- Climate change Committee urges government to cut policy costs from energy bills
- Electricity needs to be cheaper to meet green goals
- Heat pump installations up, but a lot needs to be done still
The government must remove green levies from the price of electricity if it’s going to bring down household energy bills and meet its climate change targets, according to the Climate Change Committee (CCC).
In its ‘Progress in reducing emissions – 2025 report to parliament’ report, the CCC said while there has been big progress in the roll out of heat pumps – up 56% – in the past year, thanks to expanding the Boiler Upgrade Scheme (BUS) such as heat pumps, the government still needs to do more, including expanding the upgrade scheme beyond 2028.
Removing green levies, also known as ‘policy costs’ would encourage take up of heat pumps further because it would make sure the cost-cutting benefits of transitioning to electricity are felt, according to the CCC.
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While there are government grants for heat pumps, the CCC said the government has made “no clear progress” on removing policy costs since the election, even though there has been significant progress in cutting carbon emissions overall; emissions are 50.4% lower than they were in 1990.
This lack of progress is still hindering the UK’s transition to clean energy and undermine its energy security because of its continued reliance on fossil fuels and vulnerability to geo-political shocks, such as the Russo-Ukraine war, the biggest risk being the “required scale-up in roll out of heat pumps”.
As resources in the North Sea run out, without clean energy sources the UK is facing a future of dependence on imports, with energy bills remaining “subject to volatile fossil fuel prices.”
According to the CCC the ratio of residential electricity to gas prices is “significantly off track” and action has “not been taken to remove policy costs from electricity prices” which it says would address this and accelerate the uptake of clean energy.
“This is important to ensure the underlying cost savings of switching to efficient electric technologies are reflected in the bills paid by households and businesses,” the CCC said.
Currently, a typical household with a heat pump is paying around £490 every year in policy costs alone. The CCC said this “inflates bills above the underlying cost of the additional electricity used”.
It clarified that data from other countries shows that there is a direct correlation between more favourable electricity-to-gas price ratios and heat pump installations. This is crucial because despite huge booms in heat pump installations and the take up of government grants for heat pumps such as the Boiler Upgrade Scheme.
Reacting to the report, Tamsin Lishman, CEO at heat pump manufacturer Kensa, said the company “welcomes the Climate Change Committee’s call to accelerate the shift to clean, homegrown renewable energy and heating,” but also called on policymakers to reform energy pricing that “penalises electrified heating”.
“Progress is being made, especially with the upcoming Future Homes Standard paving the way for heat pumps in new build homes,” Lishman said.
“However, to deliver cleaner, cheaper, and fairer heating for everyone, ministers must go further and remove the artificial cost barriers holding back heat pump adoption, providing the long-term clarity industry needs to invest and scale.
