Heat Pump Target needs Tax Switch
A report just published by Public First on 28 April 2021 for five utility companies concludes that:
"Policy change is needed to meet the UK's targets on heat pumps, which are a stated part of the government's plan to decarbonise heat. Decarbonising and electrifying residential heat is crucial if the UK is to achieve its Net Zero targets.
At present, however, many policy costs are imposed on electricity bills but not on gas, penalising those who do invest in cleaner options.
Far from putting a price on pollution, we are actively encouraging the use of fossil fuels.
Unless policy changes, UK households that opt for an air source heat pump will pay £305 more a year in 2030 in energy bills than those with a gas boiler."
The policy costs imposed on electricity but not gas include: Feed-In Tariffs, Renewable Obligation Certificates and Contracts for Difference. These taxes and levies imposed on electricity currently amount to 6.01 p/kWhr. The taxes and levies imposed on gas currently amount to just 0.41 p/kWhr.
The full Options for Energy Bill Reform report goes on to say that: "UK lags behind its international comparators on decarbonised heating, heat pump purchases and trajectory. A number of countries offer high incentives for decarbonised heating as part of their drive towards net zero. They have also introduced, or are introducing, more balanced costs between electricity and gas."The report notes that Germany has 2.6 times the heat pump sales per capita as the UK. The Netherlands has 4.7 times the sales and France ten times the sales per capita as the UK.
Sweden has 35 times the sales per head of the UK. The simple reason for this is that Sweden imposes significant taxes on the sale of gas and much lower taxes than the UK on electricity.
If the UK is to meet its target of 600,000 installations of heat pumps a year by 2028, as compared to the 30,000 sold in 2020, then the Chancellor needs to switch the current "green" taxes from electricity to gas.
It is important to note that many of the severest case of fuel poverty suffered in the UK are amongst those who rely on direct electric heating. Their poverty will be reduced as green taxes on electricity are reduced. These inappropriate "green taxes" need to be eliminated if the UK is serious about moving toward Net-Zero.