Heat pumps could save households hundreds of pounds a year on heating bills, if the government took simple measures to reform the energy system, an analysis has found.
The average household’s heating bills could be roughly halved, saving about £375 a year with a heat pump instead of a gas boiler, if steps were taken to make electricity cheaper.
These steps include ending green levies on electrical heating, reforming how electricity is priced, and taking measures to prevent gas power companies from jacking up their profits, according to an analysis by the thinktank E3G.
Heat pumps, which run on electricity, are more efficient than gas boilers and will be essential to reaching net zero greenhouse gas emissions. However, they are more expensive to run in the UK than they need to be, because of the way the UK’s privatised energy system is managed.
At present, homeowners with heat pumps who are on the right tariff and have well-insulated homes should save money. But some homeowners who replace gas boilers with electric heat pumps may get no saving, or even a cost increase. Their average annual heating bill is likely to be about £920, according to E3G, compared with £820 for homes with a gas boiler.
This discrepancy has held back installations, and led anti-net zero campaigners to decry heat pumps and claim that policies to promote them should be discarded. Ed Miliband, the energy secretary, has publicly voiced disquiet on the issue, while the government chief scientist has admitted that the lack of cost saving currently seen by some households was a problem.
But with a few measures, the government could transform the prospects for heat pumps and save money for millions of households, the E3G analysis has shown.
Shifting the green levies that apply to electricity bills rather than gas would save about £150 a year for a heat pump household, E3G found. Reforming the electricity system, under which the price of electricity is frequently dependent on the cost at which the highest-priced gas-fired power station is generating, would save about £90 a year on average.
Currently, there are difficulties with installation and the supply of heat pumps. Fixing these could encourage more efficient models and use, which could save about £140 a year.
Some of the biggest savings could come from ensuring that consumers have access to cheaper off-peak electricity prices, which could save about £175 a year.
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Chris Galpin, the senior policy adviser at E3G who led the research, said: “So long as the UK is dependent on gas, heating bills will remain high. A heat pump can already be much cheaper to run than a gas boiler. But the government needs to act to make these heating bill reductions accessible to the average household.”
The government is to announce its warm home action plan this autumn. A spokesperson for the Department for Energy Security and Net Zero said: “The British people are showing record demand for heat pumps and we are one of the fastest-growing markets in Europe.
“We are exploring a range of options for rebalancing gas and electricity prices – securing better outcomes for consumers is at the heart of our approach, and we will set out further details in due course. We will also repair our retail energy market and ensure people have the best possible support to choose more affordable, smarter, clean energy that is right for them.”
