Globally, a report to the International Energy Agency (IEA) notes that High gas prices have made heat pumps much more competitive against conventional gas boilers in terms of their running costs.
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Heat pumps already had lower running costs than gas boilers in many countries before the global energy crisis and high gas prices have increased this advantage further, as the chart below shows.
The IEA emphasises that for low-income households, savings can be 2-6% of their household income, meaning heat pumps “can meaningfully address energy poverty”. These lower operating costs mean that heat pumps often already compete with gas boilers on an overall cost of ownership basis, despite higher installation costs.
Equipment and installation cost of the cheapest model of main residential heating technologies in selected countries, 2022. The yellow dots indicate the impact of subsidies on costs. Image credit: IEA
The ‘levelised cost’ of heating and cooling – including equipment and installation, as well as operating and maintenance costs – demonstrates that air-to-air heat pumps are already cheaper than gas alternatives in several leading heating markets. Some, such as the UK and Canada, still need subsidies to make heat pumps cost-competitive.
Heat pumps are a more attractive prospect than gas boilers for many reasons, the IEA says. Not only are they three-to-five times more energy efficient, they are often also able to serve as air conditioners for the 2.6 billion people living in regions requiring both heating and cooling by 2050.
In contrast, the IEA is dismissive of hydrogen as a low-carbon alternative to gas boilers. The report says it will have a “negligible role” in the space and water heating fuel mix of the APS by 2030. It states:
“A key reason is that when accounting for the energy losses associated with hydrogen conversion, transport and use, hydrogen technologies for use in buildings are much less efficient than heat pumps and other available options.”
Despite the advantages of heat pumps, the report acknowledges the barriers posed by their high up-front costs. In a small number of countries air-to-air heat pumps can already be cheaper to install than gas boilers, but for the most part the IEA says, “subsidies remain key to increase the competitiveness of air-to-water and ground-source units.”
Overall, the APS requires a “huge increase” in spending on equipment and installation by building owners – a tripling of investment by 2030 to USD350-billion. This is USD160-billion more than the costs of installing conventional heating systems such as gas boilers, the IEA says. However, it notes that much of this incremental investment is already being covered by government incentives. Moreover, the additional costs will be paid back by fuel savings:
“[I]ncremental costs [of investing in a switch to heat pumps] are outweighed by the economy-wide savings on fuel, especially should the global energy crisis continue.”
Other benefits
In the APS, employment in the heat pump industry roughly triples, reaching 1.3 million workers in 2030. However, the report warns of the need for training programmes, partly covered by public funding, to ensure enough workers are available. It also notes that many relevant skills are interchangeable with the fossil fuel heating industry, meaning people could be retrained.
Finally, the APS not only drives down greenhouse gas emissions but also cuts major air pollutants that can be harmful to peoples’ health. Overall, the IEA concludes that this pathway would yield a 15-40% reduction in such emissions and would also cut other hazards associated with fuel combustion such as carbon monoxide leaks, explosions and fire risk.
