Water heaters are still undergoing many changes as a number of factors continue to shape storage-type and tankless water heaters design. This is leading the manufacturers to develop innovative products that consume less energy.
Hot water heating has always been important with modern versions still the most common type in use. While water heater technology has advanced, these systems have remained essentially the same in concept since they were first invented – heat a tank of water to the desired temperature, and then keep it hot, so it is available when it is needed, albeit there are newer, better, and far more efficient systems. The water heating sales industry has witnessed significant change over the last 5 years as renewed confidence in the house building and construction sector continues, and the focus shifts toward more eco-friendly and energy-efficient products.
The current penetration level of water heaters in India is at 10 percent. Growth in the market is led by increasing number of new residential units and other construction activities coupled with rising per capita disposable income. Moreover, improving standards of living, technological advancements, and rising demand for low-cost and efficient water heaters is further expected to propel growth in the Indian electric water heaters market over the next 5 years.
The Indian water heaters market in 2017-18 is estimated at Rs 1988 crore, a 5.2 percent increase since 2016-17. The electric storage heaters lead the segment with a 59 percent share of the market. Though electric water heaters dominate the market, with an 85 percent share, solar water heaters are finding increased popularity among Indian consumers over the past few years.
Increasing demand for reliable, eco-friendly, and cost-efficient technology for hot water preparation is driving the solar water heaters segment. Its ability to offer low running cost makes its adoption preferable over its other counterparts. Improving infrastructure and rising availability of piped water facility across the rural regions in India are expected to drive adoption of solar water heaters in the country over the next 5 years. Implementation of GST is expected to have a positive impact on the organized solar water players operating in the country. The country is also witnessing a strong demand for polymer-based storage tanks, which provide better insulation and high resistance to corrosion.
Global market dynamics
The global water heaters market size for 2017 was over USD 25 billion and the annual deployment is set to exceed 150 million units by 2024. Rapid urbanization coupled with growing demand for energy efficient heating systems will drive the global market size. Ongoing economic transformation across the developing economies owing to increasing spending toward the development of new and advanced technologies will stimulate the product adoption. In 2017, as per the UNCTAD, the world will cater over 70 percent of the global population in urban areas by 2050.
Considerable investments toward infrastructure development coupled with rising demand for reliable, eco-friendly, and cost-efficient heating systems will positively influence the market growth. In addition, accelerating demand for advanced solutions on account of improving living standards primarily across the emerging economies will complement the business outlook. Government initiatives toward the adoption of renewable systems with an aim to limit carbon emissions will accelerate the global market growth. Consumer awareness pertaining to operational benefits of advanced heating solutions over its existing counterparts will stimulate the business growth.
Higher efficiency along with convenient and easy installation is one of the vital parameters stimulating the electric water heaters market growth. The instant water heaters market is anticipated to grow on account of efficient energy utilization coupled with rising demand for quick hot water supply. The gas water heaters market will grow on account of quick hot water supply along with limited operating cost. The solar water heaters market will grow on account of introduction of government incentives and subsidies toward the adoption of sustainable systems.
Increasing demand for energy efficient systems coupled with introduction of initiatives to reduce the environment concerns will boost the United States of America’s water heaters market growth. Stringent regulatory policies owing to carbon emissions along with strong emphasis on the adoption of fuel efficient technologies will stimulate the United Kingdom’s market growth.
Energy-efficiency, cost-effectiveness, and requirement of less storage space are among the crucial needs of customers willing to install water heaters. They are introducing innovations and advancements in the existing technology to substantially increase their product demand. Various mergers and collaborations between the industry giants are complementing the business growth with primary focus on increasing the market share and facilitating efficient water heating systems to their customers. Key companies developing water heaters are also focusing on anti-corrosion, filtration sterilization technology. Providing clean and soft water through water heaters is also being focused on. Electric water heaters that are easy to install and require minimum maintenance are also being developed by manufacturers. Heat pump technology and condensing gas-fired systems are some of the innovative technologies. Solar and geothermal equipment are also being incorporated by manufacturers in their product line. Consumers are moving toward adopting higher efficiency water heaters as part of the replacement. Manufacturers are seeing a lot of potential in the solar market; hence, solar water heaters are also being developed.
Surging demand for water heating solutions across the residential establishments on account of rising per capita income will boost the growth. Increasing requisite for the replacement of conventional systems coupled with consumer awareness toward the adoption of energy efficient and sustainable solutions will fuel the industry growth. Increasing adoption of heating systems primarily across the residential establishments owing to improvement in living standards will augment the below 30-liter water heaters market. The top trends are efficiency, ease of installation, smart-home integration, water conservation, and affordability.
Efficiency. Market competition with other manufacturers striving for the same energy efficiency goals encourages further breakthroughs in designing improved technologies. The global community is pushing for lower net energy usage through participation in the Paris Accord Agreement. This international regulation pushes innovation in our industry to constantly make products more efficient, durable, and green.
Ease of installation. It is on top of mind for many contractors and contracting business owners. As water heating has evolved over the years, installers have had to evolve, too. This means learning new technology and product benefits as well as new installation and proper maintenance. Contractors want to provide great customer service, and manufacturers are responsible for developing products to help them deliver that level of service.
Water conservation. Recirculation systems are one of the major influences on residential water heater design. Due to water scarcity, building codes no longer allow water to be wasted. This includes turning on water and waiting for it to heat up. Recirculation systems allow the homeowner to receive hot water instantly by circulating water with the assistance of a pump through the water line back to the heat source.
Affordability. Consumers are looking for products that not only save upfront but continue to provide value over the product’s lifetime. Interestingly, homeowners are driving many of these trends, and they are better educated than ever before. Homeowners are educating themselves regarding water heaters performance features and options. Now more than ever, consumers understand and appreciate the benefits of installing highly efficient water heating systems.
Electric heaters emerge as the most preferred segment
Electric water heaters are a result of innovation in terms of design and efficiency. The sales of electric water heaters have increased drastically, and this has influenced the vendors to introduce new products. These water heaters are made up of the latest technology that makes these products of the premium category. The technological innovation leading to product premiumization is expected to be one of the major factors driving market growth. In recent times, the rising competition and demand for innovative and efficient products compel vendors to invest in R&D. Thus, the competence of the manufacturers increases innovation which in turn, drives product acceptance.
Growing concerns for energy efficiency are contributing to the increasing demand for electric water heaters. Energy efficiency regulations in various countries have also led to the increase in replacement of water heaters. Increasing number of pre-plumbed unvented systems in several new constructions is also driving the demand. Manufacturers are integrating smart heating controls to facilitate ease of use. This has resulted in the increasing demand for highly-efficient tankless electric water heaters.
Tankless water heaters. The global tankless water heaters market will grow at a CAGR of close to 7 percent. Technological innovations in design and higher efficiency are major factors driving the market’s growth. The increased sales of tankless water heaters in residential and commercial establishments have influenced the vendors to launch products that meet the evolved design choices of customers. The demand for a specific design depends on the place and ambiance of installation. The tankless water heaters used in residential establishments are designed for mild-use, whereas the tankless water heaters used in commercial establishments must be modern and innovative. Several players in the market offer heavy-duty, square-shaped, cylindrical, and rack system tankless water heaters that are specifically designed for high-volume use.
The residential segment held the largest market share in 2017, accounting for nearly 63 percent of the market. This segment is anticipated to post steady growth in the coming years. Various governments and regulatory agencies in places such as the Americas and Europe have mandated energy rating norms, which should be followed by vendors while manufacturing tankless water heaters. Many tankless water heaters offered nowadays are equipped with energy-star ratings according to their energy consumption.
However, the cost of electric tankless water heaters is much higher as compared to conventional storage water heaters. The high cost of these heaters is hindering the growth. Further, lack of awareness about the benefits of electric tankless waters heaters among the population is also hampering the market growth in under-developed nations. Various government regulations such as legacy standards, quality control and inspection, quality of raw material used for manufacturing of electric tankless water heaters are increasing the companies spending on the development of energy efficient tankless water heaters, which is further increasing the cost and challenging the market growth.
Storage water heaters. These water heaters help in maximizing heating capacity by using hot water storage tanks. Manufacturers are providing storage heaters in a variety of sizes as per the requirement of consumers. Compared to various water heaters, installation of storage heaters is less expensive, and these are also easy to maintain and repair. However, storage heaters have been known to explode, hence, manufacturers are focusing on providing water heater services on a regular basis. Moreover, storage heaters require space for the tank; hence, manufacturers are focusing on minimizing the size of storage heaters to eliminate the space issue. In recent years, conventional storage heaters using various fuels such as fuel oil and natural gas have also gained a lot of traction.
Energy conservation propels adoption of gas water heaters
The global gas water heaters market is set to exceed 30 million units by 2024. The market is betting big on the global energy spectrum driven by the lower operational cost and convenience associated with these water heaters. Rising concerns toward energy conservation have further propelled the adoption of gas water heaters in the households as the product consumes minimal energy during the heating process. The technological advancements pertaining to electronic thermostats and digital temperature control have garnered huge profits for the gas water heaters industry. Several companies are exploiting renewed market opportunities in this fraternity and are focusing toward a more sustainable and diversified product spectrum. The overall performance of a standard gas water heater and an instant electric water heater were testified which claimed to save Rs 89 every month per bucket. The study has also concluded that an average residential consumer can hope to use just one LPG cylinder for about 4 months.
The advent of tankless gas water heaters has endorsed the overall industry with the most energy-efficient and sustainable water heaters. The emerging nations of Asia-Pacific, MEA, and Latin America are witnessing rapid developments. Tankless gas water heaters are witnessing a huge deployment rate in the residential sector.
Several governmental measures toward energy efficiency have prompted the gas water heater market players to conduct high-end research activities for the product diversification and innovation. The industry is witnessing intense competition with the presence of large number of manufactures across the globe. Cost-effectiveness and energy efficiency of the products are the two major parameters underlining the competitive hierarchy.
Solar water heaters market accrues remarkable proceeds
The global solar water heaters market is expected to grow at a CAGR of 9 percent by 2025. This can be attributed to increasing energy prices, growing global population, and rising demand for energy-efficient water heaters. Strict government regulations to curb greenhouse gases emissions, along with growing demand for water heating systems – especially in colder regions, is predicted to augment adoption of these systems and boost industry growth. In terms of revenue, commercial segment is expected to exhibit a CAGR of 9.1 percent. Substantial growth in commercial construction is anticipated to contribute significantly to industry growth.
Demand for efficient water heaters is expected to witness rapid growth every year, along with increasing measures to control energy consumption. These systems are reasonably priced so as to cater to a wider spectrum of consumers based on their economic condition. The system’s capability to function at lower costs, 30–40 percent lower in winters and up to 75 percent lower in summer is expected to spur their adoption over other products currently available in the market.
Several solar water heater manufacturers are training their focus on developing new technologies and systems that can function with more efficiency and can be made available even to remote areas. Multinational companies with global presence control a substantial part of the market and are concentrated in Europe and North America. Top global manufacturers account for over 60 percent of the global revenue, with China and the United States of America holding significant production and export volumes. Pricing strategies and other market programs and initiatives are swayed by the conglomerates. Manufacturers closely follow developments in the industry to formulate new strategies to strengthen their market position in terms of volume and revenue. They have been making heavy investments to boost R&D and present pioneering product designs with enhanced features.
Attractive market opportunities in connected water heaters market
Smart water heaters are also gaining popularity in the global market for water heaters. The global smart connected residential water heaters market is expected to grow at a CAGR of 10.06 percent during the period 2017–2021. Smart water heaters are equipped with controlling and communication systems that can be managed with the help of a mobile application. A consumer can schedule hot water usage time and turn the water heater on and off with an application. Some of these water heaters can also display energy used along with some other data. In order to offer better technology and innovative products, companies are also focusing on mergers and acquisitions. Manufacturers are increasingly investing in the research and development of energy-efficient and cost-effective water heaters technology.
Water heating is considered as the top energy expense in the home. However, homeowners are looking for better water heaters to reduce their monthly bill. Water heaters are still undergoing many changes as a number of factors continue to shape storage-type and tankless water heaters design. This is leading the manufacturers to develop innovative products that consume less energy. With consumers moving toward adopting tankless and high-efficiency water heater technology, the manufacturers are focusing on redesigning their products to maintain their position in the water heaters market. The biggest single trend shaping water heating products is technology – specifically connectivity and the ability to remotely monitor equipment. The opportunity connectivity brings to contractors is a game changer. As water heating connectivity evolves further, contractors may soon have the opportunity to stay connected remotely to every product they install and offer value-added services when water heaters are due for maintenance. Connectivity is expected to have a growing presence for both residential and commercial water heaters. Some of that connectivity will be designed to enhance the user experience as well as increase a contractor’s ability to support and service their residential and commercial customers’ water heating products. Meanwhile, governments in different countries are also encouraging the use of natural sources of energy, thereby driving the demand for solar water heaters. Energy efficient hybrid water heaters are also being developed on a large scale by manufacturers.