Buying a heat pump is a financially irrational investment according to a new study from the not-for-profit trade body Energy and Utilities Alliance (EUA), which examined a range of decisions with modern capital investment appraisal techniques used by economists and accountants.
The analysis, for the first time, combines both the upfront costs to install a heat pump compared to a new gas boiler, with annual running costs for a heat pump with a range of efficiencies.
It concludes that heat pumps do save carbon compared to a gas boiler, but from a strictly financial perspective, they are not a good investment and should not be considered as a cash saving purchase.
The study also examines the effectiveness of the new Boiler Upgrade Scheme subsidy, concluding that it is still not sufficient to make buying a heat pump a financial rational investment.
Mike Foster, chief executive of EUA said:“Heat pumps save carbon but cost you more. It’s really that simple. All too often, heat pumps are being suggested as a way to save money. They don’t. In fact, it is financially irrational to invest in a heat pump if your motive is to save cash.”
“This study confirms how financially illiterate it is for consumers living in homes with solid walls to consider a heat pump rather than a gas boiler, with additional insulation measures making an already bad idea, even worse.”
“The Boiler Upgrade Scheme, a subsidy of £5,000 to help pay the upfront costs of a heat pump, makes the investment more palatable but it still fails the test set by modern capital investment appraisal techniques. It is merely a cash handout to those who were already considering buying a heat pump to save carbon.”
“At a time when gas prices have doubled, the study concludes that switching to a heat pump is still not an economic thing to do. And when people are rightly concerned about their energy bills, organisations selling heat pumps as a cost saving measure are misleading people. That is totally unacceptable behaviour.”
“These numbers make it crystal clear that the way to decarbonise homes currently using natural gas boilers is to switch to a net zero gas, not rip out the boiler. It is economically irrational to fit heat pumps, so converting the gas networks to hydrogen is the only sensible approach.”
A new study released by Buildings Performance Institute Europe (BPIE) shows that improving the insulation of existing residential buildings in the EU would significantly contribute to securing the bloc’s energy independence and achieving he EU target of reaching climate neutrality by 2050.
Improved insulation of EU residential buildings would result in a reduction of energy demand for heating in buildings by 777 TWh, or 44% compared to 2020: 46% in gas savings, 44% in heating oil savings and 48% in coal savings.
Recent research by the University of Exeter sets out the scale of the challenge the NHS faces if it is to achieve sustainability targets set under the government’s net zero plan by 2040, a full decade ahead of the wider commercial sector....