With inflation sky high, households with heat pumps and EVs are saving £1,180 by avoiding gas and petrol

‘Electric households’ with heat pumps and electric vehicles are saving an average £1,180 a year compared to those using petrol for their cars and gas for their heating and hot water.

New analysis by the Energy and Climate Intelligence Unit (ECIU) [1] reveals that as the inflation rate hits 9.1% over the year to May, the highest rate for 40 years, over a third of this rise (3.2%) is due to energy prices driven by the gas and oil crisis. [2] But the inflation contribution from energy is only 2.3% for households that use electricity to power a heat pump and electric car, almost a third lower than the rate of 3.3% for households that use fossil fuels.

The analysis also shows that in the year to May:

• Gas price inflation was almost double that of electricity, such that heating an efficient home with a heat pump is now more than £220 cheaper per year than heating an average home with a gas boiler.
• Petrol price inflation of 30% increased the gap between internal combustion cars and electric vehicles, with EVs charged at home being £780 a year cheaper to run.
• The overall savings for homes that avoided fossil fuels stood at £1,000 a year in May this year.

With petrol prices rising almost daily, the savings from an EV have grown to £960 a year as of late June, taking overall savings to £1,180 a year for an electric home with net zero technologies.

And with petrol prices still rising and gas and energy bills set to rise again with the October price cap, the gap in energy costs for fossil fuel and modern electric homes could grow to around £1,600 a year.

Commenting on the findings, Bim Afolami MP, Chair of the Parliamentary Renewable and Sustainable Energy Group, said: “There is no category in which inflation is hitting homes and businesses harder than in the cost of energy. The UK’s wind power generation had already begun to replace our dependence on gas, the high price of which has had a huge impact on energy bills for homes and businesses. The route to cost effective and efficient energy from domestic renewable sources is through expanding home insulation and heat pump installation.

“Recent months have also seen petrol and diesel prices soar at forecourts across the UK and beyond. Charging electric vehicles will be both cheaper and cleaner as wind power continues to grow from strength to strength. It is excellent to see the second-hand market for EVs surge to provide families with more affordable options to shift gear and drive electric.”

Dr Simon Cran-McGreehin, Head of Analysis at the ECIU, said: “Homes and cars powered by electricity are not just cheaper to run, they’re much less polluting and are increasingly running on British offshore wind. These net zero technologies are allowing more and more homes to break free of the oil and gas markets that have Putin’s hands on the levers, doing their bit for their own and the UK’s energy security.

“For struggling families that can, even investing a few hundred pounds on insulation is now paying back in record time.Installing a heat pump with help from Government grants will cut heating costs, and the growing EV second-hand market is opening up cheaper travel costs to more households. By taking further steps to make these net zero technologies more accessible, the Government can both oppose Putin and help households to cut their bills.”

Analysts expect high costs for energy and fuel to persist for many months to come, exacerbating the cost-of-living crisis. Energy bills are set to increase further in October, with the average dual fuel bill likely to reach £2,800 according to Ofgem’s latest forecast. Petrol price volatility has led some to forecast prices of well over £2 per litre.

These high prices highlight the benefits for households of moving away from a reliance on fossil fuels for transport and heating, but such a move would also bolster overall UK energy security and generate significant savings nationally, with UK households spending at least £35 billion a year more on heating and car travel than they would have to in an electric future.

Whilst low-income households will need support to purchase clean technologies, they are becoming increasingly accessible as prices fall. Grants of £1,500 were available when buying a new electric car, but the Government has announced the end of this support. Many people are also finding cheaper options on the second-hand market, with 40,000 battery electric vehicles changing hands in 2021, up 119% on 2020. [3]

Heat pumps are an established technology, commonly used in cold countries, with higher numbers used in Scandinavia, including 1.9million in Sweden alone. A study has shown that all UK homes are suitable for a heat pump, including 4.8million that need no additional work and 8.4million that would need just minimal changes such as loft and cavity wall insulation that also cut bills. [5]

Heat pumps prices start at £4,000, and a typical price is £6,000, but they are supported by a £5,000 grant from the Boiler Upgrade Scheme (BUS), which can bring the price down to the level of a gas boiler. The Government is working with industry to reduce the cost by up to 50% by 2025 and down to parity with a boiler by 2030. [4]

ENDS

Notes to editors:

1. The analysis is available here: https://eciu.net/analysis/reports/2022/the-cost-of-running-a-net-zero-vs-fossil-fuel-household

1. ONS: Consumer price inflation, UK: April 2022: https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/april2022
3. Second-hand sales of BEVs: https://www.smmt.co.uk/category/vehicle-data/used-car-sales-data/

1. ECIU: Heat pumps and the Government’s Boiler Upgrade Scheme: https://eciu.net/analysis/briefings/heat-pumps-and-the-governments-boiler-upgrade-scheme
3. Energy Systems Catapult: Electrification of Heat project: https://es.catapult.org.uk/news/electrification-of-heat-trial-finds-heat-pumps-suitable-for-all-housing-types/

For more information:

George Smeeton, Head of Communications, ECIU, Tel: 07894 571 153, email: george.smeeton@eciu.net

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The Energy and Climate Intelligence Unit is a non-profit organisation supporting informed debate on energy and climate change issues in the UK. For more information or to receive our daily newsletter, please visit our website: http://eciu.net/