What Happens to Heat Pump Costs If Electricity Prices Rise?

It is the question that keeps prospective heat pump owners up at night: what if electricity prices keep climbing? You have just invested thousands in a system that runs entirely on electricity, and the unit rate seems to only go in one direction. Is your heat pump going to become increasingly expensive to run?

The honest answer is nuanced. Yes, rising electricity prices will increase your heat pump running costs in absolute terms. But the heat pump's inherent efficiency — its coefficient of performance — means you are always paying less per unit of heat than someone using a direct electric heater, and likely less than a gas boiler too. Combined with strategies like solar PV, smart tariffs, and good insulation, you can substantially insulate yourself from future price rises.

Understanding the Electricity-Gas Price Relationship

To understand how electricity price rises affect heat pump economics, you first need to understand the relationship between gas and electricity prices — because heat pumps are almost always compared to gas boilers.

Current price ratio

In 2026, electricity costs approximately 24p per kWh and gas costs approximately 6p per kWh. The ratio is roughly 4:1. This means a heat pump needs to achieve a COP of at least 4.0 just to match the fuel cost of a gas boiler (ignoring boiler efficiency losses).

When you account for gas boiler efficiency (typically 90-92% for a modern condensing boiler), the effective cost of gas heating is closer to 6.5-6.7p per kWh of delivered heat. A heat pump with a seasonal COP of 3.5 delivers heat at approximately 6.9p per kWh — roughly comparable. A COP of 4.0 brings it down to 6p per kWh, making the heat pump cheaper.

Why the ratio matters more than the absolute price

Here is the crucial insight: if both electricity and gas prices rise by the same percentage, the relative economics stay exactly the same. A heat pump that is marginally cheaper than a gas boiler today will remain marginally cheaper if both fuels double in price.

The scenario that hurts heat pump owners is if electricity prices rise faster than gas prices — widening the ratio. The scenario that helps is if the ratio narrows, which many analysts expect due to government policy designed to encourage electrification of heating.

Impact Analysis: What If Electricity Prices Rise by 25%, 50%, or 100%?

Let us model the impact on a typical three-bedroom semi-detached home using an air source heat pump with a seasonal COP of 3.5 and annual heat demand of 12,000 kWh.

Current costs (24p/kWh electricity)

• Annual electricity for heating: 3,430 kWh (12,000 / 3.5)
• Annual heating cost: £823
• Equivalent gas boiler cost (at 6p/kWh, 92% efficiency): £783
• Heat pump premium over gas: £40/year

Scenario 1: Electricity rises 25% to 30p/kWh

• Annual heating cost: £1,029
• If gas rises proportionally (to 7.5p/kWh): Gas boiler cost = £978
• Heat pump premium: £51/year

The absolute costs rise, but the relative position barely changes. If gas rises less than proportionally, the gap widens. If gas rises more, the heat pump becomes the clear winner.

Scenario 2: Electricity rises 50% to 36p/kWh

• Annual heating cost: £1,234
• If gas rises proportionally (to 9p/kWh): Gas boiler cost = £1,174
• Heat pump premium: £60/year

Scenario 3: Electricity doubles to 48p/kWh

• Annual heating cost: £1,646
• If gas rises proportionally (to 12p/kWh): Gas boiler cost = £1,565
• Heat pump premium: £81/year

Even in the extreme scenario of electricity doubling, the heat pump premium over gas remains under £100 per year — assuming gas rises proportionally. And this is before any of the protection strategies we discuss below.

Why COP Is Your Built-In Shield

The coefficient of performance is the single most important factor protecting heat pump owners from electricity price rises. Here is why.

A direct electric heater converts 1 kWh of electricity into 1 kWh of heat. If electricity costs 24p, your heat costs 24p per kWh. If electricity doubles to 48p, your heat costs 48p per kWh. You absorb the full price increase.

A heat pump with a COP of 3.5 converts 1 kWh of electricity into 3.5 kWh of heat. Your heat costs 6.9p per kWh. If electricity doubles to 48p, your heat costs 13.7p per kWh. Yes, your costs double too — but from a much lower base. The COP multiplier dilutes the impact of price rises.

Put differently: a heat pump owner always pays roughly one-quarter to one-third of what a direct electric heating user pays. This ratio holds regardless of the absolute electricity price. The higher the COP, the greater the protection.

Improving your COP for maximum protection

Every tenth of a point improvement in your COP reduces your exposure to electricity price rises. Practical ways to improve COP include:

• Lower flow temperatures: Reducing from 45°C to 35°C can improve COP from 3.0 to 4.0+
• Upgrade radiators: Larger radiators enable lower flow temperatures. See our guide on radiators for heat pumps
• Improve insulation: Lower heat demand means the heat pump works less hard. Good insulation is the foundation
• Weather compensation: Ensure this is enabled and correctly configured
• Regular maintenance: Annual servicing keeps refrigerant charge optimal and the system running efficiently

The Solar PV Hedge: Your Price Insurance Policy

If electricity prices are your biggest concern, solar PV panels are the most effective hedge available. Here is why.

Solar electricity costs you nothing per kWh once the panels are installed (ignoring the upfront cost, which is a one-time payment). It does not matter whether grid electricity costs 24p, 36p, or 48p per kWh — your solar generation is free. As grid prices rise, the value of your solar electricity rises with them.

A 4 kWp solar system might cover 30-50% of your heat pump's annual electricity consumption. That 30-50% is completely immune to price rises. If electricity doubles, the value of your solar investment doubles too.

The numbers

• At 24p/kWh: 1,500 kWh of solar self-consumption saves £360/year
• At 36p/kWh: Same 1,500 kWh saves £540/year
• At 48p/kWh: Same 1,500 kWh saves £720/year

The higher electricity prices go, the faster your solar panels pay for themselves. Solar PV is not just a hedge against price rises — it actually benefits from them. For more on solar panels, visit Home Solar Guide.

Smart Tariff Protection

Choosing the right electricity tariff provides another layer of protection against price rises.

Fixed tariffs

Locking in a fixed rate gives you guaranteed certainty for 12-24 months. If you believe prices are about to rise significantly, fixing now protects you for the contract duration. The downside is the risk premium built into fixed rates, and you miss out if prices fall.

Time-of-use tariffs

Even when overall prices rise, TOU tariffs maintain a differential between cheap and expensive periods. Overnight rates on tariffs like Octopus Go will remain significantly cheaper than daytime peak rates. If average electricity costs 36p, overnight rates might be 12-15p — still a substantial saving for heat pump owners who can shift consumption.

Agile tariffs

Agile tariffs expose you to wholesale price volatility but also give you access to the cheapest possible rates during off-peak periods. Even in high-price environments, there are always periods (typically 1am-5am) when wholesale electricity is cheap due to low demand and high wind generation.

The Government Factor: Policy Direction on Electricity Pricing

The UK government has repeatedly signalled its intention to rebalance the electricity-gas price ratio to encourage heat pump adoption. Currently, electricity carries a significant proportion of social and environmental levies that inflate its price relative to gas.

Policy options being discussed include:

• Moving levies from electricity to gas: This would narrow the price ratio significantly
• Carbon pricing on domestic gas: Increasing the cost of fossil fuel heating
• Reduced electricity VAT for heat pump users: Targeted relief for electrified heating
• Heat pump electricity tariff support: Government-backed discounted tariffs for heat pump owners

While no specific timeline has been confirmed, the direction of travel is clear: government policy will increasingly favour electricity for heating over gas. This makes the long-term outlook for heat pump running costs more positive than current prices might suggest.

Practical Steps to Future-Proof Your Heating Costs

Rather than worrying about future electricity prices, focus on practical steps that protect you regardless of what happens:

1. Maximise your COP: Get your system professionally optimised. Even small improvements compound over years of operation
2. Insulate aggressively: Every pound spent on cavity wall, loft, or solid wall insulation reduces your electricity demand permanently
3. Add solar PV: The best single hedge against electricity price rises
4. Choose the right tariff: A specialist heat pump tariff saves 15-25% compared to a standard rate
5. Monitor and adjust: Use your heat pump's monitoring to identify inefficiencies and improve performance year on year

A homeowner who takes all five steps could reduce their net electricity cost for heating by 50-60% compared to simply running a heat pump on a standard tariff with no insulation improvements or solar. This level of reduction makes you highly resilient to even significant price increases.

The Bigger Picture: What Are the Alternatives?

It is worth stepping back and asking: if you are worried about electricity prices rising, what is the alternative?

• Stay on gas: Gas prices are also rising, and will likely face additional carbon levies. Gas boilers will be phased out of new builds and eventually face restrictions on replacement
• Oil or LPG: More expensive than gas and even more exposed to volatile fossil fuel prices
• Direct electric heating: Fully exposed to electricity prices without the COP shield that heat pumps provide
• Hydrogen boilers: Uncertain technology, uncertain pricing, uncertain timeline

Every heating option is exposed to energy price increases. The heat pump's advantage is that it uses less energy per unit of heat than any alternative (thanks to COP), and it is the only technology where you can generate your own fuel for free (via solar PV). No other heating system offers this dual protection.

Frequently Asked Questions

Will my heat pump bills double if electricity prices double?

In the simplest case, yes — your heat pump electricity costs would double. However, if you have solar PV covering part of your consumption, that portion remains free. If you are on a TOU tariff, off-peak rates may rise less than peak rates. And if you improve your COP through system optimisation, you use less electricity. In practice, most prepared heat pump owners would see increases well below the headline electricity price rise.

Are heat pumps still worth it if electricity gets more expensive?

Yes, because gas and other fossil fuels are likely to rise too — and heat pumps use far less energy per unit of heat than any fossil fuel system. A heat pump at 30p/kWh electricity with a COP of 3.5 delivers heat at 8.6p per kWh. A gas boiler at 8p/kWh gas delivers heat at about 8.7p per kWh (at 92% efficiency). The heat pump remains competitive or cheaper.

Should I wait for electricity prices to fall before getting a heat pump?

We would not recommend waiting. The BUS grant of £7,500 is available now but has a limited budget. Installation costs tend to rise over time. And every year you wait is a year of savings lost. The economics work today, and they are likely to improve as government policy shifts to favour electrification.

How much does solar PV reduce my exposure to electricity price rises?

A typical 4 kWp solar system covers 30-50% of a heat pump's annual electricity consumption. That portion is completely immune to grid price rises. If you add battery storage, self-consumption rises to 60-75%, meaning only 25-40% of your heat pump electricity comes from the grid. This dramatically reduces your exposure.

Will the government reduce electricity prices for heat pump owners?

The government has signalled its intention to rebalance the electricity-gas price ratio, though no firm date or mechanism has been confirmed. Options include moving environmental levies from electricity to gas bills, which could reduce the electricity unit rate by 3-5p/kWh. Even without policy changes, heat pumps remain competitive at current prices in most scenarios.

Is a heat pump cheaper than a gas boiler right now?

It depends on your system's efficiency. At current prices (24p electricity, 6p gas), a heat pump with a COP of 3.5 costs slightly more per kWh of heat than a gas boiler. At a COP of 4.0 or above, the heat pump is cheaper. Most well-installed systems achieve a seasonal COP of 3.2-4.0. See our calculator for a personalised comparison.