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An important question when it comes to air source heat pumps is how much they are going to cost on a continuing basis especially at a time when living costs – including the price of energy – are rising across the board. While air source heat pumps often have lower running costs than comparable heating systems, the truth is that this differs from property to property.
Running costs vary from home to home as they depend, among other things, on the price of the fuel used, the heat loss of the property, the efficiency of the heating source, how much hot water is used and to what temperature the property is on average being heated. Still, we want to give you some realistic figures to help you understand whether an air source heat pump could make financial, and not only environmental, sense for your home if you’re thinking of upgrading your heating from a gas boiler to an air source heat pump.
For our examples, we use an average annual heat demand of 12,000 kWh. That is the energy (measured in kWh) needed to heat the property as well as any water that is needed over the course of a year. If you know the annual heat demand of your home, the efficiency of your heating source and the price for your heating fuel, you can calculate the running costs for your own property to get an initial idea. It won’t replace the insights gained from a properly conducted home survey by us but it’s a good starting point, so without further ado, let’s get started.
Electricity in the UK has for a long time been more expensive than natural gas; at its peak up to five times as expensive as gas. And it makes sense that electricity is more expensive because a large part of the electricity in this country is unfortunately still generated by burning actual gas. Naturally, this raises the questions why replace a gas boiler with a heating system that heats up to four times more efficiently but could cost five times as much?
First off, truth is an air source heat pump will not cost you five times as much as gas, as our example shows and many owners of air source heat pumps can attest. In fact, an air source heat pump could already be cheaper to run than an old, non-efficient gas boiler, especially if it has been installed before 2007. Second, the times of cheap gas may soon be over. With the new April 2022 price cap in place, gas prices have already risen more steeply than electricity, and the price gap between gas and electricity has narrowed considerably. And with the price gap between gas and electricity likely to close further when the next price cap hits consumers in October 2022, the times of cheap gas could soon well be over.
What’s more, the government has already indicated that the levies currently raised on electricity (after all around 25% of its final price) will either also be raised on gas or shifted away from electricity to gas altogether. Either way, with the gap between gas and electricity prices set to reduce further, air source heat pumps have become an even more attractive proposition for anyone currently heating with gas.
And finally, let’s not forget that if you did decide to change from a gas boiler to an air source heat pump, you would also save around £100 in gas standing charges per year as you wouldn’t need a gas connection anymore. Make sure to include this in any calculations you make.
We assume a gas price of £0.07 per kWh. This is the maximum rate energy suppliers are allowed to charge you under the April 2022 price cap set by Ofgem. The cost of gas has risen by 84% since the October 2021 price cap and is set to rise even further in October 2022 (more on this below).
Gas standing charge
The gas standing charge is currently £0.27/day on average, which is £98.55 over the course of a year.
The price for electricity assumed in our calculations is £0.28 per kWh. As with the gas price, that’s the maximum your energy supplier is allowed to charge you under the latest price cap. It’s noteworthy that the price difference between gas and electricity has narrowed since the last price cap and is predicted to narrow even further. The smaller the price difference, the better off you are with an air source heat pump because the latter is up to four times more efficient than a comparable modern gas boiler. Electricity prices, just as gas prices, are set to rise again under the October price cap. Importantly, though, electricity prices are predicted not to rise by as much as gas prices, hence the gap will close even further.
Annual heat demand
Heat demand refers to the energy needed to satisfy the heating and hot water demand of a property. We assume an average annual heat demand of 12,000 kWh, which is in line with Ofgem's Typical Consumption Values for an average medium-usage home.
Gas boiler efficiency
The minimum efficiency standard for a new gas boiler in the UK is 92% as set by the Energy-related Products Regulations. The efficiency of a gas boiler, however, varies significantly and depends on whether the flow temperature, that is the temperature of the water pumped around the heating system, is low enough for the boiler to condense. It turns out that in reality most boilers do not condense.
To make matter worse, in the UK, boilers are typically oversized, which affects their efficiency. Finally, the lack of appropriate controls for many installed boilers also has a negative impact. Detailed studies of condensing boilers showed an average measured efficiency of 82.5% for combination boilers and 80.3% for heat-only boilers. concluding that “the in-situ performance of the boilers is significantly less than the rated […] seasonal efficiency”. It is hence more realistic to assume that, in most cases, 92% efficiency is not being achieved. For our calculations, we therefore use both a 90% boiler efficiency and a more realistic one of 85% for modern boilers, and 70% for older gas boilers.
Air source heat pump efficiency
Heat pumps are more efficient than any other heating systems because the amount of heat they generate is higher than the amount of electricity they use. The amount of heat generated for every unit of electricity put in is referred to as the Coefficient of Performance (CoP). So, if a heat pump has a CoP of 3.3, then it will generate 3.3 units of heat for every unit of electricity. For comparison, when we say an old gas boiler is 70% efficient, it means that you only receive 0.7 units of heat for every unit of energy consumed (in this case gas).
You will also often find the SCOP (Seasonal Coefficient of Performance) specified when researching air source heat pumps. This is relatively a new efficiency indicator which shows how effective a heat pump is on an annual basis. It’s intended to give a more realistic picture that makes it easier to compare heat pumps across producers (and models from the same manufacturer) while also taking into account different efficiency levels based on average annual outside temperatures.
Since we’re able to monitor the efficiency of our customers’ heating systems remotely, we can safely assume an average SCOP of 3.3 for the air source heat pumps we install; that’s a heating efficiency of 330%, i.e. 3.3 units of heat for every kWh consumed. Not bad if you ask us.
The formula to calculate the annual running costs is fairly straightforward:
Annual heat demand divided by the energy efficiency of the heating system multiplied by the unit cost of the fuel type in question plus the annual standing charge.
Having laid out our assumptions and the formula to calculate the runnings costs, all that's left to do is plugging the different values into the formula to calculate the running costs for each heating system. So, let's go ahead and do that:
Old gas boiler (70% efficient) = (12,000 kWh / 0.7) x £0.07) + (365 x £0.27) = £1,299
Modern gas boiler (85% efficient) = (12,000 kWh / 0.85) x £0.07) + (365 x £0.27) = £1,087
Modern gas boiler (90% efficient) = (12,000 kWh / 0.9) x £0.07) + (365 x £0.27) = £1,032
Air source heat pump (330% efficient) = (12,000 kWh / 3.3) x £0.28) = £1,018
As you can see, air source heat pumps can already cheaper to run than gas boilers. It’s important to stress that the efficiency levels we see with our customers' heat pumps can only be achieved if they are correctly designed and professionally installed, which makes who you choose to install your system all the more important.
Please also note that while we have included the gas standing charge in calculating the running costs for gas boilers, we do not include electricity standing charges in the case of an air source heat pump since an electric meter is always present whereas any gas meters can be removed if switching away from a gas boiler.
Finally, in order to be condensing and reach efficiencies of 90% and above, the flow temperature of a gas boiler would have to be set to 55°, which is effectively heat pump territory. The question one should ask oneself at this point though is why not go for an air source heat pump and benefit from a much higher efficiency if the property is warm enough with a flow temperature set to 55°.
Below we show the efficiency levels (shown in SCOP) of an air source heat pump necessary to break even with the costs of gas boilers of different ages and efficiencies. The more efficiently an air source heat pump operates (as indicated by the blue line), the less it costs to run. To beat an old gas boiler, an air source heat pump would have to achieve a SCOP of just above 2.5, and for modern gas boilers SCOPs of just above 3.1 or 3.2 are needed, respectively.
It has been widely reported that the default energy tariff price cap could rise to almost £3,000 per year this winter. Cornwall insights, who regularly offer reliable price cap predictions have stated that "the Default Tariff Cap for Q1 2023 (Jan-Mar) will rise to £3,003 per year for a typical user, with the last quarter of 2022 Q4 (Oct-Dec) predicted to be £2,980 adding that the increase is primarily led by a rise in gas prices. If the last price cap increase is anything to go by, we could see another price increase of around 80% for gas while electricity prices may rise by about 30%.
What would this fuel price increase mean for the running costs of gas boilers and air source heat pumps? We've run the above calculation again assuming a price of £0.126 per kWh of gas and £0.364 per kWh of electricity. Under this scenario, heating a property with an annual heat demand of £12,000 would cost:
£2,259 with an old gas boiler (at 70% efficiency),
£1,877 with a modern gas boiler (at 85% efficiency),
£1,779 with a modern gas boiler (at 90% efficiency), but only
£1,309 with an air source heat pump (at 330% efficiency).
By switching to an air source heat pump, you could save anything between 26-42% depending on the age and efficiency of your existing gas boiler.