Government plans to subsidise green heating are challenged today by the largest ever field study of "heat pump" devices in the UK, which reveals 80% perform so badly they would not qualify as renewable energy under proposed European standards.

The report, from the Energy Saving Trust, reveals the prevalence of badly installed heat pumps that are consequently under-performing. The controversial report could affect the government's plans to launch its Renewable Heat Incentive (RHI) next April to pay householders for generating heat from such "green" ground and air source heat pumps. There are already fears the RHI could be a victim of spending cuts announced next month.

Unlike other sources of renewable energy, such as solar photovoltaic panels and wind turbines, heat pumps require a certain amount of electricity to create energy. They work like a refrigerator in reverse, using a coolant gas to transfer heat from outside air or soil into a building. Electricity is needed to pump and compress the gas, which also allows it to generate higher temperatures than those outside. Air source pumps typically look like oversized air-conditioning and are place outside homes, while ground source ones involve loops of plastic tubing laid underground. Theoretically they should generate more energy than they consume.

But the Trust's peer-reviewed study, the largest of its kind in the UK, found the 83 devices it monitored for a year were underperforming. About 87% didn't achieve a system efficiency of 3 which the Trust considers the level of a "well-performing" system (higher is better). And 80% failed to meet 2.6, the level being considered under the EU Renewable Energy Directive for classification as a renewable source of energy.

The Trust blamed the use of multiple contractors for fitting systems instead of a single contractor as used in Europe, wrongly sized systems, complicated controls and a lack of education for householders using them. However, the Trust said that for many of the 5 million people in the UK living off the gas grid and currently using energy sources such as oil to heat their homes, the heat pumps could offer carbon and energy bill savings.

Simon Green, head of Business Development for the Energy Saving Trust, said: "This trial shows that when installed and operated correctly, heat pump technologies will save significant amounts of CO2 in the UK, when replacing oil or traditional electric heating. But there is no doubt that the results are more varied than were expected, with results showing both high- and low-performing heat pumps."

The Heating and hot water council, whose members install such systems, said there are not currently enough installers capable of helping consumers choose the right products. Roger Webb, director at the HHIC, said: "Highlighting negative and positive results keeps all of us in the industry on our toes, so that we can work out ways that this vitally important heat pump technology can be realistically delivered. ."

A Decc spokesperson said: "The RHI is designed to encourage a switch using fossil fuels for heating to renewable technologies across all sectors, not just domestic. Heat pumps are just one of the technologies that the scheme would support. The majority of the renewable heat incentivised by the RHI will be produced by the commercial, public and industrial sectors.

"We know that domestic heat pumps have worked well in other countries, so we need to do more work to find out why they didn't perform as expected in EST's trials. For this reason, Decc, EST and industry intend to carry out a further year of monitoring to identify the factors that have caused poor performance of some of the heat pumps, and to determine whether performance can be improved."

Gaynor Hartnell, chief executive of the Renewable Energy Association, which represents renewable heat companies, said: "A properly installed and sized heat pump can deliver significant carbon savings, particularly in areas not served by the gas grid. Heat pumps are one of several technologies that can contribute to greening the UK's heat supply. These trials, while important, must not delay the introduction of the RHI in April next year."

Separately today, an analysis by the thinktank Institute for Public Policy Research suggested community buildings could earn around £100m a year from incentives for green electricity generation. The IPPR believes the UK's 280,000 pubs, village halls, community centres, churches, schools and pools could create the sizeable revenue streams by installing technologies such as solar panels and wind turbines and earning the government's feed-in-tariff, which launched in April. But the authors, who extrapolated analysis of 14 projects in British Gas's "Green Streets" scheme, acknowledged the one-off capital cost of such technologies would be around £1.2bn.