UK could lose £65m exports each year if heat pump roll out is slow

In 2022, the UK exported around £85m worth of central heating boilers and their parts, according to United Nations trade data [2]. Of the total exports, over three-quarters (77%, £65m) went to countries that have at least target phase out dates for fossil fuel boilers set within the next seven years.

In addition, total UK exports of central heating boilers have roughly halved between 2019 and 2022, from around £150m to £85m, possibly related to the world moving away from gas boilers in response to high gas prices, concerns over gas supplies as the war in Ukraine continues, and the need reduce carbon emissions from home heating on the path to net zero. Around 3 million heat pumps were sold in Europe in 2022, an increase of 40% from the year before, taking the total sold to over 20 million [3].

Commenting on the analysis, Jess Ralston, Energy Analyst at the Energy and Climate Intelligence Unit said: “The IMF has said that the UK was worst hit by the gas crisis because we are so dependent on it and the OBR has shown that we could add 13% GDP to debt if we don’t transition away. The North Sea is a declining basin no matter what the Government policy on it, so unless we reduce our gas demand through insulation and heat pumps, we’re going to end up importing more from abroad.

“The switch to clean heat is continuing at pace outside of the UK as the US and Europe learn their lesson from the gas crisis. It’s starting to look like we haven’t.

"The UK’s existing boiler manufacturers must be able to see the writing on the wall. With clear signals from Government on the future of heating at home, we can take our expertise abroad and get ahead on heat pumps before we lose our place amongst the leaders of the world’s heating industry.”

The country that imported the most boilers and their parts from the UK in 2022 was Ireland (around £50m) which has set a phase out date for new fossil fuel boilers from 2025 [4]. This means that when a boiler breaks from 2025, it will need to be replaced with a clean heating solution like an electric heat pump.

Germany and the Netherlands, who imported £4m and £1.3m worth of central heating products from the UK in 2022 also have targets to phase out fossil fuel boilers by 2025 or 2026 respectively [5], although the Netherlands will still allow hybrid systems [6].

Of the top ten export countries, which account for the vast majority of exports at £81m, seven have phase out dates of 2029 or sooner, with the US (£15.6m), Australia (£1.2m) and Turkey (£2.1m) being the exceptions that do not. Most of those with phase out dates are in Europe and are expected to adhere to a proposed EU Directive that commits to a 2029 phase out date [7].

However, even the countries that have not set phase out dates yet have seen massive growth in alternative heating solutions over the last year as the worldwide gas crisis forced gas prices up and energy security concerns were raised by Russia’s war in Ukraine. In the US, where heat pumps have been dubbed ‘freedom pumps’, sales are up 11% and overtook sales of gas furnaces for the first time [8]. Similarly in Australia, the Australian Capital Territory has banned new gas grid connections from November 2023 and the state of Victoria is considering a 2035 phase out date for all fossil fuel boilers [9].

The UK committed to phasing out gas boilers in new homes from 2025, as part of the Future Homes Standard, but has yet to confirm whether new homes will be allowed to connect to the gas grid or not despite a consultation being due in ‘Spring’ 2023 [10]. The Government has also not confirmed whether a proposed ban on all fossil fuel boilers in off-gas grid homes will be implemented from 2026 [11].

However, there is a target to phase out all gas boilers in the UK from 2035 and the Government recently confirmed it will go ahead with the clean heat market mechanism which will require fossil fuel boiler manufacturers to sell a set proportion of heat pumps from 2024, with the proportion rising every year [12]. The market mechanism aims to create a mass market for heat pumps, as it is a nascent industry in the UK today. [13].

It has recently been reported that one trade body for the heating industry, the Energy and Utilities Alliance, has been extensively campaigning against heat pumps in the UK [14]. Some of the members of this trade body manufacture or sell both gas boilers and heat pumps, either in Europe or the UK.

Octopus Energy and British Gas have recently announced that they will reduce the costs of fully installed heat pumps, including the Boiler Upgrade Scheme grant, to as low as £2,500 and £2,999 respectively [15]. British Gas will also offer a money back guarantee. Currently, heat pump manufacturing sites in the UK include those in Cornwall, Derbyshire, Northern Ireland and Scotland [16].

A UK Government study showed that heat pumps are highly efficient, typically 3x more efficient than gas boilers, in the UK even down to -6C [17]. An earlier study also found that “There is no property type or architectural era that is unsuitable for a heat pump”, “from Victorian mid-terraces to pre-WWII semis and a 1960s block of flats”. [18]