Europe needs affordable heat pumps- here’s how to get there

A practical roadmap for HVAC brands. 

Across Europe, the energy transition is moving from boardrooms and legislation into the day-to-day lives of homeowners. The goal is clear, net zero emissions by 2050. However, one of the most significant contributors to residential carbon emissions, home heating, is proving to be a challenging sector to decarbonise on a large scale. Governments have introduced bans on new gas boilers, subsidies for electric heating, and clear emissions targets. And yet millions of homes continue to rely on fossil-fuel-based systems.

Heat pumps are central to Europe’s clean heating strategy. They are energy-efficient, fully electric, and capable of slashing emissions in both new builds and retrofits. Still, adoption is lagging. Even in countries with strong policy support, the uptake has been slower than expected. So, what is holding the market back? One answer keeps coming up: cost.

Heat pumps make environmental sense but not yet financial sense for most homes 

A typical heat pump system in Europe costs anywhere between €10,000 and €15,000 when installed as a complete retrofit. In contrast, a simple gas boiler replacement usually falls between €1,500 and €4,000. Even after applying subsidies and low-interest loans, the out-of-pocket expense for heat pumps remains significant for many households. This financial gap becomes even more daunting in older homes, which often require additional insulation upgrades, electrical panel changes, or extensive plumbing work to support the new system.

This issue is not just anecdotal. A 2024 joint study by European energy think tanks found that the cost of installing heat pumps has remained essentially unchanged over the past decade. Manufacturing costs have remained steady, but installation costs, driven by labor availability, technical complexity, and a lack of standardization, have kept the overall price high.

Governments across Europe now estimate that costs must drop by at least 25 to 50 percent by 2030 to hit emission goals. But with the deadline fast approaching and millions of boilers still in use, the market needs faster innovation and more affordable product solutions.

The retrofit market is massive but tough to crack

Europe’s housing stock is older and more varied than in most other regions. From compact row houses in the UK to stone buildings in Southern Europe and high-rises in Eastern cities, every retrofit project brings its own set of challenges. That makes the mass adoption of heat pumps even more complex. You cannot just build one product and expect it to work everywhere.

The industry cannot rely on the same strategies that worked in the past for new build construction. The vast majority of homes that need electrification already exist and were built without heat pumps in mind. Retrofitting these buildings requires equipment that is compact, flexible, and easy to install without requiring the tearing apart of walls or the replacement of entire heating systems. Unfortunately, most heat pumps on the market today were not designed with these challenges in mind.

For manufacturers, this challenge can feel like a maze of conflicting requirements. You need to bring down costs, meet strict local regulations, account for grid variations, and still deliver the performance people expect. But it also presents a huge opportunity. The company that can provide an affordable retrofit-ready heat pump at scale will unlock one of the biggest clean energy markets in the world.

How Blue Star’s Custom Design Manufacturing (CDM) lowers the barriers

At Blue Star, we see product design as the key to breaking the cost barrier. Through our Custom Design Manufacturing model, we collaborate closely with HVAC brands to engineer heat pump platforms that are not only compliant and high-performing but also practical and affordable.

We begin by rethinking the design of heat pumps. Our engineering teams collaborate with partners to simplify internal components, improve layout, and reduce size, all of which make installation faster and more cost-effective. Blue Star products are designed for manufacturability and can be easily scaled as your business grows without dramatically increasing costs. By integrating local compliance needs from the earliest stages, we help brands avoid expensive redesigns later.

Our approach is never about cutting corners. It is about building smarter and being more innovative. For example, we are helping brands explore compact, modular platforms that the installers can easily configure to meet different regional needs without requiring additional SKUs. This type of flexible design reduces development costs while enabling HVAC companies to respond quickly to policy changes, market trends, and evolving building codes.

Our goal is to help bring heat pump retail prices closer to €1,500 to €2,000, making them competitive with gas boilers and within reach for the average homeowner. Such a price shift could dramatically increase demand and help governments meet their Net Zero commitments.

Hybrid systems offer a bridge for reluctant households

While full electrification is the long-term goal, hybrid heating systems are gaining attention in countries such as the UK, Belgium, and parts of France. These systems pair a smaller heat pump with an existing or new gas boiler, allowing households to reduce emissions and energy use without committing to a complete retrofit. For older homes in colder regions, this can be a practical middle ground.

From a manufacturer’s perspective, hybrids offer a relatively low-risk product category. They are easier to install, appeal to a broader audience, and can be marketed as a cost-conscious step toward sustainability. While not yet widely subsidised, hybrid systems are gaining momentum and could become a significant part of Europe’s heating mix over the next decade.

At Blue Star, we are actively helping HVAC brands develop hybrid-ready platforms that are efficient, easy to integrate, and future-proofed for evolving regulations. Whether their customer is ready to transition to all-electric or wants to start making a change, we want to help our partners meet their needs, whatever they may be.

The next five years will define the market

The policy landscape is changing fast. From EU-level emissions targets to national-level bans on gas boilers, the direction of travel is clear. But ambition alone is not enough. What Europe needs now are innovative, affordable heating solutions that can work in real homes for real people.

That is why Blue Star’s Custom Design Manufacturing (CDM) model provides your company with flexibility and agility, delivering products that fit your market. We help brands navigate regulations, align with subsidy programs, and build products that are ready for scale. Whether your business focuses on electrifying single-family homes, retrofitting multi-residential units, or creating regional product lines that address local challenges, we provide the tools and support to make it happen.

We are already collaborating with leading HVAC companies worldwide to accelerate time-to-market, enhance installation efficiency, and lower product costs. Our goal is not just to manufacture equipment but to co-create solutions that make the clean heating transition both possible and profitable.

If you are ready to lead Europe’s low-carbon heating future, we are ready to build it with you. Let’s reimagine what heat pumps can be and bring smart, climate-friendly heating to millions of homes- together.