How Much Will Your Heat Pump ACTUALLY Cost

September 20, 2024

How Much Will Your Heat Pump ACTUALLY Cost?

What is the true cost of a new air source heat pump?

Air source heat pumps (ASHPs) have emerged as a key technology in the UK’s shift toward renewable energy and lowering household carbon footprints. With energy prices fluctuating and homeowners seeking long-term cost savings, many are considering switching from traditional gas boilers to heat pumps. However, understanding the full financial picture—including upfront installation costs, running expenses, and potential savings—can be complex.

In this article, we’ll aim to break down the ACTUAL costs of an air source heat pump, taking into account the current energy landscape in the UK, and provide you with the information you need to make an informed decision.

Whats in this article?

1. Upfront Costs of Air Source Heat Pumps

2. Running Costs and Energy Savings

3. Impact of the "Spark Gap" on Heat Pump Adoption

4. Maintenance Costs and Lifespan

5. Return on Investment (ROI): Long-Term Savings

6. Conclusion: Is an Air Source Heat Pump Worth Your Investment?

Upfront Costs of Air Source Heat Pumps

We understand that when investing in an air source heat pump, the initial cost is often the biggest hurdle. As a UK homeowner, the total cost of the job (without grant funding) can range anywhere from £8,000 and £15,000 for installation, depending on the size of your property and the complexity of the system.

1. Equipment and Labour Costs: The heat pump unit and materials typically cost ~£4,000 to £8,000, and installation labour adds ~£4,000 to £7,000. For larger properties requiring more powerful systems, these figures can rise. It’s important to remember that upgrading older heating systems or adding insulation to increase efficiency can also push costs higher, of which your installer should be able to provide an estimate for any additional work.

2. But, fear not. Current Government Incentives are crucial in increasing the affordability of heat pumps. The UK government’s Boiler Upgrade Scheme offers a £7,500 grant toward heat pump installation, potentially reducing your upfront cost (i.e. the final price you pay) to between ~£1,000 and £8,000. This grant is part of a broader effort to encourage the adoption of cleaner heating. When taking the grant into consideration, we’ve found the upfront cost of a heat pump to be comparable with a gas boiler replacement, therefore making it a conversation worth having should you be looking to upgrade your heating system. As a bonus, there is also currently 0% VAT on heat pump installations, further reducing your upfront cost. For a full breakdown of purchase and installation prices, see our guide to air source heat pump costs, and if you are moving off gas, our guide to the cost of replacing a gas boiler with a heat pump covers what that swap involves.

Running Costs and Energy Savings

Once installed, the operational costs of an air source heat pump largely depend on electricity prices. Given the high cost of electricity in the UK relative to gas, we understand that homeowners are concerned about the short-term affordability of running a heat pump, and rightly so.

1. Electricity Costs: Heat pumps run on electricity, and although they are far more efficient than gas boilers (typically producing 3 to 4 units of heat for every 1 unit of electricity), high electricity prices do impact running costs. On average, you can expect to spend £750 to £1,200 per year on electricity to run a heat pump, which is negligible when compared to the price you’d pay for gas over 12 months with an efficient boiler.

2. Energy Efficiency: Despite higher electricity costs, heat pumps offer significant energy savings compared to traditional electric or oil-based heating systems. In fact, they are up to 30% more efficient than conventional electric heating, helping to offset the running costs over time. Our guide to whether a heat pump will save you money looks at where those savings come from for Kent households.

Impact of the "Spark Gap" on Heat Pump Adoption

As highlighted by industry leader Jan Rosenow, the ratio between electricity and gas prices, known as the “spark gap,” is playing a crucial role in heat pump uptake. In countries like Sweden and Finland, where electricity is relatively cheaper compared to gas, heat pump adoption has soared. Rosenow’s analysis shows a direct correlation between narrower spark gaps and higher installation rates of heat pumps, proving running costs are a big factor of consideration for many homeowners making a switch.

We appreciate that the current UK spark gap—where electricity is notably more expensive than gas—can make heat pumps seem less appealing in the short term. However, as the government invests in renewable energy sources and reduces the carbon intensity of electricity, this gap is expected to narrow, making heat pumps a more viable option day by day.

Maintenance Costs and Lifespan

Air source heat pumps are relatively low-maintenance compared to other heating systems, but regular servicing is important to keep them running efficiently.

1. Annual Maintenance: The typical annual service for a heat pump costs between £150 and £300. This ensures the system remains in good working condition, helping to extend its lifespan.

2. Expected Lifespan: With proper care, a heat pump can last between 15 and 25 years, making it a long-term investment. This longevity, when compared to the 10-15 year lifespan of gas boilers, is one of the advantages of switching to a renewable heating system.

Return on Investment (ROI): Long-Term Savings

In our opinion, your decision to invest in an air source heat pump should not just be about upfront costs—it’s also about recognising the long-term financial and environmental benefits.

1. Energy Bill Savings: Despite high electricity prices, heat pumps can still provide significant savings over time, especially for households switching from inefficient electric or oil heating systems. In these instances, you can expect to save between £200 and £500 annually on energy bills, depending on their usage and home’s energy efficiency.

2. Payback Period: The average payback period for an air source heat pump in the UK is 7 to 15 years. This timeframe varies depending on the size of the property, current electricity prices, and government support. While the current high cost of electricity may slow the payback period, the long-term savings and future potential of lower electricity prices can make heat pumps a worthwhile investment. This payback period is considerably lower should you generate your own electricity through solar PV.

3. Future-Proofing Your Home and Increasing Property Value: Installing an ASHP also adds value to your property, making it more attractive to future buyers. As the UK transitions towards net-zero emissions, homes equipped with renewable energy systems like heat pumps are becoming increasingly desirable. A heat pump will improve your home’s Energy Performance Certificate (EPC) rating, which is crucial when selling. Homes with higher EPC ratings tend to sell for up to 16% more than those with lower ratings, according to research from the Department for Energy and Climate Change. For the average UK home, this could mean an increase in property value by £8,000 to £15,000 or more, depending on location and property size.

4. Environmental Benefits: Heat pumps also offer significant environmental savings, reducing carbon emissions by 1.5 to 2.5 tonnes annually. For context, this would be the equivalent emissions from driving your car from London to Sydney! As the UK continues to decarbonise its electricity grid, the environmental and financial benefits of heat pumps are only set to increase.

Conclusion: Is an Air Source Heat Pump Worth Your Investment?

While air source heat pumps involve a significant upfront cost, and short-term savings are currently tempered by high electricity prices, we believe they are a compelling long-term investment. Not only can they lower your energy bills over time, but they’ll also massively reduce your household carbon footprint, making them a smart choice for if you’re a future-thinking and environmentally-conscious homeowner.

Should you want any personalised advice on whether an air source heat pump is the right choice for your home, don’t hesitate to contact our green team. Our friendly renewable experts will happily guide you from first enquiry to installation, helping you kick-start your transition to clean home heating and a reduced carbon footprint.