New heat pump report suggests electricity costs in the UK are impacting the take up of renewables
12 Aug 2024
The European Heat Pump Association’s (EHPA) has just published a market report with figures that could shed light on the UK’s relatively low uptake of heat pumps compared to the rest of Europe.
Currently, in the UK, there’s a significant difference in the unit price of electricity and gas, which is known as the ‘spark gap’. Here, the price of electricity is almost four times that of gas. The EHPA’s research shows that in countries where the price of gas and electricity are more on a parr, there’s a higher uptake of heat pumps. It maintains that the unit cost of electricity should be no more than twice the cost of gas if governments are to encourage homeowners to make the switch to renewables.
Charlotte Lee, Chief Executive of the Heat Pump Association (HPA) sees a direct correlation between the higher price of electricity and a sluggish take-up of heat pumps, saying it penalises those who are turning away from fossil fuels.
“A significant contributor to high electricity prices in the UK is the disproportionate application of Environmental and Social Obligations – often referred to by Government as “policy costs” and known commonly as “green levies”. Domestic electricity consumers, bear around 85% of these levies, which means a typical heat pump consumer pays £170 more than an equivalent gas boiler consumer in levy costs per annum.”
Last Autumn, the HPA proposed the introduction of an Interim Domestic Heat Pump Tariff to reduce the price electricity whilst fundamental reforms to the electricity market are considered and implemented. In her response to the EHPA’s latest report, Charlotte Lee urges our new government to take action:
“UK heat pump sales per household remain the lowest across Europe with only 2.08 heat pumps per 1000 households sold. This highlights the scale of the opportunity that remains in the UK, which will only be realised if swift, decisive action is taken to reduce the price of electricity relative to gas.”
Mark Krull, Director of LCL Awards urges caution:
“We need to be careful that in calling for a reduction in electricity costs, the levies don’t shift onto gas customers, many of whom aren’t in a financial position to fit heat pumps. Some will be having to make difficult decisions this winter on whether they heat their home or put food on the table.
“The reason for the fuel price differential is complicated and, in my opinion, suggesting it’s solely down to green levies over-simplifies the situation. The cost of bailing out failing energy companies and levies relating to the Feed in Tariff are substantial. We don’t want to end up in a situation where millions of gas customers are forced into fuel poverty because of an increase in general taxation or – even worse – their gas bills. Some energy companies, Octopus and E.on for example, offer their customers special heat pump tariffs, which helps to reduce the ‘spark gap’.
“The EHPA’s report makes interesting reading. The correlation between the cost of electricity and heat pump uptake is clear, but the last thing we need is a knee-jerk reaction which could impact some of the poorest in society.
“The Government is currently reviewing how the sector works with tariffs and levies (Review of Electricity Market Arrangements (REMA)), let’s hope the outcomes of this review are fair and equitable for all energy-users.”
To read the Heat Pump Association's press release on the EHPA's report, click here: New European Heat Pump Market Report highlights need to solve UK’s electricity and gas price disparity. - Heat Pumps
The European Heat Pump Association’s (EHPA) has just published a market report with figures that could shed light on the UK’s relatively low uptake of heat pumps compared to the rest of Europe.
Currently, in the UK, there’s a significant difference in the unit price of electricity and gas, which is known as the ‘spark gap’. Here, the price of electricity is almost four times that of gas. The EHPA’s research shows that in countries where the price of gas and electricity are more on a parr, there’s a higher uptake of heat pumps. It maintains that the unit cost of electricity should be no more than twice the cost of gas if governments are to encourage homeowners to make the switch to renewables.
Charlotte Lee, Chief Executive of the Heat Pump Association (HPA) sees a direct correlation between the higher price of electricity and a sluggish take-up of heat pumps, saying it penalises those who are turning away from fossil fuels.
“A significant contributor to high electricity prices in the UK is the disproportionate application of Environmental and Social Obligations – often referred to by Government as “policy costs” and known commonly as “green levies”. Domestic electricity consumers, bear around 85% of these levies, which means a typical heat pump consumer pays £170 more than an equivalent gas boiler consumer in levy costs per annum.”
Last Autumn, the HPA proposed the introduction of an Interim Domestic Heat Pump Tariff to reduce the price electricity whilst fundamental reforms to the electricity market are considered and implemented. In her response to the EHPA’s latest report, Charlotte Lee urges our new government to take action:
“UK heat pump sales per household remain the lowest across Europe with only 2.08 heat pumps per 1000 households sold. This highlights the scale of the opportunity that remains in the UK, which will only be realised if swift, decisive action is taken to reduce the price of electricity relative to gas.”
Mark Krull, Director of LCL Awards urges caution:
“We need to be careful that in calling for a reduction in electricity costs, the levies don’t shift onto gas customers, many of whom aren’t in a financial position to fit heat pumps. Some will be having to make difficult decisions this winter on whether they heat their home or put food on the table.
“The reason for the fuel price differential is complicated and, in my opinion, suggesting it’s solely down to green levies over-simplifies the situation. The cost of bailing out failing energy companies and levies relating to the Feed in Tariff are substantial. We don’t want to end up in a situation where millions of gas customers are forced into fuel poverty because of an increase in general taxation or – even worse – their gas bills. Some energy companies, Octopus and E.on for example, offer their customers special heat pump tariffs, which helps to reduce the ‘spark gap’.
“The EHPA’s report makes interesting reading. The correlation between the cost of electricity and heat pump uptake is clear, but the last thing we need is a knee-jerk reaction which could impact some of the poorest in society.
“The Government is currently reviewing how the sector works with tariffs and levies (Review of Electricity Market Arrangements (REMA)), let’s hope the outcomes of this review are fair and equitable for all energy-users.”
To read the Heat Pump Association's press release on the EHPA's report, click here: New European Heat Pump Market Report highlights need to solve UK’s electricity and gas price disparity. - Heat Pumps