UK Energy and Net Zero: Solar Panels vs Heat Pumps

Last year I took a look at various options that we in the UK might use for energy conservation as part of a wider review of our energy crisis and its consequences. 

Since then, political parties of all hues have weighed in on the ‘greening’ debate and there appears to be a general consensus that we need to replace fossil fuels with renewables and nuclear for our energy generation and supply. The only dispute is over how quickly we should do it, and in the UK at least, this is currently tied up with the post-election policy tussle between the two (erstwhile) major parties and Reform. Starmer's recent 'go slower' initiative was designed primarily to wrong-foot the Tories and Reform on their criticism of Miliband's over-hasty introduction of Cameron's so eloquently described 'green crap'. Miliband is, needless to say not happy with the wind being taken out of his sails in this way, and I foresee trouble ahead for Starmer from his 400-strong 'rump' of back benchers, and the wider party, on this and many other issues in the coming months.

One thing that has emerged from all this post-election squabbling is that 'going green', whatever the timescale you adopt, is going to cost us all….

The infrastructure required to generate renewable energy is totally different from that used to burn fossil fuels, and you can’t replace all that wholesale without considerable resources, time and, of course…money. Let alone do it yesterday. As I'll discuss later, we're going to need a lot more power than we're currently using over the coming decades because of this change, and this will have to come from somewhere.

Government admittedly has ‘bitten the bullet’ already to some extent  by promoting and sponsoring development of offshore wind and nuclear. Greater relaxation of the effective 2010 ban on any expansion of UK onshore wind now also looks likely. These new power sources are, of course, large-scale commercial projects and can’t be undertaken by individuals.

Somewhat closer to ‘home’ for the rest of us is a realisation that our gas central heating systems, which are by far the most common form of home heating in UK, will all need to be replaced;  no new gas fired systems will be on sale after 2035, and replacement for many of our current generation of gas boilers will be necessary by 2040 if not before, as these older systems come to the end of their useful lives. Domestic heat pumps are currently seen as the best option for this when the time comes. (All developers of new build houses are already required to install heat pumps, or equivalent 'green' heating systems rather than traditional gas boilers). The problem is that the net zero timetable, which is enshrined in law,  mandates that we wean ourselves of gas more quickly than this Thus positive financial incentives will be required to defray the cost of switching earlier.

Another obvious, but so far overlooked,  opportunity to help us go green on the domestic front is solar panels. The vast majority of our external roof space in the UK is effectively standing idle all year round. Even in the UK, a vast amount of free solar energy which could be used to heat and power our homes is going to waste as a result.

However, there is a fundamental problem with retro-fitting both of these greener options to our existing housing stock – the cost.

The average cost of a replacement heat pump installation starts at around £12k and can be as high as £25-30k, depending on the heat source used and the size of the property. This type of outlay is way beyond the means of many of us.

For solar, a typical 12-panel panel array with a 6kW storage battery system, which would be suitable for a 2-3 bed semi or detached, will set you back ca £10k minimum on the open market, although community auctions can reduce the cost by up to ca 20%. For a detailed look at how best to decide whether Domestic Solar is for you and, if so, how to go about getting it installed, see here.

How likely is it then that a 'typical' household, beset by the ongoing cost-of-living crisis and struggling with ever-higher mortgage payments, will have the available funds even to consider investing in either of these ‘green’ options ?

If your answer to this question is ‘not very’ then it’s obvious that if government really wants to embrace net zero by 2050 (or any date in the future for that matter) it will have to put its money where its mouth is. The commercial sector can only assist in promoting uptake by discounting and providing the installation infrastructure at the lowest possible cost; the figures quoted above take this into account, so government help of some sort will be required, or it simply won’t happen....

What have successive UK goverments done so far ? Unfortunately, very little. There was a flurry of interest in solar during the coalition era with some very favourable feed in tariffs, which quickly disappeared once Austerity v1.0 came on the scene in the mid teens. The only practical help avaibale now that is not actively means tested is a grant of up to £7.5k towards the cost of a replacement heat pump system (this was also upgraded from £5k in Sunak's pre-election 'Green Crap' review as some pundits labelled it at the time). 

Sadly, there is still no grant provision at all generally available in UK for solar panel installations. 

Apart from the usual heavily means-tested schemes, which are in practice only available to those on benefits such as pension credit or very low incomes, the only other direct funding available for solar is discretionary local authority grants. As many of us will already know to our cost, trying to get anything out of a local authority nowadays is significantly more difficult than ‘trying to get blood out of a stone’, as the old adage goes. 

For anyone willing to fund everything themselves, apart from any 'free' power they can use during daylight hours and any stored power saved if they are prepared to invest extra in a battery system, the only current financial advantage of installing solar at present is the Smart Export Guarantee. 

This scheme replaced the much more generous 'Feed-In' tariffs available pre-2019, and mandates that every supplier offers at least one tariff that supports feed-in. However, there is a key 'get-out' clause for the suppliers in that no lower limit is set on the per-unit price. In practice, this can be as little as 2-3p per unit for the most parsimonious of suppliers, and is no more than about 12-15p/unit for the most generous of them. (Compare this with the 30p+ they were allowed to charge per unit until recently to supply power, together with the continuing hikes in the daily standing charge they have been stealthily introducing to compensate for any falls in the per unit price cap,  and you'll see where and how they make and maintain their substantial profits).

If we look at this funding anomaly in terms of net zero ‘compliance’ the discrepancy becomes even more glaring.

Heat pumps admittedly do provide more energy than they use (ca 2-3 times) but they are still heavy net consumers of electricity, and can increase the size of the average household's electricity bill by many fold if they switch from a gas boiler to a heat pump. 

The average power consumption for a typical domestic air source system varies with the size of the unit, but a typical small installation (10,000 BTU) suitable for a 2-3 bed semi will use an average of ca 3.5kW at all times when the pump is running. In practice this will be pretty much continuously during the winter months, given the lower radiator temperatures and reduced available heat output compared with gas-fired boiler systems. Cost-wise, when everything is considered, the yearly running costs of a heat pump are only marginally less than those of the gas required to run a conventional gas boiler, and may actually outstrip them if electricity prices continue to rise.

Contrast this with our 12-panel solar array, which consumes nothing and will generate up to 3.5kW in sunny conditions and at least 1-2kW during the day, even when it’s cloudy during the winter months. This is effectively free power for the consumer, which they can either use at source, charge their battery system with if they have one,  or export as excess power to the grid to bolster supplies for the rest of us. Although such an array won't provide adequate heating in winter by itself, it will provide a useful supplement year round, and should substantially reduce the cost of running a heat pump system. It will also help with the relatively high current drain of a domestic hot water immersion heater all year round.

The only alternative which would make heat pumps more competitive overall would be to lower electricity prices and /or raise gas prices. The current gas vs electricity difference (6p vs ca 30p / kWh) is simply too great, and will remain so while our UK electricity prices remain perversely linked to that of gas on the wholesale markets.

Why then does the government continue to provide no financial incentive whatsoever for domestic solar installations, and up to 60% of the cost for a heat pump ?

Looked at in this way, it becomes obvious that priorities have been allocated wrongly and should now be actively reconsidered by government. The issue is simply too critical for our future wellbeing to be coloured by political ideology. 

Since installing solar panels on a suitable roof surface is much less disruptive than ripping out a whole heating system and installing a heat pump with all the necessary new plumbing, it wouldn’t take much of an additional incentive to persuade many more households to install panels as an initial 'green' investment. 

A solar array could also pave the way for a less costly heat pump system at a later date if and when prices come down, with the advantage that any power requirement for the system  would be amply covered by the panels, during daylight hours at least. I suspect the reason for this lack of government 'buy-in' to domestic solar is a treasury-inspired fear of 'opening the floodgates'. They feel they would have more control on funding and tax concessions for individual solar farm businesses and don't want to risk a flood of domestic grant applications.

What do our neighbours do ?

It is no coincidence that incentives provided by our more enlightened EU neighbours are much more generous - in Germany, for example, not only is any income from panels free of tax for installations up to 30kW capacity, but installation cost is zero VAT-rated, and there are also tax credits and rebates available on the cost of both new and existing installations. This can reduce the cost of an installation to the consumer by more than 30%. Once again, as per the issue of  funding our NHS, our continental neighbours have a better grasp of how best to finance the solution to a problem, and we should be prepared to learn from them.

Some may argue that we don’t really need all the extra power we could generate in this way, since the grid doesn’t have the capacity to deal with the output solar and wind combined already yield on sunny days. This view is both short-sighted and quite frankly disingenuous.  As already discussed, apart from anything else, we desperately need all the extra power we can get. Why ?

Our grid regularly teeters on the brink of shutdown on calm days in winter due to the predominance of wind generation in the existing supply mix and the ongoing phasing out of coal, and ultimately gas-fired power stations. Gas supplies on the open market are now both extremely costly and highly volatile, and we must wean ourselves off them as a primary source of energy, for obvious political reasons if nothing else. Many of the first generation existing nuclear reactors are coming to the end of their lives and will progressively go off-grid over the next few years. The few new nuclear projects already in the pipeline will take many years to come to fruition, and are susceptible to cost- and time-overruns. Commercially viable fusion power is still merely an unattainable pipe-dream, and will probably remain so for decades to come.

As a nation, we are also faced with swapping our petrol-driven cars with electric ones by ca 2035, and many are already ‘taking the plunge’ despite the ongoing inadequacies of the UK recharging network. The extra power required to charge all those new electric cars will have to come from somewhere as more and more domestic vehicle charging kicks in. Another less often considered future drain on our electricity grid is AI - the power required to feed the huge banks of servers that are required to generate AI even now, let alone when it really gets into its stride also has to come from somewhere, as does that required to support bitcoin mining. The acute need for grid upgrading, just to cope with all that demand, has now belatedly been recognised and is already making headlines, as is the cost of not doing so.

It makes no sense, therefore to favour heat pumps over valuable domestic micro-generation when it comes to available grant funding. We should be actively promoting domestic solar as the untapped and locally applicable resource it is, if necessary at the expense of concessions to commercial solar farms. There is also the wider environmental land management question to consider - why on earth are we continuing to cover our green fields and valuable crop-bearing agricultural land with unsightly commercial solar farms when we could be using our roofs instead ? Modern solar panels generate power as long as there is sufficient light available, even on cloudy days in winter, thus providing a valuable 'extra' on calm days when wind input is minimal. Unlike wind, and solar farms, it also reduces the load on grid infrastructure, since all power used directly by the consumer stays local.

How Could We make Domestic Solar uptake more attractive ?

If Reeves' treasury remains dead-set against any new funding commitments involving direct grants (quite likely given her current issues), then financial incentives could instead easily be provided by HMRC through the tax system. Allowing tax relief, for example, on income equivalent to the full price of a solar array at the taxpayer’s marginal rate would effectively provide at least a 20% discount on the price, and up to 40% for the ever-increasing number of higher rate taxpayers the tax threshold freezes successive governments have created (these are also the most likely group to be in a position to consider paying the additional cost of an installation, and would thus be most tempted to go ahead if offered tax concessions). Since many installers are already offering substantial discounts to promote new business, this extra incentive could well tip the balance for the hard-pressed consumer and ensure a lot more of our households became micro-generators.

Let’s hope UK.Gov see sense and reconsider……sadly, as in the case of the many changes we will need to ensure sustainability in the future, and given this particular unhappy government's prospects and current policies, I wouldn’t hold out too much hope…

I rest my case…..

First published 15.9.23

Revised 31.5.25