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Average heating bills could be halved between now and 2035 if the government ramps up investment in low-carbon heating and other green energy initiatives, the Tony Blair Institute has said.
In a report, it found that the current heat-pump installation rate “languishes” at just 30,000 per year and hydrogen heating and heat networks are still nascent technologies.
High upfront costs of around £10,000 are needed for the installation of heat pumps which means the government needs to provide “significant financial help” in the short term to reduce carbon emissions from heating in the long term.
According to the report, this is compounded by the artificially high price of electricity relative to gas which is caused by government policy costs and unequal carbon pricing.
“The good news is that innovators believe that with the right support they can bring down the upfront costs, permanently, to £5,000, or perhaps even to parity with boilers in time (roughly £2,500),” the report states.
“This is the government’s stated strategy: to scale up the market and bring costs down. But the Treasury has thus far been unwilling to inject the level of sustained funding required to scale the market and drive down costs, despite the successes of that model in solar and wind, or to remove its own energy-price distortions, which favour gas over electricity. Heat pumps remain a hard sell to the public.”
Britons are currently facing a cost-of-living crisis that has been spurred on by record rises in wholesale gas prices in addition to the conflict in Ukraine.
After considerable public pressure, Chancellor Rishi Sunak finally announced a windfall tax on energy firms last week that would help fund a £400 discount on household energy bills.
The report recommends a few simple changes in the short term to bring about modest savings before longer term actions are taken.
This includes lowering boiler flow temperatures and advice on thermostat usage that would provide modest savings of about 5 per cent per household.
It then recommends a programme to boost insulation for millions of homes over the next five years, with poorer households given priority. Research from the Centre on Innovation and Energy Demand suggests that the remaining potential for energy-efficiency measures could save UK households around 20 per cent on average.
Finally, the next decade should then see significant funds allocated towards rolling out more heat pumps before electricity market reforms are introduced that are designed to favour low-carbon energy sources such as renewables.
The institute’s head of net zero and one of the authors of the report, Daniel Newport, said: “People right across the country are struggling to keep up with spiralling energy bills and the government doesn’t seem to have a long-term plan.
“While short-term support such as the measures announced last week are important, by spending a fraction of that amount per year the Chancellor could cut heating bills in two over the coming decade and insulate the UK from future economic shocks.
“He is currently handing out much-needed – but very expensive – raincoats. Now we need to fix the roof.”
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