Green Heating Credit could bridge affordability gap

A Green Heating Credit could help bridge the running-costs gap between heat pumps and gas boilers, says a new report from Baxi.

‘Affordable heat decarbonisation: Is it time for a Green Heating Credit?’ examines the ‘affordability gap’ that sees heat pump users paying £236 more per annum than those with gas boilers.

The report says this cost difference is down to a 25.5% levy on electricity bills, used to help fund environmental and social policies. Gas bills attract a much lower levy of 2.5%. 

Customers who switch from gas or oil heating to an electrically driven air source heat pump will inevitably be driving up their electricity consumption and as a result will see their contribution to the levy framework rise accordingly. The paper proposes that the extra levy paid by heat pump users could be offset by a £250-a-year Green Heating Credit.

Baxi’s research suggests that affordability is a crucial issue with most homeowners, with 66% of the 1277 households surveyed saying that saving money would be the main reason 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 75% of surveyed consumers, whereas the prospect of increased running costs is a disincentive for 40% of customers. For 43% of respondents, reducing carbon emissions was viewed as another good reason to invest in a heat pump.

As well as running costs, the study looks at the relative installation costs of four different property types, with an average of £7,060 for an air source heat pump, compared to £1,500 for a gas boiler and £3,350 for an oil boiler system.

However, the government’s £4,000 Clean Heat Grant, available for heat pumps from May 2022, was an attractive proposition for many homeowners, with 58% saying that they would be either ‘somewhat’ or ‘extremely’ likely to have a heat pump installed on that basis.

“Heat pumps could play their part as we decarbonise the nation’s heating but we need to bridge this affordability gap,” says Baxi MD Karen Boswell OBE. “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.”

Read the report here https://www.baxiheating.co.uk/news/baxi-report-finds-ongoing-affordability-gap