Thursday, April 11, 2024

Heat pump versus boilers: How do they compare?

After the energy price cap rose by 5% last month – increasing the average annual bill by £94 a month – you might be looking for a cheaper way to heat your home.

One solution could be installing a heat pump, which operates using electricity rather than gas or oil, as is the case with conventional boilers. But while heat pumps promise to save you money over the long term you may be worried about the higher upfront costs – and whether they’re actually cheaper to run compared with a boiler. 

Comparing the cost between a heat pump and a conventional boiler depends on a variety of factors, including the type of heat pump or boiler, energy prices, installation costs, and where you live. Jon Bonnar, Managing Director at Cotswold Energy, shares everything you need to know:

Energy efficiency and reduced energy costs

Heat accounts for nearly half of all energy consumption and 40%1 of energy-related carbon dioxide emissions. This is mostly from traditional heating systems, which rely on valuable resources like oil, coal and natural gas.

Heat pumps are more environmentally friendly because they capture heat that already exists, rather than generating new heat. This means the system itself doesn’t require fuel or emit any carbon dioxide.

While heat pumps do run off electricity, which emits carbon, the quantity of heat they produce is much greater than the quantity of electricity they use, making them highly efficient. Plus, as more electricity is generated from renewable energy sources, the electricity used to power heat pumps is becoming cleaner, making it an even more eco-friendly alternative.

This also means that, compared to a conventional boiler, heat pumps are more cost-effective. After the initial outlay, the energy savings of a heat pump nearly always outweigh the initial cost in the long run.

Typically, our clients save approximately 10% off versus what they were paying on their gas heating bill over a year. Those using solar-powered electricity will save even more. There are significant savings to be made (between 40% and 60%) compared to an oil or liquefied petroleum gas (LPG) boiler too.

However, it’s always worth comparing the costs of gas and electricity in your own area to understand the cost difference.

Installation costs

The cost of a heat pump varies between properties depending on type, size and age, but you can expect to pay between £3,000 and £8,000 on average if you take advantage of the government’s Boiler Upgrade Scheme and apply for a £7,500 grant to install a heat pump.

In comparison, a new gas boiler may set you back around £3,000.

The government has just announced a further £1.5billion of funding for their Boiler Upgrade Scheme from 2025-2028, making it much easier for those wanting to make the switch.

Different types of heat pumps come with varying costs, so prices do vary depending on the type of heat pump you’re looking to install. A ground-source heat pump, for example, might involve extensive work and expenses including drilling and excavation, so is likely to come with a higher upfront cost.

More information on the various grants and support available can be found here.

Long-term savings

For those consumers who do have the finances available to opt for a heat pump, the savings in the medium and longer term will help mitigate the bigger upfront cost, particularly when gas prices have been at historically high levels.

Long-term savings will vary between properties depending on how much energy (electricity) is required to run the heat pump. This would depend on the size of your home, whether it’s well-insulated or not and what temperature you want your home to reach.

Still, after the initial outlay of a heat pump, the energy savings that come with the system nearly always outweigh the initial cost of a heat pump in the long run.

Typically, our clients save approximately 10% off their gas heating bills over a year, but this varies between tariffs. Those using solar-powered electricity will save even more. Plus, if gas prices continue to rise at a faster rate than electricity, then savings will only increase.

Increased home value

As well as reducing energy bills, installing a heat pump could increase the value of your home. In fact, a study by WWF and ScottishPower found that low-carbon improvements could increase property value by up to £10,000.

In addition to this, research by estate agents Savills found that 71% of buyers in 2022 said that EPC ratings and energy efficiency are key to their decision-making when it comes to choosing a new home.

They also found that homes with heat pumps, specifically, demand an impressive 59% premium compared to regional averages.

1 How to cut carbon out of your heating – BBC

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