The Government plans for the cost of green levies - which raise money to pay for climate change policies - to start coming from your gas bill instead of your electricity bill. This is great news for heat pumps, because it means that by switching from gas to an electrically-powered heat pump, you will save even more on your running costs.
How does it work now?
“Green levies” is the term used to describe the part of your energy bill that contributes towards Government policies to reduce carbon emissions. Up to this point, these green levies have always been made on your electricity bill. The original logic for this was that every household in the country has an electricity supply, but not every country has a gas supply. However the consequence of this was the somewhat perverse situation in which electricity - the fuel used to power low carbon heat pumps - was disproportionately expensive, which obviously favoured gas boilers, the very technology the Government want to phase out.
Won’t this force energy bills even higher?
It depends on the exact option the Government choose. If they simply add a new levy to gas and leave the existing one on electricity, then yes, energy bills will increase. However our expectation is that the Government’s will propose switching the current green levies from the electricity bill, to the gas bill, over a period of time. So for a typical dual-fuel customer with a gas supply and an electricity supply, the combined bill will be unchanged. However of course, the gas component will be higher, and the electricity component lower.
Why is this good for heat pumps?
Whilst we live in an era of funding schemes for heat pumps, as the industry develops and grows towards the Government’s target of 600,000 units per year by 2028, long term one of the big drivers for consumers is savings on running costs. As such, the comparison between gas and electricity price is a critical metric for consumers making the decision to switch to a heat pump system.
At the moment, electricity is disproportionately high, because all the levies are unfairly raised against the electricity bill. In order for the heat pump industry to grow, it is critical that we are able to compete on a level playing field against fossil fuels. The UK’s electricity is becoming increasingly decarbonised, and so it is wrong that levies for climate change policies are raised against electricity. It is right that the Government should introduce a “carbon tax” system, where the dirtiest fuels pay the most levy towards decarbonising our country.
By making electricity cheaper, and simultaneously making gas and other dirtier fossil fuels more expensive, this is a really strong driver for consumers to make the positive step of reducing their personal carbon emissions by switching to a low carbon heat pump system.