IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v206y2025ics0301421525002940.html

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

Author

Listed:
  • Arvanitopoulos, Theodoros
  • Wilson, Charlie
  • Morton, Craig

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.

Suggested Citation

  • Arvanitopoulos, Theodoros & Wilson, Charlie & Morton, Craig, 2025. "Decarbonising residential heating: local conditions and spatial spillovers driving heat pump uptake," Energy Policy, Elsevier, vol. 206(C).
    • Handle: RePEc:eee:enepol:v:206:y:2025:i:c:s0301421525002940
    DOI: 10.1016/j.enpol.2025.114787
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421525002940
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2025.114787?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Stephen Gibbons & Henry G. Overman, 2012. "Mostly Pointless Spatial Econometrics?," Journal of Regional Science, Wiley Blackwell, vol. 52(2), pages 172-191, May.
    2. Grubb, Michael & Drummond, Paul & Poncia, Alexandra & McDowall, Will & Popp, David & Samadi, Sascha & Penasco, Cristina & Gillingham, Kenneth T. & Smulders, Sjak & Glachant, Matthieu & Hassall, Gavin , 2021. "Induced innovation in energy technologies and systems: A review of evidence and potential implications for CO2 mitigation," LSE Research Online Documents on Economics 113439, London School of Economics and Political Science, LSE Library.
    3. Karytsas, Spyridon & Theodoropoulou, Helen, 2014. "Public awareness and willingness to adopt ground source heat pumps for domestic heating and cooling," Renewable and Sustainable Energy Reviews, Elsevier, vol. 34(C), pages 49-57.
    4. Jan Rosenow & Duncan Gibb & Thomas Nowak & Richard Lowes, 2022. "Heating up the global heat pump market," Nature Energy, Nature, vol. 7(10), pages 901-904, October.
    5. Kelly, J. Andrew & Fu, Miao & Clinch, J. Peter, 2016. "Residential home heating: The potential for air source heat pump technologies as an alternative to solid and liquid fuels," Energy Policy, Elsevier, vol. 98(C), pages 431-442.
    6. Hannon, Matthew J., 2015. "Raising the temperature of the UK heat pump market: Learning lessons from Finland," Energy Policy, Elsevier, vol. 85(C), pages 369-375.
    7. Bryan Bollinger & Kenneth Gillingham & A. Justin Kirkpatrick & Steven Sexton, 2022. "Visibility and Peer Influence in Durable Good Adoption," Marketing Science, INFORMS, vol. 41(3), pages 453-476, May.
    8. Giorgio Brunello & Patricia Wruuck, 2021. "Skill shortages and skill mismatch: A review of the literature," Journal of Economic Surveys, Wiley Blackwell, vol. 35(4), pages 1145-1167, September.
    9. Soren Anderson & A. Justin Kirkpatrick, 2024. "Distributional Consequences of Policies for Electric Heat Conversion," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 11(S1), pages 9-40.
    10. Teodora Diana Corsatea, 2016. "Localised knowledge, local policies and regional innovation activity for renewable energy technologies: Evidence from Italy," Papers in Regional Science, Wiley Blackwell, vol. 95(3), pages 443-466, August.
    11. Renaldi, Renaldi & Hall, Richard & Jamasb, Tooraj & Roskilly, Anthony P., 2021. "Experience rates of low-carbon domestic heating technologies in the United Kingdom," Energy Policy, Elsevier, vol. 156(C).
    12. Patrick Devine-Wright, 2019. "Community versus local energy in a context of climate emergency," Nature Energy, Nature, vol. 4(11), pages 894-896, November.
    13. Lake, Andrew & Rezaie, Behanz & Beyerlein, Steven, 2017. "Review of district heating and cooling systems for a sustainable future," Renewable and Sustainable Energy Reviews, Elsevier, vol. 67(C), pages 417-425.
    14. Luisa Corrado & Bernard Fingleton, 2012. "Where Is The Economics In Spatial Econometrics?," Journal of Regional Science, Wiley Blackwell, vol. 52(2), pages 210-239, May.
    15. Michael White & Philip Allmendinger, 2003. "Land-use Planning and the Housing Market: A Comparative Review of the UK and the USA," Urban Studies, Urban Studies Journal Limited, vol. 40(5-6), pages 953-972, May.
    16. Pettifor, H. & Wilson, C. & Chryssochoidis, G., 2015. "The appeal of the green deal: Empirical evidence for the influence of energy efficiency policy on renovating homeowners," Energy Policy, Elsevier, vol. 79(C), pages 161-176.
    17. Pettifor, H. & Wilson, C. & Axsen, J. & Abrahamse, W. & Anable, J., 2017. "Social influence in the global diffusion of alternative fuel vehicles – A meta-analysis," Journal of Transport Geography, Elsevier, vol. 62(C), pages 247-261.
    18. Rosenow, Jan & Thomas, Sam & Gibb, Duncan & Baetens, Ruben & De Brouwer, Andries & Cornillie, Jan, 2023. "Clean heating: Reforming taxes and levies on heating fuels in Europe," Energy Policy, Elsevier, vol. 173(C).
    19. Snape, J.R. & Boait, P.J. & Rylatt, R.M., 2015. "Will domestic consumers take up the renewable heat incentive? An analysis of the barriers to heat pump adoption using agent-based modelling," Energy Policy, Elsevier, vol. 85(C), pages 32-38.
    20. Nemet, Gregory F. & Lu, Jiaqi & Rai, Varun & Rao, Rohan, 2020. "Knowledge spillovers between PV installers can reduce the cost of installing solar PV," Energy Policy, Elsevier, vol. 144(C).
    21. Barnes, Jake & Bhagavathy, Sivapriya Mothilal, 2020. "The economics of heat pumps and the (un)intended consequences of government policy," Energy Policy, Elsevier, vol. 138(C).
    22. Yueming Qiu & Shuai Yin & Yi David Wang, 2016. "Peer Effects and Voluntary Green Building Certification," Sustainability, MDPI, vol. 8(7), pages 1-15, July.
    23. Rokia Raslan & Aimee Ambrose, 2022. "Solving the difficult problem of hard to decarbonize homes," Nature Energy, Nature, vol. 7(8), pages 675-677, August.
    24. Winskel, Mark & Heptonstall, Philip & Gross, Robert, 2024. "Reducing heat pump installed costs: Reviewing historic trends and assessing future prospects," Applied Energy, Elsevier, vol. 375(C).
    25. Lorena M. D'Agostino & Rosina Moreno, 2019. "Green regions and local firms' innovation," Papers in Regional Science, Wiley Blackwell, vol. 98(4), pages 1585-1608, August.
    26. Hanna, Richard & Leach, Matthew & Torriti, Jacopo, 2018. "Microgeneration: The installer perspective," Renewable Energy, Elsevier, vol. 116(PA), pages 458-469.
    27. Katherine Scrivens & Conal Smith, 2013. "Four Interpretations of Social Capital: An Agenda for Measurement," OECD Statistics Working Papers 2013/6, OECD Publishing.
    28. Calvillo, Christian F. & Katris, Antonios & Zhou, Long & Turner, Karen, 2025. "Jobs, skills and regional implications of the low carbon residential heat transition in the UK," Energy Policy, Elsevier, vol. 202(C).
    29. Kimberly S. Wolske & Kenneth T. Gillingham & P. Wesley Schultz, 2020. "Peer influence on household energy behaviours," Nature Energy, Nature, vol. 5(3), pages 202-212, March.
    30. Agnolucci, Paolo & Arvanitopoulos, Theodoros, 2019. "Industrial characteristics and air emissions: Long-term determinants in the UK manufacturing sector," Energy Economics, Elsevier, vol. 78(C), pages 546-566.
    31. Morton, Craig & Wilson, Charlie & Anable, Jillian, 2018. "The diffusion of domestic energy efficiency policies: A spatial perspective," Energy Policy, Elsevier, vol. 114(C), pages 77-88.
    32. Xingchi Shen & Yueming Lucy Qiu & Pengfei Liu & Anand Patwardhan, 2022. "The Effect of Rebate and Loan Incentives on Residential Heat Pump Adoption: Evidence from North Carolina," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(3), pages 741-789, July.
    33. Karytsas, Spyridon, 2018. "An empirical analysis on awareness and intention adoption of residential ground source heat pump systems in Greece," Energy Policy, Elsevier, vol. 123(C), pages 167-179.
    34. Paul Elhorst & Solmaria Halleck Vega, 2013. "On spatial econometric models, spillover effects, and W," ERSA conference papers ersa13p222, European Regional Science Association.
    35. Marcello Graziano & Kenneth Gillingham, 2015. "Spatial patterns of solar photovoltaic system adoption: The influence of neighbors and the built environment," Journal of Economic Geography, Oxford University Press, vol. 15(4), pages 815-839.
    36. Lucas W. Davis, 2024. "The Economic Determinants of Heat Pump Adoption," Environmental and Energy Policy and the Economy, University of Chicago Press, vol. 5(1), pages 162-199.
    37. Theodoros Arvanitopoulos & Charlie Wilson & Silvia Ferrini, 2023. "Local conditions for the decentralization of energy systems," Regional Studies, Taylor & Francis Journals, vol. 57(10), pages 2037-2053, October.
    38. repec:hal:journl:hal-03189044 is not listed on IDEAS
    39. Zhang, Haodong & Zielonka, Nik & Trutnevyte, Evelina, 2024. "Patterns in spatial diffusion of residential heat pumps in Switzerland," Renewable Energy, Elsevier, vol. 223(C).
    40. Lowes, Richard & Woodman, Bridget & Fitch-Roy, Oscar, 2019. "Policy change, power and the development of Great Britain's Renewable Heat Incentive," Energy Policy, Elsevier, vol. 131(C), pages 410-421.
    41. Xingchi Shen & Pengfei Liu & Yueming (Lucy) Qiu & Anand Patwardhan & Parth Vaishnav, 2021. "Estimation of change in house sales prices in the United States after heat pump adoption," Nature Energy, Nature, vol. 6(1), pages 30-37, January.
    42. Sahari, Anna, 2019. "Electricity prices and consumers’ long-term technology choices: Evidence from heating investments," European Economic Review, Elsevier, vol. 114(C), pages 19-53.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Arvanitopoulos, Theodoros & Wilson, Charlie & Morton, Craig, 2025. "Decarbonising residential heating: local conditions and spatial spillovers driving heat pump uptake," LSE Research Online Documents on Economics 128927, London School of Economics and Political Science, LSE Library.
    2. Côté, Elizabeth & Pons-Seres de Brauwer, Cristian, 2023. "Preferences of homeowners for heat-pump leasing: Evidence from a choice experiment in France, Germany, and Switzerland," Energy Policy, Elsevier, vol. 183(C).
    3. Meles, Tensay Hadush & Ryan, Lisa, 2022. "Adoption of renewable home heating systems: An agent-based model of heat pumps in Ireland," Renewable and Sustainable Energy Reviews, Elsevier, vol. 169(C).
    4. Renaldi, Renaldi & Hall, Richard & Jamasb, Tooraj & Roskilly, Anthony P., 2021. "Experience rates of low-carbon domestic heating technologies in the United Kingdom," Energy Policy, Elsevier, vol. 156(C).
    5. Xingchi Shen & Yueming Lucy Qiu & Pengfei Liu & Anand Patwardhan, 2022. "The Effect of Rebate and Loan Incentives on Residential Heat Pump Adoption: Evidence from North Carolina," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(3), pages 741-789, July.
    6. Lyden, Andrew & Alene, Samuel & Connor, Peter & Renaldi, Renaldi & Watson, Stephen, 2024. "Impact of locational pricing on the roll out of heat pumps in the UK," Energy Policy, Elsevier, vol. 187(C).
    7. Sandy Fréret & Denis Maguain, 2017. "The effects of agglomeration on tax competition: evidence from a two-regime spatial panel model on French data," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(6), pages 1100-1140, December.
    8. Guozhong Zheng & Wentao Bu, 2018. "Review of Heating Methods for Rural Houses in China," Energies, MDPI, vol. 11(12), pages 1-18, December.
    9. Du, Hua & Han, Qi & de Vries, Bauke & Sun, Jun, 2024. "Community solar PV adoption in residential apartment buildings: A case study on influencing factors and incentive measures in Wuhan," Applied Energy, Elsevier, vol. 354(PA).
    10. Olmo, Jose & Sanso-Navarro, Marcos, 2026. "A nonparametric spatial regression model using partitioning estimators," Econometrics and Statistics, Elsevier, vol. 37(C), pages 126-153.
    11. Olga Demidova, 2014. "Spatial-autoregressive model for the two groups of related regions (eastern and western parts of Russia)," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 34(2), pages 19-35.
    12. Bruno Moura & Michael G Pollitt, 2025. "Spatial-neighbour effects in the installation of solar photovoltaic technology in England and Wales," Working Papers EPRG2523, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    13. Li, Xiang & Bolliger, Roman & Hall, Monika & Patel, Martin, 2025. "Supporting building heat decarbonization with heat Pumps: Analysis of subsidy schemes in Swiss leading cantons," Energy Policy, Elsevier, vol. 206(C).
    14. Laura Casi & Laura Resmini, 2014. "Spatial complexity and interactions in the FDI attractiveness of regions," Papers in Regional Science, Wiley Blackwell, vol. 93, pages 51-78, November.
    15. Murto, P. & Jalas, M. & Juntunen, J. & Hyysalo, S., 2019. "Devices and strategies: An analysis of managing complexity in energy retrofit projects," Renewable and Sustainable Energy Reviews, Elsevier, vol. 114(C), pages 1-1.
    16. Brancher, Marlon & Steiner, Cornelia & Hoyer, Stefan, 2025. "Spatio-temporal diffusion of groundwater heat pumps across Austria: A long-term multi-metric trend analysis (1990–2022)," Applied Energy, Elsevier, vol. 383(C).
    17. Spyridon Karytsas & Ioannis Vardopoulos & Eleni Theodoropoulou, 2019. "Factors Affecting Sustainable Market Acceptance of Residential Microgeneration Technologies. A Two Time Period Comparative Analysis," Energies, MDPI, vol. 12(17), pages 1-20, August.
    18. Brodnicke, Linda & Rizzo, Giacomo & Sansavini, Giovanni, 2025. "Accelerating heat pump adoption in Switzerland: An agent-based policy assessment," Energy Policy, Elsevier, vol. 205(C).
    19. Roni Blushtein-Livnon & Tal Svoray & Itay Fischhendler & Havatzelet Yahel & Emir Galilee, 2026. "From Expansion to Consolidation: Socio-Spatial Contagion Dynamics in Off-Grid PV Adoption," Papers 2605.09642, arXiv.org, revised May 2026.
    20. Malaekeh, SayedMorteza & Castellanos, Sergio, 2025. "Residential solar photovoltaic seeding effects and their unequal impact on diffusion across racial and ethnic groups in the U.S," Energy Policy, Elsevier, vol. 206(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:206:y:2025:i:c:s0301421525002940. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.