When thinking about the financial cost of any heating system, the two main considerations are going to be 1) the upfront cost and 2) the ongoing running costs.
Let’s take a look at these.
Up-Front Costs
Firstly, if we address the elephant in the room – the up-front cost of an air source heating system – then there’s no doubt that it is currently more expensive than replacing with a fossil-fuel based system such as a boiler. To offset this cost difference, however, there is generous government funding available which makes the up-front cost comparable, and even potentially cheaper than the traditional alternative.
A new boiler installation can range from £1,500 to £4,500 (heatable.co.uk).
A new air source heat pump installation can range from £8,000 to £15,000, but on average is around £10,000.
Clearly these figures depend on the make and model of boiler or heat pump, the requirement for any ancillaries or upgrades, and the extent and quality of installation work required.
Currently, the vast majority of Scottish homeowners are entitled to £7,500 in grant funding for an air source heat pump, which increases to £9,000 if the property is classed as rural – so in theory, it’s possible for funding to cover the entire cost of a heat pump installation. The reality, however, is that most retro-fitted heat pump installations – when properly designed – will require some upgraded radiators and / or pipework. Even allowing for this, most installations will be below the £15,000 mark.
To assist with this, the grant funding available can be combined with an interest free government loan.
See https://www.homeenergyscotland.org/find-funding-grants-and-loans/ for more information, or to apply for the funding.
Ongoing Costs
With the initial purchase cost of the system considered, what can you expect to pay for the running of a heat pump, compared to a traditional system?
Our energy use is measured in kilowatt hours (kWh), so the more kWh we use to heat our home and hot water, the more we pay. Not only do we need to look at how many kWh we are using, but also how much we’re paying per kWh. Then we have an idea of the running costs of a system.
A good starting point for doing this is your home’s Energy Performance Certificate. Assuming you are living in Scotland, you can check if your home already has one – see https://www.scottishepcregister.org.uk/
If you don’t have one, it is relatively inexpensive to have one produced – usually between £50-£100.
These certificates provide an overall rating of your home’s energy efficiency based on details of the property construction, but – more importantly for the purposes of this exercise – they also provide an estimate of the ‘heat demand’ – the energy required to heat your home and hot water, expressed in kWh per year.
Let’s take an example of a property which has a heat demand of 10,000 kWh per year for space heating, and 2,000 kWh per year for water heating.
If every heating system was 100% efficient, it would be quite simple. For every 1 kWh of energy you bought, you would get 1kWh towards that heat demand – so our example property would need to buy 12,000 kWh of gas, oil or electricity energy each year.
In reality, however, traditional heating systems have never been able to reach this level of 100% efficiency. A gas or oil boiler will typically reach around 90% efficiency – at best. So, this means we now need to buy around 13,285 kWh of energy in order to meet the heat demand of the property. Following so far?
This is where air source heating really delivers a significant advantage, as due to the ingenious engineering behind them (Air Source Heat Pumps - How they Work) they can deliver efficiencies of 300-400% or even more. This means for every 1kWh of energy you buy, you get 3-4kWh of energy towards the heat demand of your home. Returning to our example property, this means we only need to buy 3,000-4,000 kWh of energy to deliver that 12,000 kWh of heat demand.
So, the final piece of the cost puzzle is how much do we pay for each unit of electricity we buy?
Given fluctuations in energy prices, and changes to standing charges, this may be a bit of a ‘moving target’, but armed with the information above, you can quite easily calculate comparative energy spends.
With most electricity suppliers now moving towards lower unit rates for customers with heat pumps, costs of 15p/kWh are now readily available, which compared to a gas unit rate of around 5.5p gives an annual energy cost saving of over £200 for our example property.
With the continuing move towards greener heating solutions, and heat pumps widely acknowledged to be the most appropriate replacements for boilers, the economic argument is only set to gather momentum.
Other Considerations
Clearly, the Air Source Heating costs we consider aren’t all financial. The primary driver of the heat pump revolution is the need for us to decarbonise our systems to protect our environment. The need to reduce our energy usage has been clearly demonstrated over decades, and it is now within our power to make a difference in each and every household.
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