Running Costs and Savings of Air Source Heat Pumps

Air source heat pumps are becoming one of the UK’s leading options for clean, low-cost heating, but understanding real-world running costs is essential before deciding to install one. This expanded guide breaks down what really affects running costs, what you can expect to pay, and how much you can save compared to traditional heating systems.

1. What Determines Heat Pump Running Costs in the UK?

1. Electricity Tariff (The Biggest Factor)

Your electricity tariff is the single largest influence on how much a heat pump costs to run. Because heat pumps run on electricity, the price you pay per kWh directly affects your annual bills.

Why tariffs matter:

• Heat pumps run most efficiently at steady, low-power levels, which can be scheduled to coincide with cheaper electricity periods.

• Smart tariffs allow dynamic pricing, meaning you can heat your hot water cylinder or preheat your home during cheaper hours.

Tariff breakdown:

• Standard variable tariff (SVT): 28–32p/kWh

  
  

  Most common but not the cheapest. ASHPs are still efficient but savings vs gas may be limited.

• Economy 7 (off-peak 12–18p/kWh)

  
  

  Useful if your system can shift heat production to night hours — ideal for homes with buffer tanks or larger hot water cylinders.

• EV & smart tariffs (7–12p/kWh off-peak)

  
  

  These can dramatically reduce running costs by letting the heat pump operate when electricity is cheapest.

Real-world effect:

Even on a standard tariff, a heat pump remains cheaper to run than oil, LPG, or direct electric systems. With smart tariffs, heat pumps often become cheaper than gas too.

2. Heat Pump Efficiency (SCOP)

SCOP (Seasonal Coefficient of Performance) is the measure of how much heat a pump produces per unit of electricity over a year.

What influences SCOP:

• Flow temperature — lower temperatures increase efficiency.

• Outdoor temperature — heat pumps work harder in very cold weather.

• System design — an accurately sized heat pump performs better.

• Home insulation — reduces required output and boosts efficiency.

Typical SCOP values:

• UK average: 2.5–4.0

• High-end systems: 4.0+ (in well-insulated homes)

What this means in practice:

If your heat pump’s SCOP is 3, every 1 kWh of electricity becomes 3 kWh of heat. This multiplier effect is why running costs remain low even when electricity seems expensive.

Related Reading - How Efficient areAir Source Heat Pumps

3. Home Insulation & Heat Loss

Insulation is crucial for any heating system, but especially for heat pumps, which work best when maintaining steady temperatures.

Key insulation upgrades:

• Loft insulation — inexpensive and highly effective.

• Cavity wall insulation — essential for pre-1990 homes.

• Solid wall insulation — significant improvement for older properties.

• Double/triple glazing — reduces heat loss through windows.

• Airtightness — draught proofing prevents warm air escaping.

Impact on running costs:

A well-insulated home can cut heat pump running costs by up to 30%, improve comfort, and reduce the required heat pump size, lowering installation cost too.

4. Flow Temperature

Flow temperature is the temperature of the water sent through your radiators or underfloor heating.

Why it matters:

• Heat pumps deliver heat more efficiently at lower flow temperatures.

• Every 5°C reduction can improve efficiency and reduce costs.

Ideal flow temperatures:

• Radiators: 35–45°C

• Underfloor heating: 30–35°C (best-case scenario)

How to achieve low flow temperatures:

• Upsize radiators

• Improve insulation

• Use weather compensation controls

• Install underfloor heating where possible

5. Heating Usage Patterns

Heat pumps perform best when run consistently rather than in sharp bursts.

Best practice:

• Use steady, low-level heating to maintain a stable indoor temperature.

• Avoid “boosting” heating to high temperatures.

• Use programmable thermostats and zone controls for different areas.

Why this approach works:

Heat pumps excel at keeping a home warm by topping up slowly, which is far more efficient than rapidly heating a cold house.

2. Typical Running Costs in the UK

For an average 3-bed home using an ASHP for heating and hot water:

Annual running cost estimate:

£850 – £1,500 per yearCosts vary depending on:

• Tariff choice

• Insulation levels

• Heat pump efficiency (SCOP)

• Flow temperatures

• Climate and heating habits

This is comparable to, or cheaper than,  gas, and significantly cheaper than oil, LPG, or direct electric.

3. Savings Compared to Other Heating Fuels

Compared to Oil Heating

Oil is highly volatile and often expensive.

• Typical annual oil cost: £1,600 – £2,400

• Heat pump cost: £900 – £1,500

• Savings: £500 – £1,200+ per year

Oil users see some of the biggest financial benefits when switching.

Compared to LPG

LPG is one of the most expensive mainstream fuels.

• LPG annual cost: £1,800 – £2,600

• Heat pump cost: £900 – £1,500

• Savings: £700 – £1,300+ per year

Compared to Direct Electric Heating

Night storage heaters and panel heaters are extremely inefficient.

• Direct electric cost: £2,500 – £4,000+

• Heat pump cost: £900 – £1,500

• Savings: £1,500 – £2,500+ per year

This category sees the largest possible savings.

Compared to Gas Boilers

Gas is cheaper per kWh, but boilers are less efficient.

• Annual gas bill: £900 – £1,400

• Heat pump cost: £850 – £1,500

• Savings: £0 – £300 per year

However, savings grow when:

• Smart tariffs are used

• The home is well insulated

• Flow temperatures are kept low

• Solar PV is added

In good conditions, heat pumps can significantly outperform gas financially.

4. How Heat Pumps Reduce Bills Long-Term

1. High Efficiency = Lower Energy Use

Heat pumps can use:

• 60–70% less energy than electric heating

• 30–50% less energy than oil or LPG

This efficiency translates directly into long-term savings.

2. Compatible With Smart Tariffs

Modern tariffs let you heat your home or hot water during cheap periods, something gas cannot do.

This unlocks major cost reductions, particularly with:

• Thermal storage tanks

• Weather compensation

• Smart controllers

3. Perfect Partner for Solar PV

Solar energy can directly power your heat pump.

Benefits:

• Free daytime heating

• Free hot water (stored in a cylinder)

• Reduced dependency on the grid

• Lower peak-time electricity consumption

A PV + heat pump system can reduce running costs to very low levels, especially with batteries.

4. No Fuel Deliveries or Price Volatility

Unlike LPG or oil:

• Electricity doesn’t require storage tanks

• There are no delivery fees

• Prices are less volatile and expected to stabilise as renewables expand

This gives heat pump owners greater predictability over long-term costs.

5. How to Minimise Heat Pump Running Costs

Key steps:

Keep flow temperatures low – improves SCOP and reduces bills.Improve insulation – cuts heat loss and reduces heating demand.                                         Use bigger radiators or underfloor heating – allows lower flow temps. Enable weather compensation – automatically adjusts flow temperature. Maintain the unit – clean filters and ensure good airflow. Use off-peak tariffs – run the pump during cheaper hours. Combine with solar PV – lowers daytime running costs. Ensure correct heat pump sizing – avoids inefficiency or oversizing.

Implementing these steps can substantially improve performance and reduce bills.

6. How Government Grants Affect Savings

Boiler Upgrade Scheme (England & Wales)

• £7,500 grant for air source heat pumps

• Applies to most detached, semi-detached, and terraced homes

• Reduces upfront cost significantly

Scotland – Home Energy Scotland Grants

• Offers grants & interest-free loans

• Support varies depending on eligibility and property type

Why grants matter:

Lower upfront cost → shorter payback period Shorter payback → higher lifetime savings

For many households, the grant reduces installation costs to levels competitive with boiler replacements.

Related Reading - Government Grants and Incentives for Heat Pumps In The UK

Air source heat pumps offer one of the most cost-effective, efficient, and future-proof heating solutions in the UK. Households using oil, LPG, or direct electric will see substantial annual savings, while gas-heated homes can achieve competitive or better running costs when using smart tariffs, low flow temperatures, and good insulation.

With high efficiency, tariff flexibility, solar compatibility, and strong government support, heat pumps are quickly becoming the most economical heating upgrade for British homes. Contact Newpower today and find out how an air source heat pump can save you money.