Time to Pump It Up: A Comparative Review of the UK Heat Pump Rollout

In the UK, domestic heating contributes 16% of greenhouse gas emissions. To achieve net-zero, it is critical that the heating industry evolves from highly emitting gas boilers to low carbon technologies such as heat pumps, which rely on electricity to deliver warmth. If this electricity is renewably sourced, it makes home heating carbon free.

The response to Russia’s invasion of Ukraine has amplified the importance of gas boiler alternatives as a crucial tool in Europe’s effort to cut dependency on Russian gas. As stated by the International Energy Agency 10-point plan, doubling European Union heat pump installation rates from current levels would save 2 billion cubic meters of gas per year. Although the UK is less reliant on Russian gas than mainland Europe, soaring prices and net-zero targets make an accelerated heat pump rollout just as important in the UK. 

According to the European Heat Pump Association, the UK had 54,000 heat pumps installed in 2021, which is the worst per-household installation rate in Europe (a rate of 1.48 per 1,000 households). This makes the UK government’s target of 600,000 annual installations by 2028 appear as a distant dream, requiring 15.3 installations per 1,000 households per year.

Figure 1. Historic and Required UK Annual Installations of Residential Heat Pumps (100s of thousands)

(Source: Climate Change Committee)

To understand the UK’s comparatively poor performance, it is instructive to consider the approaches taken by European counterparts. Norway is the leading heat pump installer in Europe with 49.77 installations per 1,000 households in 2021. Finland follows with 44.01 per 1,000. 
These rates have been fueled by generous government subsides, high fossil fuel taxes, support for training schemes and reskilling, and restrictions on gas boilers—new installations were banned in Norway in 2020. The fundamental factor driving this rate of installation has been how the Nordics have used regulatory levers to give electricity a direct cost advantage over gas, making heat pumps more financially viable. The reality is that the environmental incentive alone is not enough to encourage substantial change in consumer preference. 

Considering Europe more widely, heat pump sales grew by 34% between 2020 and 2021, a record high. The two best performers in terms of units sold were France (537,000 units sold, +36% from 2020) and Italy (382,000, +64%)—fellow G7 members. Italy’s strong performance can be attributed to the country’s 110% Superbonus scheme, a tax credit for the installations of low carbon technology, including heat pumps. France has stopped all subsides for new gas boilers and offers €1100 (~$1094) grants exclusively for heat pumps.

Why Is the UK Failing to Meet Heat Pump Installation Targets?

In comparison, the UK has several factors inhibiting a successful heat pump rollout. These factors include high installation costs, an absence of engineers with relevant skills, a lack of a market push from manufacturers, and an aging housing stock in desperate need of widespread energy efficiency retrofits. However, perhaps most significant are the environmental and social levies on electricity and gas. According to the Regulatory Assistance Project, these lie at £1.01 (~$1.17) per megawatt-hour on gas and £48.60 (~$56.10) per megawatt-hour on electricity. This disparity must be reversed to ensure running a heat pump is more financially favorable than traditional heating methods. Only then can meaningful change in consumer preference be realized. Further changes include investment in training for installation engineers and bolstered domestic retrofit targets.

Although a successful UK heat pump rollout will be contingent on much-improved government policies and incentives, priorities also need to be seen at a distribution network operator (DNO) level, given that it is their infrastructure that will be profoundly affected by heat pump proliferation. This need includes investment in innovation from DNOs such as researching better ways of engaging the public and changing their attitudes toward low carbon technology, collaborating with other partners to create business propositions with heat pumps as the focus, and undertaking innovative projects that will further incentivize the adoption of heat pumps. An exciting example is a project named Equinox, which Guidehouse is collaborating on alongside Western Power Distribution and other partners. This project is investigating the flexibility value heat pumps offer the grid, one of the many benefits of a heat pump rollout.