Europe Geothermal Heat Pump Market

Europe Geothermal Heat Pump Market Size 

The European geothermal heat pump market was worth USD 2.75 billion in 2024. The European market is projected to reach USD 5.09 billion in 2033 from USD 2.94 billion in 2025, growing at a CAGR of 7.07% from 2025 to 2033.

Geothermal heat pumps (GHPs) are also known as ground-source heat pumps that leverage the Earth’s consistent subsurface temperature to provide heating in winter and cooling in summer. These systems operate by circulating a heat-transfer fluid through underground loops, extracting thermal energy for residential, commercial, and industrial applications. According to the European Heat Pump Association (EHPA), the geothermal heat pump segment accounted for approximately 15% of the total heat pump installations in Europe in 2022, with over 1.8 million units deployed across the region.

The growing awareness of energy efficiency, stringent carbon reduction targets, and supportive government policies aimed at reducing reliance on fossil fuels are fuelling the demand for geothermal heat pumps in Europe. The European Union’s Green Deal, which seeks to achieve climate neutrality by 2050, has further accelerated investments in renewable heating technologies. The International Energy Agency (IEA) highlights that geothermal heat pumps can reduce energy consumption for heating and cooling by up to 50% compared to conventional systems, making them a cost-effective and environmentally friendly alternative. Countries like Sweden, Germany, and France are leading adopters, with Sweden accounting for nearly 30% of Europe’s geothermal heat pump installations due to its advanced district heating infrastructure and cold climate suitability. Furthermore, the EHPA reports that the market is expected to grow at a compound annual growth rate (CAGR) of 12% from 2023 to 2030, fueled by technological advancements and declining installation costs. As Europe intensifies its focus on decarbonizing the building sector, geothermal heat pumps are poised to play a pivotal role in achieving sustainable energy goals. 

This robust adoption underscores the technology’s potential to address both environmental and economic challenges while aligning with broader EU sustainability objectives.

MARKET DRIVERS 

Stringent Climate Policies and Carbon Reduction Targets  

One major driver of the Europe geothermal heat pump market is the European Union’s stringent climate policies and carbon reduction targets. The European Commission’s Green Deal, which aims for a 55% reduction in greenhouse gas emissions by 2030, has spurred significant investment in renewable heating technologies. According to the European Environment Agency (EEA), buildings account for approximately 40% of the EU’s total energy consumption, with heating and cooling contributing to a substantial portion of this demand. Geothermal heat pumps, which reduce energy consumption by up to 50% compared to traditional systems, are increasingly viewed as a viable solution. The EEA highlights that countries like Germany and France have introduced subsidies and tax incentives, resulting in a 15% annual increase in installations from 2020 to 2022, further accelerating market growth.

Growing Emphasis on Energy Efficiency and Cost Savings 

Another key driver is the growing emphasis on energy efficiency and cost savings in residential and commercial sectors. The International Energy Agency (IEA) reports that geothermal heat pumps can achieve seasonal performance factors (SPFs) of 4 to 5, significantly higher than conventional heating systems. This efficiency translates into reduced energy bills, making them an attractive option for homeowners and businesses. The IEA also notes that over 70% of new building projects in Sweden and Finland now incorporate geothermal heat pumps due to their long-term economic benefits. Additionally, advancements in drilling technologies have reduced installation costs by approximately 20% since 2018, according to the European Heat Pump Association (EHPA). These factors collectively enhance the appeal of geothermal heat pumps, driving their adoption across Europe.

MARKET RESTRAINTS

High Initial Installation Costs 

One significant restraint in the Europe geothermal heat pump market is the high initial installation costs, which often deter potential adopters. The European Heat Pump Association (EHPA) highlights that the upfront expenses for geothermal heat pumps, including drilling and system setup, can be up to 30% higher than traditional heating systems. For instance, the average cost of installing a residential geothermal heat pump ranges from €10,000 to €20,000, depending on soil conditions and property size. The International Energy Agency (IEA) notes that while operational savings offset these costs over time, many consumers remain hesitant due to financial constraints. Additionally, limited access to affordable financing options in certain regions exacerbates this issue. As a result, the high capital investment required poses a barrier, particularly for low-income households and small businesses, slowing the market’s growth.

Land and Space Requirements 

Another major restraint is the significant land and space requirements for geothermal heat pump installations, which limit their feasibility in densely populated urban areas. According to the European Environment Agency (EEA), horizontal loop systems, which are less expensive, require extensive land areas, often between 500 to 3,000 square meters, making them unsuitable for compact urban properties. Vertical loop systems, though more space-efficient, involve deeper drilling, increasing costs by up to 25%. The EEA also reports that retrofitting existing buildings with geothermal systems is particularly challenging due to spatial and structural limitations. These constraints hinder widespread adoption, especially in cities where space is at a premium. Consequently, the land-intensive nature of geothermal heat pumps restricts their deployment, impeding broader market expansion across Europe.

MARKET OPPORTUNITIES

Integration with Renewable Energy Systems 

A significant opportunity for the Europe geothermal heat pump market lies in its potential integration with renewable energy systems, enhancing overall energy efficiency. The International Energy Agency (IEA) highlights that coupling geothermal heat pumps with solar photovoltaic (PV) systems can reduce energy consumption by an additional 20-30%. This synergy allows for optimized energy use, particularly in residential and commercial buildings. The European Heat Pump Association (EHPA) reports that over 60% of new installations in Sweden and Germany are now designed to integrate with renewable sources, driven by supportive policies like feed-in tariffs and net metering schemes. Furthermore, the IEA projects that hybrid systems could account for 25% of all geothermal heat pump installations by 2030. As Europe accelerates its transition to clean energy, this integration presents a lucrative opportunity to maximize sustainability and attract investments.

Expansion into Retrofitting Existing Buildings 

Another key opportunity is the growing demand for retrofitting existing buildings with geothermal heat pumps, supported by EU renovation initiatives. The European Commission’s Renovation Wave Strategy aims to renovate 35 million buildings by 2030, creating a substantial market for energy-efficient heating solutions. According to the European Environment Agency (EEA), approximately 75% of Europe’s building stock is energy inefficient, making it a prime target for upgrades. Geothermal heat pumps, with their ability to reduce heating costs by up to 50%, are increasingly viewed as a viable retrofit option. The EEA also notes that countries like France and Italy have introduced subsidies covering up to 60% of retrofitting costs, driving adoption. This focus on modernizing aging infrastructure not only boosts the market but also aligns with Europe’s broader decarbonization goals.

MARKET CHALLENGES

Limited Public Awareness and Technical Expertise 

A significant challenge for the Europe geothermal heat pump market is the limited public awareness and availability of technical expertise, which hinders widespread adoption. The European Heat Pump Association (EHPA) reports that nearly 40% of potential users in rural areas are unaware of the long-term benefits and operational mechanisms of geothermal heat pumps. Additionally, the International Energy Agency (IEA) highlights a shortage of skilled installers and engineers, with only 1 in 5 HVAC professionals in Europe trained to handle geothermal systems as of 2022. This knowledge gap leads to improper installations, reducing system efficiency by up to 15%. The IEA also notes that countries like Italy and Spain have less than 50 accredited training centers for geothermal technologies, further exacerbating the issue. Addressing this challenge requires targeted educational campaigns and workforce development programs.

Regulatory and Permitting Hurdles 

Another major challenge is the complexity of regulatory frameworks and permitting processes, which delay project implementation. The European Environment Agency (EEA) highlights that obtaining permits for drilling and installing geothermal systems can take up to 12 months in some regions due to fragmented regulations and environmental impact assessments. For instance, in France and Germany, over 30% of projects face delays exceeding six months, according to the EEA. These bureaucratic barriers increase costs and discourage investment, particularly among small and medium enterprises. Furthermore, inconsistencies in national policies across Europe create additional challenges for cross-border projects. Streamlining permitting procedures and harmonizing regulations could significantly reduce these obstacles, fostering faster market growth and ensuring alignment with EU sustainability objectives.

REPORT COVERAGE

SEGMENTAL ANALYSIS

By Type Insights

The closed loop dominated the market by accounting for the most significant share of the European market over the forecast period. The domination of closed loop segment is majorly driven by their adaptability to various soil conditions, minimal environmental impact, and compliance with stringent regulations. The IEA highlights that advancements in vertical drilling technologies have reduced installation costs by 15-20%, boosting adoption. Closed loop systems are particularly favored in residential applications, with countries like Sweden and Finland reporting over 70% of new installations using this design. Their reliability, lower maintenance needs, and ability to operate efficiently in diverse climates make them a cornerstone of Europe’s sustainable heating solutions.

The open loop segment is estimated to expand at a CAGR of 18.4% over the forecast period owing to their high efficiency, achieving seasonal performance factors (SPFs) of up to 5.0 that is making them ideal for large-scale commercial projects. The EHPA notes that regions with abundant groundwater, such as Germany and the Netherlands, are leading this expansion. Despite regulatory challenges, open loop systems are gaining traction due to their cost-effectiveness in suitable locations. As Europe prioritizes energy-efficient solutions, open loop systems play a critical role in optimizing resource use and supporting the transition to renewable heating technologies.

By Application Insights

The residential segment held the major share of the global geothermal heat pump market in 2024 owing to the government incentives, such as subsidies covering up to 50% of installation costs in countries like Germany and France. The International Energy Agency (IEA) highlights that residential systems reduce heating and cooling costs by up to 50%, making them highly attractive for homeowners. With over 70% of new single-family homes in Sweden and Finland adopting these systems, their scalability and adaptability ensure widespread adoption. Residential geothermal heat pumps are pivotal in achieving EU decarbonization goals, promoting sustainable living while reducing household energy expenses.

The commercial segment is estimated to progress at the fastest CAGR of 20.8% from 2025 to 2033 due to factors such as the increasing demand for energy-efficient solutions in office buildings, schools, and retail spaces. The EHPA notes that commercial systems achieve seasonal performance factors (SPFs) of up to 4.5, offering significant energy savings. Subsidies in key markets like Germany and France have further accelerated adoption. As Europe prioritizes green building certifications such as LEED and BREEAM, commercial geothermal heat pumps play a critical role in reducing emissions and operational costs, ensuring sustainable urban development and long-term economic benefits.

REGIONAL ANALYSIS

Germany led the geothermal heat pump market in Europe by accounting for 30.4% of the global market share in 2024. The domination of Germany in the European market is primarily attributed to the robust government incentives, including subsidies covering up to 45% of installation costs, and stringent carbon reduction targets under the Green Deal. The German Federal Ministry for Economic Affairs highlights that over 60,000 geothermal heat pumps were installed in 2022 alone, driven by a focus on energy-efficient heating solutions. Germany’s strong industrial base and commitment to phasing out fossil fuels further solidify its dominance, making it a key player in Europe’s transition to sustainable heating technologies.

Sweden is anticipated to play a notable role in the European market during the forecast period. The dominance of Sweden is fuelled by its cold climate, abundant groundwater resources, and strong policy support, such as tax exemptions for renewable heating systems. The Swedish Environmental Protection Agency notes that over 70% of new single-family homes incorporate geothermal heat pumps, driven by their cost-effectiveness and environmental benefits. Sweden’s proactive approach to sustainability, coupled with its advanced district heating infrastructure, ensures its position as a pioneer in renewable heating solutions across Europe.

France is estimated to account for a prominent share of the European market over the forecast period. The market growth in France is driven by its Renovation Wave Strategy, which targets retrofitting 7 million buildings with energy-efficient systems by 2030. Subsidies like the "MaPrimeRénov" scheme have accelerated adoption, particularly in residential applications. The IEA highlights that France’s commitment to reducing fossil fuel dependency and promoting renewable heating technologies ensures its prominence in the European market. These countries lead due to their proactive policies, financial incentives, and alignment with EU sustainability goals, making them pivotal drivers of the geothermal heat pump market.

KEY MARKET PLAYERS

The major players in the Europe geothermal heat pump market include Carrier (United States), WaterFurnace (United States), Trane (United States), ClimateMaster (United States), Bosch Thermotechnology (Germany), Viessmann (Germany), Enertech Global (United States), Florida Heat Pump (FHP) (United States), NIBE Energy Systems (Sweden), and Climatemaster (United States).

MARKET SEGMENTATION

This research report on the European geothermal heat pump market is segmented and sub-segmented into the following categories.

By Type

• Open Loop

• Closed Loop

By Application

• Residential

• Commercial

• Industrial

By Country

• UK

• France

• Spain

• Germany

• Italy

• Russia

• Sweden

• Denmark

• Switzerland

• Netherlands

• Turkey

• Czech Republic

• Rest of Europe