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Heat Pumps: Appetite for Disruption

Writer: Emin AskerovEmin Askerov

Yesterday, I heard a fascinating story about the state of the heat pump market from a developer in Germany. They installed a heat pump in a multi-flat building, only to hand over ownership and operations to the housing management company. The management company received a subsidy from the state for installing the heat pump. But when the heat pump broke down, instead of calling for repairs, they simply switched on the old gas boiler. In another instance, a management company turned off the heat pump and reverted to using gas because the heat pump was "noisy."


What Does This Tell a Startup Founder?


For me, as an economist, this is a textbook illustration of the principal-agent problem. But here, I’m not writing about economics; I’m writing about growing startups. As a founder, I love these stories. They highlight problems, and solving problems is what startups are all about.


Key Problems


1. Quality and Reliability: Heat pumps are expensive pieces of equipment. A 10 kWh heat pump, capable of heating and cooling a 250m² home, can cost anywhere from €4000 to €7000. When you spend this kind of money, you expect a product that won’t break down. Ensuring high quality and reliability is crucial.


2. Noise Levels: This equipment should operate as smoothly and quietly as a top-notch Mercedes Benz, allowing even a newborn baby to sleep nearby. Addressing noise issues is essential for customer satisfaction.


3. Economic Viability: The fact that heat pumps require subsidies to gain acceptance indicates a need for cost reduction or financial innovation. Finding ways to make heat pumps more economically viable without subsidies is a significant opportunity.


Keep Looking


These stories from the heat pump market underscore the importance of tackling real-world problems. As a startup founder, always look for these pain points and turn them into opportunities for innovation and improvement. Embrace the challenges, and keep solving problems to drive your startup’s growth and success.


Keep looking for problems to solve!


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© Emin Askerov, 2023.

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