Why your heat pump isn’t saving you money – and what could change that

Millions of European households are switching to heat pumps in the hope of cutting their energy bills, particularly after the war on Iran sent oil and gas prices skyrocketing.

However, new research suggests that the heat pump itself is only part of the equation.

The UK’s Energy Saving Trust (EST) analysed more than 1.1 million combinations of heat pumps, solar panels, batteries and tariffs to understand which delivered the lowest energy costs.

The group found that households could cut annual energy bills by around £800 (€920) by combining a heat pump with solar panels, battery storage and the right electricity tariffs. In fact, the best-performing setups saved more than £1,000 (€1,150) a year.

Why a heat pump alone isn’t always enough

More than 28 million heat pumpshave already been installed across the continent. But simply making the switch doesn’t guarantee lower bills.

One of the report’s clearest findings is that electricity tariffs can have a big impact on whether a heat pump saves you money.

Researchers found that switching from gas to a heat pump while staying on a standard tariff often delivered little or no savings. But moving to a heat pump-specific tariff or a dynamic tariff, where electricity prices change throughout the day, could cut heating costs by up to £330 (€380) a year.

They also found that, when green grants and the avoided cost of replacing old gas boilers are taken into account, a heat pump could pay for itself within two to four years.

Beyond household choices alone, better policy is making costs more competitive too.

The European Heat Pump Association credits recent growth in heat pump uptake to government measures that have reduced upfront costs and electricity prices.

For example, in the Netherlands, where taxes and energy prices have made electricity competitive with gas, you can now cut heating costs by up to 80 per cent by switching from inefficient gas boilers to heat pumps, according to the European Commission.

Batteries and solar panels can net bigger savings

The research also examined how solar panels and battery storage can work alongside heat pumps to reduce household energy bills further.

Solar panels allow households to generate some of their own electricity – and, in turn, reduce the amount they need to buy from the grid.

That electricity goes even further when you install batteries.

Battery storage allows you to charge when electricity is cheaper and use that stored power when prices are higher, the researchers say. This prevents solar power, which is produced during the day when energy consumption is typically low, from being wasted.

The biggest savings come when you combine solar panels, batteries and the appropriate tariff. Homes with all three typically cut annual energy bills by around £800 (€920) – and the best-performing setups saved more than £1,000 (€1,150) a year.

In those scenarios, heating costs fell by almost 80 per cent.

Lower upfront costs could help more households switch

While a heat pump, solar panels and batteries may deliver savings, the Energy Saving Trust says the cost of installing these systems remains a barrier for many.

The EST argues that grants, low-interest loans and other financial support could help more households access these energy upgrades by reducing the upfront cost.

“People need clearer advice, better tools to compare tariffs and more support to access these technologies so they can make confident, informed decisions on what is right for their home,” says Stew Horne, EST’s group head of sector intelligence and external affairs.