The Government must reduce the cost of electricity compared to gas to prevent homes and businesses from facing continued high prices, according to a new report from Energy UK. The report, titled 'Sparking Change: How to make clean heat cheaper and accelerate electrification', suggests that a proposed reduction in the electricity-to-gas price ratio, known as the spark gap, could lead to at least 250,000 additional domestic heat pump installations by 2030.
Electricity costs were approximately four times that of gas per unit in the year leading up to July 2026, a disparity influenced by policy costs added to electricity bills. Energy UK's report calls for a long-term goal of a 2.5:1 spark gap ratio for households, with an interim target of 3:1 by 2030. Achieving this interim target could save a medium dual-fuel customer about £40 on their annual energy bill, potentially rising to £300 if they install a heat pump.
To reach these targets, the report proposes removing all remaining policy costs from electricity bills, either by placing them into general taxation at an estimated cost of £2.5 billion per year, or through a new financing mechanism. It also suggests moving the gas standing charge onto the unit rate from April 2028, with protections for low-income, high gas consumption households. For businesses, which face some of the highest industrial electricity prices in the G7, the report recommends removing Renewables Obligation and Feed-in Tariff costs, and reforming Climate Change Levy charges on non-domestic electricity.
Dhara Vyas, Chief Executive of Energy UK, stated that reducing the price of electricity relative to gas is the most effective step the Government can take to improve affordability, utilise the energy system better, and accelerate the adoption of cleaner technologies. Russell Dean, Heat Pump Expert at Mitsubishi Electric, highlighted that lasting policy reform is needed to permanently rebalance electricity and gas prices and make low-carbon heating more affordable.