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The price of installing a heat pump is a major obstacle for households considering replacing their gas boiler.
The National Audit Office said in March that the high cost of heat pumps and a lack of understanding were preventing more households from choosing energy-saving devices.
Although some energy companies offer to install a heat pump for free, many consumers have been waiting for prices to drop further before investing in the devices.
But will that really happen? And, if so, when?
All hands on deck: The government hopes heat pump prices will drop, but is this possible?
How much further can heat pump prices fall?
Today, the cost of installing a heat pump varies depending on the type you choose and the type of property you own, but typically costs between £8,000 and £30,000.
The typical cost of an air source heat pump (the most common, as opposed to the less popular ground source heat pump) is usually around £12,000.
Some renewable energy experts say the high costs of installing heat pumps may not go down much further.
But the Government expects the cost of installing a heat pump to fall by 25 to 50 per cent by 2025 compared to 2021.
Mike Foster of the Energy and Utilities Alliance believes there is a natural limit to how cheap heat pumps can be and believes prices may not fall much further.
“The argument that prices will go down as volumes increase is false,” he says. ‘These products are already products marketed worldwide.
«The price in France or Germany is no different to that of a heat pump in the UK. The only way costs could be reduced is when installers get used to installing more heat pumps and can do it a little faster, so labor costs could be reduced.’
Bean Beanland, director of growth and external affairs at the Heat Pump Federation, also believes the cost of installing the devices may not go down much further.
“The devices themselves are already competitive,” he says.
«Basically, the heat pump sector is already mature. The air conditioning market is mature and a heat pump is effectively air conditioning.’
However, Beanland noted that much of the cost of installing a heat pump is only paid once: when the devices are first installed.
After that point, replacing the heat pump a second time is more economical since much of the prep work has already been done.
Why are heat pumps so expensive?
Heat pump installation costs typically include one-time fees for project management and design of a replacement heating system, as well as a compliance check.
All this increases the cost of installing a pump, according to a report by the consulting firm Eunomia.
Meanwhile, the fact that gas boilers are more established helps keep their costs down compared to heat pumps, although this could change if heat pumps became more popular.
Once the property has transitioned, the cost of replacing a heat pump, the cost difference at that point (compared to a boiler) is very modest.
Most heat pumps also need to be imported, which increases costs compared to gas boilers, which are likely to have been manufactured in the UK.
Additionally, many homes are insulated from the real cost of purchasing a new boiler as they have a specialist boiler casing, which does not exist in the same way for heat pumps.
Even many home emergency policies that cover boiler breakdowns do not cover heat pumps.
However, once a home has installed a heat pump for the first time, replacing it could be much cheaper.
“What determines the cost is the cost of the transition,” says Beanland. ‘Those transition costs are driven by a number of factors that depend on each individual household. There is a huge variety in terms of possible prices.
‘Once the property has transitioned, the cost of replacing a heat pump, the cost difference at that point (compared to a boiler) is very modest.
“So the challenge for the UK is overcoming the transition costs and how to manage them.”
What about energy bills?
Once a heat pump is installed, energy bills should be reduced and devices generally need to be replaced less frequently than gas boilers.
The Government wants to end the installation of new gas boilers in most homes by 2035.
Heat pumps use electricity to extract energy from the environment and come in air, water or ground heat varieties.
A number of companies, including Octopus Energy, British Gas and Ovo, have been racing to reduce the cost of installing a heat pump.
Octopus says its ‘Cozy Octopus’ heat pump can be installed for free or for as little as £500, provided the home in question is eligible for the maximum £7,500 grant from the Government’s Boiler Upgrade Scheme.
British Gas has a heat pump that can be installed from £499, and Ovo has a version that costs from £500, again, with the £7,500 BUS grant.
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