In 2014, we bought an old Victorian house in Oxford, UK, well aware it needed major renovation work. Our energy performance certificate (EPC), which shows the energy performance of a building, was a poor grade “E” on a scale of A to G, with A being the highest performing category. We have since carried out a major refurbishment programme, installing underfloor insulation, triple and double glazing, underfloor heating, internal solid wall insulation and an air source heat pump. We demolished the old kitchen at the back of the house and replaced it with a modern extension built according to the latest building codes. After all of these improvements, we expected a significant improvement in our EPC rating, yet we are still received an “E” grade.

It is possible the assessor made a mistake, up to 62% of EPCs contain errors of some kind, but the low grade is most likely due to the heat pump we installed. Official UK government policy is to roll out heat pumps across the housing stock. The Climate Change Committee, a government advisory body, believes 2.5 million heat pumps need to be installed by 2030 to meet climate targets. In contradiction to this goal, the EPC system penalises people for investing in heat pumps by regularly issuing poor ratings for their homes. Installers have also complained that EPCs do not recommend heat pumps as an energy performance improvement measure.

If we are to take heat decarbonisation seriously, all policies need to be aligned and based on reality.

There are at least three reasons why the installation of heat pumps does not result in improved EPC ratings and why it is usually not recommended by the EPC.

First, the main EPC rating is based on the cost of heating a property, and electricity prices are a lot higher than natural gas prices — approximately threefold in the domestic sector. This is partially a result of a disproportionately high burden on electricity for the costs of environmental programmes, which could drive homeowners to rely on less clean natural gas.

The second factor contributing to the low EPC scores is the estimated energy demand. Especially for larger properties such as ours, the estimated energy demand cited on the EPC is often higher than the actual measured energy demand. This is partly a result of assuming a poorer operational efficiency of heat pumps than field trials suggest.

Finally, the environmental impact score of the EPC is based on the carbon emissions of the fuels used in the building (note that this does not affect the main EPC rating though). The current algorithm, as determined in the so-called Standard Assessment Procedure, uses the figure of 0.519 kilogram (kg) of carbon dioxide (CO2) per kilowatt hour (kWh) for electricity. This compares to a carbon factor of 0.216 kg CO2/kWh for natural gas.

In the seven years since the 2012 Standard Assessment Procedure was written, the UK’s grid has made great strides in decarbonisation. We are now used to reading headlines about record renewable production and coal-free days. Official government figures show electricity is cleaner than gas. The old carbon factor from 2012 misleadingly suggests that heat pumps do not reduce carbon emissions. This point has also been picked up recently by the Climate Change Committee.

There is good news. The next version of the Standard Assessment Procedure will use a lower carbon emissions factor for electricity of 0.233 kg CO2 per kWh, compared to 0.210 kg CO2 per kWh for gas. This will most likely result in heat pumps leading to significant EPC improvements in the environmental impact part of the EPC.

The new rules will come into force when the building codes are updated, which will probably happen in 2020. The update is an important step towards rewarding properties with heat pumps with an improved EPC. But given the rapid decarbonisation of the power system, it is likely that in five years the Standard Assessment Procedure will already be out of date.

To avoid this happening and better take into account the rapid decarbonisation of the grid, I would recommend using a dynamic carbon factor that can be updated as the power system gets cleaner. This would more accurately reflect the real carbon impacts and value of low-carbon heating systems such as heat pumps.

Experiences from the UK provide useful lessons for other countries. If we are to take heat decarbonisation seriously, all policies need to be aligned and based on reality. EPCs should stop being stuck in the past and start truly reflecting the value of heat decarbonisation.

A version of this article originally appeared on Foresight Energy and Climate.

Updated on 24 October to better reflect the EPC.