The number of heat pumps in major buildings around Australia has roughly doubled as facilities switch from gas boilers to large scale heat pumps.
A report from the Australia Alliance for Energy Productivity (A2EP) said this week that this was the first time this aspect of the transition has been documented.
It found a total of 111 industrial and commercial heat pumps were retrofitted to existing buildings between 2015 and 2022, increasing to 196 in 2026 and expected to be 232 by 2027, marking a 109 per cent increase over five years.
The numbers are constrained by installations of kits that are more than 100 kilowatts. They exclude schools, dairy farms, craft breweries, supermarkets, horticulture and wineries, or smaller hot water and split system airconditioning retrofits that would significantly inflate results.
A2EP said it’s just the start and “the pace is poised to accelerate”.
Heat pumps, it said, are a major and viable near term opportunity to cut emissions and reduce heating costs, and they are typically three to five times more efficient than outgoing gas boilers. This was especially true for manufacturers, food processors and commercial buildings, with industrial and commercial heat pumps offering 40 to 60 per cent energy operating cost reductions over time.
The report’s boiler map shows that nearly 40 per cent of mapped gas boilers and burners are manufactured before 2000, and would need to be replaced now or in the coming five to 10 years.
Other opportunities include being able to be powered by on site solar photovoltaics, meaning it is possible to run on zero emissions, and the possibility of it being combined with thermal energy storage through hot or cold water tanks.
A2EP chief executive Jarrod Leak said heat pumps were a “hidden energy transition happening in Australia – without fanfare but with very real benefits for energy efficiency and security and lowering production costs.
“We’ve tracked heat pump installations in every state and territory across a range of industry sectors,” Leak said. “This is a big shift that’s largely gone unreported because it’s happening behind factory doors or in the mechanical rooms of major buildings – places the public usually doesn’t see.”
Heat pumps were a “hidden energy transition happening in Australia – without fanfare but with very real benefits for energy efficiency and security and lowering production costs.
Leak said pharmaceutical, food and beverage, commercial laundries, aquatic centres and universities are “leading the race to renewable heat”, and the next sectors that would benefit from making the switch include brewing and malting, hospitals and aged care.
Notable businesses that have made the switch include health care company Blackmores Group, commercial laundry Alsco Uniforms, meat processor Hardwick Meats, and Melbourne office building 101 Collins.
The report credits the federal Community Energy Upgrades Fund (CEUF) for enabling heat pump upgrades at more than 40 community aquatic centres and pushes the government to roll out a similar scheme for aged care facilities – saying the sector could save up to $20 million in gas bills.
The report also finds that while universities saw a strong retrofit program in 2023/24, progress is slowing due to funding restrictions. The sectors with the slowest progress are shopping centres, hospitals and hotel sectors, with current retrofit rates of 1-2 per cent for large gas users.
An ambitious rollout of heat pump technology could reduce cumulative emissions by 391 million tonnes in industrial processes, and 96 million tonnes in commercial buildings, between 2020 and 2050.
The sectors with the slowest progress are shopping centres, hospitals and hotel sectors, with current retrofit rates of 1-2 per cent for large gas users.
Leak said Australia can’t afford to miss this “huge untapped, near term opportunity” to reduce emissions in the industrial and commercial sectors and needs to be “turbocharged with smart government policy”.
Recommendations
Industry sources say faster uptake of heat pumps could be possible but for key barriers such as lack of suitable space, high costs, and reluctance to replace infrastructure before its viable end date.
The report set out recommendations to accelerate uptake of commercial and industrial heat pumps. These include
- fix the network, as it is critical infrastructure for near-term electrification – this includes providing network tariff relief to industrial electrification projects that increase grid productivity or utilisation, direct network operators to develop demand flexibility tariffs for large industrial loads, and require network operators to publish dynamic operating envelopes for major industrial customers
- fund the Powering Better Care Program on a similar model to the CEFU, committing $100 million for aged care electrification with 50 per cent co-funding, then extending to hospitals, childcare, and social housing in subsequent rounds. This can also be paired with capability building program for heat pump design and installation
- shift finance assessment to an opex base (operating expenditure) for sectors that are near term viable – creating a time limited production credit for manufacturers using low carbon heat or supporting a national white certificate scheme based on the Victorian Energy Upgrades program. Or revamp and harmonise the Australian Carbon Credit Unit (ACCU) Scheme and ensure there are simplified administrative pathways and earlier claiming of funding
- close the data gaps preventing near term action – commission baseline data studies for large gas users in the commercial building sector, commission a report to compare biomethane usage to electrification, fund further boiler mapping rounds focusing on near term sectors that lack feasibility studies, and establish a standing Industrial Decarbonisation Advisory Panel to advise DCCEEW
The Fifth Estate’s recent Transition Risk masterclass delved deep into these topics, and recordings are available for members. Get in touch with events@thefifthestate.com.au.
