Source · Select Committees · Public Accounts Committee
Recommendation 10
10
Acknowledged
High electricity prices make heat pumps more expensive to run than gas boilers.
Recommendation
DESNZ recognised that the cost of running heat pumps was also a key barrier to heat pump adoption. It explained that, as they are based on electricity, heat pumps are more expensive to run than fossil fuel boilers because of the cost of electricity is higher than gas.17 This view was supported by written evidence to our inquiry from some energy suppliers including Good Energy and Octopus Energy; a consumer campaign group, Fuel Poverty Action; and Energy UK.18 In their written evidence, the Heat Pump Association and the MCS Foundation told us that the UK’s price ratio between electricity and gas prices of 4:1 was one of the highest in Europe.19 Both EDF Energy and the MCS Foundation explained that this disparity was partly due to the government levying a large proportion of its environmental policy costs on electricity bills, such as schemes to support renewable energy development and energy efficiency. The MCS Foundation added that, for a standard direct debit customer, 16% of their electricity bill will be made up of these levies, compared to only 5% of their gas bill.20 DESNZ explained that although electricity was about four times per unit more expensive than gas, this was offset by the fact that heat pumps were three times as efficient as gas boilers, which “helps a lot”.21
Government Response Summary
Government agrees with the recommendation to address running costs but defers an implementation date, stating they are considering ways to reduce costs and funding an innovation programme to improve heat pump performance, without specific commitments on the electricity-gas price ratio.
Government Response
Acknowledged
HM Government
Acknowledged
The government agrees with the Committee’s recommendation. Target implementation date: to be confirmed 1.4 The implementation of recommendations is dependent on further steers from new ministers, and the department will inform the new Committee as soon as an implementation date is agreed. 1.5 The department has evidence that heat pumps are over three times more efficient than gas boilers. However, current differentials in electricity and gas prices do not always make them cheaper to run. 1.6 The government wants to ensure that consumers are supported to make greener choices, which will help deliver on net zero ambitions. As such, the government is considering the best and most efficient way to bring down the running costs of low-carbon technologies such as heat pumps. 1.7 The government is investing up to £42 million in the Heat Pump Ready innovation programme to overcome barriers to heat pump deployment and support innovation in product design, including improving performance. The Heat Pump Ready programme is part of the £1 billion Net Zero Innovation Portfolio and builds on the previous £16.5 million Electrification of Heat Demonstration Project. Heat Pump Ready projects are currently underway and will conclude in 2025.