Last updated: 2026-07-02

Why Heat Pump Savings Depend on More Than the Sticker Price

A heat pump uses electricity, which usually costs more per kWh than gas — yet it can still be much cheaper to run. The reason is that it moves heat rather than making it, so one unit of electricity delivers several units of heat. Whether it saves money in a given home comes down to three numbers: the coefficient of performance (COP), the efficiency of the system being replaced, and the price gap between electricity and fuel. This calculator puts those together into an annual running cost for each system, the yearly saving, and the change in CO₂.

How It Works

The building needs a fixed amount of useful heat each year, $Q_h$. Each system uses a different amount of purchased energy to deliver it. For the heat pump, the electricity consumed is the heat demand divided by the COP; for the old system, the fuel consumed is the heat demand divided by its efficiency.

where $p_e$ is the electricity price per kWh, $p_g$ is the fuel price per kWh, and $\eta_o$ is the old system efficiency as a fraction. The CO₂ change compares the emissions of the fuel avoided against the emissions of the extra electricity drawn:

with $f_g$ and $f_e$ the fuel and electricity emission factors in kg CO₂ per kWh.

Worked Example

Take an average home needing 12,000 kWh of heat a year, replacing a 90% condensing gas boiler with an air-source heat pump at a seasonal COP of 3.5. Electricity costs $0.15/kWh and gas $0.06/kWh.

Heat pump electricity: $12{,}000 \div 3.5 = 3{,}429$ kWh, costing 3{,}429 \times \0.15 = $514.29$ per year.

Old boiler fuel: $12{,}000 \div 0.90 = 13{,}333$ kWh, costing 13{,}333 \times \0.06 = $800.00$ per year.

Annual saving: \800.00 - $514.29 = $285.71$.

For CO₂, with the grid at 0.40 kg/kWh and gas at 0.20 kg/kWh: the boiler emits $13{,}333 \times 0.20 = 2{,}667$ kg, the heat pump $3{,}429 \times 0.40 = 1{,}371$ kg, a reduction of about 1,296 kg CO₂ a year.

The Running Cost per kWh of Heat

The clearest way to compare the two systems is the cost to deliver one kWh of heat: electricity price divided by COP for the heat pump, fuel price divided by efficiency for the furnace.

The heat pump wins whenever its cost per kWh of heat falls below the furnace's. That happens when the electricity-to-fuel price ratio is smaller than the COP-to-efficiency ratio.

When Heat Pumps Win, and When They Don't

Heat pumps deliver the biggest saving where electricity is cheap relative to gas or oil, where the seasonal COP stays high, and where the old system is inefficient. High seasonal COP favours mild climates, well-sized units, and low flow temperatures from large radiators or underfloor heating. The advantage narrows against very cheap piped gas, in severe cold that pulls the seasonal COP down, or when the system being replaced is an already-efficient condensing boiler. Improving insulation helps here twice over: it cuts total heat demand and lets the heat pump run at a lower, more efficient flow temperature.

Typical Values