The real reason why heat pumps are eye-wateringly expensive
The cost of fitting a heat pump has risen by a third in six years despite generous government grants – leading critics to accuse installers of profiteering.
Ministers want 600,000 heat pumps fitted each year by 2028, and hoped to cut the real term costs of installing one by 25pc compared to 2021.
But, the price of fitting an air-source heat pump actually increased by 33pc, from £9,686 to £12,951 in the six years to January 2025, according to Telegraph analysis of data from the trade standards body, MCS.
This is despite the fact the Government has since introduced grants worth up to £7,500 for each household – which were paid directly to installers.
Industry experts blamed a host of factors for the spike such as the rising cost of copper and energy, while a government spokesman said the figures did not account for inflation. But even after factoring in inflation, the cost of installing a heat pump has still risen £700 – despite promises from successive governments it would fall in real terms.
It has led critics to accuse installers of cashing in on the grants which allowed them to pass more costs on to consumers.
Dramatic charts show that between March and April 2022, the same month the first Government grant was introduced, the cost of installing a heat pump suddenly rose by 25pc to £1,465 per kW. It meant a 4kW heat pump cost almost £6,000 while a large 15kW device was upwards of £21,000.
MCS claimed this jump was due to a difference in sample size, as well as the end of the renewable heating incentive – the precursor to the grant.
Mike Foster, of the Energy Utilities Alliance trade body, told The Telegraph: 'When subsidies increase, we always see sales volumes follow, that's just basic economics. But it is also likely that price competition is less keen and as a result average costs drift upwards. That's just basic human nature.
'Given it is larger companies primarily benefitting from the Boiler Upgrade Scheme, having a dedicated workforce fitting large numbers of heat pumps, we should see average costs of installations falling – indeed that is what the Government predicted would happen – it's called the 'learning curve'.
'But the data suggests this is not happening anywhere near fast enough. Either the learning curve isn't working for heat pump installations, which would be unusual, or companies are taking higher profit margins on each job. Both require closer examination by Ministers.'
Successive governments have desperately tried to entice households into switching to a heat pump by making them cheaper.
In November, ministers announced that a planned clean heat market mechanism – which would see manufacturers fined for not selling enough heat pumps – was to be drastically scaled back.
The 'boiler tax', as it became known, had prompted manufacturers to raise the prices of gas boilers to offset fines they claimed were unavoidable due to the lack of demand for heat pumps. These price increases were reversed after Labour's announcement.
The Boiler Upgrade Scheme (BUS), introduced by the Tories in 2022, offered households £5,000 grants towards the installation of a heat pump. In 2023, the grant was upped to £7,500, prompting a 75pc surge in applications for the grant, the Government said.
Grants are paid to an MCS-certified installer, not the household, making it unclear whether or not the grant has driven down costs for homeowners switching to a heat pump.
These policies combined were intended to bring costs down, and did initially spark a price war between manufacturers. British Gas unveiled a heat pump which cost £2,999 in 2023, just £1 cheaper than the £3,000 price offered by Octopus Energy
But despite the price of physical models falling, the total bill for having a heat pump installed continues to rise.
Overall, MCS figures also show the average cost per kilowatt hour of installing a heat pump rose by 57pc to £1,579 in the six years to January.
The MCS said its data included BUS grants, and therefore was not necessarily the price the consumer paid. However, the body admitted that due to high living costs, the impact of the BUS on the overall cost of installation had been 'minimal'.
A heat pump industry source added that installation costs had been further driven up by the rising price of copper, which has more than doubled in the last five years.
Guidelines set out by the Competition and Markets Authority state that installers must not mislead consumers about price by using deceptively low figures to attract customers.
Consumer law applies 'throughout the consumer journey', and therefore includes any quotes given by an installer.
Mr Foster said: 'Heat pumps are a globally traded product, just like gas, and as such are outside the control of governments.
'That is why it was always wrong to make wild claims that costs would fall in the UK as a result of increased sales, and positively reckless for certain energy companies to promise price parity with gas boilers.'
The Telegraph approached a number of well-known heat pump installers for comment, but did not receive a reply.
The Government pointed out that a report by the National Audit Office and Energy Department found the cost of installing a heat pump had fallen by 6pc in real terms from 2021 to 2023 – the window in which the grants were first introduced.
A spokesman said: 'There are consumer rules in place for heat pump installers regarding quotes and costs, and we're providing £7,500 towards the cost of a heat pump, with families able to save around £100 a year by them using a smart tariff effectively.'
Ian Rippin, chief executive of MCS said: 'Since the grant for air source heat pumps was increased under the BUS in October 2023, MCS data shows that the total installation cost for the technology has risen directly in line with the retail price index at 3.7pc.
'The heat pump installation market is highly competitive with new entrants joining all the time, as shown by the number of MCS installers that are certified for air source heat pumps, which has risen by 15pc in the last 12 months.
'As the heat pump market continues to grow, it's crucial that everyone has confidence in the technology – and increasing the number of certified installers who are delivering installations to industry-recognised standards is a key part of that.'
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