Winter is coming, which means we're back to thinking about home heating. For many, this is a worrying prospect. The long tail of the energy crisis means that households are still paying more to heat their homes while they have less in their pocket. 

These challenges have come at a time when we urgently need to increase the rate at which we are decarbonising our homes.

Fossil boilers are responsible for 96% of emissions from homes. The best way to drive down these emissions is to electrify our home heating. Heat pumps are the solution for most homes. They are emissions free at the point of use and incredibly efficient compared to alternative technologies. 

The forthcoming Warm Homes plan could introduce policy changes which would improve the economics of heat pumps for householders and protect us from further energy price shocks. So what changes are needed to help us heat our homes in a clean, affordable way? 

The UK has one of the highest domestic electricity prices in Europe. Electricity is currently 4.2 times as expensive as gas, the largest ratio in Europe (this is called the spark gap). This is not an ideal incentive when trying to persuade people to electrify their heating. Electricity should be cheaper, and we know how to do this. The first step is fixing the levies on electricity. 

A number of components contribute towards the cost of a kWh in the UK. The wholesale cost is the biggest, but there are also policy costs (a set of levies which support social and environmental schemes). Policy costs currently make up about 17% of a typical electricity bill but only around 7% of a typical gas bill. 

We need to keep funding schemes like the feed-in tariff and the energy company obligation. But we could move their costs off electricity. One option would be for the Treasury to fund them using public money. Alternatively, we could shift some or all of their cost from electricity onto gas. Moving the two largest policy costs (the renewables obligation and feed-in tariffs) would reduce the spark gap from 4.2 to 2.8, reducing electricity bills by hundreds of pounds per year.

Second, we need to talk about how we are generating our electricity. The UK has made great strides in recent years towards decarbonising our electricity grid, with a new record of 54.5% of electricity being produced from renewable sources in Q2 of 2025. 

Sadly, the wholesale cost of electricity is primarily driven by the most expensive source of generation needed to meet demand, which happens to be gas. In 2021, we had the highest share of gas in setting the wholesale day-ahead electricity prices, with gas determining the price 97% of the time compared to an EU average of 39%. 

This means electricity prices in the UK are essentially coupled with gas prices. If we want to decouple them we need to try and fill in the gaps that gas currently fills by increasing our renewable generation. That means an array of sources, investing in storage, and shifting demand away from peak periods with consumer led flexibility. 

The Clean Power plan is making this happen, and the question that follows is what we can do to take advantage of all the new supply of electricity. Electrifying our homes is a clear case.

Saving on your energy bill with a heat pump is still possible, even without changes to electricity prices. One of the ways consumers can do this is by changing the electricity tariff to a time or type-of-use tariff. Some like the ‘Heat Pump Plus’ tariff offer a discounted rate for electricity used exclusively by the heat pump, whereas others like ‘Octopus Agile’ provide price signals to shift household consumption towards periods of surplus generation - or away from periods of high demand. 

Switching tariffs away from a fixed rate can already save heat pump owners significant sums, between £200-£600 pounds per year. Currently these types of tariffs are underutilised, with only 6% of 2,500 heat pump owners using them in our user survey from 2023. Increasing their uptake is an easy way to save consumers money, reduce the carbon intensity of electricity used, relieve grid stress and help decouple gas from electricity prices. 

Electrification of heat is a gateway to these benefits because heat is the biggest single energy cost in most homes. If the Warm Homes plan can accelerate this process, it can also build on the benefits by making it easier for households to access smart tariffs. Anything it does to boost the number of homes with other smart energy measures, such as solar PV, batteries, and electric vehicles, will only increase the potential bill savings.

Upfront costs are the biggest barrier to getting a heat pump. As electricity prices (hopefully) drop, we need to ensure that some consumer segments are not locked out from accessing cheap heat. Lower running costs can actually be part of the solution to high upfront costs. Reducing the price of electricity can help enable a whole range of financial models to help households that might currently struggle to afford any remaining cost after the £7,500 grant available from the Boiler Upgrade scheme.

For example, significantly lower monthly running costs could make simple spread payments or unsecured loans much more compelling for those that don’t want to dip into their savings. This could also enable pay-as-you-save schemes. These involve a third party (like a utility company) covering the upfront cost of a heat pump, and the customer pays it off over an agreed period through the savings from their energy bill. Lenders would also consider product specific loans or green mortgages to be less risky as consumers would have more disposable income to make repayments. Currently these types of offers are less viable due to an average heat pump being considered to have a similar running cost to a gas boiler - which is generally used as the base counterfactual (as a result of being present in about 24 million homes in the UK).

Clean heat has so much potential for innovation that would help reduce bills for households and emissions from homes. 

Soon we might see households having multiple suppliers for separate assets, like a tariff for an electric vehicle that provides cheaper electricity overnight, while a heat pump makes use of a discounted flat rate, all while the householder gets paid to put on the washing machine during periods of surplus. Adding solar panels and batteries will further add to expected savings and are becoming cheaper and cheaper to install. Clean, cheap, warm heat should be a reality for everyone - and the electrification of heat is the first step.