Save up to £693 a year by switching to a heat pump
The home heating industry is reaching boiling point: we need to ditch gas boilers fast to cut emissions and make an impact on the climate crisis. That's where heat pumps come in as the most carbon friendly solution out there, and with global gas shortages pushing gas prices up to a 16 year high, heat pumps are now the cheapest option to warm your home. Here's what we found from crunching the numbers from Octopus Energy heat pump owners.
If you're already ready to ditch gas for good, get a heat pump estimate for your home here.
🔥 You can save £321 per year by switching from a gas boiler to a heat pump on the Flexible tariff.
🔥🔥 If you're on a smart tariff like Cosy Octopus, you could save an extra £109 a year.
🔥🔥🔥 Factoring other ditched costs, like boiler cover and gas standing charge, your heat pump could save you a further £263 a year.
Taking the total saving to £693 per year
Let's break that down
Every person's home will look slightly different, but these are the average savings seen by our heat pump customers
|Gas consumption||17097kWh||Average usage for an Octopus heat pump customer (14kWh heat demand)|
|Gas unit rate||10.3p / kWh||Energy Price Guarantee April 2023|
|Gas boiler efficiency||83%||Average efficiency seen from BEIS gas boiler study|
|Total annual gas heating bill||£1,761||for our average heat pump user|
|Electricity consumption||4236kWh||Average usage for an Octopus heat pump customer (14kWh heat demand)|
|Standard electricity unit rate||34p / kWh||Energy Price Guarantee April 2023|
|Heat pump efficiency||333%||Average efficiency seen from Octopus heat pump metered data|
|Total annual heat pump bill (standard tariff)||£1,440||for our average heat pump user|
|Total savings just from switching to a heat pump||£321||for our average heat pump user|
|Additional savings from load shifting on a smart tariff||£109||assuming you shift 50% of peak heat demand to off peak|
|Additional energy bill savings from removing the gas standing charge||£104||based on Energy Price Guarantee prices|
|Additional maintenance cost saving||£159||comparing our heat pump cover to Which? average boiler cover|
|Total potential savings||£693|
So what will my savings look like?
It all comes down to the efficiency of your heat pump vs your previous boiler. If you were to compare an average gas boiler (which has an 83% efficiency according to BEIS study) to our average heat pump (with 333% efficiency) you'd save around £321 a year. The chart below shows you how that varies with different efficiencies but in almost every case heat pump costs are lower.
Home heating costs - gas boilers vs air source heat pumps
The magical efficiency of heat pumps
Heat pump basics
Heat pumps are called a pump, because they simply take the heat found in the air outside, and pump it into your home. That’s why they can deliver several units of heat for each unit of electricity. For every 1 kWh of electricity you put in, you might get 3.5kWh of heat out, which is an efficiency of 350%!
Alternatively, when you burn stuff to generate heat (like gas or wood), you are instead converting one kind of energy into another - so you never get more than one unit of heat for each unit of energy you burn. Even the very most efficient gas boilers are only around 90% efficient, so for every 1 kWh of gas you put in, you might get 0.9kWh of heat out, which is up to 4 x less efficient than a heat pump
The cost of energy
Historically UK electricity prices have been very high, propped up by environmental taxes that were only applied to electricity and not gas (despite electricity being the cheaper fuel). This made our 'spark spread'(the difference between electricity and gas prices), one of the highest in Europe, which is no doubt one of the reasons that heat pumps haven't taken off in the UK at the same rate as our European neighbours.
The Government recognised this in their Heat and Building Strategy and over the past 12 months have taken steps to reduce this spark spread. so that electricity prices are now 3x the cost of gas.
That means even with the most modern gas boiler with 90% efficiency, a heat pump only needs an efficiency of 300% to save on heating costs.
Given that the government now requires a minimum efficiency of 280% for their Boiler Upgrade Scheme grant, this is very achievable. In fact, a well installed heat pump system should reach efficiencies much higher than this (our average is 333%).
Energy super-boffin, Jan Rosenow, from the Regulatory Assistance Project reached the same conclusion in his recent analysis.
1) Here is the detailed analysis showing that with a coefficient of performance (COP) of 3, a heat pump starts to become cheaper to run than a gas boiler. In the past, a COP of around 3.7 was required to achieve the same running costs as a gas boiler. https://t.co/PhlMMhAgbA pic.twitter.com/wdVil2waJA— Jan Rosenow (@janrosenow) February 16, 2022
How can we make heat pumps even cheaper?
Heat pump users on smart tariffs can save even more by scheduling their heat pump to run during "off peak" periods.
We ran some analysis of over 1000 customers with a heat pump installed on our Agile Octopus tariff and found they were able to save 20% versus a flat rate tariff on average, by automatically programming their heat pump to come on at off-peak times.
On our Cosy Octopus tariff today, we estimate customers will save around £109 a year by making the most of the cheap, green 'Cosy' periods.
Home heating costs - smart tariff vs flat rate tariff
For example, let's say you want to achieve a temperature of 21°C around 6pm. Most people will set their heating to come on just before this (say 4-6pm) when electricity is most expensive.
Another way to heat your home is to schedule the heating to come slightly earlier (let’s say 1pm – 4pm), getting it to ~21.5 °C by 4pm and then turning it off just so it falls to 21°C by the time you get home. Your house will still reach the same temperature but your bills will likely be lower as you're making the most of peak periods.
Save even more with your heat pump
If you’re ready to go fully electric (no more gas hob) you can also save a further £104 a year as you’ll no longer need to pay for the gas standing charge or boiler cover.
Any supplier can arrange this for you, but Octopus Energy is one of the only suppliers to offer this service for free, as part of our quest to help decarbonise home heating.
You can also make significant savings on your insurance as heat pumps are much cheaper and easier to maintain.
Our heat pump service plans start at just £9 per month compared to £22 per month for the average gas boiler insurance, saving a further £159 a year.
Making heat pumps an easy choice
The good news is if you get a heat pump installed with Octopus Energy, you should never have to figure this out yourself. Once they've designed your system, our engineers will give you a personalised cost breakdown, to predict what your new system will cost to run and how that compares to your current system, so you can decide whether you want to go ahead with the install.
We hope you do, and we’ll do everything in our power to make it cheaper and easier for people to switch to greener heating technologies.
Find out more about what Octopus is doing to drive the green heat revolution.
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