Plugging heat in: smart policy can help electrify household heating in Europe

The report argues that high electricity prices, often inflated by policy-related levies, make heat pumps less cost-competitive than gas boilers despite their superior efficiency. It analyzes various policy levers—such as removing levies, reducing VAT, or implementing innovative tariffs—to lower the electricity-to-gas price ratio, which the European Heat Pump Association suggests should be no higher than 2 for competitiveness. The analysis highlights that the Netherlands, with the lowest price ratio (1.4), has significantly higher heat pump sales than countries like Germany, Poland, or Hungary, where ratios exceed 3.

• High import dependency for heating persists in the EU, with 35% of domestic heating powered by gas in 2023, totaling 75 billion cubic metres (bcm), of which approximately 90% was imported.
• The EU possesses a strong domestic manufacturing base for heat pumps, with 60-70% of units sold in Europe produced domestically and 15% of global sales manufactured within the bloc.
• Upfront installation costs for heat pumps vary drastically by country; for example, a system in Germany costs nearly €30,000 compared to approximately €12,000 in the UK, while a new gas boiler costs around €3,000.
• While heat pumps are 2-3 times more efficient than gas boilers, electricity typically costs 2-4 times as much as gas for consumers, offsetting the efficiency gains.
• The electricity-to-gas price ratio is a critical driver of sales; the Netherlands has the lowest ratio (1.4) and sells 15 heat pumps per 1,000 households, whereas Germany, Poland, and Hungary have ratios above 3 and sales below 5 per 1,000 households.
• Different policy interventions to reduce the 2024 EU average electricity-to-gas price ratio of 2.85 have varying impacts: transferring policy costs to gas is most effective (reducing the ratio to 1.98), followed by cutting VAT to 5% (2.51), removing policy costs to general taxation (2.51), and reducing network costs (2.66).
• Innovative tariffs can further improve competitiveness, such as Germany's dedicated heat pump tariff which could reduce its price ratio from 3.25 to 2.57, or specific UK time-of-use tariffs that could lower the effective ratio from 4.28 to 2.14.

APA

Harrison, T. (2025). Plugging heat in: smart policy can help electrify household heating in Europe. Ember. https://ember-energy.org/app/uploads/2025/12/Plugging-heat-in-smart-policy-can-help-electrify-household-heating-in-Europe-PDF-1.pdf

Chicago

Harrison, Tom. Plugging heat in: smart policy can help electrify household heating in Europe. Ember, 2025. https://ember-energy.org/app/uploads/2025/12/Plugging-heat-in-smart-policy-can-help-electrify-household-heating-in-Europe-PDF-1.pdf.

Wikipedia

{{cite report |last1=Harrison |first1=Tom |title=Plugging heat in: smart policy can help electrify household heating in Europe |publisher=Ember |date=17 December 2025 |url=https://ember-energy.org/app/uploads/2025/12/Plugging-heat-in-smart-policy-can-help-electrify-household-heating-in-Europe-PDF-1.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{harrison2025plugging, author = {Harrison, Tom}, title = {{Plugging heat in: smart policy can help electrify household heating in Europe}}, institution = {Ember}, year = {2025}, month = dec, url = {https://ember-energy.org/app/uploads/2025/12/Plugging-heat-in-smart-policy-can-help-electrify-household-heating-in-Europe-PDF-1.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }