Europeans Are Embracing Air Conditioning. That’s a Green Growth Opportunity.

Right now, record-breaking temperatures across Europe are driving seasonal spikes in demand for air conditioning.

Until recently, Europe’s market for air conditioning (AC) remained muted. While 90% of US homes have AC units, the figure is just 20% in European homes according to the International Energy Agency (IEA).

But that’s changing. Once the preserve of the hottest parts of Italy and Spain, AC units are now being installed at pace in more northern regions.

The So What

“The days of low AC penetration in Europe are coming to an end. We are seeing substantial momentum in the market due to this year’s multiple heatwaves,” says Helge Brinkmann, a BCG Partner and Associate Director who specializes in green energy and the environment.

“The European cooling market presents a significant growth opportunity that will continue to scale over the next decade, fueling double-digit growth year on year. However, there are several challenges to solve around the additional strain on the electricity grid and on the environment.”

• The number of air conditioning units in the EU is likely to rise to 275 million by 2050—more than double the 2019 figure, according to the IEA.

As they scale, cooling industries will need to negotiate significant obstacles, not least the pressure put on energy grids. During June’s heat wave, France recorded electricity peaks at 25% above off-season averages, while Italy experienced widespread blackouts when the power grids buckled.

And sustainability is a critical issue. While heating and cooling constitute nearly half of Europe’s total energy consumption, EU statistics show that renewable sources only fulfil around 26% of this demand.

The key, according to Brinkmann, is smart, sustainable, well-integrated grid systems that leverage renewables and advanced energy management.

“This allows for smarter, more balanced consumption, matching peak AC use with peak renewable generation.” He says smart-building technology can also reduce wastage. “Energy management systems in homes and buildings can analyze power usage in real time and connect to systems like heating, ventilation, water, and power to optimize performance.”

The age and type of building stock is also a key factor in the growth potential of AC markets. While cooling technology is easily built into new residential and commercial properties, it’s less straightforward to retrofit existing infrastructure. Installation is possible during major renovations, but in historic cities like Paris there are often additional regulatory and aesthetic hurdles to overcome.

“Alternative technologies including district cooling systems offer potential solutions to these challenges,” says Bernhard Siegert, an expert in greentech at BCG. In district cooling, chilled water is channeled to buildings through underground pipes as part of a central AC network. “This energy-efficient system was used in Paris during the Olympic Games,” Siegert explains. “It meets the demand for air conditioning while cutting carbon emissions and preserving heritage architecture.”

Now What

Strategic Partnerships. Companies across the cooling value chain can increase collaboration to address infrastructure and financing challenges. For example, energy companies can partner with cooling manufacturers to develop integrated solutions, while financial institutions can create specialized financing products for residential and commercial cooling upgrades. Public-private partnerships can accelerate grid infrastructure development and retrofits in older buildings, sharing risks while capturing market opportunities.

Sustainable Technology Innovation. Manufacturers can develop strategies that prioritize the development of high-efficiency cooling systems. Investment in innovative refrigerants with lower greenhouse gas emissions can address some environmental concerns and align cooling technology with the EU’s net zero targets. Heat pump technologies offer particular promise as dual heating-cooling solutions. Incorporating features like quieter operation and aesthetic integration will also be important.

Smart Energy Management. There will need to be a focus on grid modernization to handle seasonal demand spikes while accelerating the integration of renewable energy sources such as wind and solar. Smart grid technologies can shift peak cooling loads to times of abundant renewable generation. In addition, more advanced home and building energy management systems are required to optimize loads and enable customers to exploit the flexibility value in their assets.

Recruitment and Training. The European Labour Authority highlights a severe shortage of air conditioning technicians in the EU. The need for skilled labor to install and service cooling systems is expected to become acute in the next three to four years, particularly in countries like Germany where AC penetration has traditionally been low. To address this, the sector needs to attract more workers by targeting and training young talent and promoting technical innovation.