Decarbonising home heating: An evidence review of domestic heat pump installed costs

Mark Winskel¹ and Phil Heptonstall²

¹University of Edinburgh, UK, ²Imperial College London, UK

The UK’s net zero pathway requires a rapid rise in the use of heat pumps for home heating. Alongside a much higher installation rate, the UK Government has set highly ambitious targets for reductions in total installed costs, including both equipment and non-equipment costs.

In this study, we review UK and international data on the total installed costs for domestic scale heat pumps, both historic and forecast, across a wide range of technology types and building contexts.

Heat pump cost data is relatively scarce and is often inconsistent across different studies. Given the importance of heat pump costs for energy transitions, there is a vital need for improved data on heat pump costs, in the UK and internationally.

In the UK, there has been little or no reduction in the average total installed cost of heat pumps over the past decade. Over the same period, some cost reductions have been achieved internationally, and over time, particular countries have successfully aligned market growth with reduced installed costs.

There are real prospects for reduced installed costs, particularly non-equipment costs, over the next decade. Most UK forecasts suggest a reduction in total installed costs by 2030 of around 20-25%. Expected savings are higher for non-equipment installation costs, including labour costs, than for equipment costs.

However, almost all cost reduction forecasts are significantly less than UK policy targets, and in the short term, given rising international demand and supply side challenges, heat pump installed costs face inflationary pressures.

Substantially increasing heat pump deployment in UK homes is a critical part of the net zero transition – but meeting the UK’s heat pump deployment and cost reduction targets would require a radical change in less than a decade, from international laggard to leader.

Heat pumps also offer energy security and efficiency benefits, and jobs and local economy opportunities. Over time, they can also offer households lower and more stable heating costs. This suggests a wider framing of the heat pump proposition in the UK, going beyond possibly unrealistic goals for installed cost reduction.