Impact of heat pumps and future energy prices on regional inequalities

Abstract

The adoption of heat pumps to displace the use of gas for domestic heating is a major component of the strategy to reduce emissions in the UK. This study examines the impact of adopting heat pumps on regional inequalities in the UK. An index is used to assess how variations in household fuel costs could affect regional disparities across different future price scenarios. The findings reveal that, at 2019 prices, most households would face higher heating costs with heat pumps. However, following the 2022 energy price shock, heat pump adoption would lead to lower heating costs for most households compared to gas heating. The effect is sensitive to the electricity-to-gas price ratio, with regions experiencing high fuel poverty being most vulnerable to negative impacts. By mapping these geospatial effects, the study enables the forecasting of future inequality trends, providing insights for informed policy development. The results suggest that, under appropriate price structures, heat pump adoption could contribute to both decarbonisation and reduced social inequality. An example mechanism for financial support to mitigate the impact of adopting heat pumps on inequality is demonstrated. This study highlights the novel capability of The World Avatar (TWA) approach to integrate cross-domain data sets, combining energy policy with social equity goals. By forecasting future inequality trends based on energy price scenarios, the study provides a route to valuable insights to support informed policy development, highlighting how the adoption of heat pumps can influence regional inequalities and emphasising the need for targeted interventions to support vulnerable regions.