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

This report by Ember analyzes how electricity pricing structures in the European Union act as a barrier to the adoption of heat pumps. It argues that while heat pumps are significantly more efficient than gas boilers, high electricity prices—often inflated by policy-related levies—make them less cost-competitive. The report evaluates various policy interventions, such as removing levies or shifting them to gas, to lower the electricity-to-gas price ratio and accelerate the electrification of household heating to meet REPowerEU 2030 goals.

• EU household heating is heavily dependent on imported fossil gas, with 35% of domestic heating powered by gas in 2023. This totaled 75 billion cubic metres (bcm), representing 37% of all EU gas demand for that year, with approximately 90% of that gas being imported.
• The EU possesses a strong domestic manufacturing base for heat pumps, with 60-70% of units sold in Europe produced within the region. Globally, Europe manufactures 15% of all heat pumps sold.
• Upfront installation costs for heat pumps vary drastically across Europe. For example, a heat pump system in Germany costs nearly €30,000 before subsidies, whereas the equivalent system in the UK costs approximately €12,000.
• Although heat pumps are 2-3 times more efficient than gas boilers, high consumer electricity prices—which are typically 2-4 times higher than gas prices—offset these efficiency gains. The European Heat Pump Association (EHPA) suggests a price ratio of no higher than 2 is necessary for competitiveness, yet the 2024 EU average was 2.85.
• The report identifies several policy levers to reduce the electricity-to-gas price ratio. Transferring policy costs from electricity to gas would have the largest impact, reducing the 2024 average ratio to 1.98. Removing policy costs to general taxation or cutting VAT to 5% would both lower the average ratio to 2.51, while reducing network costs by 15% would lower it to 2.66.
• There is a strong correlation between low electricity-to-gas price ratios and high heat pump sales. The Netherlands had the lowest ratio in 2024 (1.4) and sold 15 heat pumps per 1,000 households. In contrast, Germany, Poland, and Hungary had ratios above 3 and sales below 5 per 1,000 households.
• Innovative tariffs can further improve competitiveness. Germany's dedicated heat pump tariff (Wärmepumpen–Stromtarif) provides a discount equal to 60% of network fees, which would have reduced Germany's 2024 price ratio from 3.25 to approximately 2.57.

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} }