Installing an air source heat pump can cost over £10,000, but generous government grants are available to significantly lower this expense. Discover how heat pumps work and how they could help you save on energy bills.
You can purchase a heat pump either through an energy provider or an independent installer. Costs depend on the size of the system and any additional upgrades your home may require. An expert assessment is essential before proceeding, ensuring you’re aware of the necessary work and its associated costs.
Although the initial investment is considered by many to be substantial, current government funding can cover a large portion of the expense. When installed correctly in well-insulated homes with appropriately sized radiators, heat pumps are often far more efficient than traditional gas boilers.
For most households, an air source heat pump will be the best option. However, if your home has high energy demands and ample outdoor space, you may also want to explore the benefits of ground source heat pumps.
Understanding an Air source Heat Pump
An air source heat pump extracts heat from the surrounding air and transfers it to a refrigerant fluid. This fluid is then compressed to increase its temperature, allowing the heat to be distributed throughout your central heating system efficiently.
How Much Does it Cost to Install a Heat Pump?
The average installation cost of an air source heat pump is approximately £14,000.
However, the final cost can vary based on several factors, including:
- The size and capacity of the heat pump
- The size and layout of your property
- Whether it’s a new build or an existing home
- The need for radiator upgrades or additional modification.
How much does it cost to install an air source heat pump?
Similar to gas boilers, air source heat pumps (ASHPs) come in a range of sizes, and their installation can vary from straightforward to more intricate, depending on your requirements.
The size of the heat pump you need is determined by your household’s heating and hot water usage, which will influence the overall cost.
Additional work, such as upgrading radiators, enhancing insulation, or fitting a hot water storage tank, can also increase the total installation cost.
Installation Costs Based on Household Size
|
Household Size |
Heat Pump Cost |
Installation Charges |
Total Estimated Cost |
|
1–2 Bed Flat |
£4,000–£6,000 |
£3,000–£5,000 |
£7,000–£11,000 |
|
3-Bed Semi |
£5,500–£8,000 |
£4,000–£6,000 |
£9,500–£14,000 |
|
4-Bed Detached |
£8,000–£12,000 |
£5,000–£8,000 |
£13,000–£20,000 |
While the upfront cost may seem high, government incentives like the Boiler Upgrade Scheme can reduce costs significantly, offering up to £7,500 toward installation. Proper insulation and expert assessment are essential to maximize the long-term savings and efficiency of an air source heat pump.
Air Source Heat Pump Savings in Wales
Heat pumps can offer significant annual savings for households in Wales. However, it’s essential to evaluate your energy consumption and existing heating system before making the switch. The table below highlights potential savings compared to various systems:
Annual Savings with an Air Source Heat Pump
- New (A-rated) gas boiler: -£3
- Old (G-rated) gas boiler: £290
- Old electric storage heaters: £1,200
- New electric storage heaters: £700
- Old (G-rated) oil boiler: £280
- New (A-rated) oil boiler: -£55
- Old (G-rated) LPG boiler: £650
- New (A-rated) LPG boiler: £260
- Coal: £650
Figures from from Energy Saving Trust and based on installing a standard air source heat pump in a 3-bedroom semi-detached home
While an A-rated gas boiler may be more cost-effective for some medium-sized homes with poor insulation, heat pumps often provide superior heating efficiency in most cases.
Additionally, heat pumps have a distinct advantage over traditional boilers by offering both heating and cooling. This dual functionality makes them a versatile, year-round solution, unlike boilers, which are limited to heating.
Energy Grants in Wales for Air Source Heat Pumps
The installation cost of an air source heat pump typically averages around £14,000, making it a significant investment for homeowners. However, the Welsh Government, in alignment with its commitment to achieving net-zero energy goals, offers several grants and schemes to offset these costs.
These initiatives, including the ECO4, Boiler Upgrade Scheme, and Warm Homes Programme, aim to encourage the adoption of sustainable heating solutions while reducing carbon emissions.
By taking advantage of these grants, Welsh households can significantly lower their upfront costs, making the transition to energy-efficient heating more affordable and environmentally friendly.
|
Air source heat pump grants in Wales |
||
|
Grant name |
Savings |
Available till |
|
ECO4 |
Up to £10,000 |
March 2026 |
|
Boiler Upgrade Scheme |
£7,500 |
April 2028 |
|
0% VAT |
Discount of £480 to £2,800 |
March 2027 |
|
Warm Homes Programme |
Grant amount varies |
April 2025 |
1. Energy Company Obligation (ECO4)
The ECO4 scheme aims to improve energy efficiency in low-income and vulnerable households. Running until March 2026, it provides funding of up to £10,000 for measures like insulation and heating upgrades, including air source heat pumps.
Eligibility is determined by factors such as income, receipt of certain benefits, and the current energy efficiency rating of the home.
2. Boiler Upgrade Scheme (BUS)
The Boiler Upgrade Scheme offers grants to encourage property owners to install low-carbon heating systems. Extended until April 2028, the scheme provides £7,500 towards the cost of installing air source heat pumps.
Homeowners must meet specific criteria, including owning a property in England or Wales and replacing an existing fossil fuel system.
3. 0% VAT on Energy-Saving Materials
From April 2022 to March 2027, the UK government has applied a 0% VAT rate on the installation of energy-saving materials, including heat pumps. This tax relief can result in savings ranging from £480 to £2,800, depending on the cost of the installation.
This initiative aims to make energy-efficient upgrades more affordable for homeowners.
4. Warm Homes Programme
The Warm Homes Programme is a Welsh Government initiative running until April 2025, designed to tackle fuel poverty by improving home energy efficiency.
The grant amounts vary based on individual circumstances and the specific measures required, such as insulation or heating system upgrades. Eligibility criteria include household income, receipt of certain benefits, and the energy efficiency rating of the property.
Other grants, such as the Nest Scheme Wales grant, are no longer available. Similarly, while grants like the Public Sector Decarbonisation Fund do exist, they are specifically intended for private companies and organizations, and are often limited to particular regions.
Advantages and Disadvantages of Air Source Heat Pumps in Wales
Advantages of Air Source Heat Pumps
- Financial Incentives and Grants
Wales provides a range of government schemes to support the adoption of heat pumps. Programs like the Energy Company Obligation (ECO4) and the Boiler Upgrade Scheme (BUS) have been expanded, making it simpler for homeowners to access grants and reduce installation costs. - Climate Favors Efficiency
The Welsh climate is ideal for heat pumps due to its usually moderate temperatures. Heat pumps function optimally in stable conditions, and most areas in Wales experience weather that allows these systems to operate efficiently throughout the year. - Higher Efficiency than Traditional Systems
Heat pumps are more efficient than conventional heating systems, offering long-term savings on energy bills. While gas and electricity prices in Wales remain high despite price caps, heat pumps can help mitigate costs, especially with their ability to produce three times more energy than they consume. - Easy Accessibility in Wales
The Welsh government’s push for decarbonisation has ensured that high-quality heat pumps are readily available in the region. This strong market presence makes it convenient for homeowners to find reliable systems and qualified installers.
Disadvantages of Air Source Heat Pumps
- Expensive Installation
The cost of installing an air source heat pump ranges from around £2,400 to £14,000, making it a significant upfront investment. Although grants can ease this burden, not everyone qualifies, which limits accessibility for some households. - Efficiency Limitations in Extreme Climates
While Wales’ climate is generally favorable, certain regions, such as mountainous areas in the north, experience harsher temperatures. In these locations, heat pumps may lose efficiency, making them less suitable compared to other heating systems. - Electricity Costs vs. Gas
Although heat pumps reduce energy consumption, the higher price of electricity compared to gas can diminish potential savings. Homes with poor insulation are particularly at risk of higher operating costs, as more energy is required to maintain a comfortable temperature.
Hot Water Cost and Existing Heating Using Gas
As of January 2025, the UK’s energy regulator, Ofgem, has set the gas price cap for standard variable tariff customers paying by Direct Debit at 6.34 pence per kilowatt-hour (kWh).
For a typical household consuming 11,500 kWh of gas annually, this translates to an annual gas usage cost of approximately £729.
The daily standing charge for gas is 31.65 pence, according to Ofgem, amounting to an annual standing charge of about £115.
Gas used for cooking constitutes around 2.5% of the total consumption, equating to 287.5 kWh. Subtracting this from the total, the typical gas usage for heating and hot water is approximately 11,212.5 kWh per year.
Therefore, the total annual gas cost for heating and hot water, including the standing charge, is approximately £844.
Please note that these figures are based on average consumption and rates; actual costs may vary depending on individual usage patterns and regional tariffs.
Calculating Your Heat Demand
To estimate the cost of running a heat pump, it’s important to calculate your household’s heat demand based on your annual gas consumption and boiler efficiency.
Assuming your gas consumption for heating and hot water is 11,212.5 kWh annually, and considering an average boiler efficiency of 85%, the actual heat demand is calculated as:
Heat Demand = Annual Gas Consumption × Boiler Efficiency (%)
Heat Demand = 11,212.5 × 0.85 = 9,531 kWh
So, your household’s annual heat demand is approximately 9,531 kWh.
Estimating Heat Pump Electricity Usage
A typical air source heat pump has a Coefficient of Performance (COP) of 3.0, meaning it produces 3 units of heat for every 1 unit of electricity it uses. To meet your heat demand with a heat pump:
Electricity Required = Heat Demand ÷ COP
Electricity Required = 9,531 ÷ 3 = 3,177 kWh
This means the heat pump would require approximately 3,177 kWh of electricity annually.
Annual Heating Costs with a Heat Pump
As of January 2025, Ofgem’s electricity price cap is set at 24.86p per kWh. Using this rate, the annual cost of running the heat pump can be calculated as:
Annual Cost = Electricity Required × Electricity Price per kWh
Annual Cost = 3,177 × £0.2486 = £789.34
So, the estimated annual cost of operating a heat pump for heating and hot water is approximately £789.
Note on Standing Charges
It’s assumed that households already pay the daily electricity standing charge, which is 60.97p per day, amounting to approximately £222.54 annually.
Since this charge is paid regardless of heat pump installation, it’s not included in the additional heating cost calculation.
Will Your Electricity Bill Be Higher with a Heat Pump?
Switching from gas, oil, or LPG heating to a heat pump will result in higher electricity bills. This is because all your heating and hot water usage will be added to your existing electricity consumption, which already covers kitchen appliances, TVs, lighting, entertainment systems, and other devices, combining everything into one monthly bill.
However, the upside is that you will no longer have a gas bill—provided you also replace other gas appliances, like your cooker, and remove the gas meter. The increase in electricity costs should generally be offset by the savings from eliminating your gas usage.
If your electricity bill seems unusually high, it might indicate that your heat pump isn’t set up properly or isn’t running as efficiently as it should. In such cases, consult your installer for advice.