How to Calculate Heat Pump Savings and Payback

Comparing fuel and electricity prices per kWh on their own is misleading. A boiler turns only part of its fuel into heat in the home, while a heat pump delivers more heat than the electricity it uses. The fair comparison is the cost of each kWh of heat delivered:

Cost per kWh of heat = Price per kWh of input energy ÷ Seasonal efficiency

For a boiler the efficiency is below 1 (for example 0.90); for a heat pump it is the seasonal performance, SCOP or a measured seasonal figure.

Identify what you would replace and its seasonal efficiency in your home:

• Gas, oil or LPG boiler — use a seasonal efficiency, not the peak figure on the box; older boilers and boilers running at high return temperatures are usually less efficient than their rating. The product label or datasheet is a starting point.
• Direct electric (resistance) heating — efficiency is about 1: each kWh of electricity gives about 1 kWh of heat.
• District heating or wood — compare the delivered-heat price your bill or supplier states.

If the existing boiler also heats hot water, the comparison should include hot water for both systems.

Heat demand is the useful heat the home needs over a year, in kWh. From bills:

Heat demand ≈ Fuel used (kWh) × Current system efficiency

Illustrative: 15,000 kWh of gas at 90% ≈ 13,500 kWh of heat. If your bill shows gas in m³, MJ or therms, convert it first with the gas to kWh converter, therms to kWh or MJ to kWh. If gas also covers cooking, subtract an estimate for it.

Without usable bills — or if you will insulate first — an installer's heat-loss calculation gives a design estimate. Heat demand varies with the weather year, so an average of several years is more reliable than one.

Use a seasonal figure for the specific model, for the climate and flow temperature closest to your installation — from the datasheet, label or installer design. Climate, the home's heat loss, emitter size and flow temperature, and any backup resistance heat all move the real seasonal figure. The COP and SCOP guide explains these ratings and how to choose the right one; for the cost calculation, test a range rather than a single value.

• Use unit rates per kWh from your own tariffs, converted to the same unit.
• Standing charges — if switching lets you close your gas connection, the gas standing charge you no longer pay is an additional saving; if you keep gas for cooking, it is not.
• Time-of-use electricity — a heat pump runs mostly when heat is needed, so use a weighted rate for those hours rather than the cheapest night rate, unless the system is designed to shift load (for example with a hot-water cylinder or buffer).
• Oil and LPG — prices per litre need converting to per kWh using the fuel's energy content; the Heat Pump Savings Calculator does this for you.

With heat demand, both efficiencies and both prices, the running costs follow directly:

Setting the two running costs equal gives a quick test. The heat pump is cheaper to run when:

Electricity price ÷ Fuel price < Seasonal efficiency ÷ Current efficiency

Both prices must be per kWh. In the example: 0.28 ÷ 0.11 = 2.55, and 3.5 ÷ 0.90 = 3.89, so the heat pump is cheaper. With SCOP 2.5: 2.5 ÷ 0.90 = 2.78 — still above 2.55, but only just, so the saving is small.

If a backup resistance heater supplies part of the year's heat — in very cold weather, during defrost or for hot water — that part runs at an efficiency of about 1. The effective seasonal efficiency is then lower than the heat pump's own rating.

Each row changes the illustrative base case (15,000 kWh heat, gas €0.11/kWh at 90%, SCOP 3.5, electricity €0.28/kWh) as described. None describes a real country, tariff or product.

If your current system needs replacing anyway, the relevant cost is the extra cost of the heat pump over a like-for-like replacement, after any grant. If it does not, the full installed cost counts. Include any extra work the heat pump needs — larger radiators, a hot-water cylinder, electrical upgrades.

Any difference in annual maintenance between the two systems belongs in the saving: Annual net saving = Running-cost saving − Extra maintenance cost (which may be negative if the heat pump costs less to maintain). Ask installers for their service requirements; this guide assumes none in the examples.

Payback divides a fixed cost by a saving that is the difference between two larger numbers. Small changes in either running cost therefore cause large changes in the saving, and larger changes in payback. With the same €4,500 extra cost:

Grant schemes, tax credits and eligibility rules differ by country and region and change frequently, so this guide lists no amounts. Check the official programme page for your area, and enter only support you are actually eligible for.

These situations commonly weaken the result — check them with your own inputs:

• High flow temperatures — radiators that need very hot water lower seasonal efficiency. Larger emitters or better insulation can allow lower temperatures; see the DIY home energy audit guide.
• Electricity expensive relative to fuel — if your price ratio is close to the break-even ratio, savings are small or negative.
• Cold climate with unsuitable equipment — check the model's capacity and performance at your design outdoor temperature, and how much backup heat the design assumes.
• Low heat demand — the saving scales with heat demand while installation cost does not.
• Short ownership period — if you expect to move before payback, the financial case weakens.

The Heat Pump Savings Calculator applies the formulas above: enter your heat demand or fuel use, current fuel, efficiency and price, electricity price, seasonal efficiency and net installation cost. It returns both running costs, the annual saving, the break-even seasonal efficiency and electricity price, and simple payback. Its defaults are placeholders. The methodology page documents the formulas and sources, and the Heat Pumps hub collects the related tools and guides.