UK Government reform of electricity pricing would bring clean heat savings to nearly every home in Scotland, according to new research by the innovation think tank Nesta and WWF Scotland.

The report, which modeled savings across Scotland’s homes under different pricing regimes found that 95% of homes in Scotland would see lower energy bills after fitting a heat pump, provided the new UK Government reforms electricity pricing.

Heat pump homes could further reduce energy bills by 10% by using a time-of-use tariff.

The two organisations are calling on both the Scottish and UK Governments to introduce key policies to get back on track to meeting climate targets. The UK Government, they say, must introduce electricity pricing changes that would make cleaner heating more affordable for consumers

They also call for the Scottish Government to proceed with its proposed Heat in Buildings Bill to lay the foundations for industry growth over the next decade

Fabrice Leveque from WWF Scotland said: “It’s still early days in Scotland’s heat transition but this research shows that with the right policies, heat pumps can be the lower bills option for virtually all homes when regulations requiring the switch to fit them should begin.

“The Scottish Government has failed to meet nine out of the last 13 annual climate targets. To make up for this, the immediate roll out of policies such as cleaner heating is crucial. That’s why the Heat in Buildings Bill must be introduced no later than the autumn this year to make sure it can regulate for cleaner heating and energy efficiency later this decade."

he analysis by WWF Scotland and Nesta used data from Cambridge Architectural Research to explore energy bills for homes that fit cleaner heating systems such as heat pumps and other low-carbon technologies rather than fossil fuel heating such as oil and gas. It shows that with today's prices around 25% of homes in Scotland would see lower energy bills after fitting a heat pump.

“Taking a simple average (mean) across all homes, the average saving per home – or those making savings - is £38 a month, or about £460 a year.”

However, when up-front capital costs are incorporated, savings are far less. “The proportion," it says, "of Scottish homes witnessing overall bill savings falls dramatically, to just over 5% (when the capital costs are repaid annually over 15 years, with no interest or discounting).”

The research explores what energy bills could look like in 2028 if reform to electricity markets were delivered by the UK Government. These include “adjusting levies applied to electricity bills and reforming electricity markets to remove the distortion of expensive gas-fired power stations which currently dictate wholesale electricity prices”.

2028 is the year, based on the recent Scottish Government consultation on a Heat in Buildings Bill, that proposals to require some homebuyers to fit heat pumps within a set period after purchasing a home would kick in.

The report finds that if the UK Government goes ahead with these energy market reforms, virtually all homes (95%) fitting a heat pump could see lower energy bills, with an average saving of £566 a year.

It also includes a more cautious scenario with more modest electricity price falls and finds that 85% of homes with a heat pump would see an energy bill saving.

However, even in these scenarios very few homes receive savings when total capital costs are included. The report says: "Energy bill savings under the future scenarios are still not enough to repay pay off the capital costs.  This could be mitigated by a number of factors beyond this analysis (e.g. falling installation costs, or continued Government grants)." 

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A heat pump owner checks his tariff and battery storage on his phone A heat pump owner checks his tariff and battery storage on his phone

Robin Parker, from Nesta Scotland, said: “The UK currently has higher electricity prices than any EU country. Bringing down electricity costs should be a priority for the new UK Government and it is one of the most important things it can do to help enable people in Scotland to switch to clean heating. This research shows that doing so would mean energy bills would fall for virtually everyone who switches to a heat pump.

“Linking heat pumps to home purchases would help drive investment in clean heating and help increase Scotland’s pace on home decarbonisation. The sooner that we have the regulations in place, the longer that homeowners and industry will have to prepare for the changes – which is why the Scottish Government should press forward with introducing the Heat in Buildings Bill in Holyrood.”

A Department for Energy Security and Net Zero spokesperson said: “We are committed to lowering the cost of energy for families by investing in clean power and boosting the UK’s energy independence.

“We are considering the best and most efficient way to bring down the running costs of low-carbon technologies such as heat pumps, and will set out plans in due course.”

A Scottish Government spokesperson said: “Reforms to our energy market by the UK Government are certainly needed.

“Any reforms need to support the Scottish Government’s aims of a fair and just transition to net zero as well as support further renewable deployment. They also need to ensure security of supply, reduce costs for consumers and remove barriers to decarbonisation and growth of our clean heat, transport and industry sectors.

“The Scottish Government is currently analysing responses to our own consultations on proposals for a Heat in Buildings Bill and a Social Housing Net Zero Standard, and will confirm our own next steps soon.”