Will Eco Heating Save You Money?

From boilers to heat pumps, sustainability expert Nigel Griffiths takes an in-depth look at how the main players compare on running costs, installation and green credentials
by Nigel Griffiths
24th December 2020

When it comes to choosing your heating system, there are a range of factors at play. One of the biggest is cost: both in terms of installation and what you’ll spend on running the system.

Eco technologies such as heat pumps and biomass boilers are touted as money-saving options that will free you from the shackles of rising fossil fuel prices and boost your environmental credentials to boot.

But is that really the case? The answer to this question depends on a number of factors, including:

  • Whether you have mains gas available.
  • The relative costs of different heating fuels.
  •  What sort of property you live in.
  •  Your priorities in terms of sustainability.
  •  The capital costs of installing different systems.
  •  Whether you can access any subsidies.

I’ll go into these questions in more depth as we discuss the various home heating options. But in general, and perhaps unsurprisingly, there seems to be an inverse relationship between heating technologies’ eco credentials and their costs (with the possible exception of systems that run on free wood and, perhaps, solar water heating).

At one end of the scale you have oil and gas, which are cheap to install and run; but high in carbon emissions. In the middle you have biomass boilers, which are low carbon, expensive to install and slightly higher cost to run. Then there’s air source heat pumps (a bit more to install and more expensive still to run), and finally ground source heat pumps (very expensive to install but only slightly higher running costs).

Here’s a quick comparison, with red being the highest cost/environmental impact, orange the middle and green the lowest: These comparisons are based on the pure costs and impacts, before accounting for subsidies such as the Green Homes Grant or the Renewable Heat Incentive (RHI) – both of which considerably reshape the equation.

Learn more: 11 Affordable Homes Built for Under £200,000

RHI tariffs are time-limited, so they are often viewed as a way of offsetting capital costs. So you could use this information to adjust the ‘installation costs & impact’ column in the table. This might put air source and biomass in the ‘green’ category, for instance, and potentially push ground source into the orange band.

Person installing boiler

Cheap to install and maintain, and cost-effective in use, the humble boiler is still the most widely-used heat source in the UK and an essential comparison point for eco heating

I’ve also used current fuel/power prices and grid carbon intensities at the time of going to press. Why does this matter? Well, heat pumps, for example, are powered off the electrical grid, which is rapidly decarbonising.

Why you must go fabric first

Regular readers will be familiar with this line. To recap, if you’re creating a new home to modern Building Regulations, then it will have a very low space heating demand. This is important, as it means the type of heating system you choose won’t make a huge different to overall running costs.

That’s especially true if you plan to go beyond the regs and work towards Passivhaus standards. It also means that the price and environmental impact of the installation itself become a larger component of the system’s overall lifetime costs. So it’s worth thinking about. The same logic applies to existing houses, albeit to a lesser extent.

Eco Heat Subsidies & Running Costs

This article is largely written without taking subsidies into account, as they distort the underlying figures. Moreover, while they have a significant impact on the calculations, they can be changed or even removed at short notice. So it’s important to know how different technologies stack up without them.

The government has announced that the Renewable Heat Incentive (RHI) will be extended until March 2022, and there may be a follow-up scheme providing further support after this time. The RHI provides a payment per kWh (kilowatt-hour) of heat generated by a qualifying installation. The payment is constant from the point at which you are accepted into the scheme and payable quarterly in arrears for seven years.

You must have an MCS certificate on the installation and an EPC on your property, and systems must be on the eligibility list. Any recommendations in the EPC for loft or cavity wall insulation need to have been addressed and there are other eligibility restrictions – for example, commercial developers are excluded but self builders are generally allowed.

For most domestic RHI installations, the amount of heat generated is not measured in any way but deemed, based on the estimated annual space heating needs stated on your EPC (and water heating, too, if your installation provides hot water).

So, the amount of heat you actually use will make no difference
to the payments you receive – but as fuel costs money, this still encourages us to be efficient in its use. These are the tariffs for new qualifying installations as of November 2020:

Technology RHI tariff (pence per kilowatt hour)
Ground source heat pumps 21.16 p/kWh
Air source heat pump 10.85 p/kWh
Solar thermal 21.36 p/kWh
Biomass 6.97 p/kWh

Begin by insulating wherever possible, whilst preserving architectural heritage and ensuring an adequate supply of fresh air. That way, you’ll have a lower heat demand to meet, whatever type of heating system you choose. Do bear in mind cost and embodied energy when making improvements, as certain changes may not be justified.

A classic example for renovators is window replacement. Many of us have encountered double glazing salespeople who claim your new windows will pay for themselves within a couple of years. Porkies! That isn’t to say you shouldn’t do it, but in some cases you may not recoup your investment during the lifetime of the window. Lower impact and lower cost measures are usually to be preferred.

Eco Heating Costs

But back to heating. If your home is off the mains gas grid, your choices resolve to a heat pump or some form of biomass boiler. You could consider LPG or oil, of course, but they don’t fall into the sustainable category. So let’s look at how eco options compare to standard gas boilers.

Biomass boilers

At present there’s only one form of space heating that’s definitely going to be cheaper to run than mains gas. That’s a woodburning boiler or stove where you get your fuel for free (or thereabouts). Of course, there’s no such thing as a free lunch as it takes time and energy to collect and process firewood. But it keeps you fit, plus while you’re outside doing that, you probably haven’t got the heating on.

Limited for indoor space? Grant UK’s A+ rated Vecta external biomass boiler – shown here with a side pellet store – features an exterior-grade powder coated finish and built-in frost protection

In reality, most of us will buy in our biomass fuel. As long as the wood is genuine waste and/or being sustainably replanted, biomass is at present the only really low carbon, cost-effective source of space heating. In domestic situations, the most common fuel for biomass boilers is now wood pellets. If you buy them in bulk, these cost approximately 5p per kWh, which compares well with mains gas. In practice, the running costs are usually slightly higher than a gas boiler. Pellet appliances are also more expensive to install and cost slightly more to maintain.

Log boilers open up the possibility of using that free fuel, but they cost even more to install, as they are batch-fed and therefore require an accumulator. This is a heat store that allows you to draw off the heat over 24 or 48 hours without relighting the boiler. In a smaller and well-insulated home, a woodburning stove with a back boiler could be used instead. This is much cheaper to install and run than a pellet boiler, though it can’t be automated in the same way.  It’s worth bearing in mind that air quality regulations and practical imitations mean that many locations aren’t suitable for running biomass boilers.

Heat pumps

There are two main types of heat pump: air source and ground source (as opportunities for using water source are rare). Technically, these systems are not a renewable form of heating, as they use electricity to move heat from one place to another. However, they can be very efficient in the right circumstances.

The carbon intensity of electricity supply has come down markedly in recent years. But how much carbon they save depends on the performance of the pump and on the relative carbon intensities of gas and electricity. Put simply, heat pumps now cause less carbon emissions per kWh than a gas boiler, but more than a biomass boiler that’s using sustainable fuel.

Air source heat pumps (ASHPs) have a couple of disadvantages in terms of performance. They are less efficient when providing domestic hot water (ie what we use for bathing etc). What’s more, they are less efficient in winter, when the temperature of the source (the air) is at its lowest and household heating demand is at its highest. Independent tests show a seasonal performance factor (SPF) of around 2.5 is typical for an ASHP – so don’t believe the sales hype about factors of 4+ all year round.

The SPF is important. If electricity costs three times the price of mains gas per kWh, and a heat pump provides three units of heat for each unit of electrical input (and SPF of 3), then the pump would cost the same to run as mains gas. The gap between prices is currently widening, however: on some tariffs, electricity is four times the price of gas per kWh. On that basis, if the system had an SPF of 2.5, then switching from mains gas to an ASHP would increase your heating costs by over 30%.

Worcester’s Greenstore LECP ground source heat pump unit is a similar size to a typical fridge-freezer

An air source heat pump costs significantly more than a gas boiler to purchase and install – perhaps double. If an ASHP costs £5,000 more to install than a conventional boiler, over the course of 10 years that would equate to an extra £500 per annum.

This could double the price of heating a well-insulated home. So it’s not just running costs that are important here but capital costs, too, so you can gauge your spend over the lifetime of the system.

Ground source heat pumps (GSHPs) are more efficient as they do not suffer from quite the same seasonality issues as air source. That said, the ground temperature is likely to be much lower after the heat pump has been run hard for a few months, so performance will drop slightly over a heating season. Even so, the SPF will be higher, so the running costs will be less.

However, a GSHP costs much more to install than an ASHP (a typical system will be £12,000-£20,000). So, you need to think about the capital cost, and the period over which you would spread this when doing your calculations. It may be useful to bear in mind that the most expensive part of the installation of the GSHP is the ground loop. In theory, this should need no maintenance or replacement over a long period.

Hybrid systems

There is a middle ground I should mention here – hybrid boilers – which can intelligently switch between gas and an air source heat pump. The tech can make best use of an ASHP when the outside air temperature is sufficient, but revert to gas when the air temperature drops below a set level. This combination can produce a lower running cost than mains gas, but hybrid boilers are significantly more expensive to purchase and to maintain. So, over the life of the system you are unlikely to save money.

This installation is a hybrid system, combining a Daikin ASHP with a Calor LPG combi boiler
Smart controls select between the boiler or heat pump depending on which will be most efficient

If you’re off the gas grid, it’s useful to know that hybrid boilers can be combined with oil, LPG or BioLPG. Using the latter would reduce your environmental impact further, but push up running costs even more.

Ironically, one of the most polluting heating fuels – oil – is now also one of the cheapest, in part thanks to a fall in demand due to Covid. I would never advise anyone to switch to oil, but it can be difficult to make the argument to go for an eco-friendly option when it is clear that this choice will increase both the installation and running costs.

Don’t forget solar water heating!

The sun shines on all of us, at least some of the time, which means solar thermal panels are free to run (with systems usually providing domestic hot water only). Unfortunately, solar water heating still costs a significant amount of money to install. If a system costs £3,000, then over 20 years that equates to £150 per annum.

If your hot water costs are £300 per annum and the solar setup provides 50% of your hot water, then in very crude terms it would pay for itself over that period.

Solar can also be used as one of multiple inputs to a heat store, thereby providing a contribution to space heating. But this type of system is more expensive to install, plus it’s not eligible for the RHI. It’s worth adding that combining solar thermal with a biomass boiler or stove with a back burner can provide you with year-round low carbon, low cost hot water and/or space heating.

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