In brief

Japan has installed more than half a million residential fuel-cell systems and shipped over ten million heat-pump water heaters. Europe has successfully demonstrated residential fuel-cell technology, but its heating markets are increasingly shaped by heat pumps – from cold-climate heating in Scandinavia to reversible air conditioners in southern Europe. China combines extensive district heating networks in the north with individual heating and cooling systems in central and southern regions.

Why have three technologically advanced regions followed such different pathways?

The answer lies not only in the efficiency of individual technologies, but also in climate, historical infrastructure, energy prices and government policies. Increasingly, another factor is becoming decisive: the availability of low-carbon electricity.

The comparison illustrates a fundamental principle of the energy transition: sustainable heating requires both efficient equipment and a suitable energy supply.

1. Japan: Fuel Cells and Heat Pumps Developed in Parallel

Japan is a pioneer in residential fuel-cell cogeneration and heat-pump water heating.

The ENE-FARM programme, commercially introduced in 2009, brought fuel-cell combined heat and power (CHP) systems into private homes. By 2025, cumulative installations had exceeded 560,000 units.

Most ENE-FARM systems use natural gas or liquefied petroleum gas. Hydrogen is produced from the fuel within the system and converted electrochemically into electricity. The resulting heat is recovered for domestic hot water.

The technology combines local electricity generation with efficient heat recovery. Some systems can also provide limited electricity during grid outages. However, conventional gas-fuelled ENE-FARM systems are not fossil-free heating technologies.

Japan simultaneously developed a very different solution.

Introduced in 2001, EcoCute uses a heat pump with CO₂ as the refrigerant to heat domestic water. By March 2025, cumulative shipments had exceeded ten million units.

EcoCute transfers environmental heat from the surrounding air into hot water. Depending on operating conditions, it can deliver several units of useful heat for each unit of electricity consumed.

Reversible air conditioners, another type of heat pump, are also widely used in Japan for space heating and cooling.

Japan has therefore not chosen fuel cells instead of heat pumps. It has developed both technologies, serving partly different needs.

The Japanese experience demonstrates two complementary approaches: producing electricity and heat together, or using electricity efficiently to capture environmental heat.

Sources: METI – Agency for Natural Resources and Energy; Heat Pump & Thermal Storage Technology Center of Japan.

2. Europe: One Continent, Several Heating Pathways

European manufacturers have also developed residential fuel-cell CHP systems, including proton-exchange membrane fuel cells (PEMFCs) and solid oxide fuel cells (SOFCs).

The EU-supported ene.field project installed 1,046 residential fuel-cell systems in ten European countries. The installations accumulated more than 5.5 million operating hours.

The subsequent PACE project installed more than 2,600 systems across nine countries. Manufacturers included BDR Thermea, Bosch, SolydEra, Sunfire and Viessmann.

These projects demonstrated substantial technical progress. Nevertheless, residential fuel cells did not achieve the mass-market penetration seen in Japan.

High investment costs, installation complexity, maintenance requirements and dependence on natural gas have limited their commercial expansion.

At the same time, heat pumps have become increasingly important across Europe – but in different forms.

Northern Europe: Heat Pumps in Cold Climates

Scandinavian countries have achieved exceptionally high heat-pump penetration.

According to the European Heat Pump Association, Norway, Finland and Sweden rank among Europe’s leading markets in terms of installed heat pumps per household.

Their experience demonstrates that modern heat pumps can operate effectively even in cold climates.

Long-established electric heating traditions, electricity supply structures, installation expertise and consistent energy policies have supported this development.

Southern Europe: Heating and Cooling with the Same Appliance

Southern Europe offers a different but equally important example.

In Italy, Spain, Portugal and parts of Greece, reversible air conditioners are widely used for both summer cooling and winter heating.

Technically, these appliances are air-to-air heat pumps. They extract heat from outdoor air during winter and reverse the process during summer.

Their dual function makes them particularly attractive in Mediterranean climates, where cooling demand is substantial and winter temperatures are generally milder than in northern Europe.

Gas boilers and other heating systems remain important, while air-to-water heat pumps are also expanding.

This development closely resembles the use of reversible air conditioners in central and southern China.

Thus, Europe’s heating transition cannot be characterised solely by the success of heat pumps in northern countries. Southern Europe represents another major pathway: integrated heating and cooling through reversible heat-pump technology.

Central Europe: The Legacy of Natural Gas

Germany and several neighbouring countries followed a different historical pathway.

Extensive gas infrastructure and previously competitive natural-gas prices favoured gas boilers and related heating technologies.

The European energy crisis following Russia’s invasion of Ukraine in 2022 fundamentally changed this economic environment.

Russian gas accounted for approximately 45% of EU gas imports in 2021. By 2025, its share had fallen substantially, although imports had not ceased entirely.

This disruption accelerated efforts to diversify energy supplies and reduce dependence on fossil fuels.

Heat pumps and low-carbon district heating are increasingly important alternatives, but investment costs, electricity tariffs and the characteristics of existing buildings remain decisive.

Sources: European Commission – ene.field; PACE project; European Heat Pump Association; European Commission – Energy Security.

3. China: Two Heating Systems Within One Country

China’s situation differs fundamentally from that of Japan and much of Europe.

In northern China, entire residential districts have traditionally been supplied by central heating networks, largely using coal-fired boilers and combined heat-and-power plants.

In central and southern China, individual electric heating and reversible air conditioners are widespread.

These differences reflect climate, historical heating policies and urban infrastructure.

Northern China: Modernising District Heating

Coal remains an important energy source for district heating in northern China.

The International Energy Agency reported that coal still supplied more than 80% of heat production in northern district heating networks in its 2024 assessment.

Modernisation therefore offers enormous potential for reducing CO₂ emissions and local air pollution.

Potential solutions include large-scale heat pumps, industrial waste-heat recovery, geothermal energy, renewable electricity and nuclear-powered district heating.

An important example is Haiyang in Shandong Province.

Since 2019, heat from the Haiyang nuclear power plant has been progressively integrated into regional district heating. By the 2024–2025 heating season, the system served approximately 13 million square metres of buildings.

The project uses heat from existing electricity-generating nuclear reactors rather than dedicated small heating reactors.

Haiyang demonstrates how an established district heating network can be decarbonised without requiring each household to install an individual heating system.

Southern China: Individual Heat Pumps for Heating and Cooling

Central and southern China present a different picture.

Many households use reversible air conditioners to provide both cooling during hot summers and heating during cooler periods.

These systems are particularly suitable where cooling demand is high and winters are relatively moderate.

Their operating principle is the same as that of reversible air-to-air heat pumps commonly used in southern Europe.

China is already the world’s largest market for building heat pumps, according to the International Energy Agency.

The comparison reveals an interesting geographical parallel: southern Europe and southern China often favour similar heating and cooling technologies, despite their different energy policies and economic structures.

What About Stationary Fuel Cells?

China is also developing stationary fuel-cell applications for commercial buildings, industrial parks and distributed energy systems.

However, the publicly documented residential market remains much smaller than Japan’s ENE-FARM programme.

In northern China, established district heating networks reduce the need for individual household heat generators. In southern China, reversible air conditioners already provide a familiar solution.

These structural differences help explain why Japan’s residential fuel-cell model has not been reproduced on a comparable scale in China.

Sources: IEA – The Future of Heat Pumps in China; World Nuclear News – Haiyang District Heating.

4. Fuel Cells and Heat Pumps: Different Energy Principles

A direct comparison of fuel cells and heat pumps requires care because the two technologies perform different functions.

A heat pump uses electricity to transfer heat from the environment into a building.

Under suitable conditions, one kilowatt-hour of electricity can deliver approximately three to four kilowatt-hours of useful heat. Actual annual performance depends on climate, system design and operating temperatures.

A fuel-cell CHP system converts chemical fuel into electricity and recovers useful heat.

Its combined electrical and thermal efficiency can be high, provided the recovered heat is actually needed.

A fuel-cell system therefore produces electricity and heat from fuel, whereas a heat pump uses electricity and environmental heat to provide heating.

For space heating alone, heat pumps can be highly energy-efficient. Fuel cells may offer advantages where decentralised electricity generation and continuous useful heat demand coincide.

However, their environmental performance cannot be determined from device efficiency alone.

The carbon intensity of the electricity supply and the origin of the fuel must also be considered.

5. Clean Electricity: The Essential Partner of Heat Pumps

The growing adoption of heat pumps highlights a fundamental relationship between building heating and electricity generation.

Heat pumps can deliver several units of useful heat for each unit of electricity consumed. However, their climate benefits increase substantially as electricity generation becomes less carbon-intensive.

A simplified calculation illustrates the effect.

Assuming a heat-pump coefficient of performance of 3.5:

Illustrative values, not country-specific emission factors. The calculation covers emissions from electricity generation and excludes full equipment life-cycle emissions.

The difference is substantial.

However, heat pumps can still offer environmental advantages with relatively carbon-intensive electricity, depending on their actual seasonal efficiency and the heating system being replaced.

This creates a close relationship between two major components of the energy transition: electrifying building heat and expanding low-carbon electricity generation.

Solar power, wind energy, hydropower and nuclear power can all contribute to reducing the carbon intensity of electricity.

Electricity networks, energy storage, flexible demand and heat storage become increasingly important as heating is electrified.

Japan, Europe and China therefore face a common challenge.

Installing efficient heating technologies is only part of the solution. Decarbonising the electricity supply is equally important for realising their full environmental potential.

6. Europe, China and Japan at a Glance

Figures refer to different measures: cumulative installations, cumulative shipments and installations in specified European demonstration projects. They are not directly comparable market shares.

7. Three Regions, Complementary Lessons

Japan demonstrates how sustained industrial development and government support can establish new residential energy technologies. Its parallel success with ENE-FARM and EcoCute is particularly instructive.

Europe illustrates the influence of climate, infrastructure and energy prices. Northern Europe demonstrates the potential of heat pumps in cold climates, while southern Europe shows the advantages of reversible systems that combine heating and cooling.

China illustrates another pathway: decarbonising centralised heating networks can benefit millions of residents without requiring every household to install a new heating system.

At the same time, southern China shares important technological characteristics with southern Europe.

These experiences suggest that no single heating technology is universally optimal.

The most effective solution depends on local climate, available infrastructure, building characteristics, energy prices and the carbon intensity of the energy supply.

The future of sustainable building heat therefore depends on two developments progressing together: more efficient heating systems and increasingly low-carbon electricity.

That is perhaps the most important common lesson from Europe, China and Japan.

8. A View from the United States

The United States has the world’s largest installed stock of residential heat pumps, with more than 20% of households using them for space heating. Heat pumps increasingly compete with conventional gas heating systems. At the same time, electricity generation is becoming greener: renewable sources supplied about 24% of US electricity in 2025, with solar power continuing to expand rapidly. However, natural gas and coal still account for more than half of electricity generation, making further decarbonisation essential for sustainable heating.

EIA – Electricity generation in the United States, IEA – Electricity 2026.