Cadent, the UK's largest gas distribution network, published a cost comparison of heat pumps and hydrogen heating on 6 February 2023, written by its Head of Energy Transition, David Watson. The company states that 22 million homes using natural gas for heat and hot water must be converted to low carbon alternatives within 27 years1.
On upfront appliance costs, Cadent says a fully installed hydrogen boiler will cost about the same as a natural gas equivalent does today, around £3,000, while a fully installed heat pump currently costs around £13,000, based on numbers from BEIS and MCS1. On running costs, Cadent states that electricity for heat pumps is expected to return to around 6-7p/kWh wholesale in the medium to long term, while low carbon hydrogen is expected to fall to 4-5p/kWh by 20501. It notes that the efficiency of heat pumps means their energy cost of running is likely to be lower than hydrogen boilers1.
Cadent's comparison assumes an installed heat pump cost reduction of 20% over time with hydrogen boiler costs remaining flat, and concludes that the annual running costs of the heat pump would still need to be around £500 a year less than a hydrogen boiler to offset the higher upfront installation expense, before electricity network upgrade costs are factored in1. It says this will certainly be the case for some homes but is unlikely for others, meaning hydrogen could be a cheaper alternative for some1. The company also cites figures showing that during 2020/21 around 42% of UK families had either no savings or investments, or less than £1,5001.
"the question is not a binary one of heat pumps or hydrogen, but one of how much of each technology we will need to decarbonise heat at the lowest cost to consumers"
| Measure | Cadent's stated figure |
|---|---|
| Fully installed hydrogen boiler | Around £3,000 |
| Fully installed heat pump | Around £13,000 |
| Electricity wholesale price, medium to long term | Around 6-7p/kWh |
| Low carbon hydrogen price by 2050 | 4-5p/kWh |
| Running cost gap needed to offset heat pump upfront cost | Around £500 a year |
Why it matters for households
The comparison sets out the trade-off a household faces between a cheaper appliance with higher running costs and a more expensive appliance with lower running costs. For a home's energy independence, the two routes differ in kind: a heat pump runs on electricity, which can be generated domestically, while hydrogen heating depends on a gas network being converted to carry a low carbon fuel, a change Cadent describes as requiring new storage assets and some new pipelines1. Cadent states that full electrification of heat could see total power demand not just double but become more erratic and less easily managed, requiring investment in capacity and flexibility1. The company's own position is that it backs the introduction of hydrogen as a low carbon alternative to natural gas1. How individual homes would be served, and at what cost, has not been reported beyond these figures.
What happens next
No dated next steps are set out in the announcement. Cadent says it is working with government, electricity networks, local and regional authorities and consumers to understand what decarbonisation looks like in each local area1.