The heat is on: decarbonising residential heat in the UK

By Geoff Versteeg and Tim Longstaff

The UK has already made significant progress on the path to decarbonising society – total emissions have halved since 1990. The greatest progress to date has been in power generation, where emissions have fallen from 150 MtCO₂ to below 40 MtCO₂ over the past decade, and by almost 80% since 1990. Decarbonising electricity remains the top priority, as it amplifies emissions reductions from the electrification of other sectors. For example, the emissions savings from replacing gas boilers with heat pumps have increased from 45% in 2014 to 84% today, thanks to the much lower carbon intensity of our electricity supply.

The UK’s electrification efforts initially focused on transport, where electric vehicles are increasingly being chosen by drivers due to falling costs, improved range, and enhanced charging infrastructure. Heat is the next frontier – and, like EVs, there is no single “tipping point”. Clickbait claims such as “heat pumps won’t work in the UK” oversimplify the diverse reality of UK homes. The truth is more nuanced: electrification is not a one-size-fits-all solution, and progress requires tailored, segmented strategies.

Where are we starting?

Most homes in the UK are heated using gas boilers. The country has a highly developed natural gas network, supplying to 85% of homes, with three-quarters relying on gas as their primary heating fuel. Natural gas heating benefits from methane’s high energy-to-carbon ratio, resulting in relatively low carbon emissions per unit of energy. While heat pumps and district heating systems are more carbon-efficient, the UK’s heating sector will see smaller relative gains from electrification compared to countries that rely more heavily on higher-carbon fuels such as LPG or heating oil.

Challenges and opportunities

We identify five critical factors that will shape the pace of demand growth for low-carbon residential heating in the UK: capital cost, product performance, occupier inconvenience, running cost, and supply chain capacity and fragmentation. As with electric vehicles , customer segments for whom these challenges are less prohibitive will be the early adopters of electric heating solutions. Businesses and investors that can identify these segments and/or overcome the associated barriers will be best placed to benefit as the transition to low-carbon heat gathers pace.

Capital cost

UK consumers have consistently shown that very few are willing to pay a “green premium”, but most will consider a low-carbon alternative if and when that premium is removed. Buying and installing a new gas boiler typically costs around £4,000 for a UK home, whereas a heat pump costs approximately £13,000. In our recent survey of UK households, 58% cited purchase and installation costs as the first or second most important factor when selecting a new heating appliance. No non-financial consideration was selected as the most important by more than 10% of respondents.

Running cost

Incentivising the switch to heat pumps while simultaneously applying policy costs that discourage their use is incoherent. Shifting all policy costs onto gas would accelerate the transition to electric heating, but with 85% of consumers connected to the gas grid, such a move is unlikely to be popular. A simpler and more equitable approach would be to apply policy costs as a percentage of the total energy bill, thereby eliminating the current cost distortion faced by consumers considering a switch. At present, policy costs account for around 12.5% of the average household’s annual bill. Setting this rate consistently would remove the £150 cost disadvantage for a typical household choosing a heat pump over a new gas boiler. Introducing a dedicated heat pump tariff could further increase annual savings to £200–£300 — or even more in well-insulated homes with well-specified systems.

What's holding the market back?

Despite the compelling carbon benefits, several factors continue to slow the adoption of low-carbon heating solutions. These include high upfront costs, the need for tailored approaches, and limitations within the supply chain.

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