Baxi report finds ongoing affordability gap between low-carbon heat pumps and traditional gas boilers

New research for Baxi shows the ongoing affordability gap between the low-carbon heat pumps - that could reduce many homes’ carbon footprint - and traditional gas boilers.

The UK government is targeting the installation of 600,000 heat pumps-a-year which would lead to a sizeable reduction in greenhouse gas emissions. Yet the paper, commissioned by Baxi a provider of heating solutions including heat pumps and boilers, quantifies the ongoing higher running costs that will be an obstacle to progress towards low carbon heat in the UK. 

The affordability gap in running costs for heat pumps is largely because of a 25.5% environmental levy on electricity. Heat pump use electricity and are therefore penalised with greater environmental taxes even though they are low carbon sources of heat.

The paper proposes that the government pay a £250-a-year Green Heating Credit for heat pump owners which could bridge this gap in running costs. This would refund the extra levy paid by Air Source Heat Pump users. The government has already announced a Clean Heat Grant that will support householders with up to £4,000 towards the installation of a heat pump from May 2022 but ongoing running costs remain the issue. 

The main findings of the modelling averaged across four different types of housing are: 

  • The average annual running cost of a low-carbon air source heat pump remains £236 more than a gas boiler.[1]

  • Air source heat pumps are typically cheaper to run than the oil fired boilers typically used in homes that are not on the gas grid.[2]

  • The initial installation cost averages for an Air Source Heat Pump compared to for a gas boiler and for an oil boiler.

Baxi research [3] also shows just how important affordability is to customers. Saving money was seen as the most attractive reason (by 66% of respondents) for switching to a heat pump. The survey  found that a Green Heating Credit of £250 per annum would increase interest in a heat pump for three quarters of surveyed consumers whereas the prospect of increased running costs is a disincentive for 40% of customers. 

Karen Boswell OBE, Managing Director of Baxi UK & Ireland, said: “Heat pumps could play their part as we decarbonise the nation’s heating but we need to bridge this affordability gap. 

“A green heating credit would be fairer to heat pump users who are investing in decarbonising their heating and it is fair to consumers using traditional forms of heating as it won’t affect their heating bills. It also leaves room for alternative low carbon heating technologies such as hydrogen to emerge.”

Download the white paper here.

[1] 1,014-a-year for an Air Source Heat Pump versus £778-a-year for a gas boiler.

[2] £1,296-a-year for oil fired boilers versus £1,014 for Air Source Heat Pumps.

[3] In September 2021 we approached a representative sample of 1,277 households.