The Government has announced the end of the £1,500 grant that was available when buying a new electric car1. The Energy and Climate Intelligence Unit (ECIU), a non-profit organisation supporting informed debate on energy and climate change, reported the closure of the support in an analysis published on 5 July 20221. The announcement date of the closure itself has not been reported in the available material.
The ECIU analysis puts the change in the context of wider running costs. It states that "electric households" with heat pumps and electric vehicles are saving an average £1,180 a year compared with households using petrol for their cars and gas for their heating and hot water1. That figure combines a £960 annual saving from running an electric vehicle charged at home as of late June, up from £780 in the year to May, and more than £220 a year saved by heating an efficient home with a heat pump rather than an average home with a gas boiler1.
"Grants of £1,500 were available when buying a new electric car, but the Government has announced the end of this support."
The analysis also reports that inflation reached 9.1% over the year to May, the highest rate for 40 years, with over a third of that rise, 3.2%, due to energy prices driven by the gas and oil crisis1. For households using a heat pump and an electric car, the energy contribution to inflation was 2.3%, against 3.3% for households using fossil fuels1. Ofgem's latest forecast at the time put the average dual fuel bill at £2,8001.
On the second-hand market, the analysis reports 40,000 battery electric vehicles changing hands in 2021, up 119% on 20201. It states that heat pump prices start at £4,000, with a typical price of £6,000, supported by a £5,000 grant from the Boiler Upgrade Scheme, which can bring the price down to the level of a gas boiler1. The Government is working with industry to reduce heat pump costs by up to 50% by 2025 and to parity with a boiler by 20301.
Why it matters for households
The grant that has ended applied to the purchase price of a new electric car, not to running costs. Households weighing up electric driving now face the full upfront cost of a new vehicle, while the running-cost gap reported by the ECIU has widened: petrol price inflation of 30% increased the gap between internal combustion cars and electric vehicles, with EVs charged at home £780 a year cheaper to run in the year to May, rising to £960 by late June1. The analysis states that overall savings for homes that avoided fossil fuels stood at £1,000 a year in May 2022, rising to £1,180 a year for an electric home with net zero technologies1.
For a home's energy independence, the analysis frames the shift away from fossil fuels for transport and heating as a way to break free of oil and gas markets, and states that UK households spend at least £35 billion a year more on heating and car travel than they would in an electric future1. It notes that low-income households will need support to purchase clean technologies, and that these are becoming more accessible as prices fall1. The second-hand market is one route to cheaper electric driving that the analysis identifies, without the purchase grant1.
What happens next
The analysis states that energy bills are set to increase further in October, with the average dual fuel bill likely to reach £2,800 according to Ofgem's latest forecast, and that petrol price volatility has led some to forecast prices of well over £2 per litre1. It adds that the gap in energy costs between fossil fuel and modern electric homes could grow to around £1,600 a year1. No replacement for the £1,500 electric car grant has been reported.