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Electricity and gas price disparity holds back heat pump deployment

Posted: Monday, July 29th, 2024

According to the UK's Heat Pump Association (HPA), the European Heat Pump Association’s (EHPA) recent 2024 market report highlights the crucial impact of a low electricity and gas price ratio on accelerated heat pump deployment.

Currently, the UK's electricity and gas price ratio is 3.97, the highest in Europe and nearly double the EHPA’s recommendation of 2, HVP Mag reported.

The report illustrates that European countries with a high ‘spark gap’ (the ratio between household electricity and gas prices) also have lower annual total sales of heat pumps per household.

A significant contributor to high electricity prices in the UK is the disproportionate application of Environmental and Social Obligations—often referred to by the government as 'policy costs' and known commonly as 'green levies'.

The HPA says domestic electricity consumers bear around 85% of these levies, which means a typical heat pump consumer pays £170 more in levy costs per annum than an equivalent gas boiler consumer.

In November 2023, the HPA proposed introducing an Interim Domestic Heat Pump Tariff Discount to provide a short-term solution to reducing the price of electricity relative to gas while fundamental reforms to the electricity market were considered and implemented.

This report and extensive background analysis set out the implications of various options for tackling one of the critical challenges in accelerating heat pump deployment: running costs.

Commenting on the EPHA report, Charlotte Lee, HPA Chief Executive, said: “This latest data release yet again highlights the crucial need for the UK government to act quickly to tackle the disparity between electricity and gas prices to accelerate heat pump deployment.

The Labour government has been transparent that it is the party of delivery, and it is imperative that the new government now prioritise the publication of a consultation on this issue.”

UK heat pump sales per household remain the lowest across Europe, with only 2.08 heat pumps per 1,000 households sold.

The HPA says 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.

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