Carbon counter: heat pumps are a greener, costlier option

In countries experiencing cold snaps, heating is a hot topic. What should one do when a boiler shrugs off its mortal coil? Rush to replace it? Or is it time to switch to a heat pump?

That is a crucial question for households looking to save money on energy bills, and also for governments. In the UK, for example, 28mn homes together account for roughly 15 per cent of the country’s emissions.

For the typical household, money will be the deciding factor. And if carbon were no issue, the boiler would still be the cheapest way to go, at least in many cases. The upfront investment is significantly lower — some £3,000 compared with maybe £8,000 for a heat pump, even including a hefty government subsidy. The latter may also require more insulation and the installation of bigger radiators or underfloor heating.

Chart showing annualised cost of new heating technologies, when switching from a gas boiler in an efficient, owner-occupied house (£ per year, 2020 real), for Capex, Transition cost, Opex and full cost, comparative prices for 2021 and 2030.

True, the heat pump is much more efficient: sucking heat out of the air and transferring it into the home means it delivers three times the energy required to run it. But electricity, at 34p per kWh on price cap levels, is about three times more expensive than gas. While the heat pump might be able to compress that by using power when it is cheaper, there’s little to be saved on the running costs — likely in the region of £1,200-1,300 for both technologies.

But that is for one year only, and boilers and heat pumps last a long time. The better choice will be determined by the relative competitiveness of gas and power going forward. Removing distortions would be a good place to start. Electricity is weighed down by levies that have little to do with its real cost — some £120 on the average annual bill. Lop that off — as the government should — and the differential will narrow, to the benefit of the heat pump.

But the best thing heat pumps have going for them is that they are green — and getting greener. Buildings are not currently subject to any carbon price, but accounting for their emissions at the ETS price of £80/tonne would add some £200 to the average household gas bill. Even with the current power generation mix, heat-pump households would pay less than half of that. The rising of the carbon price and the greening of the grid would widen the gap going forward.

Heat pumps may not be the only decarbonisation technology in town — but they can help starting now. That’s reason enough for government to extend its warmest support.

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