"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 yesterday at 20:55 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

[Mike]

Ignoring the saving on standing charges mentioned by @JohnMo - in fact ignoring standing charges all together - I just looked up the domestic rates here in France (first half of 2025, including tax):

 

   Electricity: €260/MWh

   Natural gas: €134 /MWh

   Ratio: 1.94 in favour of gas

 

Compared to the UK (October to December 2025, North West region):

 

   Electricity: £271/MWh

   Natural gas: £63/MWh

   Ratio: 3.4 in favour of gas

 

Which is undoubtedly a key factor in the popularity of heat pumps in France. Not to mention that gas has been banned for new developments for several years, and that replacement boilers (but not heat pumps) are hit with 20% VAT.

 

3 hours ago, LnP said:

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

It certainly looks that way.

[JamesPa]

8 hours ago, Mike said:

Ignoring the saving on standing charges mentioned by @JohnMo - in fact ignoring standing charges all together - I just looked up the domestic rates here in France (first half of 2025, including tax😞

 

   Electricity: €260/MWh

   Natural gas: €134 /MWh

   Ratio: 1.94 in favour of gas

 

Compared to the UK (October to December 2025, North West region😞

 

   Electricity: £271/MWh

   Natural gas: £63/MWh

   Ratio: 3.4 in favour of gas

 

Which is undoubtedly a key factor in the popularity of heat pumps in France. Not to mention that gas has been banned for new developments for several years, and that replacement boilers (but not heat pumps) are hit with 20% VAT.

 

It certainly looks that way.

Interesting that the more favourable ratio is principally because gas is much more expensive not because electricity is substantially cheaper!  That wasn't what I was expecting nor the popular perception in the UK.

[JohnMo]

8 hours ago, Mike said:

Natural gas: €134 /MWh

Nearly twice the cost of the UK!

 

That's expensive heating, a time of use tariff and direct electric heating would cost about the same when you add in boiler efficiency.

[Roger440]

1 minute ago, JohnMo said:

Nearly twice the cost of the UK!

 

That's expensive heating, a time of use tariff and direct electric heating would cost about the same when you add in boiler efficiency.

 

Just as well most of france doesnt have anything like the heating requirement we do.

[Mike]

2 hours ago, JohnMo said:

Nearly twice the cost of the UK!

A lot of that presumably due to the costs of the grid - a bigger country to connect, most of it away from the North Sea, and more rural areas too far away to connect (where main options are electricity, oil or propane).

[Mike]

2 hours ago, Roger440 said:

Just as well most of france doesnt have anything like the heating requirement we do.

That poses an interesting question.

 

It seems that it's actually France that has the higher heating requirement; the mean heating degree days (average figures for 2019-2024) are 2,080.81 for France and 1873.53 for the UK.

 

That assumes that both datasets are population weighted - the UK certainly is and I'd be surprised if France wasn't - and also that the UK is still calculating as it did when it was an EU member.

 

 

[Crofter]

1 hour ago, Mike said:

That poses an interesting question.

 

It seems that it's actually France that has the higher heating requirement; the mean heating degree days (average figures for 2019-2024) are 2,080.81 for France and 1873.53 for the UK.

 

That assumes that both datasets are population weighted - the UK certainly is and I'd be surprised if France wasn't - and also that the UK is still calculating as it did when it was an EU member.

 

 

This seems like a good time to point out that the Scandinavian countries seem to get on just fine heat pumps too.

[JamesPa]

20 minutes ago, Crofter said:

This seems like a good time to point out that the Scandinavian countries seem to get on just fine heat pumps too.

They bother insulating their houses,  We dont (or at least didn't until recently).  I suspect thats at least relevant!  Which is not to say a heat pump cant cope with an uninsulated house, it can, but just like any other heating it will cost more in this case.

[JohnMo]

52 minutes ago, Crofter said:

This seems like a good time to point out that the Scandinavian countries seem to get on just fine heat pumps too.

There climate is a lot different from ours, they are hotter in summer and way colder in winter, which is way better than the just above freezing, high humidity winter climate we have, for ASHPs. So defrosts are way less of an issue. Then it's just a matter of sizing correctly.