By Kathryn Porter, Watt-Logic

Today I have published a new report into the heat pumps market and the UK’s policies for decarbonising heating.

The UK Government has set ambitious targets for the deployment of heat pumps as the main route to decarbonising home heating. But progress is slow with the number of installations falling short. Even with increased subsidies covering most of the difference in capital cost compared with a gas boiler, most homes would need extensive improvements to their thermal efficiency and larger emitters (radiators) to achieve similar levels of warmth to that achieved with gas boilers. These improvements are both costly and disruptive. And in the best case scenario where targets are met, the resulting increase in electricity demand will stress electricity grids.

A viable alternative would be the use of hybrid systems that combine a heat pump with a conventional gas boiler. Such systems deliver significant reductions in emissions while imposing lower upfront costs and smaller behavioural changes on householders. By allowing the gas boiler to take over on the coldest days warmth is maintained and electricity demand contained. This is now the preferred solution in the Netherlands, and should be given strong consideration in the UK.

In refusing to consider hybrid heating systems as part of the solution to the decarbonisation of heating, policymakers are effectively making “the perfect the enemy of the good”. They are also forgetting that the purpose of decarbonisation is not to only reach net zero in 2050, it is to immediately reduce emissions as much as possible. Continuing to focus on full electrification when it will clearly be out of reach for many years means that emissions will remain higher for longer.

What are heat pumps?

Before looking at heat pumps, it is worth briefly describing the dominant form of heating used in the UK ie gas boilers. Conventional boilers burn gas in the combustion chamber of the boiler to generate hot jets that move through a heat exchanger usually made of copper, where heat is transferred from the gas to water which is heated to 60oC.

The heated water is pushed through the central heating system using an electric pump. The heated water flows around a closed loop inside each radiator, entering at one side and leaving at the other – as each radiator gives off heat, the water is cooler when it leaves a radiator than it is when it enters. After heated water passes through all the radiators, the now cooled water returns to the boiler to be heated again. Waste heat from the boiler is dispersed into the air as flue gas through a smokestack.

Heat pumps use electricity to provide both heating and cooling to buildings, by transferring heat from one place to another: in winter, a heat pump provides heating by extracting heat from outside the building and moving it inside, while in summer, it provides cooling by moving heat from the inside to the outside. Air source heat pumps and air conditioning units are similar in operation, and many air conditioners are also able to provide heating. The main difference is that air conditioning units tend to blow out hot or cold air, while heat pumps tend to heat water for circulation in radiators.

Heat pumps use technology similar to that found in refrigerators. They extract heat from a source, such as the surrounding air, geothermal energy stored in the ground, or nearby sources of water or waste heat from a factory. It then amplifies and transfers the heat to where it is needed. Because most of the heat is transferred rather than generated, heat pumps are far more efficient than conventional heating technologies such as boilers or electric heaters and can be cheaper to run.

The output of energy in the form of heat is normally several times greater than that required to power the heat pump, normally in the form of electricity. For example, the coefficient of performance (COP) for a typical household heat pump is around four, i.e. the energy output is four times greater than the electrical energy used to run it. This makes current models 3‐5 times more energy efficient than gas boilers. Heat pumps can be combined with other heating systems, commonly gas, in hybrid configurations.

The benefits and disadvantages of heat pumps

Heat pumps are generally more environmentally sustainable than gas boilers
The main benefit of heat pumps is that they are more environmentally sustainable than gas boilers in use since they do not involve directly burning fossil fuels. They run on electricity, and while a significant proportion of electricity is still generated through burning natural gas, increasing amounts are generated with zero carbon sources such as nuclear power and renewable sources, such as solar and wind power. Even today, the round trip emissions when considering the source of the electricity are lower for heat pumps than for gas boilers.

However, there are some questions about the manufacturing processes. Components can be imported from countries which still rely heavily on coal to generate electricity meaning more emissions are involved in their manufacture. Heat pumps have more components and require more materials than gas boilers and the supply chains for these can have problems with sustainability and other environmental and social concerns.

Unlike gas boilers, heat pumps provide a facility for cooling
A major benefit of heat pumps, and one which is frequently overlooked, is the ability of most models to provide cooling as well as heating. Although the UK cannot be considered to be a “hot” country, once temperatures rise above c 25oC during the day and 15oC during the night, things can become uncomfortable, and sleep in particular becomes harder. Householders can benefit significantly from the cooling potential of heat pumps, and this is likely to emerge as a major benefit to heat pump users. However it will likely have an adverse impact on electricity grids, creating summer demand for “heating” which is currently absent and is not always factored in to system planning, as will be discussed later.

In its 2024 Future Energy Scenarios, NG ESO acknowledges that consumers are increasingly likely to seek out domestic air conditioning in response to climate change. It recognises that this will impose additional strain on the electricity grid and says it hopes that other measures such as curtains and fans will be adopted instead. This seems like wishful thinking. Those consumers who think ahead may realise they can add cooling with their heat pump installation, either by using an air-to-air system or a hydronic system with fan coil units for cooling. Those who do not think ahead may simply decide to attempt cooling through cold water circulation and live with the possible condensation problems – after all, water cooling works extremely well at Victoria underground station in London!

Heat pump efficiency is higher than for gas boilers
Heat pumps are more efficient than gas boilers. They can produce up to four units of energy for each until of electricity although this is more likely to be 300%. This compares with efficiency rates of 80-90% for boilers up to ten years old. However, this does not take account of the efficiency of the electricity system – once the efficiency of electricity generation and transmission is taken into account, heat pump efficiencies are nearer to 210%*.

The lower round-trip efficiency matters from a whole system perspective, but is less relevant to householders. Within the household, the higher heat pump efficiency can be a benefit, meaning less energy is required for heating. This is not straightforward since the heat generated by the heat pump has a lower temperature, so it may be harder to achieve comfort levels and, in some cases, additional heating sources may be required.

Heat pumps are less effective in cold weather

The use of additional heating systems is particularly true in colder countries since heat pumps are less efficient in cold weather, particularly if temperatures are below freezing. Much is made of the use of heat pumps in Nordic countries, but it is common in these countries to have a secondary heating system, either a second heat pump or a wood burning stove. A 2019 study by the Norwegian Institute for Air Research found that there were an estimated 2.1 million domestic wood burning heating installations in the 2.4 million Norwegian households, with an additional 900,000 in the 1 million cabins and summer houses of Norway. Far more Norwegian homes have a wood burner than a heat pump.

Nordic homes are also better insulated than their British equivalents.

For effective heating with heat pumps homes may need to be upgraded

In order for the system to work effectively, it may be necessary to install larger radiators or underfloor heating, and to upgrade insulation due to the fact that heat pumps generate less heat than gas boilers. It is important that the system is well designed and that heat-loss calculations are performed correctly to ensure adequate comfort levels without incurring high bills. If an unsuitable heat pump is specified or if it is set up incorrectly, energy costs might be higher than with a gas boiler heating system.

In addition, because heat pumps provide low grade heat, it is more important for the home to be well insulated compared with homes heated with gas boilers. Retrofitting insulation can create additional cost and disruption for householders, not least because UK homes are some of the least thermally efficient in Europe. The costs of retrofitting insulation and energy saving measures could be significant. A study by Nottingham Trent University found that deep retrofits of one-bedroom bungalows cost £42,055 each and £58,369 each for three-bedroom houses. The target for the deep retrofit was to get as close as reasonably possible to the EnerPHit standard (a modification of the full Passivhaus approach) to make refurbishment and retrofit more practical. This included heating and solar PV systems as well as insulation.

Impact of ASHP noise on neighbours

Heat pumps require enough space outside the home for the condenser unit and indoors for a hot water cylinder. The outdoor unit can also be noisy due to the operation of fans. This can cause disruption to both the householder and neighbours, and there are concerns that current rules around noise disturbance are on a property by property basis and do not consider the potential impact of multiple ASHPs in close proximity, for example terraced or multi-occupancy housing. Heat pump manufacturers have also expressed concern over the possibility that tighter noise restrictions would increase costs due to the need to install more noise control measures.

Although to date the number of noise complaints relating to heat pumps has been low, location and the proximity of ASHP units to neighbouring properties has emerged as a key cause of complaints. Complaints generally centred around disturbed sleep and installers reported they were typically resolved through moving or replacing the ASHP. Current guidelines fail to take account of background noise, so a heat pump unit could be perceived to be more disruptive in areas with typically low noise levels, particularly at night.

Both the upfront and operating costs of heat pumps can be higher than for gas boilers

The upfront costs of heat pumps are significantly higher than for gas boilers – around £13,000 for an air source heat pump compared with around £3,000 for a gas boiler. The UK Government’s Boiler Upgrade Scheme provides grants of up to £7,500 for the installation of heat pumps, with a view to making the capital costs of the units broadly equivalent to the installation of a gas boiler. However, taken with the need to upgrade insulation and install larger heat emitters, for most households, the installation of a heat pump would be more expensive than a like-for-like gas boiler replacement even after the grant.

The operating costs of heat pumps also tend to be higher than for gas boilers because electricity is more expensive to buy than gas. While the most efficient heat pumps may be cheaper to run than gas boilers, most households are likely to see an increase in heating costs if switching to an air source heat pump unless they are able to access preferential heat pump tariffs.

The UK Energy Research Council (UKERC) found that expectations of high heat pump cost reductions both by the Government and some businesses operating in the sector reflect a belief in a significant increase in supply chain efficiency and improved installation practices in the UK. According to the Heat and Buildings Strategy, heat pump cost reduction will be achieved through a combination of market competition, economies of scale and new financing models. A UK Net Zero Research and Innovation Framework  aimed to “reduce costs and improve efficiency, for example, industrialised manufacture and supply chain innovation”.

The experience in the Netherlands calls into question aspects of this strategy. The UKERC study suggests that one of the drivers of success in the Netherlands was a willingness to access imported components which are cheaper than domestic equivalents. Indeed, since the UK would be building up supply chains from a lagging position, it is questionable whether this can be achieved within the desired timeframe in a way that is cost-competitive against international manufacturers. And since international markets for heat pumps are mature, it is unclear that there are further efficiency gains to be realised.

Key challenges to meeting heat pump targets

The Government is targeting 600,000 heat pump installations per year by 2028 – an eleven-fold increase on 55,000 heat pump sales in 2022. By 2035, Government wants to see up to 1.6 million heat pumps installed annually. However, according to the National Audit Office the number of heat pump installations by December 2023 was less than half of planned projections; and uncertainty around the role of hydrogen in home heating is hampering investment and effective planning.

According to the NAO, the Government is “relying on optimistic assumptions about consumer demand and manufacturer supply of heat pumps increasing substantially to achieve 600,000 installations per year by 2028”. Heat Pump Association data indicate that 55,000 heat pumps were sold in the UK in 2022, meaning the 600,000 target will require an elevenfold increase 2022 to 2028, using sales as a proxy for installations. The NAO says that a key issue behind lower-than-expected heat pump uptake is their cost to use and install.

Low levels of public awareness

The NAO also found that the Government has no overarching long-term plan to address the low levels of awareness among households about the steps necessary to decarbonise their heating systems. Decarbonising home heating will require almost every household to make a decision that will have a significant impact on their homes, but public awareness around this is low: around 30% of respondents to a 2023 Government survey had never heard of, or hardly knew anything about the need to change the way homes are heated in order to reach net zero.

High capital and operating costs

Cost is clearly a key driver behind the uptake or otherwise of heat pumps, and while there are now larger grants available and average installation costs have fallen, these reductions have been slower than the Government had hoped, and there has been no progress on reducing running costs. A survey of heat pump installers by Nesta found that 45% of survey participants believe that home owners do not progress with a heat pump installation after receiving a quotation as the costs are too high.

According to the NAO, at the end of 2023, the average cost to replace a gas boiler with a heat pump was around four times higher than replacing it with another gas boiler.

Supply chain constraints
A major barrier to meeting heat pump installation targets is a lack of capacity in the supply chain. Two thirds of heat pumps installed in the UK are manufactured abroad, compared with under half of gas boilers. The majority of heat pumps sold in the UK are imported from Asia (China, South Korea and Japan) and Europe. In a 2020 survey, carried out by Eunomia Research & Consulting Ltd on behalf of the Department for Business, Energy and Industrial Strategy, manufacturers reported being very confident that they could increase heat pump supply into the UK market, through a combination of imports and domestic manufacture, by a minimum of 25-30% year on year for the next 15 years. Such increases have been achieved before, but not consistently for many years, or decades as is now required. Also, the extent to which demand could be met from UK-based manufacturing is unclear.

The majority of heat pump components are sourced from outside the UK – currently, there is not enough heat pump manufacturing demand in the UK to support local components manufacture. European and Asian manufacturers have the volumes necessary to justify investment in automation and other efficiency technologies. Survey respondents suggested that this divergence has become so entrenched that it would be effectively impossible to establish large-scale manufacturing in the UK for specialised components as these markets are all international, and have been developing in the absence of the UK for so long, the barrier to entry would now be prohibitive.

Lack of skilled installers is hampering installations

There is no currently formal definition of who is and who isn’t recognised as a heat pump installer, and no data on the number of people currently carrying out such installations. It is agreed, however, that the sector is small. According to the Heat Pump Association, the number of people who completed a short training course to become qualified heat pump installers increased by 166% between 2022 to 2023, from just under 3,000 in 2022 to close to 8,000 in 2023. MCS reports there are 1,500 businesses with MCS accreditation currently installing heat pumps.

MCS certification is not a requirement for heat pump installation. In contrast there are around 150,000 gas boiler engineers on the Gas Safe Register (which replaced the CORGI scheme) in the UK. Since the installation of gas boilers does require certification, there is more certainty around the numbers.

The Heat Pump Association estimates that the equivalent of 33,700 full time employed heat pump installers will be needed to support the Government’s installation ambitions, however MCS expects 50,000 installers will be needed. It is clear that there is currently a lack of skilled heat pump installers, and that existing Government schemes to grow their number are likely to prove insufficient.

Impact of electrification on the GB electricity grid

NG ESO and the Climate Change Committee (“CCC”) both indicate that changes will need to be made to the way people heat and maintain warmth in their homes as they move to using heat pumps. As noted earlier, ESO expects houses to be maintained at lower temperatures than is currently the case, and in its sixth carbon budget, the CCC suggested that people would “pre-heat” their homes, by turning on central heating earlier than it’s needed, before people come home from work, in the hope that the house would be warm enough to allow the heat pump to be turned off once people get home, a time which coincides with the evening peak of electricity demand. For this to work, houses would need to be highly thermally efficient. However, since heat pumps deliver low grade heat, continuous low-temperature operation is more likely, so while it may be possible to pause active heating during peak demand periods, the concept of “pre-heating” does not really make sense.

NG ESO, in its Future Energy Scenarios 2023 report suggests that people should install large thermal storage in their homes to help manage peaks and troughs in heating and related electricity demand. Going further, UK FIRES, a research programme funded by UK Research & Innovation which is itself government funded, has indicated that people should use 60% less energy than they do at the moment and for heating to be “powered on for 60% of today’s use”. These suggestions all indicate concerns over the impact the electrification of heating will have on electricity demand, and electricity grids.

The Future Energy Scenarios published in 2024 show an overall reduction in energy demand of 28-50% and of residential energy demand of 23-64%. Some of this is due to a move from less efficient gas boilers to more efficient heat pumps, but where heat pumps are powered by intermittent renewables, overall efficiency will be lower since supply will not always match demand meaning electricity needs to be sourced from elsewhere or stored.

Once heating is electrified, not only will electricity demand be higher, it will also become more temperature sensitive, meaning that demand will increase faster and to higher levels than it does today when temperatures drop (and there could be similar increases when temperatures rise if there is an increase in domestic cooling). These effects are already observed in countries with higher levels of electric heating than Britain, such as France. Currently, when the weather turns colder, France turns from being a net exporter of electricity to a net importer, including from Britain, and experiences increases in both electricity demand and electricity prices.

NG ESO assumes that consumers will be persuaded to reduce demand in peak periods, and has had some success with the Demand Flexibility Service, however a similar and long-established scheme in France (“Tempo”) is only used by 1.6% of households (500,000 households against a target of 5 million). Although some studies have shown that up to 100% of households would be better off on Tempo than the regulated tariff, it suffers from low public awareness, and structural problems.

Concerns over the impact of electric heating on power grids have led the Dutch Government to adopt a hybrid-first policy for heating, urging households to install hybrid systems as a priority. One of the challenges with heat pumps is that they must be sized for the maximum annual heating requirement which in the Netherlands can involve ambient temperatures of -10oC. However, such low temperatures may only occur for ten days each year. Sizing a heat pump to manage this heating requirement can require a larger unit with a larger grid connection, possibly necessitating grid reinforcement, particularly if multiple households are specifying similarly large systems. A hybrid system allows smaller heat pumps to be used because the low temperature requirement can be covered by the gas boiler. Since the number of very cold days on which gas would be required is typically low, the climate impact of this choice is similarly small. Hybrid heat pumps would also be compatible with the use of green gas.

The Dutch Energy Minister, Rob Jetten said that hybrid systems allow users to switch between using gas and electricity and are therefore less burdensome for the electricity grid – hybrid systems can switch to gas at times of peak electricity grid demand if necessary to maintain security of electricity supplies. This solution is considered temporary, but is being evaluated for new buildings – the Netherlands, like the UK, has a housing shortage, and the ability to deliver the required number of low carbon homes is threatened by electricity grid constraints. The Dutch Government would like to ensure that grid constraints do not undermine the delivery of housing targets. Electric central heating boilers have already been banned as a result of congestion concerns, and the Minister also outlined plans to enforce the ban more strictly.

Benefits of hybrid heating systems

Hybrid systems, as the Dutch Government has recognised, solve a great many of the problems created by fully electric heating systems. They reduce the need to retrofit expensive home upgrades such as insulation and larger emitters, since on the coldest days the gas boiler can fire up to deliver high temperature heat.

The ability to switch between the boiler and heat pump also provides in-built insurance for the electricity grid since boilers can be used if electricity demand becomes too high, allowing consumers to maintain warmth without risking blackouts. This would be particularly beneficial for vulnerable consumers who could face health risks if they were unable to maintain adequate indoor temperatures.

While hybrid systems still involve some use of fossil fuels, even if the electricity grid is fully decarbonised, the emissions associated with heating would be greatly reduced from current levels.

In refusing to consider hybrid heating systems as part of the solution to the decarbonisation of heating, policymakers are effectively making “the perfect the enemy of the good”. They are also forgetting that the purpose of decarbonisation is not to only reach net zero in 2050, it is to immediately reduce emissions as much as possible. Continuing to focus on full electrification when it will clearly be out of reach for many years means that emissions will remain higher for longer.

A better approach would be to embrace hybrid solutions to stimulate consumer demand. Consumers would be much more likely to accept heat pumps if they came with less up front cost and upheaval, and the risk of cold weather underperformance was removed. Consumers are also more likely to accept solutions which involve a small change rather than a large change – currently installing a heat pump means a major change both to heating equipment and the way that the equipment is used (long periods of low-temperature operation versus short periods of higher temperature operation).

Higher heat pump demand as part of hybrid systems would also provide the market signals necessary for manufactures to scale up production, and for heating companies to recruit and train more installers.

It is not a perfect solution, and there will still be delivery challenges, but this approach could deliver more emissions reductions faster, meaning that overall emissions between now and 2050 would be lower than would otherwise be the case based on realistic uptake projections.

The Dutch experience illustrates what is needed to achieve higher uptake of heat pumps, but it also illustrates the challenges this brings. Policymakers in Britain should pay attention to these lessons, and adopt a more pragmatic approach to the decarbonisation of heating, rather than the current all-or-nothing approach which is unlikely to succeed.

* Round trip efficiency calculation:
- Transmission and Distribution Efficiency:
- Transmission Efficiency = 1−0.02 = 0.98
- Distribution Efficiency = 1−0.10 = 0.90
Combined Transmission and Distribution Efficiency = 0.98 × 0.90 = 0.882

- Overall Efficiency = Gas Power Station Efficiency × Transmission and
- Distribution Efficiency × Heat Pump Efficiency
= 0.60 × 0.882 × 4 = 2.1168 = 211%

ABSTRACT

The UK Government has set ambitious targets for the deployment of heat pumps as the main route to decarbonising home heating. But progress is slow with the number of installations falling short. Even with increased subsidies covering most of the difference in capital cost compared with a gas boiler, most homes would need extensive improvements to their thermal efficiency and larger emitters (radiators) to achieve similar levels of warmth to that achieved with gas boilers. These improvements are both costly and disruptive. And in the best case scenario where targets are met, the resulting increase in electricity demand will stress electricity grids. A viable alternative would be the use of hybrid systems that combine a heat pump with a conventional gas boiler. Such systems deliver significant reductions in emissions while imposing lower upfront costs and smaller behavioural changes on householders. By allowing the gas boiler to take over on the coldest days warmth is maintained and electricity demand contained. This is now the preferred solution in the Netherlands, and should be given strong consideration in the UK.

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Original article   l   KeyFacts Energy Industry Directory: Watt-Logic