HeatPumpHeat Pump Running Costs — What You'll Actually Pay Per Year
The honest answer everyone avoids: at the standard electricity rate, a heat pump costs about the same to run as a gas boiler. But on the right tariff, it can cost less than half. Here's the full picture with real numbers.
How We Calculate Running Costs
A typical UK 3-bed home needs around 12,000 kWh of heat per year (space heating plus hot water). The cost depends on two things:
- COP (Coefficient of Performance): How efficiently the heat pump converts electricity into heat. We use a realistic seasonal COP of 3.2 for air source heat pumps — this accounts for colder winter months when efficiency drops.
- Electricity price: What you pay per kWh. This varies enormously depending on your tariff.
Formula: Annual cost = (Heat demand / COP) x Electricity price per kWh
Example: (12,000 / 3.2) x £0.245 = 3,750 kWh x £0.245 = £918/yr
Running Cost by Electricity Tariff
Your electricity tariff makes a massive difference. Here's what the same 12,000 kWh home costs to heat on each major tariff:
| Tariff | Rate | Electricity Used | Annual Cost | vs Gas |
|---|---|---|---|---|
| Standard variable | 24.5p/kWh | 3,750 kWh | £918/yr | +£34 more |
| Octopus Agile (avg) | ~18p/kWh | 3,750 kWh | £675/yr | -£209 less |
| Economy 7 (off-peak) | ~10p/kWh | 3,750 kWh | £375/yr | -£509 less |
| Octopus Cosy (off-peak) | 7.5p/kWh | 3,750 kWh | £281/yr | -£603 less |
Gas comparison: 12,000 kWh / 0.9 (boiler efficiency) x £0.065/kWh = £884/yr. Gas price based on Ofgem Q1 2026 price cap of 6.5p/kWh.
The Honest Gas Comparison
Let's be straight about this, because many heat pump sites gloss over the reality:
At the standard electricity rate, a heat pump is slightly MORE expensive to run than gas.
£918/yr (heat pump at 24.5p/kWh) vs £884/yr (gas at 6.5p/kWh with 90% efficient boiler). The difference is only £34/yr — but it's not the "massive saving" some installers promise.
However, the picture changes dramatically with the right tariff:
- Economy 7 off-peak (~10p/kWh): Heat pump costs £375/yr — saving £509/yr vs gas. You need a hot water cylinder to store heat generated overnight.
- Octopus Cosy (7.5p/kWh off-peak): Heat pump costs £281/yr — saving £603/yr vs gas. The tariff has two off-peak windows (overnight and afternoon) designed specifically for heat pumps.
- Octopus Agile (~18p average): Heat pump costs £675/yr — saving £209/yr vs gas. Best if you have a smart controller that shifts heating to cheaper half-hour slots.
The bottom line
A heat pump only saves money on running costs if you use an off-peak or time-of-use tariff. On the standard rate, it's roughly break-even with gas. The real financial case for heat pumps comes from combining the BUS grant, an off-peak tariff, and the 20+ year lifespan (vs 12-15 years for a gas boiler).
How to Minimise Your Running Costs
1. Switch to a Heat Pump Tariff
This is the single biggest lever. Octopus Cosy, Octopus Agile, and Economy 7 all offer significantly cheaper off-peak electricity. You need a smart meter (SMETS2) for most of these tariffs. If your current supplier doesn't offer a heat pump tariff, switch.
2. Use a Hot Water Cylinder
A well-insulated 200-250 litre cylinder lets you heat water during cheap off-peak periods and use it throughout the day. This is essential for Economy 7 and Cosy tariffs. Most heat pump installations include a cylinder — if yours doesn't, ask your installer about adding one.
3. Insulate First
A well-insulated home needs less heat, which means the heat pump uses less electricity. Reducing your heat demand from 12,000 kWh to 9,000 kWh saves roughly £230/yr at standard rate, or £70/yr on Cosy. See our insulation first guide.
4. Set the Right Flow Temperature
Heat pumps are most efficient at low flow temperatures (35-45°C). Many installers set them too high initially. Dropping the flow temperature from 50°C to 40°C can improve COP from 2.8 to 3.5 — saving around £100-£150/yr.
5. Add Solar Panels
Solar PV generates free daytime electricity. A typical 4kW system produces 3,400 kWh/yr — enough to cover most of your heat pump's electricity during spring and summer. Combined with a battery, solar can reduce running costs by 30-50%. See our heat pump with solar guide.
Running Costs vs Other Fuels
Gas isn't the only comparison. Here's how a heat pump stacks up against every common fuel type (same 12,000 kWh heat demand):
| Fuel | Efficiency | Price/kWh | Annual Cost |
|---|---|---|---|
| Heat pump (Cosy tariff) | COP 3.2 | 7.5p | £281 |
| Heat pump (Economy 7) | COP 3.2 | 10p | £375 |
| Mains gas | 90% | 6.5p | £884 |
| Heat pump (standard rate) | COP 3.2 | 24.5p | £918 |
| LPG | 85% | 8.5p | £1,200 |
| Oil | 85% | 7.5p | £1,059 |
| Electric storage heaters | 100% | 24.5p | £2,940 |
The standout insight: heat pumps are a no-brainer for homes currently on oil, LPG, or electric storage heaters. For gas homes, the running cost saving depends entirely on your electricity tariff. Read our heat pump vs gas boiler comparison for the full picture, or heat pump vs oil if you're on oil.
Related Guides
Installation Costs
Full installation cost breakdown for ASHP and GSHP.
BUS Grant Guide
Get £7,500 towards your heat pump installation.
Heat Pump vs Gas Boiler
Full head-to-head comparison including total cost of ownership.
Heat Pump with Solar
How solar panels can slash your heat pump running costs.
Frequently Asked Questions
Are heat pumps cheaper to run than gas boilers?
It depends on your electricity tariff. At the standard rate of 24.5p/kWh, a heat pump costs roughly the same as gas (about £918/yr vs £884/yr). On off-peak tariffs like Economy 7 or Octopus Cosy, heat pumps are significantly cheaper — as low as £281/yr on Cosy versus £884/yr for gas.
What is COP and why does it matter?
COP (Coefficient of Performance) measures how efficiently a heat pump converts electricity into heat. A COP of 3.2 means for every 1kWh of electricity used, the heat pump produces 3.2kWh of heat. Higher COP = lower running costs. Real-world seasonal COP (SCOP) typically ranges from 2.8 to 3.5 for air source heat pumps.
What is the best electricity tariff for a heat pump?
Octopus Cosy is currently the best tariff for heat pumps, offering 7.5p/kWh during off-peak periods (overnight and afternoon). Economy 7 is also good at around 10p/kWh off-peak. Both require a compatible smart meter and a hot water cylinder to store heat generated during cheap periods.
How much electricity does a heat pump use per year?
A typical 3-bed home needs around 12,000kWh of heat per year. With a COP of 3.2, a heat pump would use approximately 3,750kWh of electricity. This is roughly equivalent to running a large fridge-freezer, washing machine, and tumble dryer combined — but it provides all your heating and hot water.
Will a heat pump increase my electricity bill?
Yes, your electricity bill will increase by around £700-£900/yr at standard rate. However, your gas bill drops to zero. For homes currently spending £800-£1,200/yr on gas, the net effect is roughly neutral at standard rate, and a significant saving on off-peak tariffs.