One of the primary barriers to the adoption of heat pumps across the United Kingdom is the UK’s unfavourable Electricity-to-Gas Price Ratio (EtGPR). Because electricity is a lot more expensive than gas, people worry that it may not be cost-effective to switch out their gas boilers for a heat pump. Put another way, because of our high EtGPR, heat pump advocates and policymakers can’t confidently say that ‘switching to a heat pump will keep you warm, save the environment, AND save you money on your heating bills.’
The UK is, therefore, left trying to convince people to switch to a heat pump based on personal comfort and the environment. This does not appear to be enough of a motivator. Heat pumps heat most homes very well and dramatically reduce carbon emissions – but, they can be costly to run (unless you make certain system and fabric upgrades which also carry a cost).
As illustrated by Table 1, the UK’s EtGPR has been above 3.0 for more than fifteen years, with no sign of abating. In October 2024, the EtGPR sat at 3.9. This means, relatively speaking, heating your home with electricity is almost 4 times more expensive than it is with gas.
Table 1. Electricity-to-Gas Price Ratio in the United Kingdom: 2008–2024.
| Year | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 |
| Ratio | 3.51 | 3.37 | 3.43 | 3.18 | 3.22 | 3.28 | 3.20 | 3.35 | 3.53 | 3.77 | 4.06 | 4.30 | 4.63 | 4.89 | 3.91 | 4.00 | 4.0 |
That said, heat pumps are an amazing piece of technology. They routinely turn one unit of electricity into 3 units of heat. Although not a perfect calculation, this means if the EtGPR was 3.0, heating your home with a heat pump would cost the same as with gas – and, if the EtGPR went lower than that, switching would start to save you money. Research by Nesta found that “virtually all homes see an energy bill saving once the electricity-to-gas price ratio reaches 2.0.”
The price of electricity relative to gas is different in other parts of Europe.
Figure 1. Comparing the EtGPR of the UK, Sweden, Germany, and Switzerland Between 2012 and 2023.
As shown in Figure 1, EtGPRs vary between the UK, Sweden, Germany, and Switzerland. Sweden is more comparable to Switzerland, and Germany mirrors the situation here. The EtGPR in Germany has been above 4.0 almost every year between 2012 and 2023. Sweden, on the other hand, has not had an EtGPR above 1.75 for more than a decade, and Switzerland has had an average EtGPR of around 2.0 since 2012.
Comparing these EtGPR figures with the rate of heat pump adoption in each country is revealing.
Figure 2. Heat Pump Adoption Rate: Heat Pumps Sold per 100,000 Population (2022).
Data: EHPA 2023.
As we can see from Figure 2, Sweden is a heat pump leader with 2,047 heat pumps sold per 100,000 people in 2022. We, by comparison, sold a paltry 89 heat pumps per 100,000 that year.
While the EtGPR ratio isn’t the only factor facilitating heat pump adoption (otherwise, you’d expect to see stronger sales in Switzerland), it certainly frustrates deployment here in the UK.
This begs the question: how do we get the EtGPR where we need it to be in the UK to accelerate our adoption of heat pumps?
It’s common to suggest we look at the ‘green levies’ and ‘policy costs’ that are tacked onto electricity but don’t seem to affect the price of gas in the same way.
According to Ofgem, green levies constituted 16% of the April-June 2024 price cap on electricity. According to Nesta, if all taxes and levies were removed, electricity in 2023 would have been 27p/kWh and gas 7p/kWh – or an EtGPR of 3.8. According to CaCHE analysis, removing the levies from electricity alone would potentially lower the EtGPR from 3.91 to 3.3. Shifting the levies from electricity to gas may lower the EtGPR to 2.8.
The proposal to shift green levies onto gas is not without its issues, however. Citizens Advice notes that fuel poverty is four times more prevalent among those on gas heating. Making gas more expensive may have unintended consequences for those in society least able to pay. Furthermore, as an increasing number of households move from gas to electrified heating, the policy costs would be “spread over the increasingly small number that remain on it.” Such a situation is unlikely to be politically or socially sustainable. If, on the other hand, these levies ultimately find their way to general taxation or national debt, the policy change will have been “more or less irrelevant” and do little to address the ever-increasing cost of electricity in the United Kingdom.
While shifting or removing green levies from electricity is a good start – provided we can deal with some of the unintended consequences and knock-on effects – we need a more permanent and long-term solution. We need to reduce the price of electricity absolutely in the UK, not merely relatively.
A soon-to-be-published CaCHE report addresses precisely this question and offers policy recommendations on how to lower the consumer price of electricity in a structural, systemic, and fundamental way.
