Nesta published analysis on 8 August 2023 showing that the UK's electricity-to-gas price ratio was the third-highest in Europe, behind Germany and Belgium1. The ratio compares the cost of a unit of electricity with the cost of a unit of gas, and Nesta describes it as essentially a comparison between the running cost of a heat pump and that of a gas boiler1.
Across the 17 countries examined, a unit of electricity was on average 3.1 times more expensive than a unit of gas between 2011 and 20211. In the UK over the same period, electricity was on average 3.8 times more expensive than gas, and between 2018 and 2022 the UK average rose to 4.4 times1. Nesta calls the direction of the UK trend "alarming"1.
The figures matter against a threshold Nesta draws from its own earlier work: air source heat pump running costs reach parity with gas boilers when electricity is just over three times more expensive than gas1. The UK's averages sit above that level in both periods.
| Measure | Figure |
|---|---|
| Average electricity-to-gas ratio, 17 countries, 2011-2021 | 3.1 |
| Average electricity-to-gas ratio, UK, 2011-2021 | 3.8 |
| Average electricity-to-gas ratio, UK, 2018-2022 | 4.4 |
| Heat pump running cost parity threshold | Just over 3 |
Nesta reports a weak negative correlation between the electricity-to-gas price ratio and heat pump installation rates, with countries where electricity was comparatively more expensive than gas tending to have lower installation rates between 2018 and 20211. Most countries with high heat pump installation rates had ratios typically averaging below three over 2018 to 2021, and the three Scandinavian countries with high installation rates were excluded from that part of the analysis because they have very limited gas grids1. Nesta states that the correlation does not signify a causal relationship1.
"The UK has the third-highest ratio in Europe after Germany and Belgium."
Nesta also notes that countries with extensive gas grids, including the UK, the Netherlands and Germany, have historically been slower to adopt heat pumps, and that the presence of a gas grid is a possible disincentive to adoption1. It adds that the presence of an extensive gas grid might cause delays due to path dependence, and raises the prospect of hydrogen being used for home heating1.
Why it matters for households
The ratio is a running-cost comparison, not a purchase-price one. A household weighing a heat pump against a gas boiler is comparing what each costs to run over a year, and Nesta's parity threshold of just over three sets the point at which it says air source heat pump running costs match gas boiler running costs1. On the UK averages reported, electricity has been priced above that threshold, which means the running-cost case for switching has been weaker in the UK than in most of the countries examined1.
For a home's energy independence, the ratio shapes what a household gets for the money it spends on heating. Where electricity is cheap relative to gas, a home that runs on electricity can heat itself at a comparable cost to one burning gas, and the choice of heating fuel becomes less of a financial penalty. Where the ratio is high, as Nesta reports for the UK, a household that moves off gas carries a running-cost disadvantage unless other factors offset it. Nesta notes the ratio is most relevant in countries with high penetration of gas as a heating fuel, which includes the UK1.
The analysis also points to the gas grid itself as a factor. Nesta says an extensive gas grid is a possible disincentive to adopting heat pumps and that countries with limited gas grids, such as Sweden, Norway and Finland, have among the highest rates of heat pump penetration1. For households, that describes a market in which the incumbent fuel has an established delivery network behind it.
What happens next
No dated next steps are set out in the analysis. Nesta states that making electricity cheaper relative to gas is an important policy instrument to encourage the switch from fossil fuel heating systems to heat pumps and other systems that use electricity, while noting the ratio is not the only factor affecting heat pump uptake1.