• Trial with 8,016 participants by innovation charity Nesta and Behavioural Insights Team (BIT)
• Results offer ‘win-win’ for homeowners and government

Interest-free loans and reducing running costs triples the number of people who say they would switch to a heat pump if their current gas boiler needed replacing, according to a UK-wide trial. This suggests that with high gas prices continuing to hurt family finances, a significant number of people are prepared to consider a switch to more efficient, low carbon heating if the finances stack up.

In May 2022, the UK government launched the Boiler Upgrade Scheme, a £5,000 subsidy for heat pumps. With this subsidy in place, 21% participants in the trial said they would choose a heat pump over a gas boiler*. However, the subsidies are expensive, and the Treasury has so far allocated enough money for just 30,000 grants a year. The research shows that other, much cheaper, options for government - including cheap loans and lower running costs - could be almost as effective as the £5,000 subsidy in persuading people to get a heat pump.

In the UK-wide online trial, 8,016 homeowners were put in a hypothetical situation where their boiler needs replacing. Participants were offered a range of incentives to encourage a shift from gas boilers to heat pumps. With no incentives, 12% of homeowners said they would choose a heat pump over a gas boiler. The study tested a range of hypothetical offers to help make the shift more appealing.

• Interest-free loans, repaid over six or 12 years, increase the number of homeowners in the trial choosing a heat pump by nine percentage points (i.e. 21% opted for a heat pump over a gas boiler).
• Cutting running costs, so that a heat pump costs £40 a month less to run than a gas boiler increased the number choosing a heat pump by seven percentage points. This change in running cost could be achieved by moving the levies on electricity bills to gas bills.
• When these two measures are combined, there is a multiplier effect which gives a 24 pp increase in the number opting for the heat pump - in this scenario more than one in three could choose a heat pump (36%).

Andrew Sissons from Nesta’s Sustainable Future team said the results have important implications for policy makers.

“Demand for heat pumps is increasing, and we could be seeing the early signs of a take off for low carbon heating. The energy crisis has helped to make heat pumps a more attractive option, because they use so much less energy and because oil and gas prices have risen so steeply.

“We need urgent measures to help people through the current energy crisis, and redoubling our efforts to weaning UK households off imported gas is an important part of that.

“This research shows that, if the government gets the support right, there is a significant appetite for switching to heat pumps. Interest free loans are appealing to homeowners, easy to set up, and much cheaper than subsidies. Government should also lower heat pump running costs by shifting environmental levies currently imposed on electricity to gas.

“Moving the levies makes sense in terms of incentivising people to choose greener heating - and crucially it wouldn’t lead to higher bills for consumers. It is a win-win for government and families” he said.

Read the full report.

ENDS

Heat pumps are a low-carbon, high-efficiency alternative to gas boilers that extract heat from the air or the ground to provide heating for a building. They are powered by electricity and work with existing home heating systems such as radiators and underfloor heating.

*That is equivalent to over 350,000 homes choosing a heat pump each year (if everyone follows through on their intentions, and homes needing boiler replacements are heat pump ready), which is ten times more than the number of heat pumps installed last year.

Notes to Editors

For more information on the analysis or to speak to one of the experts involved, please contact Mark Byrne, Head of Media, on 07745 234 909 or [email protected].

• The research asked a representative sample of 8,016 homeowners whether they would choose a gas boiler and a heat pump based on information provided about each heating option. Different participants saw different information about running costs, upfront costs, whether they would have to pay upfront or as a monthly payment. This enabled the researchers to identify how much demand increased when different incentives were offered.
• For the interest-free loan, participants were told they would not pay the upfront cost but would pay £75 a month for either 6 years (if they also received the £5,000 subsidy) or 12 years (if they did not receive a subsidy)
• On running costs, the baseline scenario showed a heat pump costing £5 per month more than a gas boiler (£80 for a heat pump versus £75 for a gas boiler). The lower running cost scenario showed a heat pump costing £40 less per month than a gas boiler (£60 for a heat pump versus £100 for a gas boiler). This shift could be achieved in two ways: 1) by switching the levies on electricity on to gas bills; 2) by gas prices increasing further relative to the price of electricity.
• Note that just because people say they will do something in an online experiment, it doesn't mean they always will in the real world. We, therefore, interpret stated intent as a likely upper bound of real behaviour.