Will an electric heat pump increase your energy bills?

For a long time I have bemoaned the fact that while electricity has been getting cleaner and cleaner, it is not getting cheaper. Ten years ago I used to say that gas was a third the price of electricity and a third the emissions. More recently I have been saying that electricity is less than twice the emissions but four times the price. With an electric heat pump you should be able to get an efficiency of 250% or so, but this is not enough to level out the difference. Times have changed.

These days, if you are flexible in when you consume energy, which should be quite possible with a heat pump, you can get electricity at close to twice the cost of gas, so your heat pump really should work out cheaper. I anticipate your next questions are (a) where can I get this cheap electricity and (b) how does having a heat pump mean I can be flexible.

Of course it is even easier to be flexible if you have an electric car, which is why smart chargers are all the rage for EV owners.

Where can I get cheap electricity?

To get cheap electricity you need a time of use tariff. This means you will need a smart meter, so that it can record not only how much you have used but when you have used it.

Then there are two kinds of time of use tariff - the fixed ones, like TIDE from Green Energy and the variable ones like Agile from Octopus. With TIDE your tariff is a slightly more complicated version of Economy 7, with an expensive peak period from 4-7pm on weekdays, a low rate overnight, and just a bit cheaper than average the rest of the time. (See chart). With Agile the rates are set in half hour time slots based on the day-ahead wholesale prices. You are notified the prices for each day by 4pm the day before.

TIDE is great for people who can use most of their energy at night. At that time, it is about twice the price of gas. With Agile, there is a massive peak time premium (at least 12p, on top of the natural wholesale price premium) but the rest of the time, it is about on a par with TIDE overnight (though variable). The chart shows average prices for a winter month and a summer month based on their actual prices in 2019.

In case you are wondering how Octopus can make money on this,  I do not know. It is especially surprising given that only about a third of your electricity bill is due to wholesale prices. (See OFGEM's breakdown here). However, another quarter is network costs, and network costs are mostly related to peak demand, which is why Octopus charges you so much for peak time demand. Actual wholesale prices are typically 4-5p/kWh (see charts from OFGEM here). They can range higher or lower, and even go negative - as they have done several times recently, during the Covid 19 lockdown. At these times you will be paid to use power (UK EV Owners Got Paid To Charge Their Cars Over The Holiday Weekend (CleanTechnica).

How does having a heat pump make it possible for me to be flexible?

The easiest way to be flexible would be to install a battery system which has enough power to cover the peak period. You can charge this up whenever power is cheapest, and use it 4-7pm instead of taking power from the grid. Depending on how inefficient your house is, you are likely to need up to 4 kW of heat on a cold winters day to keep your house warm. (If you need more than this you probably should not be using a heat pump). So, if you need 4 kW heat and your heat pump is working rather inefficiently with a COP of 2, you actually need 2 kW electricity and to cover the 3 hour peak period you need 6 kWh from your battery. For comparison the Tesla Powerwall 2 has 13.5 kWh usable storage.

Instead of an electric battery you could use a heat battery which stores heat (such as SunAmp) or you could rely on your house to act as a heat battery. Houses vary as to how fast they lose heat, but if they are well insulated and have a masonry construction they should lose no more than 2-2.5°C over 4 hours when the heating goes off. So what you do is you programme your heating to turn the thermostat up a degree for an hour before the peak to charge the house up and then set it down a degree during the peak. Even if the worst happens you will still use much less electricity than you would have. You should also avoid heating your hot water tank during the peak time.

There may be other reasons why a heat pump is not for you, but electricity price is not one of them. The renewable heat incentive is still available (see OFGEM for more information). 

Saving money saves carbon too.

The really nice thing about the flexible tariff option is that when you shift your power demand to cheap times you are also saving carbon. Prices are usually lower when there is more wind and solar energy available as you can see from this chart. The bars each show the range in carbon intensity for electricity over one day. The blue dot, showing intensity at the cheapest time, is almost always below the grey circle which is the mean for the day. So by choosing to use energy at the cheapest time you are also generating less carbon emissions.

Daily max/min/mean/lowest price carbon intensity base on Agile prices. Carbon data from ElectricityInfo.org

Of course you do not have to have a heat pump to take advantage of Agile prices.