Heat pumps are the backbone of clean energy in buildings, delivering efficient, low-carbon heating and cooling while reducing air pollution. But their full potential can only be realized when households and businesses see clear financial benefits. Today, electricity is often burdened with taxes and levies that make it more expensive than fossil fuels, discouraging adoption. This imbalance isn’t inevitable; it’s the result of policy choices that can and must be reformed.

To make clean heating the easy, affordable choice, we’ve developed six guiding principles that governments should follow:

1. Ensure that the cost of electricity used for heating should be no more than 2.5 times higher than that of fossil fuels used for heating by 2030, ideally sooner.
2. Avoid overloading electricity bills with levies and taxes, instead recovering system and policy costs through broader, fairer funding bases.
3. Ensure fossil heating is not underpriced, through appropriate taxation, carbon pricing or subsidy reform.
4. Build and operate the least-cost reliable electricity systems with renewable energy at their core, improving efficiency and resilience.
5. Ensure electricity retail offerings reward demand-side flexibility, so that consumers benefit from shifting to times of low-cost, clean electricity.
6. Offer support for building owners to invest in on-site storage and power generation to further reduce their heating costs.

Countries from all over the world have already shown that reforming pricing works. By balancing taxation with targeted household support, shifting renewable costs into general budgets, and enabling time-based electricity pricing, they’ve made clean heating both practical and affordable. These reforms show that rebalancing energy prices can be done in multiple ways, but all lead to the same result: cleaner, more affordable energy for everyone.

Rebalancing electricity and fossil fuel prices delivers broad benefits — boosting energy efficiency, clean transport, and economic competitiveness, while enhancing energy security and equity. With the right safeguards to protect vulnerable households, price reform can accelerate the clean energy transition and make sustainable heating a win-win for people and the planet.

Author info

RAP: Richard Lowes (lead author), Duncan Gibb, Shawn Enterline, Jingying “Jing” Chen, Lorenzo Sapochetti, Samuel Thomas, Tom Butler, Louise Sunderland

CLASP: Marie Baton

Global Buildings Performance Network: Mugure Njendu

Agora Energiewende: Steffen Verheyen