Heat pumps: an economical solution for relatively few households

Eddie Curran & Andrew Murphy, founders of leading Scottish renewable energy company GreenFox Energy, continue to take us through the ins and outs and the do’s and don’ts of renewable energy for the home. In the third article of the series on home renewables, the topic under discussion is heat pumps...

The transition to low-carbon domestic heating systems is essential to the UK’s net-zero strategy and - to some extent - to reducing national reliance on foreign-sourced fuel sources. Notably, governments in Westminster and the devolved nations are attempting to put heat pumps at the heart of that effort.

Air-source and ground-source heat pumps have been promoted as sustainable alternatives to gas boilers, providing heating and hot water with significantly lower carbon emissions. However, while heat pumps can be efficient and environmentally beneficial in ideal conditions, in practice they offer an economical solution for relatively few UK households. This is primarily due to their reliance on high-cost grid electricity and the frequent need for costly home upgrades to make a heat pump system viable.

Here’s what you need to know...

Understanding “the Spark Gap”

At the heart of Heat Pump’s economic challenge lies the “spark gap” - a term used to describe the price differential between electricity and gas per unit of energy. In the UK, mains electricity is roughly three to four times more expensive per kilowatt-hour (kWh) than gas - essentially because electricity is burdened with policy and grid costs that drive up its price.

Heat pumps operate by moving heat rather than generating it, and they are typically three to four times more efficient than gas boilers. In theory, this should offset the cost disparity between fuels. However, when the cost of electricity is three to four times higher than gas, the economic benefit of that efficiency quickly erodes and, in many UK homes, the spark gap renders heat pump operation more expensive than running an efficient gas boiler - especially during peak winter demand, when efficiency can drop and electricity prices can spike.

Thus the UK’s energy pricing model directly disincentivizes the use of electric heating systems like heat pumps, as the user is paying significantly more for each unit of electricity sourced heat compared to that from gas... unless they are able to mitigate that cost through self-generation of electricity - for example via solar panels. Without such mitigation, households are often left with higher heating bills post-installation, especially if the system is not optimally designed or the property has not been properly retrofitted.

It is for this reason that, at GreenFox, we often talk customers out of paying us thousands of pounds to fit Heat Pumps and, when we do fit them (roughly 1 in every 15 jobs overall and around 1 in every 3 times we’re asked for them) we always emphasise that it’s essential to do so in tandem with a properly specified solar energy system.

Compatibility and Cost of Upgrades

Another barrier to the adoption of heat pumps is that many homes require the upgrade or modification of their existing heating system in in order to distribute heat around the home effectively. This is because most UK housing stock is not designed with low-temperature heat distribution systems (like Heat Pumps) in mind. Heat pumps work most efficiently at lower flow temperatures (typically 35–55°C) compared to conventional gas boilers (which operate at around 70–80°C). As a result, existing radiators may need to be replaced with physically larger models (providing greater heated surface area), or underfloor heating may need to be installed. Homes with poor insulation will also require significant retrofitting to prevent heat loss (due to the inability to simply ‘crank up’ a heat pump operated system to compensate for heat leakage).

These adjustments are not trivial. The cost of upgrading insulation, replacing radiators, and ensuring a system is air tight can easily run into many thousands of pounds, significantly increasing the overall cost of installation. Moreover, the heat pump unit itself—particularly for ground-source systems—is expensive and may require planning permission, space for external components, and complex groundwork. Together, these factors can make the upfront cost of switching to a heat pump unaffordable or economically unviable for the average homeowner.

The Limited Economic Case for Heat Pumps

Given the above constraints it’s little wonder that heat pumps only present a financially advantageous solution for a limited number of households.

We see four key criteria to bear in mind which determine your home’s likely suitability for a heat pump:

Ideally, one of statement 1 or 2, plus both of 3 & 4 should be true:

1. Your home is new-build or recently renovated: and therefore likely already designed with high levels of insulation and a low-temperature heating system.
2. Your home is not connected to the gas grid and so oil or LPG heating is the current standard, which makes the cost comparison for a switch to electrically powered heating more attractive than it would be if replacing mains gas.
3. Your home is capable of on-site energy generation, most likely a solar installation and battery storage, enabling users to bypass grid prices for the majority of their electricity use.
4. Your home is detached or semi-detached: with enough outdoor space to accommodate the installation of the pump with minimal disruption.

Even in these scenarios, achieving a favourable return on investment relies very much on careful system design, smart system control technologies and some ongoing care and attention to system monitoring and performance management.

Conclusion: proceed with care & take good advice

The current push for heat pump adoption risks oversimplifying what is, in reality, a complex and highly context-dependent decision. Heat pumps are not a plug-and-play alternative to gas boilers. Their efficiency and economic viability depend on a multitude of factors, including property design, insulation levels, heat distribution systems, user behaviour, and your ability to mitigate grid electricity prices through self-generation.

It is crucial, therefore, that both homeowners and policymakers approach heat pump adoption with care. The property assessment and system design must be thorough and customised. Overly generic advice or poorly planned installations risk burdening households with high costs and underperforming systems, and we can see this is already risks undermining public confidence in the technology.

Most importantly, installing a heat pump without simultaneously investing in solar PV or another form of renewable self-generation will be a mistake in almost every conceivable scenario. The ability to offset the high cost of grid electricity with on-site solar generation is often the tipping point that turns an otherwise marginal or negative economic case into a sound - albeit long-term - investment.

Until broader reforms address the spark gap and rebalance energy costs across fuels, heat pumps will remain an economically viable option for only a small subset of UK homes. Policymakers, installers, and homeowners must be honest about this reality and act accordingly.

Want to learn more? Drop us an email at hello@greenfoxenergy.co.uk.