Nesta, the research and innovation foundation, published analysis on 25 October 2022 showing that the energy crisis had improved the case for investing in a heat pump by narrowing the whole life cost gap with a gas boiler. The whole life cost measure used includes upfront installation costs, running costs and maintenance costs1.
Before any policy changes are considered, the energy crisis moved heat pumps closer to the cost of gas boilers by £100 to £250 per year compared with pre-crisis prices, according to the analysis1. The modelling uses an efficiency (SPF) of 2.76 for heat pumps and 0.87 for gas boilers, apart from in the high efficiency system scenario, and is based on current market forecasts of energy prices1.
The analysis also modelled individual policy changes. Moving environmental levies off electricity bills reduces the whole life cost per year of a heat pump relative to a gas boiler by £100 to £240 under the central forecast of energy prices. Improving heat pump efficiency reduces the relative whole life cost by £120 to £290 per year. A £5,000 subsidy, equivalent to the Boiler Upgrade Scheme, reduces the whole life cost of a heat pump by £333 per year relative to a gas boiler under all scenarios1.
The table below shows the difference in whole life cost per year between a heat pump and a gas boiler under the central forecast, by property type. Positive values mean a heat pump is more expensive over its lifetime than a gas boiler; negative values mean it is cheaper1.
| Property type | Baseline (price guarantee and temporary levy removal) | Plus levy removal to 2037 and flexibility payments | Plus high efficiency system | Plus £5,000 grant |
|---|---|---|---|---|
| Flats (Medium) | £450 | £340 | £220 | -£110 |
| Terraced (Medium) | £540 | £380 | £190 | -£140 |
| Detached (Large) | £770 | £530 | £240 | -£90 |
A second table using a decoupled electricity market scenario, in which more existing electricity sources are switched to Contracts for Difference, gives lower figures: £370, £330, £210 and -£130 for medium flats; £420, £360, £170 and -£160 for medium terraced homes; and £590, £490, £210 and -£120 for large detached homes1.
"the energy crisis is likely to have improved the case for investing in a heat pump, moving the whole life cost of a heat pump closer to a gas boiler"
The analysis states that heat pumps are cheaper than a gas boiler over their lifetime when a high-quality installation delivers high efficiency, a £5,000 grant is available, and either levies are removed or shifted, or electricity prices are decoupled from gas. Combining the full range of policy scenarios with a decoupled electricity market makes heat pumps £120 to £160 per year cheaper over their lifetime than gas boilers1.
Why it matters for households
The gap between a heat pump and a gas boiler is usually judged on heat pump vs gas boiler running costs, but this analysis uses whole life cost, which folds the upfront price of installation and ongoing maintenance into the same figure as running costs1. That matters because a heat pump's higher purchase price can be offset over time by lower running costs, and the size of that offset depends heavily on the price of electricity relative to gas.
The figures show the gap varies by property type. Under the baseline scenario, a heat pump costs a medium flat £450 more per year over its lifetime than a gas boiler, rising to £770 for a large detached home. Under the scenario combining levy removal, flexibility payments, a high efficiency system and a £5,000 grant, all three property types show a heat pump as cheaper, by £90 to £140 per year1.
Two of the modelled changes sit outside a householder's direct control: whether environmental levies are moved off electricity bills, and whether electricity prices are decoupled from gas. The other two relate to the installation itself and to grant availability. The analysis notes that heat pump households receive a 2% discount to their heating bill for using electricity flexibly from 2025, around £33 per year for a typical home, under the levies and flexibility scenario1.
For a home's energy independence, the analysis frames the choice as one of exposure: a gas boiler ties running costs to gas prices, while a heat pump ties them to electricity prices and to the efficiency of the installed system. The efficiency assumption is central to the result. The baseline uses an SPF of 2.76, while the high efficiency scenario uses 3.28, described as any system designed for low flow temperatures, a properly sized and high-performance heat pump, or a hybrid system with solar PV or thermal1.
What happens next
The baseline scenario in the analysis includes the Energy Price Guarantee from October 2022 to October 20241. The other scenarios assume levy removal continuing through 2037, flexibility payments from 2025, and a £5,000 subsidy equivalent to the Boiler Upgrade Scheme1. No further dated steps are set out in the analysis.