How We Calculate Heat Pump Costs
Every formula, every assumption. Full transparency so you can check our working.
We believe you should be able to verify every number on our site. This page shows you every formula we use, the values we plug in, and why. If you disagree with an assumption, you can substitute your own values and recalculate. That's the point of transparency.
Our Input Values (Q1 2026)
| Variable | Value | Source |
|---|---|---|
| Electricity unit rate | 26.3p/kWh | Ofgem price cap Q1 2026 |
| Gas unit rate | 8.0p/kWh | Ofgem price cap Q1 2026 |
| Oil unit rate | 11.4p/kWh | UK average Q1 2026 |
| LPG unit rate | 8.5p/kWh (August 2026 observation; use your own delivery price) | UK average Q1 2026 |
| Heat pump COP (SCOP) | 3.2 | BEIS / MCS field data |
| Gas boiler efficiency | 90% | A-rated condensing boiler |
| Oil boiler efficiency | 85% | Modern condensing oil boiler |
| BUS grant | £7,500 | Ofgem |
| ASHP installed cost range | £11,128–£15,627 | MCS / EST |
| GSHP installed cost range | £18,136–£42,110 | MCS / GSHPA |
| Electricity standing charge | 54.83p/day | Ofgem |
| Gas standing charge | 29.68p/day | Ofgem |
Formula 1: Annual Running Cost
Annual running cost = (Heat demand ÷ Efficiency) × Fuel price
Example: Heat pump in a 3-bed semi (average insulation)
Heat demand: 12,000 kWh/year
COP: 3.2
Electricity needed: 12,000 ÷ 3.2 = 3750 kWh
Fuel cost: 3750 × £0.2632 = £987/year
Same home with a gas boiler
Heat demand: 12,000 kWh/year
Efficiency: 90% (0.90)
Gas needed: 12,000 ÷ 0.90 = 13,333 kWh
Fuel cost: 13,333 × £0.0797 = £1063/year
Same home with an oil boiler
Heat demand: 12,000 kWh/year
Efficiency: 85% (0.85)
Oil needed: 12,000 ÷ 0.85 = 14,118 kWh
Fuel cost: 14,118 × £0.114 = £1609/year
Formula 2: Cost per kWh of Heat
Cost per kWh of heat = Fuel price per kWh ÷ System efficiency
- Heat pump: 26.3p ÷ 3.2 = 8.2p per kWh of heat
- Gas boiler: 8.0p ÷ 0.90 = 8.9p per kWh of heat
- Oil boiler: 11.4p ÷ 0.85 = 13.4p per kWh of heat
- LPG boiler: 8.5p ÷ 0.85 = 10.0p per kWh of heat
- Electric storage: 26.3p ÷ 1.0 = 26.3p per kWh of heat
Formula 3: Annual Saving
Annual saving = Current annual running cost − Heat pump annual running cost
For a 3-bed semi replacing a gas boiler (12,000 kWh demand):
Current gas cost: £1063/year
Heat pump cost: £987/year
Annual fuel saving: £76/year
Plus gas standing charge saved (if disconnecting gas): £108/year
Minus heat pump maintenance premium (vs gas): ~£50/year
Net annual saving: approximately £134/year
Formula 4: Payback Period
Payback (years) = Net installation cost ÷ Annual saving
Example: replacing a gas boiler in a 3-bed semi, at the DESNZ median installed price
Installation cost: £12,908
BUS grant: −£7,500
Net cost: £5,408
Annual saving (from above): ~£134
Payback: £5,408 ÷ £134 = ~40 years
This compares the heat pump with doing nothing. If your boiler needs replacing anyway, compare against the cost of a new boiler (about £3,000) instead, which shortens the payback considerably.
Formula 5: Lifetime Cost (25-Year Comparison)
Lifetime cost = Install cost + (Running cost × Years) + (Maintenance × Years) + Replacement costs
Over 25 years, comparing a heat pump (one installation) to a gas boiler (two installations, replaced at year 13):
Heat pump (25 years):
Install: £12,908 − £7,500 grant = £5,408
Running: £987 × 25 = £24675
Maintenance: £150 × 25 = £3,750
Total: £33833
Gas boiler (25 years):
Install (first): £3,000
Install (replacement at year 13): £3,000
Running: £1063 × 25 = £26566
Maintenance: £100 × 25 = £2,500
Gas standing charge: £108 × 25 = £2708
Total: £37774
Note: These are illustrative figures for a typical scenario. Your actual costs will depend on your home's specific heat demand, the installation price you receive, and future energy prices.
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