E3G, an independent climate change think tank, published a report on 24 April 2024 setting out what it describes as viable routes to market for heat pumps and the financial offers needed to underpin them1. The report was written by Leo Vincent1.
The report states that heat pumps will be the primary technology for decarbonising the way homes are heated, but that the UK lags behind European and American peers and frequently finishes "bottom of the league table" for the number of heat pumps installed1. It identifies two obstacles: heat pumps remain more expensive than gas boilers, which it says frustrates uptake, and although heat pumps are three times as efficient as gas boilers, electricity unit prices are around three times higher, which it says effectively eliminates the efficiency benefits from a running cost perspective1.
"This report considers a range of viable routes to market for heat pumps and sets out the financial offers needed to underpin them."
The report's recommendations are grouped around upfront and running costs1:
| Area | Recommendation |
|---|---|
| Running costs | Lower the cost of electric heating, and of electricity more generally, to improve heat pump running costs |
| Business models | Support new business models for heat pump purchase, including leasing and service options and more flexible tariffs |
| Finance | Unlock private and public finance options, such as property-linked finance, demand aggregation, and attractive retrofit loan offers |
E3G states that policy changes can make heat pumps the most cost-effective option for consumers, without the need for expensive and permanent subsidies1. It also notes that the UK has a history of nationally co-ordinated heating system transitions and argues that with the right coordination and leadership from government it can make similar strides towards cleaner and more efficient heating systems1. The report does not set out a timetable for the changes it recommends, and no delivery dates or funding figures are given in the published summary1.
Why it matters for households
For a household weighing up a heat pump, the report's central point is that the efficiency advantage of a heat pump over a gas boiler is currently cancelled out at the meter: three times the efficiency against roughly three times the unit price of electricity leaves running costs broadly level1. That means the running cost of a home's heating, and therefore its exposure to energy price movements, depends as much on the price of electricity relative to gas as on the technology installed. The report's proposals on leasing, service options and flexible tariffs point to payment structures that spread or reduce the upfront cost of a heat pump rather than changing the unit price itself, while its finance proposals concern how the capital cost of a retrofit is raised and repaid1. Nothing in the report changes any current grant, tariff or regulation, and no scheme described in it has been confirmed as government policy1.
What happens next
The report was published on 24 April 2024 and is available in full, with an executive summary, from E3G1. No next steps, consultation dates or implementation timetable are set out in the published material1.