A new policy position paper from the energy trade body EUA, shows that promise has not been delivered and that the assumptions behind it were flawed.

Successive government strategies, impact assessments and policy statements assumed real‑terms installation cost reductions of 20–25% by the mid‑2020s, with public messaging often implying eventual cost parity with gas boilers. Those expectations shaped subsidy design, rollout targets and repeated claims that today’s high household costs were temporary.

Accredited installation data now shows otherwise.

Analysis of market data from 2022 to early 2026 finds no sustained downward trend in average heat pump installation costs. In cash terms, costs remain persistently high. Adjusting for inflation slightly moderates the picture but does not change the conclusion: real‑terms cost reductions have been inconsistent, are now negligible and far below those assumed in policy design.

By March 2026, real‑terms installation costs had fallen by under one percent compared with a 2022 baseline,  a small fraction of the reductions that policymakers relied upon. In several periods, costs rose again in real terms, highlighting the absence of any stable learning‑rate effect.

“These were not marginal forecasting errors,” the paper concludes. “Rapid cost reduction was a foundational assumption. It sat at the centre of policy design, subsidy justification and political assurances to households. The evidence now shows that assumption has not held.”

“Ministers sold households a story that scale would make heat pumps cheap. The real-world installation data tells a blunter story: the big savings never arrived, and pretending otherwise is now the most expensive option of all.” Mike Foster, CEO of the EUA, said.

The paper questions why optimistic cost projections persisted despite long‑standing structural constraints. Heat pump costs are dominated by bespoke, property‑specific installation work, not factory‑produced components. The age and diversity of the UK housing stock limit standardisation, installation remains labour‑intensive, and increased deployment driven by subsidy has not produced the efficiency gains repeatedly assumed.

As a result, heat pump rollout remains structurally dependent on substantial public subsidy, which was presented as transitional but is now at risk of becoming permanent. The long‑term cost to public finances is materially higher than anticipated, and delivery trajectories based on falling costs are increasingly misaligned with market reality.

Foster added: “Most of the cost is not a box you buy off a shelf, it’s skilled labour, redesign work and time in people’s homes. You can’t wish that away with a ‘learning curve’ slide in an impact assessment.”

The EUA warns that continuing to base policy on optimistic assumptions risks undermining public confidence in net zero delivery. Affordability gaps ignored in modelling do not disappear – they re‑emerge later as consumer resistance, political backlash and loss of trust.

The organisation is calling for a reset in heat decarbonisation policy, starting with an honest reassessment of cost assumptions, explicit recognition of long‑term fiscal implications, and a genuinely technology‑neutral approach that recognises heat pumps will not be economically rational for all homes.

“If policymakers want the public to stay bought into net zero, they have to stop over-promising and start budgeting for reality,” said Foster. “That means admitting heat pumps aren’t the rational choice everywhere and designing policy around what works — not what looks neat in a model.”

“Net zero depends on assumptions that survive contact with evidence,” the paper concludes. “On heat pump costs, policy must now catch up with reality.”

🔗 Reach EUA's Policy Position Paper: https://www.eua.org.uk/uploads/6A3D2724C70A8.pdf