WWW.FRONTIER-ECONOMICS.COM - ACCELERATING THE EFFICIENT ELECTRIFICATION OF HEATING BUILDINGS

COM ACCELERATING THE EFFICIENT ELECTRIFICATION OF HEATING BUILDINGS frontier economics | Confidential 1 ACCELERATING THE EFFICIENT ELECTRIFICATION OF HEATING BUILDINGS The decarbonisation of buildings is key for the EU to achieve its climate goals Buildings are responsible for almost 40% of total energy consumption in the EU and for over one third of the total greenhouse gas emissions (GHG). [...] Assuming a heat pump consumed a third of the energy required to fuel a typical gas boiler, electricity prices would need to be no higher than three times the price of gas for a customer to see lower heating bills, should they switch their gas boiler for a heat pump. [...] For example, the French government currently offers grants depending on the income and the type of heat pump: aid for geothermal heat pump grants € 11,000 for low income households and € 5,000 for average income households, and aid for water heat pump grants € 5,000 for low income households 5 Note that for the policy-maker, an appreciation of the typical household discounts rates will be critical. [...] In the UK, the Boiler Upgrade Scheme supports households installing heat pumps and biomass boilers with upfront capital grants of between £5000 and £6000, depending on the technology.6 For the policy-maker, an appreciation of both typical household capital savings and discounts rates would therefore be critical to determine the right level of any such grant scheme to catalyse heat pump installatio. [...] The idea is to offer grants directly to suppliers for the installation of heat pump; the house owner pays a sign-on fee at the installation of the heat pump, a price for the heat supplied, and a monthly subscription fee.7 An additional set of challenges stem from the demand side: in addition to the possibility of high discount rates rendering future cost savings less powerful as a driver for a cho.