Buying and operating a heat pump could now save you as much as £557 a year on your energy bills, as Octopus Energy launches a device that can be fitted for as little as £2,500.
Previously, installing a heat pump would set you back between £7,000 and £13,000 but energy providers are now working to make the environmentally friendly heating alternatives more affordable.
Octopus has unveiled an air source heat pump that it said would cost homeowners as little as £2,500 to install, around the same as a typical gas boiler installation.
The firm estimates that replacing a typical gas boiler with an air source heat pump would save £187 in running costs, £102 due to there being no gas standing charge, around £159 on maintenance and up to £109 thanks to a smart energy tariff.
It comes just a few weeks after British Gas said that it would fit its own heat pumps for £2,999.
Heat pumps are becoming more popular as they are a more efficient, low-carbon heating system that operate similar technology to that which powers your fridge, using electricity to extract and boost warmth from the outside air to heat your home.
The devices, which can replace a traditional gas boiler, are not only better for the environment but also can save owners hundreds of pounds a year because they can heat homes more efficiently.
They generate less carbon dioxide than gas boilers, do not need as much maintenance and use electricity more efficiently than electric heating or cooling units.
Yet uptake of the devices is still low. A government grant programme, the Boiler Upgrade Scheme, was introduced to reduce the cost of installing a heat pump by between £5,000 and £6,000.
However, it was slammed by a House of Lords enquiry this week, described as “seriously failing” and unlikely to meet the Government’s target of installing 600,000 heat pumps annually within the next five years. At present, just 50,000 are installed each year.
Official figures show the Government’s boiler upgrade scheme only issued 7,600 vouchers out of a total 30,000 available for this financial year. The scheme was launched at the end of May 2022.
i takes a look at heat pumps and how they can save you money.
You can think of them like a fridge in reverse: an outdoor unit takes in heat from the air surrounding your home and transfers it to a coolant liquid.
This liquid is then compressed, raising its temperature even further, before it is piped along to a hot water reserve tank, where it transfers the energy across via a heat exchanger.
Hot water from this tank is then circulated around your home to radiators and hot water supplies throughout the house. As that heat is transferred to your home, the water falls in temperature and circulates back to the water tank.
This cooler water then cools the coolant liquid again, which is transferred back to the outdoor unit to be heated up once again.
This is all done with a relatively small amount of electricity, which itself can be sourced from green sources such as a solar panel or wind turbine to keep the environmental impact even lower.
How much does a heat pump cost?
There are two types of heat pump – air source and ground source. The former takes in ambient air from the air, as the name suggests, while the latter extracts it from the sun and the earth using underground pipes.
An air source heat pump could set you back somewhere between £7,000 and £13,000, according to the Energy Saving Trust, depending on the manufacturer of the device, the size of your property and the complexity of the installation required.
This price can be brought down thanks to the Government’s Boiler Upgrade Scheme, which can provide a grant of up to £5,000 towards that cost.
The cheapest option currently is Octopus Energy’s self-designed heat pump, which can cost as little as £2,500 after grant costs. The firm said most consumer should expect to pay between £3,000 and £3,500, when factoring in additional costs however, depending on their home.
British Gas, meanwhile, said in January it will price match any offer made by a rival company for an accredited installation of an air source heat pump. It has set a starting price of £2,999 per installation, after the grant has been applied.
How much can they save you?
To get a good idea of how a heat pump could save you money, you can make a rough calculation based on the energy efficiency of your home, the amount of energy you use, the size of your home and the price of energy.
As the price of energy is rising, this calculation can become outdated, however, so it is worth updating as this changes.
Typical household gas consumption is 12,000 kWh a year, according to Which?. With a typical boiler giving an energy efficiency of around 85 per cent, that means that the heat demand of this home would be 9,945 kWh per year.
Gas used for cooking makes up around 2.5 per cent of that total, or 300 kWh, so the typical quantity of gas used for space and water heating is 11,700 kWh a year.
From 1 October, the average price cap for gas is £0.103/kWh, making the annual cost of gas consumption is in this instance £1,205.10. The average gas standing charge is £0.28 per day, so the annual standing charge cost is £102.20.
That makes the total gas bill for space heating and hot water (excluding cooking) £1,307.30.
An air source heat pump, meanwhile, would deliver that same heat demand at a rate of three times the amount of electricity it uses, making the same typical home require around 3,315 kWh of electricity to run it a year.
Currently, the price cap for electricity is £0.34/kWh, so the annual cost of electricity for heating and hot water, making its annual running cost £1,127.10.
Though there is a standing charge for electricity, this would already be paid to power the rest of this example home.
According to Octopus Energy, that cost saving could be even higher when combined with a smart tariff and lower maintenance costs.
The firm estimates that replacing a typical gas boiler with an air source heat pump would save £187 in running costs, £102 due to there being no gas standing charge, around £159 on maintenance and up to £109, thanks to a smart energy tariff.
That makes for a total potential saving of £557 a year, which would mean a £5,000 heat pump would pay for itself over the course of nine years.
A more expensive heat pump could take longer to pay for itself but some are more energy efficient so the exact saving per cost of pump will depend on its efficiency rating.
‘It’s magical – they create more energy than they consume’
Dom Eames included a heat pump in his new home, and says it will save him thousands in the long run (Photo: Dom Eames)
Dom Eames, 53, from Lincolnshire, built his own home in 2020 along with his family, with the intention of making it as close to zero-carbon as possible. They installed a heat pump as part of the process.
“We’ve got a very well insulated house, with solar panels on the roof and batteries in the garage to store any excess, and we’ve got a heat pump. We’ve tried to make the whole thing as energy efficient as possible.
“When I bought my heat pump I was eligible for the renewable heat initiative, which meant that I only paid around £4,000 for my heat pump, rather than £11,000.
“The main attractions were to be climate positive but also to save money. Now, we don’t use any gas – our home is 100 per cent electricity powered.
“This year our energy bill will be about £3,000, but that includes powering two electric cars. Without them, just to run the heating and hot water for our 4,500 sq ft house will probably cost around £1,500.
“For me, heat pumps do something magical – they create more energy than they consume. They basically take the heat from the air and extract the energy, to get extra value from it, at the cost of a small amount of electricity.
“I think there’s a lot of misinformation out there about how heat pumps are disastrous, but for me it always made a lot of sense, particularly combined with using solar to give us more electricity.
“One of the great things about heat pumps is using the energy tariffs that are specifically tailored to them. For example, you can set them to heat your hot water at night when energy is a lot cheaper.
“We need more government support for heat pumps. We need an industry that has trained people up to install them, and people need to understand that they work best with a well-insulated home.”
