A Department of Energy & Climate Change (DECC) contracted project to report on the effects and implications of operating heat pumps within a smart grid system. The continued electrification of heat energy will have a major impact on not only the capacity required by the grid but also the grid’s ability to respond and manage large peaks in electricity demand. With many countries facing similar issues in electricity grid balancing with an increasing deployment of low carbon generation and electrically driven heating, DECC considers this research annex to be of interest to the UK.