How to run a heat pump for 80-90% less than a gas boiler

This article explains step by step how heat pumps can achieve incredible reductions in running costs compared to a gas or oil boiler. Please read, comment, share and spread the word so these strategies can become common knowledge!

Step one: Disconnect from the gas network

Electrification enables homes to use a single energy distribution system, rather than two. The financial benefits of this can be realised by disconnecting from the gas network. Based on price cap rates as of Q4 2024, this will save £115 a year.

While this may incur additional up-front costs, for example to replace gas cookers with electric, this comes with the significant co-benefits of improving indoor air quality, and removing the risk of both carbon monoxide poisoning and gas explosions. ONS data indicates that carbon monoxide poisoning has been associated with dozens of annual fatalities, hundreds of hospitalisations, and thousands of visits to accident and emergency each year, while research by Fair Fix suggests there are hundreds of gas explosions each year.

Step two: Achieve a good system efficiency

The efficiency of heat pumps is very sensitive to heating system design, installation, commissioning, and operation. In particular, space heating flow temperatures should be correctly weather compensated, domestic hot water should be stored at sensible temperatures with adequate sterilisation cycling, and the hydraulic performance of systems needs to be carefully optimised. The range of efficiencies that are possible from installations of different quality can place heat pump running costs either above or below that of a boiler.

The Electrification of Heat field trial reports a reasonable but not amazing average efficiency of 290%, while skilled installers such as certified Heat Geeks and Good Energy, have a track record of achieving average efficiencies of 340%. Monitoring data from heat pumps shows that even higher efficiencies are possible, even in older homes. Anecdotal evidence suggests that some of the poorest households may be getting some of the least efficient systems under ECO4 and similar schemes, however these can usually be improved providing the required expertise is available.

Figure 2 shows the importance of good heat pump efficiency to ensure that heat pumps are cheaper to run than oil or gas boilers. The energy bills are calculated using OFGEM typical domestic consumption values, Q4 2024 price cap rates, and they assume heat pump efficiencies of 240% and 340%, for comparison. Boiler efficiencies are assumed to range from 83 to 85%, as reported by government field trials. The same field trials measured electricity use of boilers at 100-750kWh of electricity a year, so the figures below also assume a reduction in electricity use of 100kWh once the boiler is removed.

Consistently high heat pump efficiencies are being achieved in other countries across Europe, and need to become the default in the UK. This can be achieved through a combination of installer training, consumer education, ensuring suitable mechanisms are in place for poor installations to be promptly fixed, and ensuring that action is taken against installers to prevent similar issues occurring in the future.

Step three: Get on the right electricity tariff

Arguments that heat pumps cost more to run than boilers usually start by explaining that electricity costs four times as much as gas in the UK. While this is generally true for price cap rates, electricity pricing is very different to gas, with the wholesale price changing every half hour as supply and demand vary.

This article explains how taking advantage of this can reduce electricity costs by about 30 to 50%, but in summary getting on the right tariff is one of the single most important measures to reduce heat pump running costs. Figure 3 below shows how the running costs of a heat pump using a dynamic electricity tariff can be about a third lower than a boiler. In 2023, the potential savings were closer to 40%.

There are also a number of heat pump specific electricity tariffs. Ovo energy currently offer one where the heat pump is metered separately on a supply that's about 30-40% cheaper than price cap rates, Octopus Cosy offers three reduce price periods each day, and economy 7 or economy 10 could also be effective options in some cases. Households who are submetered by their landlords, on a prepayment meter, or on a communal heating system, may have less access to some of these tariffs.

Step four: Get solar

The fourth step of getting a solar array may seem counterintuitive, as heat pumps need the most electricity in the winter, when a solar photovoltaic system is generating the least electricity. Despite this, it is still a very effective strategy for a few reasons:

1. Heat pumps draw a relatively small amount of power fairly continuously, which is well-suited to the generation profile of solar. This means that even in the winter, solar can still provide a useful amount of electricity, often covering 20-30% of a heat pump's electricity needs through the heating season.
2. Domestic hot water is required all year, so much of it can be generated using solar electricity.
3. Several export tariffs have settled at around 15p/kWh, meaning excess solar energy produced in the summer can effectively be banked into the grid, and then repurchased for a similar cost in the winter, when there's usually more wind generation available. The exported electricity can be used by other buildings, electric vehicles, stationary storage, or sold to other countries via interconnectors.

Figure 4 shows the massive impact that solar has on the running costs of a home with a heat pump, reducing the net bill to just £219 a year, an 86% reduction compared to a boiler. This assumes a 5 to 6kW solar array, which is large enough to provide a net zero energy balance over the course of the year. Given the efficiencies of modern solar panels, that's a pretty achievable output for a good proportion of homes in the UK, though a larger system is often desirable to cover electric vehicle charging.

Step five: Get a battery?

The steps above are already enough to get the typical home OFGEM uses for its price cap calculations down to an equivalent of about £20/month. Batteries can reduce this further by increasing solar self-consumption, and working with time of use tariffs to avoid peak pricing periods while storing cheap off-peak energy. For homes that don't have stationary storage, the impending arrival of bi-directional vehicle charging could provide access to a battery on wheels, that has enough energy to power a typical home for days. Whether or not a stationary battery makes financial sense will vary from one home to another, and is a moving target as technologies and tariffs develop over time.

Conclusions

The superpower of heat pumps over boilers is their ability to use cheap renewable energy, whether it is wind energy from the grid via a dynamic tariff, or an on-site solar array. This can result in negligible energy bills while providing significant protection from energy price shocks.

Implications and next steps:

1.      These levels of running cost massively increase the number of households where a heat pump makes financial sense among the able to pay, while offering the prospect of long-term strategic reductions in fuel poverty among others.

2.      The strategies required to achieve these levels of operational cost reduction need to become commonly understood among policymakers, and professionals such as heating engineers, and anyone involved in housing retrofit.

3.      Fuel poor households on prepayment meters may not be able to access the full range of time of use tariffs, and therefore may be excluded from the lowest grid electricity prices. In these cases, use of solar electricity may be an even more effective measure.

4.      Simple affordable pathways need to be established to fix inefficient or otherwise botched heat pump installations, particulalry for households that cannot afford to pay a heating engineer to carry out this work.

5.      Communal and district heating can result in lower system efficiencies (by preventing use of weather compensation and lower temperature domestic hot water storage), lack of access to time of use electricity tariffs, and reduce ability to use behind the meter solar to power heat pumps. Energy costs could be significantly higher than for individual heating systems as a result. Planning policy reform should be considered that allows use of individual heating systems where they can be demonstrated to have lower running costs than district systems.

Notes and References

Energy prices include V.A.T.

The 'typical home' referred to in the article is assumed to be a 3 bedroom semi-detached house that uses OFGEM's typical domestic consumption value of 11,500 kWh of gas for space and water heating, which is assumed to equate to 9,775 kWh of heat demand, and 2,700 kWh of electricity.

Energy Saving Trust (2009) In-situ monitoring of efficiencies of condensing boilers and use of secondary heating

Energy Systems Catapult (2023) Electrification of Heat - Interim Heat Pump Performance Data Analysis Report

Fair Fix (2023) Gas explosions in England

National Institute for Health Care and Excellence (2023) Carbon monoxide poisoning: How common is it?

Nesta/Cornwall Insight (2024) Domestic heat pump flexibility modelling

OFGEM (2024) Energy price cap