Government Incentives Driving the Energy-Efficient Pump Market in Europe

05 March 2009

Syed Tauseef Ahmad, Frost and Sullivan research analyst for Industrial Automation and Process Control in Europe reports on the energy-efficient pump market in Europe.

The market for energy-efficient pumps in Europe has shown strong growth over the past few years. The regulations passed by the various European governments are the largest driver for the use of energy-efficient pumps. The regulatory bodies in these countries have come up with regulations and mandates that require industries and residential and commercial buildings to optimise their energy usage. With approximately one-third of all installed pumps being energy-efficient, Europe is a huge market for energy-efficient pumps. The most significant growth is found in the larger markets of France, Norway, Finland, Italy and Austria, while the markets in Germany and Switzerland are consolidating.

Tax rebates, public funding and subsidies by the governments are driving the market for energy-efficient pumps. The governments in these countries offer significant tax rebates and subsidies for using these pumps. The French market is presently benefiting from a generous subsidy scheme offered by the French government, which offers financial incentives and tax rebates for using energy-efficient pumps. As a result of these incentives and subsidies, the market has witnessed a growth rate of 14.3 per cent in 2008. Similar subsidies and public funding for the installation of energy efficient pumps are being offered by the Swedish government. These subsidies, along with a likely increase in the construction activity in the future, are expected to drive the sales of energy-efficient pumps. Switzerland also provides tax reduction for investments towards the use of energy-efficient pumps. With respect to market size, Switzerland has one of the most developed pump markets in Europe, with a majority of them being energy-efficient.

For many years, Sweden and Germany have been the fastest growing markets for energy-efficient pumps. However, the market in these countries has witnessed a decline. After long years of extraordinary growth, the Swedish market faced a 21 per cent drop in sales during 2008. This decline in the Swedish market was due to several reasons; the most important of which is the fact that the energy-efficient pump market in Sweden is in the mature stage, especially in the building services sector.

The high growth in the market until 2006 was due to high energy prices and was driven further by a subsidy scheme for phasing out oil-boilers. The subsidy scheme was originally planned for five years, but as all the funds earmarked for the scheme were spent in less than one and a half years, the scheme was stopped in March 2007. This had a major negative impact on the market, as there were no financial incentives and subsidies for end-users to install energy-efficient pumps. Similarly, the German market has witnessed a sharp decrease in the sales of energy-efficient pumps from 2007. This slowdown was mainly due to an increase in the value added tax that came into force starting January 1, 2007. However, the German market is expected to witness a positive trend in the future. Given the considerable size of this market, which is still dominated by the highly energy-inefficient oil and gas boilers, it is expected that the regulation and directives will have a positive impact on the energy-efficient pump market.

Developing markets like Ireland, the United Kingdom, the Netherlands and Eastern Europe are expected to witness a steep increase in revenues, albeit from a very small base. The overall market for energy-efficient pumps in the United Kingdom is small, but it has been growing at a strong rate over the last few years. Market growth is being mainly driven by the legislation to reduce carbon dioxide and greenhouse emissions from new buildings. The market is mainly dominated by gas boilers, and end-users are not very eager to install energy-efficient pumps due to the high cost of investment involved. This is likely to change with a potential increase in energy prices in the future, strict enforcement of government regulations and greater end-user awareness about optimising energy usage.

The future market prospects for energy-efficient pumps in Europe look promising. Government regulations, penalty for non-installation of energy-efficient pumps, the expansion of Eastern Europe, financial incentives, tax rebates and greater end-user awareness are likely to further drive the market for energy-efficient pumps. There is a huge scope for the manufacturers of energy-efficient pumps, as only 30 to 32 per cent of the installed pumps in Europe are energy optimised and there is greater demand for energy-efficient pumps.

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