UK electricity prices are nearly double the European average for industrial users and 40% higher for households. That single fact, buried in a report from the CBI and energy experts, explains why both the economy and the nation’s home retrofit programme are stuck in low gear.
As reported by Envirotec Magazine, the CBI and energy experts have warned that UK growth is ‘out of reach’ without cheaper electricity. The message is aimed at Whitehall, but it lands squarely on every homeowner considering a heat pump or solar array.
What cheaper electricity means for your home energy bills
Right now, a typical 3-bed semi with a heat pump pays around £1,100 a year for electricity, assuming 12,000 kWh usage and the current price cap of 24.5p/kWh. If electricity fell to 18p/kWh, still above the EU average, that bill drops to £864, saving £236 annually. For households on a standard variable tariff, that is real money.
The Energy Saving Trust has long argued that the biggest barrier to heat pump adoption is not upfront cost but running cost perception. Cheaper electricity flips that calculation. A heat pump that costs £1,200 a year to run today would cost closer to £960 at 18p/kWh, within spitting distance of a gas boiler’s £800 annual bill. The ‘but gas is cheaper’ argument collapses.
Who benefits most, and who gets left behind
The catch is that electricity price reform is not a universal win. Households with gas boilers and no electric heating see a smaller direct gain, maybe £50 a year off lighting and appliances. But for the 4.5 million homes in England with EPC ratings of D or below, cheaper electricity makes electric heat pumps, storage heaters, and solar-plus-battery systems financially viable for the first time.
Ofgem’s current consultation on reforming network charges, due to report by mid-2025, could shift costs from the unit rate to the standing charge. That would help heavy users (heat pump homes) while slightly increasing costs for low-use households. The government has signalled it wants to align electricity and gas prices, but no timeline has been set.
What you can do now to prepare
Households planning upgrades should not wait for policy to move first. The Boiler Upgrade Scheme still offers £7,500 off a heat pump, and solar panel installation costs have fallen 40% since 2019. If electricity prices fall, the payback period on a 4 kW solar system drops from around 12 years to 8 years.
Check your current tariff. If you are on a standard variable rate, you are paying the full price cap. A fixed-rate electricity deal can lock in lower unit rates now, though most fixes are currently only 5–10% below the cap. Use the Ofgem-accredited comparison sites to see what is available in your region.
Talk to an MCS-certified installer about sizing a heat pump or solar system for your home. The savings from cheaper electricity will compound over a 20-year system life. A heat pump installed today will still be running in 2045, when electricity may well be 30% cheaper in real terms than it is now.
Frequently Asked Questions
Not automatically. The price cap and network charges are set by Ofgem and government regulation. If reforms go ahead, you could see savings within 12–24 months. In the meantime, switching to a fixed tariff or improving home insulation will lower your bills faster than waiting for policy changes.
Yes, but only if electricity falls to around 18p/kWh or below. At current prices, a heat pump costs about 30% more to run than a gas boiler. At 15p/kWh, running costs are roughly equal. The £7,500 Boiler Upgrade Scheme grant already narrows the upfront gap, making the payback period sensitive to electricity price changes.
