The private equity founder of unicorn green ventures like Swedish battery maker Northvolt AB is targeting residential homes with smart heat pumps to tap demand that’s expected to surge 25% annually.

Aira will be Vargas Holding AB’s fourth startup focusing on decarbonization after Northvolt, H2 Green Steel and Polarium. The plan to provide home energy systems will save families in Europe as much as 30% of heating related energy costs, as the continent seeks to wean itself off fossil fuels including gas from Russia, according to Vargas’s founder.

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“There are still around 130 million gas boilers installed in Europe, accounting for 40% of all household emissions,” Vargas Chairman Harald Mix said in an interview. “This is a bigger challenge than people driving around in big SUVs.”

While heat pump technology has been around for decades, it’s become central to reducing carbon emissions from the housing sector that’s lagging behind on European Union targets. Demand for the systems, which use electricity to transfer heat from outside via a refrigerant into the home, is outstripping supply as governments ban new gas and oil systems and offer incentives to boost adoption.

In April, US firm Carrier Global Corp. agreed to pay €12 billion ($13 billion) for German family-owned Viessmann, a leading heat pump manufacturer, describing the move as a once-in-a-generation opportunity. In Sweden, heating technology provider Nibe Industrier AB has overtaken Ericsson AB by market value. According to Aira Chief Executive Officer Martin Lewerth, demand is set to surge at least 25% annually with the market for heat pumps alone exceeding €100 billion.

“If you add batteries and solar panels to that, you see an even bigger potential,” Lewerth said.

Vargas earlier this year acquired a production site in Wroclaw, Poland from Volvo Buses where it plans to start production next year. Investments so far total about 300 million kronor ($26 million), with Aira about to finalize a 1 billion kronor financing round. When scaling up production in the second half of next year, “we’re looking at additional financing of a couple of billion kronor,” according to Mix.

Aira is currently conducting a pilot study in Italy. The company expects to start operating in Germany and UK later this year and extend to over 20 markets by the end of the decade. The push will employ more than 10,000 “clean energy experts” and technicians across Europe. Within 10 years, the company plans to provide five million European homes with greener and cheaper heating.

The capital efficiency makes the project “very different” from Vargas’ high upfront investment in Northvolt, Mix said. “To produce 1 million units you will perhaps need two plants of this size, but you don’t need to invest like €10 billion.”

Northvolt is constructing multiple facilities to make battery cells for electric cars as well as precursor products in Europe. So far the company has secured more than $55 billion of contracts from the likes of BMW AG and Volkswagen AG.

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(Adds reference to Nibe AB in fifth paragraph)