Should we shift energy taxes to make heat pumps cheaper to run?

Tariffs vary but averaged across the country, under the current OFGEM price caps, electricity costs four times gas per kWh. This means that by my estimate [1] unless you go off gas completely (hence avoiding the fixed daily charge) you need a heat pump efficiency (SCOP) of 360% to get similar costs. This is not unknown but considerably better than average. If you do go off gas completely, you need 320% which is still better than average. If you only got 300% you would be paying 6% more with the heat pump than gas. This is discouraging for people wanting to switch to low carbon heating.

However, a significant part of the electricity bill is due to environmental and social policies or 'taxes'. If these were removed or shifted, the ratio of electricity to gas price would be smaller, making heat pumps relatively cheaper. Hitherto, policy has been to keep gas cheap because so many of us rely on it for heating which is essential for health. However, doing so penalises households that make the transition to low carbon heating. What are these taxes and how much difference would this make? Here is a graph showing policy costs on gas and electricity as of September. There are more policy costs on the electricity bill than the gas bill and the home with a heat pump uses more electricity, so pays even more policy costs.

 

Policy costs for a typical bill of 12000 kWh gas, 3100 kWh electricity or, with a heat pump, 6650 kWh annually. The policy costs are from OFGEM [3] and the heat pump kWh used is from [1] Costs are taken from the period July/Sep 2023, the latest available. These costs vary little by region. The acronyms are explained below. 

Understanding the costs and savings on your EPC recommendations

On your home energy performance certificate (EPC) you may find a list of recommendations for energy saving measures you can make. For each one, there is a range given for ‘typical’ installation cost and a value for ‘typical’ annual savings. However, looking at a sample of EPCs I was shocked to find that the ‘typical’ cost of each measure is the same regardless of the size or type of house. On the other hand, the savings figure does vary in a plausible fashion. 

For example, assuming you have cavity walls that are not filled it might say cavity wall insulation (CWI) will cost £500 to £1,500 to install and will save £90/year, implying a payback time of five to fifteen years. Five years is quite good but fifteen is not so good so this is not very helpful. This EPC was for a semi-detached house and looking at Checkatrade I see that the typical cost for CWI for a semi-detached house is £800 to £1,200. That gives a payback time of nine to thirteen years. That is more usefully precise – but is it accurate?

In this post I explore the meaning of these figures in more detail and compare the installation costs with on the EPC with those from Checkatrade or Energy Saving Trust.

How much can you save from solar PV and battery with a heat pump?

You can substantially reduce your electricity bills if you have solar panels and a battery. What about if you have a heat pump? It certainly does make a difference but most of your heating demand is in the winter and most of your PV generation is in the summer. You would need an enormous battery to save enough in summer to use in winter. Suppose you put in enough solar panels to match your annual use so you are net zero for electricity consumption. What would this mean for your bills and for carbon emissions? This chart shows example savings from an energy use model.

Impact on the electricity bill for the model house heated with an air source heat pump, firstly with no panels, then with solar panels (6,700 kWh/year), then adding a medium or large size battery. Assumes a flat tariff with 30p/day fixed charge, 25p/kWh for electricity supplied and 12p/kWh for electricity export.

I have used a model of a fairly typical semi-detached home. Using a combi boiler, the gas bill for this model is about 10,500 kWh/year, electricity 2,800 kWh/year. Switching to an air source heat pump for heating, electricity demand increases to 6,700 kWh/year and I have given the house solar panels to match, so net zero electricity over the year. The battery charge-discharge efficiency is 90% and the solar inverter efficiency is 95%.The weather is typical for Cambridge, with hourly resolution. 

NB. Few people have more than 4 kWp, partly for lack of suitable roof area, and partly as you need special permission from the DNO (Distribution Network Operator) to exceed this. If these were all south facing you might get 3700 kWh from them. I have also modelled the impact of an array that size. The savings are smaller but definitely worth having. Also you can increase the savings with a tariff that has lower rates for off-peak electricity - I have used the Octopus Cosy tariff as an example.

Are hybrid heat pumps a good thing?

A hybrid heat pump is normally a combination of a gas boiler and an air source heat pump (HP). The simplest arrangement runs either one or the other at any one time. For example, you can use the boiler (possibly your existing boiler) for space heating when it is cheaper to run, thus reducing your bills. This typically means using the boiler when the outside temperature is low. You might also use the boiler to provide hot water, if you currently have a combi and do not want to find the space for a hot water cylinder, or if you do have a cylinder but it is not suitable for the heat pump. The hybrid approach avoids some of the disruption and expense of switching to a standalone heat pump.

Government subsidy for hybrids – off and on.

Hybrids were supported under the RHI subsidy but only with meters to see how much you use the HP side. They are not supported by the Boiler Upgrade Scheme which gives grants for heat pumps now. The consultation for the Clean Heat Market mechanism proposed including them [1]. This mechanism aims to increase the rate of heat pump installs by requiring heating system suppliers to install an increasing proportion of heat pumps rather than boilers (a bit like the old Renewable Energy Obligation scheme). It will be interesting to see what different stakeholders think about allowing hybrids to count – the responses are not yet published.

A hybrid HP could be a temporary or a long term solution.

You might opt for a hybrid heat pump as a temporary solution:

• To see if it the HP is adequate, because you have doubts.
• Because your house has high heat loss at the moment and you intend to do some more work on it, so you will get a heat pump sized for when you are finished and use the boiler as a backup in the meantime. 

You might opt for a hybrid as a long term solution:

• To minimise your energy bill – from hour to hour you can use whichever is cheaper (see below for more analysis)
• Or to minimise your carbon emissions, using predicted emissions intensity instead of price
• Because your house has high heat loss and you do not believe it is possible to make it ‘heat pump ready’. You can have a hybrid solution with no radiator upgrades and it will reduce your gas demand but not completely.

What happens to the wood we grow?

A recent article in New Scientist, and the peer reviewed paper behind it [1], opened my eyes to the staggering amount of wood from managed forests that goes up in smoke, if not immediately then after quite a short lifetime as something useful. This is a shame, given the potential for using wood to store carbon. The article includes a rather fine flow digram of what happens to the wood we cut at the global level. I have compared these figures to what happens in the UK using data produced for the government by Forest Research [2]. A great deal less of our wood is used immediately for fuel, but rather more of it is used for short lived uses like fencing or paper/packaging. How can we increase the value of wood for carbon storage?

Flow diagram of how wood is used globally.

Flow diagram from [1] showing what happens to wood harvested from plantations. The figures are global averages based on 2010. Roundwood is logs, or other parts of trees removed from the forest in any form. OSB is oriented strand board.

Smart meter for detecting water leaks

Many of us now have smart meters for electricity and gas, but we are starting to see smart meters for water too. They may help you with reducing water use – which is very important because of climate warming as well as the growing population. However, one of the key benefits is going to be detecting leaks – for water companies and for consumers. We had a water leak a few years ago and we would have spotted it a lot quicker if we had a smart meter!

We take water for granted and don't think about it. Smart water meters will help us track our use and detect leaks.

What is a smart water meter?

Smart water meters usually have similar features to smart energy meters so they record how much you use, often hour by hour, and send the readings to your water supplier (or their agent). This means there is no need for a man to come and read the meter in person and you can get much more frequent updates as to how much you are using. Southern Water is trialling a clip-on device that fetches readings from the old meter and sends them wirelessly to a datacentre [1]. In Coventry and Warwickshire, Severn Trent is testing new meters that allow you to check your consumption hourly if you want [2]. Anglian Water is rolling out something similar for all customers [3] and so is Thames Water [4]. They aim to have most customers on the system by 2030. 

On 15 minute neighbourhoods

15 (or 20) minute neighbourhoods are an immensely good idea. The goal is to reduce the need for use of cars by ensuring that routine daily activities are in range of walking, cycling or possibly public transport. This encourages active travel, with associated health benefits, as well as reducing GHG emissions. There is no single accepted definition of what this actually means in terms of distance (how far do you walk in 15 minutes?) or what services are supposed to be in this range (school, doctor, shops …). Here I report on some findings from a survey of residents in Oxfordshire [1] about what facilities people want, a related report [2] and a literature review of the subject [3]. Also there are some numbers on how well Cambridge scores from the Cambridge City Portrait: State of the City report [4].