Analysis of UK’s 2025 ban on gas and oil heating systems highlights the need for additional policy intervention

The ban on fossil-fuel based heating systems in new homes, announced by UK Chancellor Philip Hammond last week, is a positive step towards decarbonising the UK’s households.  Our analysis suggests it could lead to annual carbon emissions savings of around 13 mtCO2 by 2050.

However, our analysis also highlights the importance of ensuring that both low-carbon development and affordable heating are delivered in conjunction with the ban to avoid higher household heating costs.

Cambridge Econometrics and Radboud University assessed the impact of the policy announcement by looking at the diffusion rates of different technologies in household heating:

Simulation through the FTT:Heat model[1]. The figure above shows how the stock of heating systems might change over time. The dark blue area represents traditional gas systems that are currently gradually being replaced with condensing boilers (light blue). Electric heating is covered by the orange area upwards.

Hector Pollitt, Head of Modelling at Cambridge Econometrics said:

Overall this announcement is an important first step in decarbonising household heating.

However, policy makers need to consider additional measures.  For example, as our analysis shows, gas will be around for some time due to the long lifetime of heating systems.  Householders may need to be incentivised to switch to less carbon intensive options.

In addition, new homes should be fitted with heat pumps or similar systems with low running costs to avoid higher heating bills.

There are questions around the capacity for the grid to cope with peak-time demand so reform may be needed there.

Finally, we shouldn’t forget that, as previous analysis by Cambridge Econometrics has shown[2], improvements in efficiency can lead to significant rewards both in terms of lower heating bills and increased energy efficiency.

Key points to note:

  • Gas will still be around for a long time, even with the ban, due to the long lifetime of existing systems.
  • Displaced gas is replaced mainly with standard electric systems, i.e. panel and storage heaters. The share of heat pumps in the overall mix changes only slightly.
  • The ban may discourage existing home owners from shifting to more efficient condensing gas boilers if they are gradually being phased out.
  • The six-year lead time on the announcement is sensible. This gives companies the chance to become familiar with and develop new technologies to meet demand.
  • The electricity grid in its present form would struggle to cope with such an outcome; more investment would be needed to cover peak-time demand.

Notes

With many thanks to Florian Knobloch of Radboud University for running the simulations. The FTT:Heat model is described here.

Our work for the European Commission using FTT:Heat is available here:

European Commission: A technical analysis of FTT:Heat

 

[1]: The model does not distinguish between existing and new-build homes, so we have imposed an outright ban on new gas and oil-based systems, while allowing existing systems to reach the end of their lifetimes.

[2]:  Energy efficiency report for the European Commission