The average UK household pays about £150 a year in green levies on their electricity bill. That figure, buried in the standing charge and unit rate, is the single biggest reason electricity costs three times as much as gas per kilowatt-hour. And it is why, as reported by Recharge News, business chiefs in Greater Manchester are calling on mayor Andy Burnham to shift these costs off electricity bills entirely.
How the current system punishes electrification
Ofgem’s latest data shows that environmental and social obligations make up about 12% of a typical electricity bill. Gas bills carry a fraction of that. The result: anyone switching from a gas boiler to a heat pump faces a higher running cost per unit of energy, even though heat pumps are three to four times more efficient. The Energy Saving Trust estimates that a typical 3-bed semi running a heat pump could save £200–£300 a year on heating, but only if electricity were priced closer to gas. Right now, the levy imbalance wipes out most of that gain.
What shifting levies would mean for your EPC and bills
An EPC rating of C or above is now a de facto requirement for selling or renting a home. Heat pumps and solar panels are among the fastest ways to improve that rating, but their payback periods stretch beyond 10 years partly because of the electricity price distortion. Move the levies to general taxation, as Germany did in 2022, and the payback on a heat pump could drop to 5–7 years. The government’s own 2023 consultation on this very question estimated a typical household could save £80–£120 a year on electricity alone.
The catch, and what homeowners should watch
Yet shifting costs to taxation is not a free lunch. Every pound moved from bills to general taxation must be raised elsewhere, either through income tax, VAT, or borrowing. The Treasury has resisted the idea for years because it prefers the current system’s stealth, households see the levy on their bill but rarely connect it to a specific tax rise. What this misses is the wider economic gain: cheaper electricity would accelerate take-up of heat pumps, solar, and EVs, cutting carbon emissions and reducing the UK’s reliance on imported gas. For homeowners, the immediate question is whether the next Budget contains a move in this direction. The Autumn Statement in November is the most likely moment.
For now, the smart move is to plan as if the change will happen. Solar panels and heat pumps installed today will benefit from any future shift. The Boiler Upgrade Scheme already offers £7,500 off a heat pump installation. If electricity levies are cut, the running-cost maths only gets better. Homeowners should check their current EPC rating and get quotes for a heat pump or solar array, before any policy change pushes up demand and installer waiting lists.
Frequently Asked Questions
Ofgem reports that environmental and social obligations make up roughly 12% of a typical electricity bill, about £150 a year for the average household. This includes subsidies for renewables like wind and solar, as well as energy efficiency programmes.
Yes, significantly. Currently, electricity costs about 3 times more per kWh than gas. If green levies were moved to taxation, electricity could become roughly 2 times the cost of gas. Combined with a heat pump's 300–400% efficiency, running costs would likely be lower than a gas boiler.
