Experimental evidence on heat pump and retrofit subsidies

Heat pumps often require complementary building-fabric upgrades to work most efficiently, a requirement that may explain persistent gaps between policy targets and household uptake. Using a nationally representative survey experiment of over 1,000 homeowners with oil or gas heating systems, this paper examines homeowner willingness to switch to a heat pump when faced with building fabric upgrades under different levels of financial support. Retrofit requirements were tailored to dwelling characteristics, while heat pump and retrofit grant levels were independently randomised. Learning about heat pump benefits increased willingness to switch, from 39 points to 50 points out of 100, but this increase was largely eliminated once respondents learned of retrofit requirements of their home. Enhanced grants for both heat pumps and complementary upgrades partially offset this decline. Results further show that grant support influences willingness more strongly than equivalent decreases in private costs. A €1,000 increase in grant support raised willingness by 1.50 points, versus a 0.90-point reduction from an equivalent rise in private retrofit costs, suggesting subsidies carry value beyond their direct financial effect. Resistance to upgrades appears to operate mainly through cost, although homeowners in older dwellings and lower-income households remain less willing to adopt even when costs and grant support are held constant. Meeting heat pump targets under fabric-adequacy policies will likely require substantially greater and better-targeted subsidies, although financial support alone may be insufficient to overcome barriers faced by some households, particularly those living in older homes and with lower incomes.