Changes announced in the Budget in November 2025 remove some levies from electricity bills, making clean electric technologies cheaper to run, according to analysis published by the research and innovation charity Nesta on 20 January 20261. The analysis models the effect of the government's Warm Homes Plan alongside those bill changes1.
Nesta estimates that a typical household which invests in a heat pump, solar panels and a home battery could see its annual bill fall from around £1,670 to around £670 under the changes announced by the government, a saving of £1,001 at April prices1. The figures assume a medium two to three person, two to three bedroom home consuming 2,700kWh of electricity and 11,500kWh of gas annually, with an equivalent heat pump home using 5,877kWh of electricity and no gas connection, 8 to 10 solar panels generating 3,740kWh a year and a 5kWh battery1.
| Household type | Tariff type | Annual bill (April prices) | Saving vs typical dual fuel |
|---|---|---|---|
| Dual fuel | Standard variable (price cap) | £1,668 | - |
| Heat pump | Heat pump time of use | £1,387 | £281 |
| Solar | Standard variable plus fixed export | £1,047 | £621 |
| Solar and home battery | Solar and battery time of use | £919 | £749 |
| Heat pump and solar | Heat pump time of use plus fixed export | £721 | £947 |
| Heat pump, solar and home battery | Solar and battery time of use | £667 | £1,001 |
The bill changes modelled are the removal of the Energy Company Obligation levy and the moving of 75% of the Renewables Obligation levy off energy bills, alongside interim determinations applying the effect of network cost changes under the RIIO-3 regulatory framework, which starts in April1. Nesta derived time of use tariffs by averaging current Octopus tariffs for Great Britain1. The analysis says advanced users with a higher appetite for risk could make larger savings through battery arbitrage or pass-through tariffs that track the real-time cost of generating electricity1.
Under the Warm Homes Plan, the government will offer fully funded solar panels and batteries to low income households, while other households will be able to access a new Warm Homes Loan and a subsidy from the Boiler Upgrade Scheme1. Madeleine Gabriel, director of sustainable future at Nesta, said:
"Today's announcements provide a clear path to helping millions more families reap the rewards of low-carbon home upgrades, whatever their financial situation and whether they own or rent their home."
Why it matters for households
The levies in question are policy costs added to unit rates and standing charges, and their removal from electricity changes the arithmetic of running a home on electricity rather than gas. The gap between gas and electricity per kWh has been a central reason heat pumps and other electric technologies have looked expensive to run; shifting levies off electricity narrows it. For a household weighing up a heat pump, solar panels or a battery, the running cost of the equipment matters as much as the purchase price, and the modelled bills above show the running cost falling in every combination Nesta tested1. The savings also depend on the tariff: time of use tariffs, which charge different rates at different times of day, produce the largest reductions in the model1. Households that generate and store their own electricity reduce the amount they buy from the grid, which is the practical form energy independence takes for a home.
What happens next
The RIIO-3 regulatory framework starts in April, and Nesta's April bill estimates apply the network cost changes it brings through interim determinations1. The Warm Homes Plan measures described, including fully funded solar and batteries for low income households, the Warm Homes Loan and the Boiler Upgrade Scheme subsidy, are set out as part of the plan1. No further dates for those measures are given in the analysis.