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Last updated: 25 March 2021

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Heat Pump Costs and Financial Benefits in the UK

Heat pumps are not a cheap investment for your home in the short run, but they have plenty of long-term benefits. The running costs of heat pumps are fairly low, especially when compared to various electric, oil, and bottled gas boilers.

What is more, not only do you save month by month on your energy bills, but such sustainable solutions are also financially supported by the British government. If you apply for the Renewable Heat Incentive (RHI), you will get paid for every unit of energy generated for a total of 7 years.

Your choice of heat pump doesn't only depend on your property but your budget might also influence your decision. Certain types are cheaper than others, and the RHI payments also differ, as presented in the table below.

Price and RHI Payments of Different Heat Pump Types (2021)
Type Price Range RHI Payments*(p/kWh)
Ground Source Heat Pump £20,000–£40,000 21.29p
Air Source Heat Pump £8,000–£18,000 10.92p
Water Source Heat Pump £20,000–£32,000 21.29p

* The specified RHI tariffs were specified by Ofgem in Q1 of 2021.

Disclaimer: The price ranges mentioned above are a reflection of unbiased research from our heat pump suppliers. GreenMatch cannot guarantee that these are the lowest possible prices you can find. However, we are confident that you will get a pleasant purchasing experience using our trustworthy, certified heat pump installers.

Currently, air source heat pumps are the most popular in the UK and account for roughly 87% of all sold units, while ground and water source heat pumps account for 9%. 


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What Are the Pros and Cons of Heat Pumps?

Heat pumps extract free heat from the soil, ambient air, or a body of water. This heat is then transferred for domestic use with the help of an electric compressor. This compressor, however, consumes significantly less energy than a boiler. As a result, a heat pump provides close to free heating for your home.


While they may be a significant investment for many households, the benefits of heat pumps are numerous:

  • The government helps homeowners who would like to use an environmentally friendly heating solution with the Renewable Heat Incentive (RHI), under which you may be eligible for receiving payments for each kWh of energy generated.
  • Thanks to their low running costs, you can save up to £1,350 per year with heat pumps compared to conventional heating options. Consequently, within years, your investment is returned and you start earning money.
  • They require little maintenance: all that is needed is a yearly check-up that can also be done by you, and an inspection by a certified professional every 3 to 5 years.
  • The lifespan of heat pumps is, on average, between 14 to 15 years. However, high-quality devices can last for up to 50 years.
  • They are not only better for the environment thanks to their low energy consumption, but they also make your home safer by eliminating the need for gas pipes and oil tanks.
  • Last but certainly not least, many heat pumps are able to reverse the heat collection process, thus providing cooling for your home during summer.


However, there are also certain disadvantages associated with heat pumps:

  • The upfront costs are rather high. However, you should see it as an investment: thanks to the low operating costs and the RHI, heat pumps are easily profitable in the long run.
  • They might be difficult to install — especially ground source heat pumps, for which installation depends on the local geology and your garden becomes a construction site.
  • Heat pumps are the most efficient when used in combination with underfloor heating, or alternatively, with large radiators. If your house has an older radiator system, you might find it costly to replace the heat emitters.
  • There are also environmental concerns regarding the refrigerant fluid used in the pipe system. However, under regular conditions, the special liquid should never exit the piping.

What Are the Different Types of Heat Pumps?

There are various different types depending on the source of the heat and the use of that heat in your home. While all types of heat pumps are worth the investment in the UK, your choice depends on two things:

  1. Whether you want the heat to be extracted from the soil (which requires digging up your garden for laying pipes underneath), from the ambient air (which requires little space but a fan will constantly emit a low amount of noise), or from a body of water (if you have such available close to your house).
  2. Whether you want the heat to be used for domestic hot water and conventional heating using radiators or underfloor heating, or you prefer heating the home by ventilating with heated air (similarly to how an air conditioner would cool the room).

When the heat source is the soil, we talk about ground source heat pumps. Similarly, the ones using the ambient air or a body of water are called air source and water source heat pumps, respectively. These umbrella terms can, then, be broken down based on the application.

Read more about the specific heat pump types below:

  • Ground source heat pumps
  • Air source heat pumps
  • Water source heat pumps

Ground source or geothermal heat pumps are, in most cases, used for heating water. With the help of additional system elements, it is possible to use heated air ventilation with geothermal systems, but it is far more common to use it for conventional radiators and underfloor heating.

Both air source and water source heat pumps can be used for heating water as well as indoor air in your home.

When used for heating water, we refer to air-to-water heat pumps and water-to-water heat pumps. Water source, air-heating systems are called liquid-to-air heat pumps which are a kind of speciality products.

Hot air ventilation is usually provided by air-to-air heat pumps. The latter can also be reversed and used for cooling your home — however, it is not eligible for the RHI.

Heat Pump Types

What Is a Ground Source Heat Pump?

There is a variety of ground source heat pump systems (GSHP). GSHPs can be sub-categorised into vertical and horizontal systems, and open- and closed-loop systems. The different choices affect the prices of ground source heat pumps. 

The video below explains how a ground source heat pump works:

Open-Loop Systems

Despite being called a ground source heat pump, open-loop systems pump up groundwater from deep underneath the soil, then after extracting the heat from it, the water is pumped back. Such a system has higher running costs, as you need to make sure the water is unaffected and need to comply with regulations of using such natural water sources.

Closed-Loop Systems

Closed-loop ground source heat pump systems are far more common in the UK. These systems circulate an antifreeze liquid through a closed plastic polymer tubing that is buried in the soil.

  • Vertical ground source heat pump systems: Such a system requires several holes to be drilled into the ground, 5 metres apart from each other. Each hole is 15–120 meters deep. At greater depths, the temperature increases significantly, warming the anti-freeze liquid. This liquid then comes back through an exit hole, where it then heats up the refrigerant that stays in the house within a second system. The system’s main disadvantage is its high initial investment.

  • Ground Source Heat PumpHorizontal ground source heat pump systems: This type of GSHP is less costly than a vertical system, as it is less complex. To install a horizontal geothermal system, the ground has to be dug out just below the frost line. Then, coiled pipes are laid down into the ground, creating spirals. A liquid is sent through the system which heats up the refrigerant in the second pipe system. Although more affordable, this system requires more garden space and is affected by seasonal changes due to the lower depths of the system’s installation.

Radial or Directional Drilling

A radial or directionally drilled system is a great option when the property cannot be reshaped. With this GSHP system, small holes are drilled into the ground at an angle in order to insert the pipes. Radial or directional drilling enables you to install a GSHP system without needing to demolish gardens, yards, buildings, etc. The cost of the system lays somewhere in between the vertical and horizontal systems.

What Is an Air Source Heat Pump?

Air source heat pumps (ASHP) use the principles of vapour compression to generate heat. It's a popular low carbon heating system, and there are many benefits to using air source heat pumps.

They use outdoor air to produce heat to your home. ASHPs consist of 4 major elements that allow the refrigerant to pass from the liquid form to gas: a compressor, a condenser, an expansion valve, and an evaporator.

How an Air Source Heat Pump Works

When the refrigerant passes through the system, it absorbs the heat from the outside air. Then, the compressor increases the heat by increasing the pressure. In the condenser, this higher temperature heat is transferred to the heating and hot-water circuits of your home. After that, the medium-temperature liquid flows into the expansion valve where upon the release of pressure, its temperature also drops. Finally, the now cooled down liquid is returned to absorb more heat from the air and repeat the process.

ASHPs can be used for heating water for domestic use, radiators, and underfloor heating. Such systems are called air-to-water heat pumps (A2W). If suddenly a large amount of hot water is needed, they are also equipped with an electrical resistance heating element that would supply additional heated water (at a lower efficiency rate, though).

Alternatively, air source systems can be used for heating and cooling the indoors air using air-to-air heat pumps (A2A). These work similarly to an air conditioning unit but can both heat and cool the house efficiently, adding to the list of benefits of air-to-air systems.

What Is a Water Source Heat Pump?

Water source heat pumps (WSHP) extract energy from a body of surface water. While WSHPs are really efficient, not all homes have a sufficiently large body of water close by.

Open-Loop Systems

An open-loop WSHP system is deployed in a well or a pond. The water from the pond is pumped through the pipes; once the heat of the water is spread through the system and the heat is absorbed, it is returned back to the pond or recharges the well.

Closed-Loop Systems

Closed-loop WSHPs can be considered by anyone living near a larger body of water. The water should be at least 8 feet deep in order to avoid freezing. Closed-loop WSHPs work similarly to GSHPs: a special liquid is pumped through the pipe system laid in the water that picks up the heat of the water and transfers it to the compressor to generate usable heat. Closed-loop systems are one of the most effective options, keeping water source heat pump costs low.

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