Interim research findings that show the cost of retrofitting heat pumps across 30m households in Great Britain and the importance of government subsidies and industry confidence in encouraging the switch from gas boilers to heat pumps
18 August 2021
Homes account for 21% of total greenhouse gas (GHG) emissions and 35% of total energy consumption in the UK in 2020. Natural gas is the most common heating fuel in domestic buildings, covering 80% of domestic heat demand in the UK. Yet the deployment of heat pumps presents a major opportunity to decarbonise the way we heat our homes. One of the major reasons for its slow uptake is the high up-front costs of heat pump systems relative to gas boilers.
In this analysis we looked at 30m properties across Great Britain to estimate the distribution of costs to retrofit an air source heat pump – rather than focusing on the cost for an ‘average’ household that currently dominates discussions.
We found that a £4,000 subsidy, as proposed under the Clean Heat Grant consulted on by government, could make air source heat pumps cheaper than gas boilers for 13% of GB homes. However, three-quarters of these homes are flats, for which there are currently practical challenges in adopting heat pumps. Excluding flats, the same subsidy will bring 3% of homes to cost parity. As with other energy technologies such as solar and wind, we would expect heat pump costs to fall as more are installed. In this way, a subsidy that affects 3% of homes in the first instance could deliver cost-parity for 16% of homes after two years. This could lead to uptake of around 230,000 heat pumps per year.
Subsidies could be reduced over time, but the government will need to balance fiscal responsibility against industry and household confidence, which will be essential in underpinning sustained innovation and demand growth.
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