Heat pumps could become £60 to £110 per year cheaper than gas boilers over an average 15-year lifetime, once installation and running costs are counted, according to analysis published by the charity Nesta on 2 March 20221. The finding rests on data from 60,000 heat pump installations in the UK since 2010, which Nesta describes as the largest such analysis to date1.
The comparison assumes the existing £5,000 government grant available in England and Wales, the Boiler Upgrade Scheme, is used to cut the upfront cost, alongside three changes: shifting social and environmental levies from electricity to gas, suppliers offering discounted heat pump tariffs, and improving the efficiency of heat pump systems in homes1. Nesta says the levy shift alone would take £600 per year off the running cost of a heat pump in a large detached home compared with a gas boiler1. Without the £5,000 upfront reduction, the same three changes would leave a typical heat pump costing between £230 and £270 per year more than a gas boiler over its life2.
Upfront prices vary widely by property. Nesta puts typical installation at around £9,000 for a flat, around £11,000 in a mid-sized home and £13,000 in a large detached house1. The median air source heat pump cost rose from around £9,000 in 2015 to £10,500 in 2021, an increase of 15 per cent, while equipment trade prices rose only 5 per cent2. Around 16 per cent of installations cost more than £15,000 and 18 per cent were under £8,0002. Running costs account for 55 to 65 per cent of the lifetime cost1.
Households with no other gas appliances could cut whole-life costs by around £95 per year relative to a gas boiler by having the gas line disconnected, Nesta says1. Gas standing charges are around 24p to 27p per day, roughly £90 per year, but removing the meter can cost £300 to £500, which would reduce the saving to £60 to £70 per year for customers paying their own disconnection costs1. Some suppliers, including Octopus Energy, currently cover that cost1.
"Heat pumps may be a more expensive option for many homes at present, but there is huge scope for their cost to fall over the coming years. Our analysis shows that, with relatively modest changes, heat pumps could soon become a better overall investment than a gas boiler."
Separate Nesta analysis published on 1 March 2022 found the saving would be marginally better in Scotland for certain homes, and that Scotland's grid met over 97 per cent of electricity demand through low carbon means in 20203. That work modelled savings of £100 to £120 less per year for households needing only low levels of property upgrade, and estimated around 200,000 Scottish properties could install a heat pump with low or no upgrades3. It used a £7,000 grant rather than £5,000, reflecting the Scottish scheme of a £2,500 loan plus up to £7,500 cashback3.
| Property type | Whole-life cost versus gas boiler today | After running cost reductions | After £5,000 upfront reduction |
|---|---|---|---|
| Small (50-100m²) | £670 more | £270 more | £60 less |
| Medium (100-150m²) | £840 more | £230 more | £60 to £110 less |
| Large (150-200m²) | £1,190 more | £260 more | £60 to £110 less |
Source: Nesta2. Nesta gives the post-grant range as £60 to £110 per year cheaper across the UK1.
Why it matters for households
The gap between a heat pump and a gas boiler is not only about the price of the box on the wall. Nesta's figures show most of the lifetime cost sits in running the system, so the electricity price relative to gas, and how efficiently the unit performs in a given home, decide whether the numbers work. Heat pumps typically use around three to four times less energy to heat a home than a gas boiler, but Nesta says they are held back by the very high cost of electricity in the UK1. A household that switches and keeps a gas connection still pays the standing charge; one that removes the connection avoids it but may face a meter removal bill1. For energy independence, the report frames heat pumps as replacing imported gas with electricity made in the UK, most of it now from low-carbon sources, and notes Russia produces a tenth of all global supply1.
What happens next
Nesta says ministers were already reportedly considering shifting levies from electricity to gas, and that such a change could open up financing offers spreading the upfront cost into monthly payments1. It also calls for training more highly skilled heating engineers1. The Scottish Government has created a loan and cashback scheme and has asked the UK Government to restructure levies and charges, powers Nesta says remain reserved to Westminster3. Nesta says the Boiler Upgrade Scheme is due to run from 2022 to 2025 in England and Wales2. No further dates are given in the published material.
Sources3 cited
- Heat pumps could soon be cheaper than gas boilers | Nesta, nesta.org.uk
- How to reduce the cost of heat pumps | Nesta, nesta.org.uk
- Heat pumps could be greener and cheaper in Scotland | Nesta, nesta.org.uk