as previously planned. Similarly, the real estate market has recovered very fast and the pre-decoration policy is enforced widely. Thus, the project market for wall-hung boilers develops well in 2020 and is likely to keep up with last year's sales volume. On the other hand, the retail market has been severely damaged by the COVID-19 pandemic as consumers’ wages shrunk and they naturally became cautious with their spending. Sales of hydronic heat pumps were also greatly affected in 2020 but demand is expected to recover to previous levels in 2021, boosted by resuming construction activity.

Looking at the impact of COVID-19 on the European markets, suppliers reported similar issues faced in the building sector: most construction projects carried on at a slower pace while some were cancelled, and production lines at some HVAC manufacturers had to be put on hold for several weeks. 

There are many common traits visible in every country, as COVID-19 caused lockdowns, impacted on construction, and triggered economic consequences which in turn diminished consumers’ purchasing power. HVAC manufacturers have been closely watching their expenditure, wholesalers reduced their inventories, installers have been staying away from work, and supply chains suffered interruptions. Costs for components, transport and labour crept up, but prices of equipment remained the same, putting a pressure on manufacturers’ margins.

Sales trend for boilers and heat pumps

Nevertheless, the measures in place to pull the market towards more energy efficient buildings and decarbonise heating proved to be successful. Many private households and project owners embraced their new ways of living to undertake renovation works. In the meantime, installers took the time to upskill and promote the benefits of heat pumps over boilers. This trend, along with the financial support allocated to replace old heating systems helped reverse the dip in heat pump sales in the new-build sector. Overall, sales of heat pumps in France, Germany, Italy, the Netherlands and the UK remained on an upward trend. Current forecasts until the end of the year point towards positive results in the main European markets. The package of financial incentives voted under the EU Recovery Fund are foreseen to keep demand growing, particularly in the replacement sector. BSRIA experts forecast 2020 to mark another year of strong progression in heat pump sales with double-digit growth rates likely to be posted in many European countries.

At the same time, the domestic boiler sector has been hit hard in Italy, Spain and the UK. Sales are down in North America as well, where the mild winter has already affected the market before the pandemic erupted.

Globally, in comparison to domestic boilers, sales of commercial boilers were affected to a lesser extent. Some verticals suffered more than others though, with projects in hospitality market severely affected by the pandemic.

Building Automation and Controls market recovers slowly

Building Automation and Controls (BACS) have a major role in improving HVAC system efficiencies. Sales of Building Automation System software have been performing better than the other control products segments so far in 2020, while valve and actuators have been suffering slightly more due to a decline in large projects. Suppliers are also reporting a shift towards more refurbishment work and an increase in service & maintenance activity. The overall Building Automation market is expected to be down compared to 2019 and will only recover to the previous year’s level in 2022.

Global BACS products pre & post-COVID-19 forecast

As a second wave of infections is under way, the uncertainty surrounding the duration and severity of this crisis make it hard to anticipate how a recovery could unfold for the new construction industry in the medium term. 

The recent announcement made by EU Commission to drastically reduce CO2 emissions by 2050 gives another strong and clear signal in favour of clean energy products. As a result, and with help of the financial support available to homeowners, further growth of renewables in the renovation sector is to be expected.