With fossil fuel prices skyrocketing, emissions from homes in the UK stubbornly high and the price of clean electricity from renewables tumbling, it’s clear that we are not taking the right approach to heating our buildings. Heating, which is dominated by gas, makes up a large share of energy consumption and contributes 23 per cent of the UK’s greenhouse gas emissions, so tackling it is vital for both energy security and clean energy goals.
Government and much independent analysis identifies heat pumps as the key technology to replace gas boilers. The British government has committed to installing 600,000 of them a year by 2028. Yet while the number of heat pump installations is growing, deployment in the UK remains at very low levels.
Preliminary estimates for 2022 show that the UK installed only 60,000 heat pumps – equivalent to two heat pumps per 1,000 households. This puts the UK at the bottom of the European heat pump league table. In Finland, which tops the rankings, nearly 70 heat pumps per 1,000 households have been installed.
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How can the UK become a European leader in heat pumps? The House of Lords’ Environment and Climate Change Committee has carried out an inquiry into the UK’s main heat pump support scheme, called the Boiler Upgrade Scheme (BUS). It concluded that the scheme is “failing to deliver on its objectives with a disappointingly low take-up of grants”; at the present rate only half of the allocated budget would be spent. The design of BUS is not perfect, but it has stimulated the market, even without any government promotion. After failed programmes such as the Green Deal and the Green Homes Grant, the UK can ill-afford yet another scheme that does not meet its potential.
Grant policies such as BUS are typical in all markets with significant heat pump deployment, but it is only one of many ingredients for a successful programme. When we analysed successful heat pump policies around the world, we found that in addition to funding programmes such as the BUS, three other ingredients are needed.
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Ingredient one: the running costs of heat pumps need to be significantly lower than those of fossil fuel heating to encourage consumers to make the switch. While heat pumps are currently cheaper to run than gas boilers, the cost savings are relatively modest. The reason for this is that in the UK electricity is taxed for carbon emissions and the majority of levies for environmental and social programmes are attached to electricity bills. Gas and heating oil are subject to no carbon tax and much more limited levies. Several countries have faced similar problems and have begun to reform how they tax and attribute levies to energy, making heat pumps a much more affordable proposition. The UK government is working on this through its electricity market review but this is being held up by delays.
Ingredient two: market certainty through clear regulation and phase-out dates for fossil fuel heating systems. The International Energy Agency says no more fossil fuel heating systems should get installed after 2025 to meet net-zero targets. Many countries have adopted and announced such bans and once put in place, investment in heat pumps has followed. As the Lords committee points out, mixed messages around hydrogen for heating and the lack of clarity about the future of the gas grid is not aiding the transition away from fossil heating. Chris Skidmore MP was right to call for a firm end date for the installation of gas boilers in his net-zero review. The government should also firm up its proposals to ban fossil fuels in new homes and homes off the gas grid.
Ingredient three: wider co-ordination around heat pumps, alongside effective communication to consumers. As the Lords committee points out, 80 per cent of people in the UK have little or no awareness of heat pumps and almost two-thirds are not aware of the need to change their heating system as part of the journey to net zero. A well-designed and executed engagement programme that boosts the role for local authorities and local heating solutions is crucial. The decarbonisation of UK heating was previously primarily a legal requirement. It’s increasingly clear, however, that it’s an economic imperative, too. Significant political capital is needed to reform the UK’s policy around heating, but that investment will return dividends. The sooner the system can be reformed, the better the returns will be.
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