Soaring gas bills have made air source heat pumps installed in the UK cheaper to run over their lifetime than conventional boilers, new research from UK innovation agency Nesta has found.
Despite heat pumps offering well-documented operational and emissions savings compared to gas boilers, the cost of buying and installing such systems has long been seen as a barrier to mass adoption by the UK public.
But fresh research today suggests an inflection point has been reached, as gas prices have soared and the government’s Boiler Upgrade Scheme has come into force.
Nesta found that in the current operating environment, owning a heat pump could be £120 to £160 cheaper annually to run than a gas boiler, provided both the installation and heat pump itself are of high quality and the homeowner avails themselves of the £5,000 subsidy offered through the government’s Boiler Upgrade Scheme.
That is due to gas prices soaring more quickly than electricity prices in the wake of Russia’s invasion of Ukraine and the government’s recent decision to temporarily shift environmental and social policy levies from electricity bills onto general taxation as part of its Energy Price Guarantee.
The report notes that replacing a gas boiler with an air source heat pump reduces a household’s gas consumption by around 70 per cent, if the provenance of electricity provided by the grid is taken into account.
As such, it notes that the mass roll out of heat pumps could help UK households and businesses avoid billions of pounds in energy bills due to expensive fossil gas.
Replacing all 23 million boilers in the UK with a heat pump could avoid roughly £25bn per year in wholesale gas costs – or £1,100 for each household – which is equivalent to 1.2 per cent of the nation’s GDP, according to the report.
“Heat pumps are an essential part of the UK’s route to a net zero economy but they should also be considered a tool to keep costs to taxpayers down while gas prices are so high,” explained Andrew Sissons, deputy director of sustainable future at Nesta. “Because the government is subsidising energy bills through the Energy Price Guarantee, by bringing down household gas use by as much as 70 per cent, each heat pump installed can save the government and taxpayers around £1,100 per year.”
But while a national rollout of heat pumps is widely seen as critical to meeting the UK’s net zero targets while also helping to reduce exposure to expensive fossil fuels, their price tag and costs of installation continue to render them out of reach of many cash-strapped households.
The government has set out plans to roll out 600,000 heat pumps annually by 2028 and phase out gas boilers by 2035 as part of its plans to decarbonise the UK’s housing stock to meet its net zero goal.
But current rates of heat pump deployment fall short short of what is required to deliver on government targets, with figures from the European Heat Pump Association noting that just 43,000 heat pumps were installed across the country last year.
Nesta has therefore set out a number of measures it argues could be implemented by the government to make heat pumps more attractive to households in the long-term. These include permanently shifting ‘green’ levies on to general taxation, reforming the electricity market to ensure that electricity prices are not driven by the price of gas, and ensuring all heat pumps are installed with an efficiency of 3.2 – the top of the range for heat pumps installed today.
“It is important that anyone who has a heat pump installed is able to reap the financial rewards of any savings too, which can be achieved by just a few sensible reforms to the energy market,” said Sissons. “The new Chancellor could boost the economy and energy security, bring down public spending, and show the government’s continuing commitment to tackling climate change by prioritising heat pumps now.”