New calculations show that by taking advantage of a government grant to have a heat pump installed, and switching to the most appropriate electricity tariff, both the upfront installation cost and ongoing energy bills can be lower than the equivalent gas or oil boiler.
With the right combination, households could install a heat pump for as little as £500 and save more than £500 a year on bills.
Sounds too good to be true? We’ve looked at the options to find out how to do it.
But aren't heat pumps expensive?
While the initial cost to install a heat pump can be more than £10,000, it may be much cheaper depending on your situation. A recently updated government scheme promises a discount of £7,500 on the upfront price.
However, as well as that initial outlay, one of the most commonly cited barriers to installing them is the perceived high running costs. And with good reason: they are powered by electricity and electricity is currently much more expensive, per unit of energy, than gas.
The current price cap is 27p/kWh for electricity and 7p/kWh for gas. Even allowing for the relative inefficiency of a gas boiler, to match the running costs of gas central heating, a heat pump would have to be around three times as efficient.
And although heat pumps can have a seasonal coefficient of performance (SCoP) of 4.0 or more, indicating 400% efficiency across the year, there has been criticism that in cold weather they simply don’t perform at that level. That can result in higher bills or a cold home, which few people are willing to risk.
But what if the electricity running them was considerably cheaper than the current price cap? Suddenly the calculations look more promising.
Can heat pump running costs match those of gas boilers?
Dr Jan Rosenow, Principal and European Programme Director at RAP (Regulatory Assistance Project), regularly compares the running costs of gas boilers against heat pumps.
His latest calculations show that the running costs for a heat pump can match or beat the costs for a gas boiler, even when paying the standard capped energy prices.
The typical UK boiler runs at approximately 85% efficiency. The graph below shows that the running costs for a heat pump with a seasonal coefficient of performance (SCoP) of 2.9 or more are lower than those of a typical gas boiler.
Even the most efficient gas boiler (92% efficiency) can be beaten by a heat pump with a SCoP of 3.1 or more. With a very efficient heat pump operating at SCoP 4.0, you could save £259/year.
Heat pump electricity tariffs make for the best savings
The biggest savings for people with heat pumps, however, can be made by switching to a time-of-use or heat pump-specific electricity tariff that means your electricity is cheaper than the price cap.
Dr Rosenow calculates that using the Octopus Agile tariff, which charges according to demand based on the half-hourly energy price, the savings can be considerable.
Using an average unit price of 21.57p/kWh, this would result in savings of £214/year at SCoP 3.0 or £395/year at SCoP 4.0, compared to running a gas boiler.
Finally, Dr Rosenow recalculated the potential savings using OVO’s new Heat Pump Plus tariff. This tariff offers a rate of 15p/kWh for the energy used by the heat pump only; a standard rate applies to all other energy use.
Dr Rosenow commented that the “savings could potentially be very large, exceeding 50%”. His calculations based on the OVO tariff show savings of £434 for a SCoP 3.0 heat pump, and £560 for SCoP 4.0, compared to running a gas boiler.
Start by saving on heat pump installation
Unless you have savings that you're willing to spend, you'd be forgiven for thinking a heat pump is out of reach. But there's a surprising amount of money to be saved.
Many energy suppliers offer heat pumps and installations, with some claiming prices as low as £500 with a BUS grant. If your home is well insulated, with suitably sized radiators and an existing hot water tank, you may get a heat pump installed for that price. For most, however, it's likely to cost more, as you may need insulation, radiator upgrades and other 'extras'.
Look out for heat pump-specific tariffs
Once you've had your heat pump installed at a significant discount, the numbers show that your savings will come back more quickly if you're using a dedicated tariff.
We’ve found two heat pump-specific tariffs currently on the market.
As more switching options become available, expect to see heat pump-specific tariffs from other energy suppliers. Other time-of-use (ToU) tariffs may also be suitable, depending on your pattern of use, but be careful of tariffs with very high peak rates, as you may not save money if you’re unable to shift your energy use away from those times (typically 4-7pm).
Use our free, independent to compare gas and electricity prices and find the best provider for you.All graphs by Dr Jan Rosenow. Reproduced with permission.source https://www.which.co.uk/news/article/a-heat-pump-might-be-a-lot-cheaper-than-you-think-heres-how-aSx7P0B2hOHW