Will a heat pump save you money?

Investigating heat pumps: Nick Daws delves into the costs, efficiency and other crucial factors for adoption.

As you probably know, the Government is pushing the heat pump hard as a method for reducing pollution and carbon emissions and achieving its Net Zero target. But what are heat pumps, and what do they cost to install and run? 

In this article I will aim to answer these questions, and assess whether these products make sense from a financial perspective.

What is a heat pump?

Heat pumps are devices that extract heat from the outside and use it to power heating and hot water. There are two main types, air source and ground source. The main difference between them is that air source heat pumps get heat from the air, while ground source heat pumps get it from the ground. 

Air source heat pumps are easier to install than ground source because they don’t require any groundwork. They can be installed on a wall or on the ground outside your home. They are also cheaper than ground source heat pumps. They are less efficient, however, because they rely on the temperature of the air outside. When it’s cold outside – which of course is when you need the heat most – their efficiency is reduced.

Ground source heat pumps are more expensive than air source because they require more groundwork. They are more efficient, however, as they rely on the temperature of the ground, which is more consistent than the temperature of the air outside. 

Ground source heat pumps can be installed in two ways, horizontally or vertically. Horizontal installations require more outside space so won’t be suitable for everyone. But they are cheaper than vertical installations, which involve drilling 90-160 metres down into your garden using specialized (expensive) equipment.

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What does a heat pump cost to install?

According to heat pump specialists Ecoexperts, an air source heat pump can cost between £7,000 and £14,000 to purchase and install, while a horizontal ground source heat pump can cost between £15,000 and £35,000.

If you need a vertical installation ground source heat pump – maybe because there isn’t room in your garden for a horizontal one – the average cost (again according to Ecoexperts) is an eye-watering £49,000.

Until 2025, homeowners who opt to install a heat pump can apply for a grant of up to £5,000 as part of the Government’s Boiler Upgrade Scheme (increasing to £7,500 from 23rd October 2023). This obviously reduces the cost significantly.

It’s not all good news, though. Even after the grant is deducted, a heat pump is still likely to be more expensive to buy and install than a new gas boiler. The price of the latter is typically from £1,000 to £3,000 (though currently the government plans to ban the sale of new gas boilers from 2035).

There will likely be additional costs too, which may be substantial. For starters, because standard heat pumps can only heat water to a maximum of 65C compared with the 75C of a traditional gas central heating system [source] many houses will need extra insulation to stay warm enough.

This will of course save you money in the longer term, but can still cost thousands of pounds. For older properties especially, insulating for energy efficiency can also sometimes cause damp and condensation problems. [source]

In addition, you are likely to need bigger radiators in some or all rooms. This can cost up to £3,000 plus the price of installation. Alternatively you may be advised to install underfloor heating (which again is costly, not to mention the disruption it will cause). In addition, if you don’t currently have a hot water cylinder, you will probably need to get one. The same applies if your current hot water cylinder isn’t heat pump compatible.

All of this means that buying and installing a heat pump is likely to be expensive. So how long will it take for the savings to kick in? Let’s look at this in more detail…

What do they cost to run?

Although heat pumps use heat naturally present in the air or in the ground, they still  require electricity to operate. They certainly aren’t free to use, therefore.

How much heat pumps cost to run is a somewhat controversial question. Some suppliers, regrettably, have been known to exaggerate the potential savings on offer. 

The figures quoted vary considerably, but Ecoexperts (mentioned earlier) say that for a three-bedroom household the running costs for a heat pump (ground source or air source) will typically come to around £1,200 per year. By contrast, they say the running costs for a traditional gas boiler will be around £900, or £300 cheaper.

So in the short term, savings are unlikely. In the longer term, though, the cost of electricity is likely to fall relative to gas – if not naturally, then through taxes and subsidies. Even so, it will likely be decades rather than years before you see any overall saving.

On their website Ecoexperts say that “an air source heat pump will now typically save you £1,442 more than a gas boiler over 20 years.“ Despite the precise-sounding figure that is clearly a vague estimate, as nobody can know how costs will change over twenty years.

Other considerations

Although in this article I am primarily focusing on financial aspects, there are other considerations that may affect your decision whether to get one. Here are some of them…

• Heat pumps make some noise in operation. According to heatable a typical air source heat pump will generate between 40 and 60 decibels on average. That is similar to a dishwasher or microwave. The noise level rises when the heat pump is working harder, as is likely to be the case in winter.

• Heat pumps are less efficient in cold weather. That means they may work better in the south of England, which is typically a degree or two warmer. By contrast, they may struggle to heat some homes in Scotland. Recently Lord Haughey, the owner of a major heat pump supplier, said there were parts of Scotland where it was simply too cold for them to work. [source].

• British Gas recently said they will refuse to install heat pumps in millions of homes where they won’t make them warm enough and will recommend other low-carbon heating options instead. [source]

• If you live in a listed building and/or conservation area, you may require planning permission to install a heat pump, and councils may be reluctant to grant this. This recent article from the Daily Mail describes one woman’s experience with this problem (among others).

• Heat pumps have to be serviced by a professional every two or three years to ensure everything is working at peak efficiency. This will cost around £150, roughly similar to a gas boiler. As for how long they last, estimates vary but around 15 years seems to be the consensus. That obviously compares favourably with the typical ten years of a gas boiler. But as this is new (and evolving) technology, nobody can really be sure.

• While heat pumps are being promoted as an eco-friendly solution to the climate crisis, it’s important to bear in mind that they require electricity to operate. So really, heat pumps are only as eco-friendly as the electricity generators. While an increasing proportion of our energy in the UK comes from renewables and nuclear power, over 40% still comes from fossil fuels [source].

My thoughts

So far as the question in the title is concerned, the clear answer is that in the short to medium term heat pumps almost certainly won’t save you money, especially when you take the installation costs into account. In the longer term (and we’re talking decades here) they might, but without a crystal ball nobody can say for sure.

It does seem to me that heat pumps will be most cost-effective (and work best) in new-build homes designed around them, with plenty of insulation. Retrofitting older properties is of course possible but likely to require considerable extra outlay on insulation, underfloor heating, bigger radiators, hot water cylinders, and so on. And all that is assuming you can get planning permission, of course!

I really, truly don’t want to sound too negative about heat pumps. The likelihood is that in the coming years prices will fall and the technology (which is still very new) will improve. Of course, against that the current grants of up to £7,500 are scheduled to be phased out by 2025. 

Personally, though, I have no inclination to install a heat pump in my 40-year-old home at present. I will continue to monitor the situation, but plan to keep my faithful Worcester Bosch boiler for a few years yet. I will also follow with interest the possible alternative of low-carbon hydrogen, which would involve much less up-front outlay and upheaval. The Hello Hydrogen website has more information about this.

So that’s my view anyway. But what do you think? Will you get a heat pump, and why or why not? And if you already have one, would you recommend it to others? Please post any comments below!

Photo Credits: Plexel