How much does it cost to install a heat pump?

The recently announced Net Zero Strategy includes a boiler upgrade scheme with a £5000 grant towards installing a heat pump. How does this compare with actual heat pump costs? To be fair, you should bear in mind that when you upgrade your boiler you only need a new boiler slotted into the same space as the old, whereas when you convert to a heat pump there are additional one-off costs for plumbing and other work. So subsequent heat pump upgrades will cost less. Still, there is no doubt that heat pumps cost more than just replacing a boiler, which is usually £2,000 to £3,000. Here are some top level estimates for a heat pump installation – as you can see they vary greatly We will break this down in a minute.

Energy Savings Trust (2021)	£7,000 - £13,000
Renewable Energy Hub (2019)	£5,000 - £8,000
EDF Energy (allows 20% for installation costs)	£5,000 to £10,000
Heat Pump Retrofit in London (Carbon Trust, 2020)	£7,000 (3.5 kW) - £11,000 (11 kW), mean £8,800
Cost of domestic heating measures (Delta EE, 2018)	£9,000 (8 kW) - £15,000 (16 kW)
Development of trajectories for residential heat decarbonisation to inform the Sixth Carbon Budget (Element Energy , 2020) – excluding the fabric upgrades.	£10,000 (mean).

Cost breakdown

This chart show the breakdown in costs from the last two sources. The first three columns are from the Delta EE report which has most detail. They correspond to increasing sizes of heat pump. The last column is from the Element report and is an average over all homes. The categories of cost do not match terribly well, unfortunately, but the estimates are broadly compatible.

Chart generated using data from the Delta EE report and the Element report listed above.

The Delta EE data shows the cost of controls does not vary but other costs increase with the size of the heat pump. A bigger heat pump generally means a bigger house, more pipework and bigger hot water cylinder.

Heat pumps need different controls than a boiler.

You will very likely need need new controls, by the way, because boiler controls are optimised for boilers and heat pumps are not the same. In particular you really should have weather compensation or something equivalent to reduce the flow temperature when heat demand is low. Also you want to be able to program different temperatures at different times of the day, because heat pumps cannot ramp up the temperature quickly. You might use the controls that are integrated with the heat pump but you probably want to add at least a thermostat. You might consider an intelligent system optimised for time of use tariffs such as Homely. 

Replacement costs will be lower

When the heat pump comes to its end of life, you can expect to replace that but the controls, plumbing and tanks should last a lot longer. Also you should not need to upgrade radiators at all. Labour costs will be less because the job is simpler - much less plumbing. Also, for the first installation your heat pump installer has to do a full survey of your home, calculate room by room heat demand and compare this with the radiators you have. The size of this job depends on the size of the house but it is a significant part of the labour cost of installing a heat pump for the first time. Replacement cost will be much closer to the cost of the heat pump itself and could be as little as £4500 depending on the heat pump size.

Element predicts mean heat pump size 5.4 kW 

The fourth column shows the Element estimated mean cost for all homes, with the average size of heat pump being only 5.4kWh. This seems very low to me and this being the case the £6,400 cost seems rather high. However that clearly includes the controls and fittings and most of the labour that is allocated separately by Delta EE. Delta EE estimates a 6 kW heat pump (not shown in the chart above) would cost about £500 less than the 8 kW.

Element presumes fabric efficiency costs £2485 per home on average

The small heat pump is presumably because they have assumed ‘economic’ fabric efficiency measures are installed first. They estimate these to cost £2,485 on average - but this will vary greatly from one home to another. The measures potentially include insulation of lofts, cavity walls, suspended floors and a proportion of solid walls - in my modelling, solid wall insulation of compact mid-terraced homes is not generally cost effective though it is for semi-detached and detached homes with more wall area. Element indicates that with these measures the annual fuel bills with heat pumps will be less than before. 

The Net Zero strategy is strong on energy efficiency too, with the aim of phasing in minimum performance standard over time. All homes should be at least EPC Band C by 2035. This would ensure that the heat demand can be satisfied sensibly by a heat pump - though there are other considerations too.

Element costs include more for radiator upgrades ... 

There are some significant differences between the Element and Delta EE estimates. Element suggests £1,870 for radiator upgrades on average. The Delta estimate for this was zero except for the largest heat pump size when it included only £1000. Radiator upgrades could be required in any home but are most likely in inefficient homes where larger heat pumps are needed.

... but Delta EE estimates are higher for the hot water cylinder

On the other hand, Delta estimates higher costs for the hot water cylinder: between £1500 and £3500 for this and a buffer tank. Buffer tanks are not always necessary - Kensa has a good explanation of this. Basically they are to help the boiler when there is low heat demand and most of the radiator valves are closed. Element did not include a buffer tank but says if this is needed it only costs another £300. Taking this off the Delta estimate, we still have £1200 to £3,200 for the hot water cylinder compared to only £1080 according to Element. This somewhat balances the lower estimate from Delta for radiators.

For some homes, micro-bore heating pipes will need replacing.

Neither report considers the potential cost of replacing micro-bore plumbing. Most homes have sensible sized plumbing in the radiator circuit but there was a fashion in the 1970s for micro-bore i.e. very narrow pipes. These are a problem for heat pumps as using lower flow temperatures means you need higher flow volume rates. The smallest micro-bore pipes, less than about 10mm, are just not big enough, especially as they are prone to getting blocked up. This can be a serious problem even without a heat pump, which is one reason why they went out of fashion again quite quickly. If you do have narrow pipes this could mean a lot more replacement plumbing needed! Fortunately it only affects a small proportion of homes.

Costs reducing over time - 25% for the heat pump bit

The Element report also projects how costs might change over time with an estimate for 2035 to compare with now. The difference in 2035 is that the heat pump is about 25% cheaper. The Net Zero strategy is much more optimistic than this: it claims that growing the market for heat pumps will reduce costs by 25% to 40% by 2025.

Any cost reductions will greatly benefit householders when replacing their heat pump in 10-20 years. However other costs have not changed and overall the 25% decrease in heat pump cost translates to an 10-15% reduction for the first time install.

The boiler upgrade grant just about covers the difference for a small home

Delta EE estimates £2700 for replacing a boiler and so the boiler upgrade grant of £5000 takes you up to £7700. That is more than the bottom of the range from most of the estimates in the table, though some of them seem optimistic. It is plausible for a small house with little or no need for radiator upgrades and where there is already a suitable hot water cylinder. However, most homes will need some additional outlay, for the larger homes quite a lot more. 

The fixed price voucher makes sense if the intention is to grow the market starting with small and efficient homes. Other homes need their fabric efficiency installations first anyway. 

Cost reductions will narrow the gap for the larger homes.

As the market grows and the cost of heat pumps reduces, this will narrow the gap the £5,000 voucher is supposed to fill. It could plausibly cover most of the extra 'first time' cost: say £1,500 for a hot water cylinder, £1,000 for fittings and controls, £1,000 for radiator upgrades and £1,500 for labour.

It is hard to imagine that the cost of a heat pump can ever quite match the cost of a cheap combi-boiler today. However, it is worth paying some extra for eliminating NOx air pollution and risk of carbon monoxide poisoning and gas explosions, and of course zero carbon heating.