New report tracks true cost of green energy switch

A new report by the not-for-profit body Energy and Utilities Alliance (EUA) finds customers are typically facing a five-fold cost increase to install a heat pump, compared to a hydrogen-ready boiler.

Households can currently expect to pay up to £15,000 for transition to a heat pump depending on the property type, compared to less than £3,000 for a hydrogen-ready boiler. In addition to the higher cost of the heat pump itself, the disparity is largely due to the additional energy efficiency measures needed to enable a heat pump to operate efficiently, plus the need to fit a hot water cylinder and new radiators. Some homes also require new internal pipework.

In its recent Heat and Buildings Strategy, the UK Government set an ambitious cost reduction target for heat pumps to reach cost parity with gas boilers by the end of the decade, with 25-50% of the reduction achieved by 2025.

To support the initial upfront costs, the Government is offering consumers £5,000 grants for the installation of heat pumps, yet the allocated funding is only enough to support 30,000 heat pump installations per annum for three years – this equates to just 5% of the annual installation target of 600k heat pumps per year by 2028. For the first time this report gives clarity for customers considering the switch to greener energy and is the first in a series which will track the progress towards the Government’s cost reduction target.

Introducing the report, Mike Foster, chief executive of EUA said: “We need to decarbonise homes if we are to meet our Net Zero ambitions but consumers simply do not have the cash to pay for the high upfront costs of many low carbon heating options. The recent Heat and Building Strategy is right to demand massive reductions in the cost of heat pumps, which according to this report can cost consumers up to seven times that of a simple boiler switch.

“Many heating industry experts are sceptical that the scale of the cost reduction can be achieved, with the claim that heat pump costs will be at parity with gas boilers by April next year, as simply implausible.

“Regardless of what happens in the heat pump market, it is increasingly clear that they are not a like-for-like replacement of a gas boiler. Consumers will face considerable disruption, cost and the need for behavioural change to retrofit their homes with a heat pump.

“It is recognised that the majority of UK homes are simply not suitable for heat pumps. When an existing boiler needs replacing, installing a hydrogen-ready version, at no extra cost, means that a householder can switch over to clean burning hydrogen when it’s available in the network.”

There is no silver bullet to tackle the challenging target of achieving Net Zero by 2050 and every energy solution will be needed to play its part. The report highlights that the costs of transitioning to cleaner energy can vary vastly in different homes, dependent on the fabric of the building and whether there are any energy efficiency measures in place. It is therefore vital that customers understand the options available to them so they can make the best decision. This will help to ensure an affordable and fair energy transition for everyone.

Mr Foster concluded: “We urge the Government to expedite a decision to mandate hydrogen-ready boilers so that when a boiler reaches the end of its natural life it can replaced which one which is future proof. The UK’s leading boiler manufacturers have made a promise that the hydrogen-ready boilers can be produced at the equivalent cost of today’s natural gas equivalents and with the products already developed they are ready to start manufacturing.”

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