Finland Heat Pump Market Size & Share Analysis - Growth Trends And Forecast (2025 - 2030)

Finland Heat Pump Market Trends and Insights

Supportive energy–tax incentives

Finland has ramped up its push for heat pump adoption, rolling out direct subsidies and tax incentives. In 2024, homeowners saw renovation subsidies soar to EUR 9,000 (USD 10,402.65) for air-to-water heat pumps and EUR 15,000 (USD 17,337.75) for ground source variants. On top of this, the Finnish government bolstered its support with a 20% corporate income tax credit for industrial-scale heat pump investments, capping at EUR 150 million (USD 173.38 million) per corporate group. These moves sync seamlessly with Finland's National Climate and Energy Strategy, which champions non-combustion heat production and offers tax breaks for larger industrial heat pumps, all aimed at fast-tracking market changes.

Rising Demand for Energy-Efficient Systems

The Finnish Energy Authority, in 2023, reported that 80% of consumers in Finland are now actively comparing or switching their energy contracts, marking a significant shift in consumer awareness regarding energy efficiency benefits. This growing awareness is fueling the adoption of heat pumps, especially as the price gap between electricity and oil widens. Research shows that heat pumps can cut heating energy costs by 45% in Finland and notably reduce CO2 emissions, a fact underscored by renovation projects in Jyvaskyla. In response to this trend, the market is rolling out advanced products, including air-to-water heat pumps. These innovative models are designed to thrive in Finland's harsh climate, with some proving efficient even at frigid temperatures of -20°C.

National subsidy schemes (Energy Efficiency and ARRA)

Subsidies aimed at boosting renewable energy production and improving energy efficiency have been instrumental in reducing technology risks associated with new heat pump investments, particularly for projects utilizing surplus heat. For 2025, the energy aid budget of EUR 14.1 million (USD 16.29 million) earmarks at least 60% for energy efficiency initiatives. Notably, heat pumps exceeding 1 MW capacity can receive subsidies if linked to low-temperature heating networks. This strategic focus has spurred market growth, particularly in lower-income regions where residents historically allocate a larger share of their income to energy, underscoring the subsidies' impact.

Carbon-neutral 2035 target

Finland is on track to meet its ambitious carbon neutrality goal by 2035, and at the core of this electrification strategy are heat pumps. This commitment has not only fueled investments in renewable energy but has also led Finland to achieve a remarkable milestone: nearly 95% of its electricity generation is now carbon-neutral, a feat accomplished by 2025. The energy sector has set its sights on ambitious CO2 emission reductions: 60% by 2030 and 80% by 2040, both benchmarks set against 1990 levels. This aggressive timeline underscores the urgent need for the rapid electrification of heating. The impact of these policies is evident in the market dynamics: in 2024, a striking 75% of new single-family homes in Finland opted for heat pumps, a stark contrast to the mere 14% adoption rate in similar markets, such as the United States.

Tightened F-gas quotas

EU F-gas rules effective March 2024 limit HFC availability and have inflated the price of popular blends by over 40%, squeezing installers’ margins and nudging buyers toward propane or CO₂ designs. ^{[1]Daikin, “Thinking About Buying a Heat Pump?,” daikin.ie} In sparsely populated regions, the EUR 8,000 (USD 9,040) cost of a modern pellet boiler still undercuts a EUR 15,000 (USD 16,950) ground-source package, delaying fuel-switch projects despite lifetime savings.

High upfront CAPEX vs biomass

In rural Finland, heat pumps, despite their long-term economic benefits, struggle to gain traction. The primary hurdle is their initial investment costs are steeper than those of traditional biomass heating solutions. In regions where housing prices are modest, residents are less inclined and financially equipped to adopt heat pumps. This economic dilemma hits harder in rural locales, where biomass is abundant and traditional heating methods hold cultural significance. In response, the market is rolling out innovative financing solutions. One notable model is "Heat as a Service" (HaaS), which waives upfront costs.

Segment Analysis

By Type: Ground-Source Gains on Air-Source Dominance

Air-source units generated 71% of share the Finland heat pump market. Subsidised pricing and easy rooftop or façade mounting sustain their lead. Yet refrigerant compliance costs and rising demand for year-round efficiency have lifted the profile of closed-loop bore-hole systems in new districts. Propane-charged air-to-water models capable of –20 °C operation now ship with predictive frost algorithms, trimming defrost losses during prolonged cold spells.^{[2]Finnish Environment Institute, “F-Gases and Ozone-Depleting Substances,” ymparisto.fi}

Ground-source systems are on track for a 4.8% CAGR, bolstered by municipal zoning that reserves drill plots under parking lots. When loop fields connect to district heating, operators access Fingrid’s balancing market and earn flexibility fees. The Finland heat pump market size for this segment is forecast to reach USD 55 million by 2030, underscoring its role in long-duration storage and summer cooling. A Helsinki office block that switched from district heating to a 600 kW bore-hole array now sells excess heat in summer, cutting net energy costs 35%.

By Rated Capacity: Small Units Dominate While Medium Capacity Accelerates

Systems below 10 kW served fragmented detached-house demand worth USD 70.9 million in 2024 and remain the volume driver of the Finland heat pump market. Online showrooms bundled with remote-support apps have shrunk acquisition friction. 

Nevertheless, installers active in the 50–100 kW range report order books up 30% year-on-year as schools, supermarkets and logistics centres retrofit fossil boilers. This mid-capacity band, projected to grow 5.2% annually, benefits from the 20% corporate tax credit and robust ESG disclosure rules on property portfolios.

By Application: Space Heating Leads While Hot Water Accelerates

Space-heating duty absorbed 79% of share in 2024 revenue in the Finland heat pump market. Metered district loops still dominate high-density cores, yet apartment cooperatives are peeling off to autonomous geothermal fields, citing lifecycle savings and control over tariff escalation. 

Hot-water-only systems, once rare, now post an 4.95% CAGR as building codes demand higher sanitary-water efficiency. Developers increasingly specify split-circuit layouts that separate DHW and space-heating loads, optimising COP across seasons and earning A-rated EPCs.

Note: Segment shares of all individual segments available upon report purchase

By End-User Vertical: Residential Dominance with Commercial Acceleration

Households represented 68% share, of the Finland heat pump market size in 2024. Sales are buoyed by automatic e-grant portals and utility-run leasing offers. Commercial premises, offices, retail and hospitality, will outpace other segments at a 5% CAGR, helped by corporate net-zero pledges and payback windows shortened to under five years where waste-heat recovery is feasible. 

Industrial campuses are currently testing high-temperature units designed to deliver process heat of up to 120 °C. This development represents a significant step forward in industrial heating technologies. By enabling higher temperature outputs, these units create new opportunities for further electrification in industrial processes, aligning with the broader goals of energy efficiency and sustainability.

By Installation Type: Retrofit Market Leads While New Build Accelerates

Retrofits accounted for a share of 62% of the Finland heat pump market in 2024. Oil-to-air replacements dominate, but geothermal conversions in 1960s apartment blocks are climbing once preliminary bore-field studies confirm viability. 

Despite rising interest rates, the new-build penetration rate is expected to grow at an annual rate of 4.82%. This growth is attributed to lenders incentivizing EPC-A projects by offering margin discounts. Currently, new-build penetration accounts for 70-80% of annual dwellings, and this trend is anticipated to continue during the forecast period.

By Sales Channel: Distributors Dominate While E-Commerce Surges

Traditional distributor/installer chains delivered 59% of 2024 revenue, in the Finland heat pump market share. They have responded to F-gas turbulence by stocking dual-refrigerant-ready inventories. E-commerce, running at 5.2% CAGR, wins mostly sub-10 kW orders. 

Digital DIY guidance and plug-and-play packages have significantly reduced the frequency of service callbacks. These solutions empower customers to handle installations independently, minimizing the need for professional assistance. However, larger capacity projects still require the expertise of certified technicians. This dependency is further exacerbated by the persistent shortage of installers in regions outside the primary growth corridors.

Geography Analysis

Urban Finland anchors the Finland heat pump market through early integration of wastewater, seawater and data-centre waste heat. Helsinki’s Katri Vala plant exemplifies the model: two 17 MW ammonia compressors lift wastewater thermal energy into district loops that serve 20% of the capital’s heating load. 

Similar projects in Tampere and Espoo adapt the concept to mine geothermal wells beneath industrial brownfields. The south-western archipelago leverages mild coastal winters to maximise air-source COP, while Lapland resorts prefer geothermal to shield against –30 °C extremes.

Regional policy activism shapes adoption speed. Helsinki mandates carbon-neutral new buildings by 2026, driving near-universal ground-source specification in greenfield housing. Conversely, municipalities in central Finland still subsidise biomass micro-CHP, slowing the Finland heat pump market in those districts. Grid flexibility incentives up to EUR 7/MWh (USD 7.9/MWh) for demand response favour installations clustered near wind-power hubs along the west coast.