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

Theodoros Arvanitopoulos, Charlie Wilson and Craig Morton

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

Keywords: decarbonisation; residential heating; heat pumps; local conditions; spatial spillovers; spatial econometrics (search for similar items in EconPapers)
JEL-codes: C31 Q40 R11 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2025-11-30
New Economics Papers: this item is included in nep-env and nep-geo
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Published in Energy Policy, 30, November, 2025, 206. ISSN: 0301-4215

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