Wood Pellets Hit 7.2p/kWh: How They Compare to Gas and Oil in July 2026
With heating oil at 94.9p/litre and mains gas locked at 6.04p/kWh, biomass is proving cheaper than ever. Here's what UK homeowners need to know.
Summer might seem an odd time to think about heating, but July 2026 is delivering a clear message: wood pellets are now the cheapest fuel option available to UK homeowners.
At 7.2p/kWh, pellets undercut both mains gas (6.04p/kWh under the Ofgem price cap) and electricity (24.5p/kWh), making them an increasingly attractive choice for anyone considering a heating system upgrade or renewal.
The Cost Comparison
Here's how the numbers stack up:
- Wood pellets: 7.2p/kWh – lowest cost per unit
- Mains gas: 6.04p/kWh – Ofgem capped rate, but limited to properties on the grid
- Heating oil: 94.9p/litre (ex. VAT) – equivalent to roughly 9.5p/kWh for typical boilers
- Electricity: 24.5p/kWh – most expensive for direct heating
What makes pellets stand out is reliability. Unlike gas prices, which fluctuate with wholesale markets, pellet prices have stabilised significantly. Homeowners burning pellets avoid the exposure to international gas volatility that affects both mains gas customers and oil heating users.
Why This Matters Now
For off-grid properties—particularly in rural areas—the choice between oil and pellets has narrowed considerably. A household burning 3,000 litres of heating oil annually currently spends around £2,835 (ex. VAT). Switching to a pellet boiler could reduce that to roughly £2,160, assuming equivalent heat output.
Even for mains gas users, a pellet system offers insulation from future price shocks. With government commitments to phase out fossil fuels, investing in renewable heat now positions homeowners ahead of regulatory change.
The Catch
Upfront installation costs for pellet boilers remain higher than traditional systems—typically £8,000–£12,000 before grants. However, the Boiler Upgrade Scheme provides £7,500 towards biomass installation, significantly reducing the payback period.
Storage is another consideration. Pellets require dry space equivalent to roughly 10–12 cubic metres for a year's supply. Homes with room often benefit most.
What You Should Do
Compare your current heating fuel costs against pellet alternatives. If you're on oil or living off-grid, check eligibility for the Boiler Upgrade Scheme at the same time. Compare heating oil prices to see your current baseline, then investigate pellet boiler suppliers in your area.
For those on mains gas, the case is weaker unless you're replacing an end-of-life boiler—but worth exploring if you value long-term price certainty.
Summer is the ideal season to plan heating upgrades. Start conversations with installers now, and you'll be ready before autumn demand drives waiting times and prices up.