Findings – energy bills
Today
At today’s (July 2024) energy prices, our modelling found that roughly 25% of homes might make energy bill savings when moving to a heat pump, with those homes seeing, on average, a bill saving of just over £700. Homes with oil, electric and older non-condensing gas boilers make up the majority of the 600,000 homes that could make bill savings today under this methodology.
| All homes | Houses only | Flats only | |
| Number of homes with lower bills | 621,000 | 525,000 | 95,700 |
| Proportion of homes lower bills | 25% | 33% | 11% |
| Avg. bill saving for homes making a bill saving | £852 | £482 | £508 |
| Avg. bill increase for homes with an increased bill | £274 | £173 | £100 |
In all energy price scenarios in our model houses perform better than flats. This reflects the CAR modelling where several factors such as the greater ratio of hot water to space heating demand in flats weaken the economics of heat pumps in these dwellings. This supports the idea that a range of technologies will help decarbonise flats including communal solutions like heat networks and networked heat pumps (which were not included in our study). This could also be reflected in policy design with the Scottish Government proposing a different mechanism for requiring clean heating in homes within ‘heat network zones’, many of which are likely to be flats.
Bill savings in 2028
As the electricity-to-gas price ratio narrows in each of the scenarios making electricity cheaper the number of homes making bill savings from fitting a heat pump compared with sticking with their original heating type increases. Virtually all homes see an energy bill saving once the electricity-to-gas price ratio reaches 2:1 under the narrow scenario.
| Standard tariffs | Time-of-use tariffs | |||||
| Wide | Medium | Narrow | Wide | Medium | Narrow | |
| Number of homes with lower bills | 1,376,500 | 2,120,700 | 2,382,300 | 1,936,400 | 2,286,200 | 2,440,900 |
| Proportion of homes lower bills | 55% | 85% | 95% | 78% | 92% | 98% |
| Avg. bill saving for homes making a bill saving | £384 | £443 | £566 | £420 | £532 | £642 |
| Avg. bill increase for homes with an increased bill | £170 | £130 | £142 | £199 | £199 | £263 |
Figure 1 - Percentage of homes with lower annual energy bills
Image Description
This column chart shows the percentage of homes with lower annual energy bills, split by wide, medium and narrow scenarios and standard tariffs and time-of-use tariffs. The shows that the percentage of homes with lower bills increases from wide to medium and narrow scenarios and increases from standard to time-of-use tariffs. 98% of homes on time-of-use tariffs in the narrow scenario would have lower bills.
Findings – time-of-use tariffs
Under CAR’s methodology, almost all homes (98%) were found to make additional bill savings by using their heat pumps in combination with a time-of-use tariff (TOU). However, there were variations across the building archetypes in the scale of this saving. The average (simple mean) bill saving across the archetypes was £150 per year and the highest saving was the equivalent of 13% of the baseline bill.
The modelling suggests that homes that can store the most heat could benefit most from this kind of tariff and pre-heating, either because they have lower heat loss or a greater thermal mass.
This modelling shows that TOUs are likely to be beneficial to many heat pump owners and that the barriers are mostly not related to the building type. This suggests the need to ensure the smart meter rollout reaches as many households as possible (since these are required for TOUs), ongoing innovation in electricity retail markets and research to better understand the comfort impacts, household impacts and other social aspects that might influence the suitability of TOUs for heat pump owners.
