Source: CHEAA-run China Appliance Magazine
As of April 2018, most coal-to-electricity projects ran smoothly after a mild winter and a following cold one, lending credence to the technical roadmap of switching coal-fired boilers to air source heat pumps (ASHP) for space heating in the cold northern China.
China’s coal-to-electricity projects will intensify in years to come, which are expected to make an impact on the heating systems in areas of severe winters as well as places with hot summers and cold winters. Industry insiders, at this point, must put more efforts in addressing problems surfacing in previous implementations in their following projects.
Proven feasibility after a severe winter
Year 2017 has been a busy yet worrisome year for ASHP makers. The sector expanded fast in the past year in response to the intensified coal-to-electricity projects in northern China, particularly in Beijing which reached its peak of project implementation in 2017. The broad and fast expansion provoked concerns among industry insiders. Could these products all survive cold winters? Excitingly, vast majority of them did in the cold winter of 2017, receiving positive feedbacks from users. “It’s safe to say that ASHPs are applicable in cold-winter plain areas, and can be safely extended broadly.” says Song Zhongkui, Secretary General of China Energy Conservation Association (CECA).
Behind the hustle and bustle was a multiplied market size in 2017. According to ChinaIOL.com, ASHP space heaters and dryers saw an explosive boom last year, posting sales volume of 0.7 million units with a year-on-year growth of 206%, and sales value of 9.6 billion RMB with a year-on-year rise of nearly 200%, of which dryers took a small market size of only 6.67%. Most industry players have seen their market sizes expanded. Haier’s ASHP projects, which consists of both household type and central type, covered 2 million square meters in 2017. For the same year, Gree’s ASHP products, including water heaters and space heaters, posted sales value of 2 billion RMB; Aux and Phnix both sold out more than 10,000 units of products thanks to coal-to-electricity projects; McQuay surpassed its expectations; Compressor makers Emerson and GMCC both saw improved track records.
While Beijing and Tianjin continue to be the key cities of focus, more provinces including Shandong, Shanxi, Hebei and Henan sped up their paces. According to a report on the performance of China’s ASHP market in 2017 from HP.HVACRHOME.COM, household ASHP units installed amid coal-to-electricity project in Beijing and Tianjin accounted for 63.95% and 18.5% respectively of all installed ASHPs in China last year, while Hebei, Shanxi, Shandong and Henan 6.5%, 3.8%, 2.9% and 2.6% respectively.
Alongside the shifting projects of household ASHP units, central units also boomed, making a highlight of the industry in 2017. Used mainly in schools, hospitals, village committees as well as guest houses, central ASHP projects saw industry players such as Haier, Gree, Airpower, Midea, Outes, Phnix and Tica in the running. According to the report of HP.HVACRHOME.COM, Beijing alone has shifted the heating systems of 1,514 village committees and public places in rural areas into ASHP. District heating station is also a coal-to-electricity option, designed for areas not covered by central heating. “It is a trial project launched in Haidian District of Beijing with Airpower as the major supplier in 2017.” says Song Zhongkui, Secretary General of CECA. We learn from Midea that, the industry heavyweight has achieved strong track record in commercial and central heating in 2017, posting shifted areas of more than 3 million square meters with a year-on-year growth of 600%.
Great market potential to be unleashed
The demands for clean heating are expected to further push forward the development of ASHP market in 2018. Great market potential is barely tapped in “2+26” cities except for Beijing, whose shifting projects almost finished. Talking about the gas supply crunch in the end of 2017, Zhang Jing, General Manager of Phnix, believes it is solvable and therefore will not make a major impact on this year’s policy. “Electricity or gas, local circumstances will be the major factor to consider.” Zhang Jing believes that the coal-to-electricity project will extended its reach in 2018, but local subsidies in other places might not be as high as Beijing or Tianjin. “This year’s coal-to-electricity projects will focus on switching the coal-fired heating systems in the remaining plain areas and some mountainous areas, as well as the replacement of previously installed electric thermal storage heaters. The project quantity is expected to take a dip this year and Tianjin is expected to be the next key market.” Yang Lei, General Manager of the heat pump division of Haier Water Heater, says.
According to Song Zhongkui, 4 million households are expected to switch their heating systems from coal to gas or to electricity in northern China as of this year. 450 villages in Beijing will be remodeled in a bid to reach the goal of being coal free in rural areas on Beijing’s plains. Following the principle of electricity first, Tianjin plans to use electricity as the replacement across the board by offering multiple central or distributed heating options such as electric thermal storage boilers and ASHP based on specific circumstances. Under this principle, Tianjin is set to shift 317,000 households from coal to electricity, of which 11,000 use central heating, striving to cut the coals used for heating down to zero in non-mountainous areas as of the end of 2019. Besides, more provinces including Shandong, Shanxi, Hebei and Henan have officially carried out their coal-to-electricity policies and are now actively implementing them.
Tianjin will be a crucial market in the following two years which enterprises should look closer to, reveals Song Zhongkui. Through our interviews, a number of enterprises including Haier, Gree, Aux and Phnix say Tianjin will be a key market of focus for them in 2018.
The fast expanded shifting projects create new areas of growth for the industry. Many enterprises have targeted this market by rolling out products and launching pilot projects. Hou Haisheng, Project Director of Commercial AC division of Gree, says, Gree builds clean energy stations to offer heating for communities not covered by central heating with its air-cooled screw units, which have been applied in Gree’s pilot projects in Langfang and Baoding cities of Hebei, Tianjin as well as Shandong. The fast growing shifting projects also fuel the surge of matching compressors. Xie Ying, Vice President of household and light commercial AC market in Asia-pacific region of Emerson, tells our reporter that, sales of Emerson’s large-capacity compressors used for regional heating surpassed the company’s expectations to double in 2017, making this sector an area of focus in 2018.
Enterprises invest in shifting projects
On April 13th, Fangshan District of Beijing launched a public tender for its coal-to-electricity projects in 2018, signaling the start of a new round of coal-to-electricity work of ASHP industry. Learning the experience from last year, both the authorities and the enterprises are making adjustments to offer better heating experience for consumers. The government raises the threshold of project bidding and tendering, while offers suggestions on the maintenance of previously remodeled houses. On the enterprises’ side, more efforts are put in technology upgrading, product line expanding and service improving, in a bid to advance the healthy and orderly development of the industry.
Variable frequency is seen as a technological trend of this sector. “According to China Air Source Heat Pump Alliances, variable frequency products increase its share of 32% in 2016 to 48% in 2017. The figure is projected to continue to go up this year.” says Song Zhongkui.
What’s more, enterprises put efforts in raising outlet water temperature. Some enterprises extend their product portfolio.
Air heaters rise amid the era of coal-to-electricity
Air heaters, with no doubt, are the hottest items of ASHP market in 2018. Through our interviews, multiple enterprises including Gree, Haier, Midea, TICA, Phnix, Bilai, AMA and Aux are explicit about their intentions to roll out ASHP air heaters. According to a conservative estimation of an industry insider, at least 70 enterprises have placed their air heaters on the market currently.
Last year, ASHP air heaters were considered niche products. Song Zhongkui tells our reporter that, only Fangshan District and Miyun District of Beijing had installations of ASHP air heaters, totaling 9800 units, all supplied and installed by Gree. Heading into 2018, this sector is surging, as more and more enterprises roll out new ASHP air heaters.
Our interviewees from enterprises share their views on this product. Chen Ze, head of market planning at Bilai, believes that, lower-cost ASHP air heaters are a better choice compared to ASHP water and space heaters for areas without government subsidy or with a subsidy lower than 10,000 RMB. Jin Xin, General Manager in charge of coal-to-electricity projects at Aux, says, ASHP water and space heaters offer a more comfortable experience though the initial purchase cost and installation requirements are high, while air heaters, at lower cost, are more suitable for areas with little subsidy. Hou Haisheng believes that, target consumers of air heaters are small-size families or families with tight space.
Yet others believe that, air heaters are not the best heating solution, despite its strong momentum to surge in two years to come. Chen Ze says, “Air heaters might be in line with China’s coal-to-electricity trend, but they are not where ASHP sector is going.” An industry insider says, “In fact, I don’t think the heating performance of air heaters is satisfactory. The temperature rises fast but falls fast too. The air is warm but dry. It is not our intention to roll out air heaters. Some regions bundle air heaters with ASHP water and space heaters in bidding. Without this category, we would not be qualified in the first place.”