"Autumn budget removes ECO levies from electricity tariffs". Will this favour heat pump operating costs?

[LnP]

Unfortunately not.

 

According to Nesta, the "spark gap" (ratio of electricity to gas price), won't change much.

 

It is currently 4.2 but was due to rise to 4.7 in January due to new costs on electricity bills and falling gas prices. If the budget measures were to have taken effect in January, it would have fallen back to 4.3. However, these changes will actually be implemented in April 2026, when electricity bills are expected to increase yet again.

 

There is something else the Treasury is considering, though, hidden in the Budget documents. HMT could also choose to rebalance the remaining 25% of the Renewable Obligation levy on to gas bills. This wouldn’t affect the bill savings much, but it would lower the price ratio further, from 4.3 to 3.9.

 

So we shouldn't be surprised if the sluggish uptake of heat pumps continues.

Edited 2 hours ago by LnP

[JohnMo]

25 minutes ago, LnP said:

It is currently 4.2

But that isn't fully correct, because it doesn't take into account the gas standing charge, which goes when you remove the gas meter.

 

So if your house consumed 6000kWh of gas per year your pay £377 for the gas plus £125 standing charge. So your 6000kWh cost you 8.35p per kWh, based on standard prices. Electric is 26.35p per kWh. So real spark gap is 3.2, not 4.2.

 

And the above doesn't account for the approximate 80-85% efficiency of nearly all gas boiler installs.

 

So piss poor reporting by Nesta