The transition from traditional domestic heating oil to Hydrotreated Vegetable Oil (HVO) is a clear technical victory for the UK’s decarbonisation efforts. HVO fuel suppliers are ready to deliver a 'drop-in' solution that can cut a home's net carbon emissions by up to 90%. However, despite the success of industry trials, the widespread adoption of this renewable fuel is currently stalled at an economic crossroads, with its price being the single most significant barrier for the millions of off-grid households.
The Clear-Cut Cost of Conversion
The initial cost to switch from domestic heating oil to HVO is a major selling point. For most modern oil-fired boilers, the conversion is simple, requiring an accredited technician to replace only a few small parts, such as the nozzle and filter, and adjust the combustion settings. This minor upgrade is typically completed during a standard service appointment. Industry figures, supported by the Future Ready Fuel campaign, consistently estimate the cost of this conversion at around £500 per working boiler. This minuscule upfront cost, often less than one-tenth the price of installing a new low-carbon technology like an air-source heat pump, positions HVO as the most practical and accessible decarbonisation route for the UK’s diverse housing stock, particularly older, less-insulated rural homes.
The Tax Anomaly Driving Up HVO Prices
The primary challenge facing HVO fuel suppliers in the domestic market is not logistical, but fiscal. Currently, HVO is treated as a transport fuel under UK law, subjecting it to the same excise duty (tax) rates as regular diesel. This taxation dramatically inflates its price compared to standard domestic heating oil (kerosene), which benefits from a much lower duty rate. While specific live prices fluctuate daily based on crude oil markets, distribution costs, and global events—like the ongoing war in Ukraine—HVO is generally substantially more expensive per litre than kerosene. This premium price makes it an unviable everyday alternative for cost-conscious homeowners. The market’s inability to offer HVO at a price competitive with domestic heating oil remains the key impediment to mass rollout.
Policy Intervention: The Urgency for an RLHFO
To unlock the potential of HVO, the liquid fuel heating industry is urgently calling for the government to introduce a Renewable Liquid Heating Fuel Obligation (RLHFO). This proposed legislation is designed to address the price issue at no cost to taxpayers. The RLHFO would create a market mechanism—similar to the one already in place for transport fuels—that would oblige suppliers to increase the volume of renewable fuel they sell for home heating. Crucially, this move would allow the government to align the duty on HVO for heating purposes with that of kerosene, effectively equalising the consumer price. This policy change would transform HVO from a premium, niche product into an immediately affordable, low-carbon substitute for domestic heating oil, facilitating a swift and voluntary transition for hundreds of thousands of homes.
Securing a Sustainable Supply Chain
Despite the current price challenges, HVO fuel suppliers are actively investing in their infrastructure to secure a stable, long-term supply. Major distributors are expanding their storage and blending capabilities, supported by global supply chains that source HVO from certified, sustainably sourced waste materials such as used cooking oil and animal fats. Furthermore, the high quality of HVO—which is cleaner-burning, more stable, and can be stored for up to 10 years—promises reduced boiler maintenance and greater peace of mind for homeowners compared to traditional domestic heating oil. The supply chain is ready; the technology is proven; the only missing piece is a policy decision that makes HVO financially accessible, ensuring that the easiest technical solution is also the most economically sensible one.
