Technical Report 323, c4e-Preprint Series, Cambridge

Authors: Jieyang Xu, Sebastian Mosbach, Jethro Akroyd, and Markus Kraft*

Reference: Technical Report 323, c4e-Preprint Series, Cambridge, 2024

Associated Themes:
 

• Forecast impact of heat pumps on inequality based on projected fuel prices
• Inequality index used to facilitate scenario analyses
• Identified regions that are most sensitive to fuel price fluctuations
• Explored a potential funding scheme to lessen the impact on inequality

This work investigates the impact of changes in fuel prices on regional inequality in the context of scenarios where air source heat pumps replace domestic gas heating in the UK. An index is calculated to understand how changes in household fuel costs would affect regional inequality across a range of future price scenarios. At 2019 prices, most households would experience higher heating costs. Conversely, after the energy price shock in 2022, most households would experience lower heating costs if using a heat pump instead of gas. This change is sensitive to the electricity-to-gas price ratio, with regions of high fuel poverty shown to be the most vulnerable. By understanding the geospatial distribution of these impacts and future energy prices, the study enables forecasting of future inequality, supporting informed policy decisions. The data suggest that adopting heat pumps could support decarbonisation while simultaneously reducing social inequality under a suitable price regime. A mechanism for financial support to mitigate the impact of adopting heat pumps on inequality is demonstrated.

PDF (8.1 MB)