Boosting heat pump adoption could save NZ households billions and secure jobs

Tuesday, 12 August 2025

Wider adoption of heat pumps would ease pressure on the energy system, a new Green Building Council report says.

Wider adoption of heat pumps could cut household energy bills by $1.5 billion per year and help protect thousands of jobs, the Green Building Council says.

Expensive, dwindling natural gas supplies and rising electricity costs and demand are hitting businesses and households hard. Last winter Winstone Pulp International and Oji Fibre closed several mills between them, and pointed to costly energy prices as one of the reasons.

But the situation has not improved, and last month a group of organisations representing businesses and consumers published a letter urging Prime Minister Christopher Luxon to take urgent action to fix the “dysfunctional” energy market.

Now, the Green Building Council has released a new report which reveals accelerating the adoption of heat pumps would ease pressure on the energy system, cut costs and help keep businesses open.

It said Energy Efficiency & Conservation Authority (EECA) data showed commercial and residential buildings consumed 18 petajoules (PJ) of natural gas/LPG for space heating and water heating each year.

The report found replacing gas and inefficient electric heaters with heat pumps could save from 18 to 48 petajoules (PJ) of gas annually, which equated to 14% to 38% of current production, and deliver electricity savings of up to 4000 gigawatt hours (GWh).

It would also reduce the cost of living and business expenses, and at current prices the savings to households alone would be up to $1.5 billion.

High energy costs are putting significant pressures on businesses, the Green Building Council’s Andrew Eagles says.

If a heat pump conversion programme for commercial and residential space and water heating was implemented over the coming decade it could reduce natural gas/LPG use by up to 240PJ - around a quarter of the remaining reserves - by 2035, it found.

Green Building Council chief executive Andrew Eagles said high energy costs were putting significant pressure on businesses and industries around New Zealand, and some were going under.

That was bad for communities, which were being hollowed out, and for the economy as those businesses provided jobs, exports, and revenue for the Government, he said.

“We’re still connecting thousands of new buildings to gas each year, even as supply runs out, and it does not seem sensible.

“But there is another pathway, and this report shows increasing the use of heat pumps reduces pressure on gas reserves and on the electrical grid, and that lowers bills and helps protect jobs.”

Businesses would also benefit from more certainty around energy supply, reduced operating costs, and a better chance of staying competitive, he said.

Seventy-six per cent of homeowners cited upfront costs as a barrier to heat pump adoption, so the report recommended that subsidies for heat pumps be expanded to middle-income families and businesses.

Other recommendations included that gas hot water heaters be required to be replaced with heat pumps at the end of their life, energy efficiency standards for heating systems be improved, and insulation and retrofit programmes be expanded.

Eagles said other OECD countries were already implementing a range of measures to help households and other buildings move to heat pumps for water and space heating.

In Australia households and businesses were offered subsidies to replace gas heaters, while the UK offered a £7500 incentive for adopting air source heat pumps, and the US offered 30% rebates on heat pump installations, for example.

There was no one measure that was better than others, but anything that led to more heat pumps in buildings was positive, he said.

“The investment boost scheme is one of the Government’s flagship policies. It could be easily amended to incentivise low carbon, more energy efficient efforts.

The Government is expanding its flagship Warmer Kiwi Homes programme, promising broader access to insulation grants for households in middle-income areas while tightening support for some in lower-income areas.

“We can get really massive wins from reducing energy costs and freeing up investment.”

Last week, Energy Minister Simon Watts announced the Government was expanding the Warmer Kiwi Homes initiative.

The initiative provides grants of between 50% to 90% of the costs to purchase and install insulation and up to 90% off energy efficient heaters for those who qualify for the scheme.

While the initiative’s expansion made more households eligible for insulation grants, it scaled back eligibility for heating grants.

But at the announcement, EECA spokesperson Richard Briggs told The Post that not all the funding allocated for heating grants had been spent last year.

Heating was quite a mature market in New Zealand, with the 2023 census showing that 67% of all homes in New Zealand had a heat pump as their primary source of heating - up from 47% in 2018, he said.

“A sizeable amount of homes are moving to heat pumps, and there is sales data showing heat pump sales are dropping, so a large amount of the country already has some sort of energy efficient heaters.”

That was part of the reason for a bigger focus on insulation, but it was also about return on investment as heat pumps were not as efficient if a home was not properly insulated, he said.

But Eagles said over 30% of homes still did not have heat pumps for space heating, and they were not utilised enough for hot water heating.