Scotland could be the cheapest and greenest place in the UK to run a heat pump.
The total cost of a heat pump over an average 15-year lifetime, including the system, installation and running costs, could soon be cheaper than a gas boiler across the UK, according to analysis from our sustainable future team.
Our team looked at data on 60,000 heat pump installations in the UK since 2010 and offset the costs of installation against savings made via proposed and existing government subsidies and potential policy interventions.
The analysis showed the lifetime cost of a heat pump could be between £60 and £110 per year cheaper than a gas boiler across the UK. Additional analysis using specific data for Scotland found the cost saving would be marginally better in Scotland for certain homes. What’s more, Scotland’s electricity grid is one of the lowest emitting in the world, covering over 97% of electricity demand through low carbon means in 2020, making an electric-powered heat pump installed here a clean source of home heating.
Heat pumps are widely acknowledged as one of the best ways to decarbonise home heating. However, they typically cost around £9,000 to install in a flat, rising to around £11,000 in a mid-sized home and £13,000 in a large detached house. The Climate Change Commission has estimated that heat pump installations need to double, year-on-year from now until 2030 in Scotland to be on track to reach our net zero ambitions by 2045.
We previously explored how the environmental cost of gas boilers is often underestimated by homeowners and that their contribution to emissions are very large. However, the price to install heat pumps is still prohibitively high for most households.
The Scottish Government is highly supportive of heat pumps and has created a loan and cashback scheme to support the adoption of heat pumps, which includes a £2,500 loan plus up to £7,500 cashback. They have also called on the UK Government to restructure the levies and charges that are added to energy bills to further incentivise low carbon heating systems. These powers remain reserved to the UK Government but ministers are reportedly considering the move.
The cost savings in our analysis are calculated based on a scenario where the current levies are shifted from electricity to gas and with a grant of £7,000 used to reduce the purchase price for the householder.
In addition to the above measures, a householder without other gas appliances such as cookers could stop their gas supply entirely. This could save an additional £60-£90 per year in gas standing charges. Once this has been taken into account a heat pump becomes a financial no brainer.
And because of Scotland’s low-carbon electricity generation, a heat pump running in Scotland emits as little as 4 grams CO2 per kWh of delivered heat, compared to a gas boiler (215 grams) and an oil boiler (320 grams). As more wind, solar and hydro assets come online, this number will continue to edge towards zero making heat pumps genuine net zero heating solutions.
The modelling shows how the lifetime costs are impacted by lowering upfront costs and running costs for different property types in Scotland. And for those households that only need a low level of upgrades to their properties, the savings are modelled as £100-120 less, per year.
We estimate that around 200,000 properties across Scotland could install a heat pump with low level or no upgrades to their homes and could make the maximum cost saving over the next five years.
The desire to end our relationship with high-emitting combustibles necessitates that we must make heat pump installations achievable for all property types and every household budget. The Scottish Government is supporting the creation of a ‘low carbon heat pump centre of excellence’ in Scotland with Mitsubishi Electric in Livingston to increase efficiency of heat pump production and training which should also bring down the costs over time.
If the UK government makes the change to electric and gas levies to be in line with their relative carbon impact it could open up new financing offers to spread the upfront cost of a heat pump into monthly payments.
This is the most obvious and necessary step to usher in a clean heating revolution whereby a heat pump becomes the clear economic and environmental solution for a good number of households in Scotland.