The economics of heat pumps and the (un)intended consequences of government policy
Barnes, Jake and Bhagavathy, Sivapriya Mothilal (2020) The economics of heat pumps and the (un)intended consequences of government policy. Energy Policy, 138. 111198. ISSN 1873-6777 (https://doi.org/10.1016/j.enpol.2019.111198)
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Abstract
In Europe, space and water heating account for approximately 80% of final energy use in the domestic sector. For many European countries the electrification of heat provision, via heat pumps (HPs), provides a promising decarbonisation pathway. The UK is no different, but recently concerns have been raised about the financial attractiveness of HPs given how, through various policy choices, taxes and levies are applied more heavily on electricity bills than gas bills. In this paper, we critically examine this argument by assessing the financial attractiveness of HPs across their lifetime for a typical UK household and within the current UK tax and regulatory regime. The results suggest taxes and levies do weaken the economic case for HPs: their current distribution having an unintended impact on the economics of HPs. Nonetheless, they are not the only reason for HPs comparative financial disadvantage. Upfront costs and HP performance, both influence the extent to which taxes and levies impact the economics of HPs. The results have implications for the future deployment of HPs in the UK and point towards policies to increase deployment (to drive down costs) and increase HP performance as being important.
ORCID iDs
Barnes, Jake and Bhagavathy, Sivapriya Mothilal ORCID: https://orcid.org/0000-0003-3200-4308;-
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Item type: Article ID code: 84107 Dates: DateEvent31 March 2020Published11 March 2020Published Online15 December 2019AcceptedSubjects: Technology > Electrical engineering. Electronics Nuclear engineering > Production of electric energy or power Department: Faculty of Engineering > Electronic and Electrical Engineering Depositing user: Pure Administrator Date deposited: 10 Feb 2023 12:39 Last modified: 12 Sep 2024 02:30 Related URLs: URI: https://strathprints.strath.ac.uk/id/eprint/84107