Heat Pumps: Cambridge Energy’s Agenda for Reform

Three issues have converged for me over the past few months relating to heat pumps, which have given me new insights I hope are worth sharing. First, I supported a local school in deciding whether to replace aging gas boilers with low-carbon heat pumps, or whether to stick with the system they knew. Second, our modelling work for the Government’s Department of Business and Energy (BEIS) about electric heating for homes was published [1]. And third, two great new reports were published about how to decarbonise heating in homes – one focused on London, the other Manchester [2, 3].

Heat pumps are arguably more important in the UK now than at any time in the past. Roughly 300,000 heat pumps have been installed so far in the UK – less than 1% of all heating systems. There are around 35,000 new installations each year, and 90% of these are air-source heat pumps. Most new heat pumps are used in new, relatively energy efficient homes. However, the Government is trying to make heat pumps the heating system of choice for existing homes, and to meet a target of 600,000 heat pump installations a year by 2028.

This will be no small feat: increasing the manufacture of heat pumps is not a major barrier, but finding 17 times more specialist installers than we have now is far from trivial. Sadly, neither plumbers nor electricians possess all the necessary skills to install heat pumps alone. Some ‘split system’ heat pumps also require installers to have special ‘F-gas’ certificates that allow them to work with refrigerants safely.

Why push heat pumps so hard?

Heat pumps bring major environmental benefits. Our modelling work showed that whereas a new gas boiler operates on average at just under 90% efficiency, the average new air-source heat pump operates at 310% efficiency [1]. This means that every 1kWh of electricity used by the heat pump provides 3.1kWh of heating. Now, there is a long list of factors at play in determining the efficiencies of heat pumps: the type and model chosen, how they are installed, what ‘emitters’ (radiators or underfloor heating) are attached to the heat pumps, how well insulated and air-tight the homes using heat pumps are, and how the heat pumps are operated. Heat pumps are also more efficient for (usually low temperature) space heating than they are for (higher temperature) domestic hot water.

As well as the efficiency gain, the amazing reductions the UK has achieved in carbon emissions per unit of electricity generated (from 529gCO2/kWh in 2013 to 181gCO2/kWh today) mean that heat pumps offer carbon savings that would be very difficult to achieve in any other way. The savings are far higher than other kinds of electric heating, or (in the medium term at least) hydrogen heating. Even better, UK electricity is already on a path to even lower carbon emissions from electricity, and the Government reckons we’ll achieve 41gCO2/kWh by 2035 [4]. This means that heat pumps running on decarbonised electricity will offer close to zero-carbon heating. If most homes make the switch to heat pumps the UK will achieve the sort of very dramatic carbon savings we need to stay within the Committee on Climate Change’s fifth and sixth Carbon Budgets, covering the period from 2027 to 2037.

The big catch here is that heat pumps cost more than conventional heating systems, both to install and to operate. After the price rises announced for October 2021, electricity will cost five times as much per kWh as gas – easily offsetting the efficiency benefit of heat pumps.

Cost is not the only barrier

A concern about increased running costs was front of mind for many of the Governors at the Cambridge primary school I supported in deciding how to replace its old and unreliable gas boiler. However, SALIX funding that was available through the County Council removed the risk of higher energy costs and seemed to me to be too good to turn down. Essentially the Council would find an installer that would guarantee running costs no higher than the existing gas boiler – any increase in costs would be met by the installer in full. (Whether any installer would be prepared to take on this risk, written into the contract, is open to question.)

The Council was unable to meet the full cost of installing heat pumps at the school – estimated at £115,000 – and there would be a shortfall of £25,000. However, the Council was able to offer a very favourable loan, repayable over 20 years, with interest of only 1.25% (below the rate of inflation). Repayments on this loan would be considered as part of the operating costs of the heating, and again the installer would be bound to meet any increase in running costs resulting from the repayment charges.

Surely the school couldn’t reject an offer like this: I calculated carbon savings of around 70% from heating immediately, rising towards 100% as electricity continues to be decarbonised; and it would reduce NOx emissions – improving air quality near the school; with no increase in operating costs.

The school Governors didn’t agree – not even to a hybrid solution where a conventional gas boiler steps in during periods of peak heating demand, which also offers contingency heating as a potential backup if the heat pump requires maintenance. The main objection was not wishing to take on debt, and there were subsidiary concerns about providing adequate heating in very cold weather, given the school’s medium thermal performance (insulated cavity walls, but only partial double glazing, and some areas of poor roof insulation). There was also some anxiety about the school’s ability and staff time to manage a new, unfamiliar form of heating.

Interestingly, the Council ruled out both forms of ground-source heat pump (GSHP) from the start, because of prohibitively high capital costs of either a slinky coil under the school playing field or boreholes. They had had their fingers burnt on multiple other schools installing GSHPs before, where poor ground conditions resulted in very high costs (hundreds of thousands of pounds) for the ground couple.

I summarised pros and cons of switching to air-source heat pumps or a hybrid heat pump/gas boiler solution in the table below, but I was unable to persuade the governors to opt for low-carbon heat pumps.

Pros and Cons of Different Heating Systems for a Cambridge Primary School

New research on heat pumps and decarbonisation

The first of two important new research reports on heat pumps and decarbonisation was ‘Heat Pump Retrofit in London’. [2] This said that decarbonising heat is the biggest challenge to achieving Net Zero emissions (the Mayor’s target by 2030) in the capital. Natural gas used for heating currently accounts for 37% of London’s greenhouse gas emissions and 22% of NOx emissions (which add to air quality problems and are damaging to health).

The report says that heat pumps have the potential to deliver 60-70% CO2 savings compared to conventional electric heating, and 55-65% savings compared to A-rated gas boilers (see chart below). This excludes any saving from insulation or air-tightness improvements, or savings from continued decarbonisation of the electricity grid. It recognises that there are potential issues of noise pollution and making space for heat pumps in smaller homes. It also recognises that up-front costs of heat pumps are currently a deterrent for people considering installing heat pumps in homes and businesses.

Carbon Intensity of Gas Boilers and Heat Pumps, 2010-2050

Source: The Carbon Trust (2021) [2]

The report’s authors suggested that in spite of these barriers there is simply no way to achieve the Mayor’s Net Zero target without installing large numbers of heat pumps. They called on the Government to act urgently to provide financial support to help meet the capital cost of heat pumps, and to rebalance energy taxes to incentivise low-carbon heating.

‘Pathways to Healthy and Net Zero Housing in Greater Manchester’ [3] aimed to work out how Manchester’s homes can achieve Net Zero Carbon by 2038. It found that without a decarbonised system to provide heating (i.e. electric or hydrogen), CO2 emissions from housing could only be reduced by half. Average CO2 emissions for heating and lighting homes in Manchester are 3.6 tonnes per home per year. At the same time, there are more than 2,000 excess winter deaths in Manchester, and roughly a quarter of these are due to excess cold.

Among other conclusions, this report suggests that once low-carbon heating has been installed, the additional savings from more insulation or air-tightness measures are relatively small. ‘These results indicate that once the heat source has been effectively decarbonised, fabric measures are no longer a cost-effective way to cut CO2 emissions.’ This is a knockout conclusion, and a serious challenge to all those calling for ‘deep’ retrofits (involving multiple and major improvements to the fabric of buildings). It forces a profound rethink of half a century’s emphasis in the energy efficiency world on ‘fabric first’.

However, the report notes that such measures may be essential for reducing fuel poverty and to address the health impacts of excess cold. Fabric measures will also help to relieve pressure on the electricity grid, which would be severely overstretched if all homes adopt heat pumps without parallel improvements in energy efficiency.

But aren’t homes different from non-domestic buildings?

Yes, public sector buildings like schools are unlike homes in several ways. They are typically larger, with many more users and significantly higher energy costs and carbon emissions. Replacing heating systems is inevitably more complicated and disruptive – which is a problem for most public sector buildings that need to offer continuous services. Arguably, in a period of public sector austerity, they face more uncertainty about future income and funding (which makes them even more reluctant to take on debt). Finally, those responsible for public sector buildings usually have a longer-term perspective than householders, who may be waiting for the next opportunity to climb the property ladder – or who may need to move in the short- to medium-term for other reasons.

However, there are also significant similarities between homes and public sector buildings: both usually face constrained budgets for capital costs and ongoing energy and maintenance costs, both have limited (or no) access to expertise about low-carbon heating, and both are understandably nervous about switching to a new technology they have not encountered before for ‘mission critical’ services like space and water heating.

The bottom line

There are seven key points to draw from all this:

  1. Heat pumps are the only proven technology that could deliver large carbon savings at the scale and pace needed to achieve the UK’s (and cities’) decarbonisation targets for buildings.
  2. Heat pumps are not direct substitutes for gas or oil boilers, and they run most effectively with much lower flow temperatures – typically 35-45C. This means they usually need larger heat emitters, and they need to run near-continuously in cold weather. The corollary of this is that existing systems for delivering heat in homes (radiators) will often need to be replaced, which brings hassle and disruption, and householders will also need to learn how to use heat pumps.
  3. Prospective customers for heat pumps (both domestic and non-domestic) are wary of taking on debt to cover the installation costs. Uncertainty about installation costs is particularly frightening, and anecdotal experience of escalating install costs sows fear and doubt.
  4. Prospective customers (domestic and non-domestic) also have doubts about the ability of heat pumps to deliver comfort. It is not entirely clear where this comes from, but weak anecdotal evidence and a lack of trust in installers are contributing factors.
  5. Without a significant Government intervention, householders and organisations will continue to replace existing gas and oil boilers with like-for-like heating systems that perpetuate high carbon emissions. Even with cost parity, most people would continue to use the boilers they are familiar with – not least because heating system replacements are usually ‘distress purchases’ that need to be made urgently because an existing boiler cannot be repaired.
  6. A wholesale conversion to heat pumps at the scale required to meet greenhouse gas targets will compound existing pressures on the electricity grid. Information and incentives are needed to optimise the control of heat pumps for efficiency and to contain the impact on peak electrical demand.
  7. Pressure to move towards the government’s preferred solution – installing heat pumps – risks making access to affordably heated homes unfairer, and further entrenching fuel poverty.

So what should we do?

This is Cambridge Energy’s Agenda for Reform if the Government is serious about a large-scale shift to using heat pumps for heating:

  1. Provide financial support for the higher up-front costs of heat pumps that does not force customers into debt.
  2. Change energy taxes to make gas and electricity comparable in costs.
  3. Offer advice to householders, landlords and those responsible for non-domestic buildings for drawing up a plan of energy efficiency upgrades and heat pumps *in advance* – so they do not wait for a crisis point before working out how to replace their heating with a low-carbon alternative. This way, they can identify and approach competent installers in advance and where possible carry out work outside the heating season.
  4. Gather and publish evidence that heat pump installations really do deliver the thermal comfort required for different building types.
  5. Protect the poorest groups in society so that carbon savings do not come at the expense of fairness, and so decarbonisation is instead used as an opportunity to lift vulnerable households out of fuel poverty.


[1] J Palmer, N Terry (2021) Cost Optimal Domestic Electrification. London: BEIS.

[2] The Carbon Trust (2021) Heat Pump Retrofit in London. London: GLA.

[3] Parity Projects/Association for Decentralised Energy/Energy Systems Catapult/Bays (2021) Paths to Healthy Net Zero Housing in Greater Manchester. Manchester: Greater Manchester Combined Authority.

[4] BEIS (2020) Updated Energy and Emissions Projections 2019. London: BEIS. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/931323/updated-energy-and-emissions-projections-2019.pdf