How to reduce the cost of heat pumps

Heat pumps are currently the best low-carbon option for heating most homes. They are highly efficient, use electricity which is increasingly generated from renewable sources, and can be adapted to heat almost all homes effectively. However, heat pumps are currently expensive, which makes them unaffordable for many households. This is a major barrier to their widespread adoption.

This paper sets out a comprehensive analysis of the cost of heat pumps and the prospects for making them more affordable. Our analysis shows that, while heat pumps are currently more expensive than gas boilers, it would take only relatively modest changes to make heat pumps competitive on price. In particular, changes to reduce the running costs of heat pumps can make a big difference.

We find that three changes, which are all realistic under current policy and market conditions, could bring the whole life cost of a typical heat pump to between £230 and £270 per year more than a gas boiler.

If these reductions in running costs were combined with a £5,000 reduction in the upfront cost of a heat pump, equivalent to the subsidy offered by the UK government’s Boiler Upgrade Scheme, then heat pumps would become £60 to £110 per year cheaper than a gas boiler over their lifetime.

Authors

Andrew Sissons

Andrew Sissons

Andrew Sissons

Deputy Director, A Sustainable Future mission

Andrew is Deputy Director on Nesta's mission to create A Sustainable Future, which focuses on decarbonisation and economic recovery.

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Kevin Wiley

Kevin Wiley

Kevin Wiley

Analyst, sustainable future mission

Kevin is an analyst for the sustainable future mission team

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Christopher Williamson

Christopher Williamson

Christopher Williamson

Junior Data Scientist, Data Analytics Practice

Chris is a Junior Data Scientist in the Data Analytics Practice, embedded in the Sustainable Future mission team.

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