Cold snap in heat pumps: why the sector is collapsing in France.
This is the title of this article from BFMTV which explains to us that on the heat pump side there is a collapse in sales and that no one wants them anymore despite the voluntarism of the State which wanted to make one mass production sector, except that between what the State wants and what people can there is a big gap.
A very big gap.
This is the whole problem with the managed economy.
Here is what BFM says.
“Barely a year after a very ambitious objective displayed by Emmanuel Macron, the heat pump sector is suffering, weighed down by demand which has collapsed for two years.
What is happening in the heat pump (PAC) market? Emmanuel Macron announced a major industrial project for this equipment a year ago, but today a big cold snap hit the sector.
A million heat pumps made in France. This was the very ambitious project of the Head of State for 2027. The difficulty then was to find the competent workforce, to train at all costs and to finance the expansion of industrial sites.
The objective of one million PACs produced in France seems completely unachievable, the country would have to painfully produce 170,000 in 2024.
And for once, it is not the fault of the manufacturers who played the game. In 2023 after two years of strong growth in sales, they had invested massively, hired with all their might. In recent years, France has even become the leading European country with 6 million units installed.
But today it's no longer a cold snap, it's a blizzard blowing through the factories. All manufacturers have revised their targets downwards. Dividing their production objectives for the current year by 2, 3 or 4.
“Everything stopped suddenly”
“In three years, we went from a capacity of 20,000 heat pumps to more than 120,000. In June 2023, everything came to an extremely abrupt halt, with a recorded drop in sales and volumes of more than 40%. From October 2023, we were on partial unemployment,” lamented last July Yuna Josse, the director of the Saunier-Duval factory in Nantes.
German shareholder Vaillant had nevertheless invested no less than 30 million euros to increase the brand's production capacity in France.
Other manufacturers like Intuis or Atlantic, which had also invested heavily, are cutting jobs, ending temporary contracts or putting their employees on technical unemployment. At Saunier-Duval, explains a manager in Le Parisien, some employees had to go to work for neighboring manufacturers like Airbus or Vorwerk.”
A new industrial fiasco after that of sanitary masks made in France?
The situation is very different. Unlike masks, French PACs can be competitive and probably remain a sector of the future. An air-water heat pump can sometimes divide the electricity consumption of a home by five.
The problem here is above all cyclical. Demand has collapsed over the past two years. For the French who had equipped themselves heavily after Covid, this was no longer the priority with inflation.
You should know that an air-water heat pump (the most efficient) costs between 12,000 and 18,000 euros compared to 4,000 for a gas boiler. As with electric cars, it is a market that can only take off if it is heavily subsidized. However, since 2020, the rules of MaPrimeRenov' have continued to change, being conditional on different home renovation work.
Aid too complex?
To be energy efficient, a heat pump must be installed in a well-insulated home. Otherwise it's like changing the faucet in a leaking bathtub.
In 2023, the Head of State wanted to condition aid on so-called global renovations of housing and not just single actions such as changing windows alone. Faced with the plummeting market, the government returned to this ambition at the start of the year. But that wasn't enough for the moment. The number of large-scale renovations is still very far from the objectives.
But it is above all the fall in the real estate market which is weighing down the PACs which are collateral victims of the construction crisis. We no longer build, so we no longer install heat pumps. As a reminder, the new housing market was still down almost 10% year-on-year at the end of September.
Despite the drop in interest rates and the decline in inflation for more than a year, the sector does not seem to want to take off again, making the objective of the million PACs produced in France even more hazardous.”
The problem is the administered economy.
Let me explain.
The State wants to put everyone on the PAC but PACs are very expensive. Between 15 and 20 K€ for just the installation of a heat pump (without the heating circuit) while a gas boiler costs 4,000 euros. Economically, the price of gas is not yet 5 times more expensive than the heat pump, so there is simply no return on investment possible by installing a heat pump.
For the CAP to be profitable, aid and a renovation bonus are needed to compensate for the lack of profitability of such an investment. It is therefore a subsidized economy which only works when the State coffers are full and the State can pay… which is no longer the case.
So the State makes the renovation bonus more complicated… and when it is more complicated there are fewer of them and people no longer buy PACs.
But the State also wants to be reimbursed for the aid paid in the event of resale, I spoke to you about it yesterday in this article.
If you sell you will have to repay the renovation bonus received!
Are you going to want even more to be “paid” for a PAC of €20,000 by the State but which you will have to repay if you have a change of life within 10 years such as a forced move, divorce, death? or come on, let's stay happy with a birth of triplets which was not “expected”… at 3!
The economy is a simple thing.
If it's profitable people do it.
When it's not profitable people don't do it.
To force, the State prohibits, regulates or subsidizes according to its mood or its wickedness of the moment.
But it always ends in failure.
Not in all cases of course.
But when the goal pursued has no economic coherence at all then failure is assured, and that is exactly the case in which we find ourselves here. The goal pursued has no economic coherence because installing heat pumps has no financial profitability, and in many cases, technically it is a bad idea, and in rental it is so fragile that it is too expensive.
In short, the all-PAC strategy is a bad strategy.
The right strategy is simple.
10 more power stations and everyone on the latest generation of thermal storage electric radiators… it's cheap, it's efficient, it's pleasant heat and it doesn't produce CO2.
Charles SANNAT
“Insolentiae” means “impertinence” in Latin
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source BFMTV here
