Can the installation prices of heat pumps fall further? Experts say they can remain high, but replacing them will be cheaper

The price of having a heat pump installed is a major obstacle for households considering replacing their gas boiler.

The National Audit Office said in March that the high costs of heat pumps and a lack of understanding are preventing more households from choosing energy-saving appliances.

Although some energy companies are offering to install a heat pump for free, many consumers have waited for prices to drop further before investing in the appliances.

But will that actually happen – and if so, when?

How much further can heat pump prices fall?

Today, the cost of installing a heat pump varies depending on the type you choose and the type of property you own, but the cost is typically between €8,000 and €30,000.

The typical cost for an air-to-water heat pump – the most common, as opposed to the less popular ground-to-water heat pump – is normally around €12,000.

Some renewable energy experts argue that the high installation costs of heat pumps may not drop much further.

But the government hopes that the cost of installing a heat pump will drop by 25 to 50 percent in 2025 compared to 2021.

Mike Foster of the Energy and Utilities Alliance thinks there is a natural limit to how cheap heat pumps can be, and believes prices may not fall much further.

“The argument that prices will fall as volumes increase is a false argument,” he says. ‘These products are already globally traded products.

‘The price in France or Germany is no different than that of a British heat pump. The one area where costs could come down is if installers get used to installing more heat pumps and can do it a little quicker, which could reduce labor costs.”

Bean Beanland, director of growth and external affairs at the Heat Pump Federation, also thinks that the costs of installing the devices may not drop much further.

“The devices themselves are already competitive,” he says.

‘In principle, the heat pump sector is already mature. The air conditioning market is mature and a heat pump is in fact air conditioning.’

However, Beanland pointed out that much of the cost of installing a heat pump is paid only once: when the appliances are first installed.

Afterwards, replacing the heat pump a second time is cheaper because much of the preparatory work has already been done.

Why are heat pumps so expensive?

The installation cost of a heat pump normally includes one-off costs for project management and designing a replacement heating system, as well as a compliance check.

All this increases the bill for having a pump installed, according to a report by consultant Eunomia.

Meanwhile, the fact that gas boilers are more established helps keep their costs down compared to heat pumps – although this could change if heat pumps become more popular.

Most heat pumps also have to be imported, increasing costs compared to gas boilers which are likely to be made in Britain.

In addition, many homes are insulated from the actual cost of purchasing a new boiler because they have special boiler cover, which does not exist in the same way for heat pumps.

Even many home emergency policies that cover boiler breakdowns do not cover heat pumps.

However, if a home has a heat pump installed for the first time, replacing it can be much cheaper.

“What drives costs is the cost of the transition,” Beanland says. ‘These transition costs are determined by a number of factors, depending on each individual home. There is a huge range in terms of possible prices.

‘Once the building has made the switch, the replacement costs of a heat pump, the difference in costs at that time (compared to a boiler) are very modest.

‘So the challenge for Britain is to overcome the transition costs, and how we deal with them.’

What about the energy bill?

Once a heat pump is installed, energy bills should drop and the appliances typically need to be replaced less often than gas boilers.

The government wants to end the installation of new gas boilers in most homes by 2035.

Heat pumps use electricity to remove energy from the environment, and are available in air, water or ground source variants.

Several companies, including Octopus Energy, British Gas and Ovo, are competing to reduce the cost of installing a heat pump.

Octopus says the ‘Cosy Octopus’ heat pump can be fitted for free, or for as little as £500, provided the household in question qualifies for the maximum grant of £7,500 from the government’s Boiler Upgrade Scheme.

British Gas has a heat pump that can be fitted from £499, and Ovo has a version that costs from £500 – again with the BUS grant of £7,500.