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The state of the commercial heating industry – and what the future holds
As we move towards UK Net Zero targets, Steve McConnell, director of ICOM, explores how the commercial heating sector is navigating the challenges of high costs, shifting policies and infrastructure limitations while remaining ready to deliver the low-carbon heating solutions needed for a sustainable future.
T
he commercial heating sector is split into two distinctive areas: the newbuild market is moving towards all-electric systems, while
the much larger refurbishment market continues to rely on gas. This view is supported by sales figures for gas-fired products remaining strong even though alternative technologies have been quoted alongside the more traditional products. It’s often said the industry is resistant to change, but in reality, manufacturers have electric products ready and available. However, for refurbishment projects, customers simply aren’t prepared for the scale of system upgrades required to swap a boiler for a heat pump, which can require major electrical upgrades, larger heat emitters or underfloor heating and broader system changes. Unlike a less intensive plant room boiler swap, moving to low-carbon heating is very often a more complex system and building fabric upgrade. One of the sector’s biggest challenges is the
market’s hesitant readiness to adopt new technologies while navigating shifting government policies. For example, manufacturers invested heavily in hydrogen- ready products following previous government signals, only for ambitions around hydrogen for heating to be scaled back, leaving manufacturers with available products but no market for them. It’s not reluctance from the heating industry slowing progress, but the unpredictability of policy and the high costs of transition. We were told years ago that heat pumps would be the same price as boilers by now. That was never realistic, and it’s still far from true today. Schemes like the Public Sector Decarbonisation Scheme (PSDS) had a real, positive impact on non- domestic heat pump uptake. Councils, hospitals and public buildings made the switch, creating visible progress and supply chain confidence. Yet, a single announcement removed the funding, creating uncertainty just as momentum was building. This sudden policy change will likely cause heat pump sales to dip, undermining confidence in market stability.
On the workforce front, commercial heating faces
a skills shortage, as with a lot of the engineering and construction sector. Apprenticeships are key to filling this gap, offering young people the chance to earn while they learn, building economic resilience while directly addressing skill needs. But it needs to start earlier, in schools, with careers advice highlighting
Steve McConnell, director of ICOM
that engineering is for everyone, regardless of background or gender. Encouragingly, the industry is already seeing increasing diversity among new entrants, with women joining the engineering workforce in growing numbers. Heat networks will also play a significant role in
decarbonising commercial heating. By centralising energy sources, these networks can efficiently distribute heat while using lower-carbon, lower- temperature systems. They can harness waste heat from sources such as data centres or even flooded mines, which traditional heating systems cannot do efficiently. Heat networks also support the integration of renewables, enhancing system flexibility and resilience. Regulation and policy have a profound influence on the sector by shaping demand. We’re awaiting the final Future Homes and Building Standard, which will determine what’s required of new and existing buildings. But it’s important to remember that when regulations increase costs, some clients may think twice about new projects, impacting uptake of low- carbon heating. Customer expectations are evolving, with many
keen to showcase green credentials, particularly in the newbuild market. However, high upfront costs often deter customers from adopting low-carbon solutions, even when the desire is there. Many want manufacturers to offer new technologies while retaining the flexibility of gas boilers, reflecting the difference between ambition and affordability. Collaboration is essential for progress. Designers, manufacturers, installers and end users need to align
from the start of a project to ensure systems are designed and installed efficiently and cost-effectively for their entire lifecycle, not just to the point of handover. The impending Heat Network Technical Assurance Scheme, for example, will guide projects through clear gateways, ensuring effective delivery and operation. Economic viability remains a central barrier to
transition. Subsidies have proved to be effective at kickstarting adoption but must be stable and long-term, not pulled at short notice. We’ve seen in Europe how removing subsidies can cause heat pump sales to collapse. If we are serious about decarbonisation, certainty is needed to encourage the long-term investments required. Looking ahead, natural gas should not be demonised in the transition to Net Zero. We know we can’t continue burning fossil fuels indefinitely, but we also can’t simply switch off gas and expect electric systems to take the strain immediately while grid constraints persist. Hybrid systems, using heat pumps for base loads and gas boilers for peak demand, could be a practical transitional pathway, reducing system costs and grid strain while substantially reducing emissions. With smart controls, gas may only be needed around 20% of the time, providing flexibility when the grid is under pressure. The technology is ready, and so is the industry. When the market is ready, the commercial heating sector will be there, ready to deliver.
20
September 2025
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