Heat pumps will never be cheaper than gas boilers, expert warns

Telegraph

16-02-2025

Heat pumps will never be cheaper than gas boilers, the boss of a company selling the technology has admitted.
The Government wants the majority of homes to switch to heat pumps to meet its net zero goals by 2050.
However, it has said it will not set a deadline to end the sale of gas boilers until heat pumps are cheaper for households.
Heat pump installation costs are currently around £12,000 without subsidies, compared to around £2,000 for a gas boiler.
Subsidies provide households with £7,500 towards the cost of installation, but the budget covers less than 40,000 heat pumps a year and is set to end in 2027.
'I don't think you will ever see heat pumps priced on parity with gas boilers, because it's like comparing a bicycle to a car,' said Daniel Särefjord, the UK CEO of heat pump installation company Aira.
'A heat pump is a more complex device,' said Mr Särefjord. 'A gas boiler is an 800 degree flame that hits water. It's an incredibly simple - but also incredibly inefficient - device.'
Heat pumps work similarly to a fridge in reverse, taking energy from the air or the ground and compressing it to heat water for radiators and taps, or the air inside your home.
Concerns over cost are seen as one of the major factors holding back take up of the technology.
Studies have suggested that cost reductions of 25 per cent are possible by 2030.
But experts agree that savings on installations compared to gas boilers are unlikely in the long run.
Installation costs have actually risen in the last five years, essentially flatlining when accounting for inflation.
If subsidies were to remain in place in the UK, meeting the Government's rising targets for heat pump installations would cost taxpayers £2.4 billion a year by 2028 to pay for the grants, even if the amount handed out to each household comes down, according to think tank Nesta.
One reason that the price is stubbornly high is that heat pumps are a well established technology, reducing the scope for the kind of innovation that has brought down the costs of electric vehicles.
British manufacturers also compete for parts and capacity on the global market, where demand is rising and expected to increase further as other countries try to hit their own green targets.
'Realistically, I don't think that suddenly, the UK's rising demand is going to have a significant impact on that global supply chain where we're quite a small piece of the overall market,' said Joanna O'Loan from the Energy Saving Trust.
'We're probably not looking at getting a heat pump for £1,000 pounds. That's probably not a reality that exists.'
'Whether there's a point in time that it actually is cheaper than a gas boiler to install, I think that that's quite an uncertainty. I don't think I would be gambling that that would happen anytime soon.'
Even in Sweden, one of the most developed markets for heat pumps, an air source heat pump will cost between £4,200 to £9,200.
Adding to the costs are the changes that need to be made to most British homes to fit a heat pump for the first time.
These can include bigger radiators, underfloor heating, new wiring, drilling holes in the wall, making space for a hot water heater and switching out a gas hob.
'If you look at the total cost of getting a heat pump installed, less than half of that cost is related to the product, a lot of it is actually the labour and the materials that you need to convert the house from a gas or oil house to a heat pump house,' said Mr Särefjord.
Aira provides heat pumps on a subscription model, and Mr Särefjord said they can work out cheaper than gas boilers over the course of their lifetime.
The company was launched in Sweden in 2022, and has said it will invest £300 million in the UK as part of plans to target a million British households to take up its service over the next decade.
The Government is also relying on the lifetime cost, meaning energy bills, maintenance and installation, coming down below that of a gas boiler.
However, it is unclear when this might happen without significant Government subsidies, even if upfront costs come down, two recent studies from green think tanks have found.
A study released this month by the Regulatory Assistance Project (RAP), a global NGO focused on decarbonisation, looked at the likely impact if heat pump installation costs were to drop 25 per cent and electricity became cheaper.
It found that even with the reduction in costs, removing subsidies from heat pumps would still leave them more expensive over their lifetime than a gas boiler.
Another study from Nesta, a charity that works to help homes go green, found that once subsidies are removed, gas boilers would still be cheaper overall compared to heat pumps in 2035.
A proposed 2035 deadline to ban gas boilers is intended to ensure the UK hits its goal to be net zero, meaning carbon neutral, by 2050, as the lifetime of a gas boiler is 15 years on average.
Jan Rosenow, who led the study for RAP, said subsidies 'remain a vital policy' for the heat pump market.
'Heat pump retrofit costs often include 'making good' existing systems, meaning that upfront costs for heat pumps will typically be higher than gas boilers.'
Heat pump advocates argue that they can have cheaper running costs than a gas boiler, because they are around three times more efficient, and simpler to maintain.
But because electricity is more than four times as expensive per unit of energy compared to gas, running a heat pump often increases overall heating bills.
Green campaigners have called for reforms to urgently reduce the price of electricity by removing levies that account for 17 per cent of the bill, but the Government has yet to commit to this.
Depending on where this rebalancing falls, it could mean that taxes would have to increase or gas bills rise, making heat pumps the more attractive option, but putting fuel poor gas households at risk.
But the studies from Nesta and RAP found that even when levies were removed or rebalanced, heat pumps without subsidies were still more expensive overall than gas boilers.
Both bodies told The Telegraph that they had found in their research that there are routes to making heat pumps a cheaper option than gas boilers.
Mr Rosenow said: 'Heat pumps can be cheaper than gas boilers but, as shown by our research, this is not always the case and policy reforms can and should significantly enhance their economics.'
These include efficiency improvements in the technology, heat pumps having a longer lifespan than gas boilers, and cheaper electricity tariffs for heat pump households.
Nesta found that by 2035 costs could come down to £200 if the Government implements its policy suggestions, which include zero interest loans for households.
But some experts are sceptical about whether a few hundred pounds a year will be enough to persuade households to take up heat pumps, given the lack of familiarity with the technology and the inconveniences of installation.
'There's a huge hassle factor,' said Ms O'Loan. 'There are people that are being offered heat pumps for free under fuel poverty schemes, and still rejecting them.'
A Government spokesman said: 'We want to help people get a heat pump as they are three times more efficient than gas boilers, enabling families to save around £100 a year by using a smart tariff effectively.
'We are making them more affordable by providing £7,500 towards the cost and are considering how we can ensure people are aware of the benefits of heat pumps – improving families' access to clean, affordable, secure power.
'We're also making them cheaper in the long term by investing in research and development to support innovation and improve their performance and efficiency.'