Heat pumps cost and funding

This page explains the cost, payback periods, and available funding for heat pumps.

Installation and operation costs

Overall costs for heat pumps will vary depending on

  • the size of the system required
  • the technology selected
  • the complexity of the project.

As a very general guide, the installed cost of a typical system would be about £1,000 per kWth capacity. This estimate does not include the cost of the heat distribution system - underfloor or central heating.

Factors which will influence the installation cost are the:

  • amount of available land
  • type and structure of the building
  • time required for installation
  • disruption to normal activities
  • geographical location
  • need for planning permission.

Fuel bill savings

On estimate, a typical heat pump system could save you £160 to £840 a year. This will depend on what type of fuel is replaced. Savings are greatest when replacing electric heating and for properties off the gas grid. Savings are lowest when replacing gas or oil.

A heat pump with mid-range efficiency can be expected to use only a third of the energy of an average existing gas boiler to produce the same amount of heat. Thus there is significant scope for considerable savings in the cost of fuel when replacing conventional heating systems.

Maintenance costs

Heat pumps have very few moving parts and so require minimal maintenance. The inverter will probably require replacement over a heat pump life span (20-25 years). This costs £1,000 to £2,000 in a domestic system.

For a commercial system the inverter is likely to constitute 10 to 20 per cent of project costs. Underground piping used in underfloor heating or larger district heating schemes typically carries a 50 year warranty.

Payback periods

The payback period for heat pump systems depends on the:

  • type of heat pump installed
  • age and type of building that it is installed into
  • the type of heating it is replacing or displacing.

Installing systems into existing buildings is more expensive than incorporating them into new designs.

These following table shows payback period estimates based on published data and field studies, assuming current electricity prices and a mid-range system efficiency. Payback periods are likely to decrease if energy prices rise and the renewable heat incentive (RHI) is enacted.

Ground source heat pump

Traditional fuel used for payback comparison Payback periods without RHI* Payback periods with the RHI
Direct electric heating 12 to 18 years 6 to 8 years
New oil boilers 29 years 12 years
New gas boilers 47 years 14 years

Air source heat pump

Traditional fuel used for payback comparison Payback periods without RHI* Payback periods with the RHI
Direct electric heating 10 years 5 to 13 years
New oil boilers 16 years may not pay back within lifetime of the building
New gas boilers 31 years may not pay back within lifetime of the building

*Please note that the payback period without RHI given is the lower estimate. This could extend to not being paid back within the lifetime of the building depending on the variables discussed above. This shows that the RHI is crucial to making these systems economically viable.

Example costs for heat pumps in a detached house

The following examples indicate the costs of installing and running a heat pump for a detached house with and without the RHI. The example demonstrates the importance of selecting the correct technology for the building under consideration. In this example the air source heat pump would use much more electricity than the ground source heat pump.

This would increase the operational costs sufficiently to make the installation financially unviable as well as having a significant impact on the buildings CO2 emissions.

  Ground source Air source
Heat demand of house 7,056kWh/year 7,056kWh/year
Installed capacity 5kWth 5kWth
Capital cost £6,058 £4,599
Electricity required 2,392 kWh/year 4,246 kWh/year
Operational and maintenance costs £304 per year £579 /year
If eligible for RHI
cost savings £749 per year £535 per year
payback period 14 years unviable
Without RHI    
cost savings £247 per year £247 per year
payback period unviable unviable

Funding schemes

The main source of funding for heat pumps is the renewable heat incentive (RHI). Refer to the funding and delivery page for more information on the renewable heat incentive.

Funding and delivering energy projects

Additional funding may be available through the Carbon Emissions Reduction Target (CERT). This is a statutory obligation on the six largest energy companies to reduce CO2 emissions in the domestic sector. Funding is available for all energy efficiency measures and several renewable heat generation technologies. Each of the six energy companies administers their own program. This funding will remain available until 2012.

Information on CERT - on the Energy Saving Trust website.


1 May 2012

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