There is a risk that a heat pump leads to no running cost saving (compared to gas), alongside an upfront cost, which means that both homeowners and property managers are hesitant to make the investment into renewables. This is due to super expensive electricity in the UK.
What can be done by installers and installees to make the numbers move in a direction which supports the transition to clean heat?
The magic of heat pumps
Before jumping into the how, a summary on the ‘what’s’ involved.
As anyone who has had the pleasure of being sat near me in a social setting for the last year can attest… heat pumps are magic. Using technology first theorised in 1824 we can use one unit of electrical energy to produce four units of heat energy. It does this by combining electrical energy with thermal energy from the air or the ground (as opposed to a boiler which burns a fossil fuel to generate heat). And to put the cherry on top, you can flip the thing in reverse to cool down the same building.
The efficiency of a heat pump (amount of heat produced by each unit of electricity) does vary. In the UK, the average efficiency was 2.8 (Catapult Energy Systems, 2023), but this is trending upwards. On Open Energy Monitor, an open source platform for measuring system performance, the average system is at 3.8, and some systems regularly perform at over 5, with the most efficient heat pump on the system producing 5.5 units of heat for every unit of electricity used! We’ll jump into driving efficiency later.
Next, why is electricity so darn expensive?
Electricity – the energy bogeyman
Many smarter than me have written about the cost of electricity in the UK. I will link to some works below. As far as I understand it, there are two specific reasons, and one broader one.
First, the cost of electricity produced in the UK grid is set by the most expensive kWh produced at that time. That means that electricity produced by a wind turbine at 0 marginal cost is charged at the cost of producing electricity by burning gas – bonkers. Second, there a green taxes in place to raise funds for energy transition projects (wind/solar farms, grid works).
Broadly, the UK government are unable to deliver any kind of energy policy at all that could put a long term downward pressure on electricity prices. This would involve thinking long term, building nuclear power stations and driving ambitious grid reform.
Unfortunately, unless we up sticks, become MPs, join the cabinet and nab the job from Ed Milliband, these factors are out of our control in the short term. We will be stuck with a spark gap (electric to gas price ratio) of around 4 (the highest in Europe!).
There are however things that can be done to reduce the effective cost of electricity for a building.
How – beating a 4:1 efficiency.
When installing a heat pump, you want to pull each of the ratios in opposite directions. You want the heat pump to be as efficient as possible to ensure you’re using electricity productively. You want to reduce the relative cost of electricity to make sure the stuff you’re using is as cheap as it possibly could be at that time.
Three key factors drive heat pump efficiency; flow temperature, heat pump sizing and weather compensation.
Flow temperature is the temperature which the heat pump heats up the water going through radiators or underfloor heating – the lower the better. Heat pumps are like bicycles, and they find it much easier to cycle on a flat road (35 degrees), rather than a steep hill (50 degrees). Practically, this means using underfloor heating is better than radiators because it works very well with low flow temperatures. I always have to add here that heat pumps can be very efficient with radiators, but if you are looking for the most efficient system underfloor will always win.
Next up, a heat pump needs so be sized just right – too small and you’ll risk being too cold in the winter. Too large and you’ll risk the system turning on and off all the time as it fires up to deliver small outputs. As with most electrical appliances (my brother Ollie uses a sauna as an example, I question the relatability…), most of the energy is used turning the unit on, meaning turning on and off can be a real kick in efficiency’s teeth. The worst impacts of this have been reduced in the last few years as heat pump technology has evolved, but it is still a driver.
Finally, weather compensation. To ensure heat pumps produce water at the lowest possible flow rate, it uses the outside temperature to understand the required flow temperature to achieve the desired inside temperature. The relationship between outside temp and flow temp is determined by a setting known as a heat curve. This is a setting which can be adjusted manually, or more recently by software which does the job for you. Shout out to Havenwise who have stolen the show in this arena over the last year.
So you’ve made your heat pump as efficient as possible and you have given yourself a brilliant chance to have an efficiency well over 4. Now, time for the electrics…
Using the cheapest possible electricity at all times
So, how do we reduce the spark gap?
Instinct tells you to run head first into a solar PV system (electricity from the sun). Solar is a marvel; it is cheap with a payback period of 5-8 years. If you have the budget to install it is a no brainer. However, there is a seasonal mismatch between solar and heat pumps – when the solar is producing the most in the summer, the heat pump is demanding the least, and vice versa. This means it’ll cover your properties usage over the summer, but won’t when we really need cheap electricity in the winter.
That’s where battery storage systems become your friend. Many sell the benefit of a battery as storing excess solar, but that hardly touches the sides. The true power of batteries is the access it gives you to Time of Use (ToU) tariffs all year round.
ToU tariffs mean your provider will change the price they charge over a day for electricity. They do this to balance demand – it’s expensive when everyone is using lots of electricity, and cheap when they’re not. A battery means you can charge on the cheap and use it when you would be buying expensive.
In practice, this means you can reduce your spark gap. For example, if you buy electricity at 8p/kWh overnight to run your heat pump, your effective Spark Gap is almost 1:1 with gas. This means you’ll be seeing an effective 75% reduction in your bills. There is uncertainty on the exact price of variable rates into the future, but a battery is the only device that guarantees you can always access the cheapest kilowatt available – whether it comes from your roof or the grid.
We’re also seeing batteries, when partnered with smart controls, becoming the brain of the home. They control the procurement of electricity in the house and the distribution to appliances, meaning it can optimise for cheap costs. For example, if the sun is going to be shining more than expected in the next day, the battery wants to make sure to benefit. It will therefore tell the heat pump to come on a bit early, store heat in the house, and make space for more cheap electricity.
By using a battery, supported by solar PV, you are reducing your effective electricity cost, dragging the spark gap down and significantly reducing your bills.
To close…
The cost effectiveness of heat pumps comes down to how efficient the heat pump can work, and how much you have to pay for each unit of electricity you do have to use. I’ve summarised the drivers for an efficient heating system (flow temps, sizing and weather comp) and ways to reduce effective electric costs (solar PV, battery storage and ToU tariffs). The name of the game, when optimsing for reduced running costs, is to pull the ratios in the right direction.
Heat pumps are brilliant. If you install one you’ll have a lovely warm building and if designed, installed and controlled properly you will pay substantially less every month.
Electricity price articles
