Decarbonising residential heating: local conditions and spatial spillovers driving heat pump uptake

Arvanitopoulos, Theodoros ORCID: 0000-0001-6368-1390, Wilson, Charlie and Morton, Craig (2025) Decarbonising residential heating: local conditions and spatial spillovers driving heat pump uptake. Energy Policy, 206. p. 114787. ISSN 0301-4215

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Abstract

Air source heat pumps are the principal means of decarbonising residential heating. What drives local uptake of heat pumps? We present and examine a unique, highly disaggregated, spatial-temporal dataset for heat pump diffusion across Great Britain at the local authority level from 2010 to 2020. We find average total installed cost of 1075 £/kW and a negative learning rate of −3.3 %, with most installations in owner-occupied houses. Using spatial econometric models, we investigate how local conditions drive heat pump installations. We find early adopting local areas tend to be rural, off the gas grid, with prior use of solid fuel or oil for heating, and participate in renewable and community energy projects. Early adopting areas benefit from a combination of more readily accessible properties, low-carbon energy skills, and local supply chains. We find robust evidence of spatial spillover effects that show early adopting areas serve as deployment test beds, indirectly stimulating deployment in contiguous areas. We reason that spatial spillovers are driven by installer availability and local supply chains materialised around installation activity. We estimate for every three heat pumps installed, one heat pump is subsequently installed in a neighbouring local authority with less advantageous conditions. This implies an important policy trade-off for low-carbon heat between maximising effectiveness (incentivise early adopters) and widening equality of access (support later adopters). Concerted policy action to tackle fragmented supply chains and skills shortages which inflate installation costs of heat pumps relative to gas boilers is also urgently needed.

Item Type:	Article
Additional Information:	© 2025 The Author(s)
Divisions:	Hellenic Observatory
Subjects:	G Geography. Anthropology. Recreation > GE Environmental Sciences G Geography. Anthropology. Recreation > G Geography (General)
JEL classification:	C - Mathematical and Quantitative Methods > C3 - Econometric Methods: Multiple; Simultaneous Equation Models; Multiple Variables; Endogenous Regressors > C31 - Cross-Sectional Models; Spatial Models; Treatment Effect Models Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q4 - Energy > Q40 - General R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R11 - Regional Economic Activity: Growth, Development, and Changes
Date Deposited:	28 Jul 2025 08:48
Last Modified:	28 Jul 2025 18:03
URI:	http://eprints.lse.ac.uk/id/eprint/128927

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