A government minister said that the cost of household gas could increase if plans are made to expand the use of heat pumps in the UK.
Lord Callanan is the Minister for Energy Efficiency and Green Finance. He wants to shift green levies away from electricity and towards gas to discourage traditional home boilers.
Gas will be more expensive and electricity cheaper with the green levy.
At present, green charges can make up up to 15% of domestic electricity bills, which adds around £200 per year. The policymakers are concerned that this will have the intended effect of discouraging heat pumps which use electricity.
In the UK, only 55,000 heat pump installations were made last year. This is significantly less than the government’s goal of 600,000.
Lord Callanan, who spoke at the Conservative Party Conference in Manchester on February 2, said that “we need to make gas and electricity proportionally more expensive.”
We will issue a consultation on rebalancing later this year, which is about how to make electricity cheaper. We will consult about transferring some of these levies to gas bills, or perhaps, as I wanted, to general taxation. But discussions need to be held.
Lord Callanan acknowledged that certain consumers, particularly those who rely on gas heating for heat, would be sensitive to these changes.
Heat pumps are not suitable for all dwellings. Many flats and other types of housing would be affected by any increases in their gas bills.
He said: “It is something we must do, but nothing will happen in the near future.”
His remarks follow Rishi’s Net Zero speech last month, in which he criticised several of the government’s green policies and increased grants for replacing boilers by heat pumps from £5,000 up to £7.500.
Heat pumps are up to three times more expensive than boilers.
Raman Bhatia is the chief executive officer of Ovo Energy. He said that the levies added £200 to an average electricity bill, and made heat pumps unattractive.
He said, “There are basically two options for levies.” The first is to switch them from gas to electricity, which would send a clear price signal to encourage electrification. Or, they could be shifted to general taxation.”
Green levies support the Warm Home Discount scheme, which offers rebates to households with low incomes. Levies are also used to pay for large-scale renewable energy projects and energy efficiency.
Ovo stated in a press release: “The cost of electricity bills is made higher by the environmental and social charges that are added to them.
“At the moment, electricity costs three times as much as gas. This is delaying the transition to cleaner electricity. Heat pumps will be unaffordable to most households if there are no changes made to the energy bills. “We need to see the electricity bills drop.”
For a comment, we contacted the Department for Energy Security and Net Zero.