Advertisement

Household gas bills expected to rise under heat pump rollout

gas bills
gas bills

Household gas bills could rise under plans to boost the roll-out of heat pumps across the UK, a government minister has said.

Lord Callanan, minister for Energy Efficiency and Green Finance, said he wants to move green levies from electricity to gas in order to discourage the use of traditional home boilers.

The green levy shift on household energy bills will make electricity cheaper and gas more expensive.

Currently, up to 15pc of the domestic electricity bill is made up of green levies, adding around £200 in annual costs. Policymakers fear this has had the intended effect of deterring installation of heat pumps, which run on electricity.

Last year, just 55,000 heat pumps were sold in the UK, significantly lower than the Government’s target of 600,000 installations a year by 2028.

Appearing at the Conservative Party conference in Manchester on Tuesday, Lord Callanan said: “We do need to make electricity cheaper and gas proportionately more expensive.

“We will be issuing a consultation later this year on rebalancing, which is essentially about how we can make electricity cheaper. We will consult on passing some of those levies over to gas bills or possibly, something I wanted, on to general taxation – but discussions still need to take place.”

Lord Callanan accepted that some consumers would be sensitive to such changes, especially those who relied on gas for heating.

Some dwellings, including many flats, are unsuitable for heat pumps so any increase in gas bills would hit them hard.

He added: “It’s something we need to do but nothing is going to happen in the short term.”

His comments follow Rishi Sunak’s net zero speech last month in which he rowed back on several of the Government’s green policies but boosted grants for replacing boilers with heat pumps from £5,000 to £7,500.

New boilers typically cost £4,000-5,000 while heat pumps can be up to three times as expensive.

Raman Bhatia, chief executive of Ovo Energy, said the levies were adding £200 to the average electricity bill and making heat pumps unattractive.

He said: “There are two options on levies. One is to move them from electricity to gas, which would be a very clear pricing signal to encourage the adoption of electrification. Or they could be moved to general taxation.”

Green levies are used to support the Government’s Warm Home Discount, a scheme that offers rebates on energy bills to low-income households. Levies also help pay for energy efficiency and large-scale renewables projects.

In a statement, Ovo said: “Electricity bills are made more expensive by a series of environmental and social levies heaped onto them.

“Currently, electricity is three times more expensive than gas which is stalling the switch to clean electricity. Without changes to rebalance energy bills between electricity and gas, heat pumps will remain unaffordable for the majority of households. We need to see electricity bills come down.”

The Department for Energy Security and Net Zero was contacted for comment.

Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month, then enjoy 1 year for just $9 with our US-exclusive offer.