Rachel Freeman, Senior Consultant at DNV Energy Systems
Most consumers care most about two things: affordability and reliability. This balance is unlikely to change as the UK navigates its path towards net zero.
While the environmental benefits of the energy transition are widely acknowledged, what is less often discussed is the impact it will have on our finances.
Modelling from DNV on the UK market suggests that the transition to a low-carbon energy system will eventually deliver a clear prize for the everyday consumer, in the form of tangible cost savings.
As highlighted in our third UK Energy Transition Outlook (ETO) report – a comprehensive study on the likely trajectory for the UK energy system – the energy transition is affordable and could reduce average household energy expenditure by nearly 40% by mid-century, compared to 2021 levels.
Improvements in affordability are primarily driven by more efficient, electrified technologies, particularly heat pumps for homes and electric vehicles for transport.
Our forecasts indicate that by 2035 the UK’s electricity system will be completely decarbonised and electricity will provide as much as half of the UK’s final energy demand by 2050. However, the building sector will only see a 12% drop in emissions.
Removing emissions from buildings is a stubborn challenge. Over 23 million homes, almost 80% of the UK housing stock, are currently heated by natural gas boilers – accounting for 13% of UK CO2 emissions. Heat pumps are a prime option to decarbonise home heating, being up to three times more energy-efficient than gas boilers. They can produce 2-3 kW of heat from each 1 kW of electricity consumed.
For consumers, however, it is not always clear that heat pumps are a good choice. Heat pump adoption is hampered by high installation costs, the disruption caused by installation especially in older buildings, and uncertainty about whether the savings in running costs will pay for installation costs.
Electricity prices are still roughly four times higher than gas on a per-kWh basis. A rule of thumb is that heat pumps will only be economic if the electricity price is no more than double that of gas. This is even when counting in the UK’s generous subsidies for heat pumps. The levelised cost of home heating with heat pumps will remain higher than for gas boilers for up to another ten years. Not all homes are suitable for heat pumps. Based on EPC ratings data, only about half of the UK housing stock is suitable for heat pumps without significant building improvements.
The UK target of 600,000 heat pump installations by 2028 is highly unlikely to be met. In fact, the government has recently reversed an earlier decision to ban the sale of new gas boilers by 2035, as practical difficulties become apparent.
Over the medium to long term, DNV’s data shows that there will be a strongly growing trend toward the electrification of heating in domestic buildings, as heat pump technology improves and the electricity to gas price ratio gradually decreases. By 2040, heat pumps could be heating 20% of UK homes, rising to almost 40% by 2050.
Regarding policy, it is clear that despite their high efficiency and environmental benefits, heat pumps will not scale on ambition alone. There needs to be more government intervention to promote the use of heat pumps, develop significant improvements in their attractiveness to customers through technological innovation, and invest in improving engineering practices in the heating supply chain.
More work is needed to ensure heat pumps can be rolled out without placing any further financial strain on households that are already facing energy and cost-of-living pressures. Industry investment is needed to ensure the affordability of heat pumps for households is improved through: (i) reducing upfront installation costs, (ii) reducing running costs that are dictated by the price of electricity, (iii) finding better ways to make older buildings heat pump ready, and (iv) improving the real-world operating efficiency of heat pump equipment and homes.
If done right – including rebalancing energy prices to be fairer for electrification over the use of gas – heat pumps, especially when paired with improvements to building energy efficiency, will eventually lead to leaner energy bills for consumers across the country and support our net zero target. This would provide positive effects for millions of households, particularly at a time when fuel poverty and energy affordability are at the forefront of the public consciousness.
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This article appeared in the October 2025 issue of Energy Manager magazine. Subscribe here.
