Installed heat pump costs to fall by 20% by 2030, says UK research institute

The UK Energy Research Center says that the total installed cost of air-source heat pumps could fall by 20% by 2030. Non-equipment costs may decline by 30%, while equipment costs alone could drop by 17%.

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Researchers from Imperial College London and the University of Edinburgh have compiled a review of the total installed costs of residential heat pumps.

 

The researchers only focused on total installed costs and did not analyze data related to lifetime or running costs, nor to wider energy system costs or benefits. They collected over 550 individual data points across three main categories of cost metrics: single-year cost, experience rate (cost trends), and percentage cost reduction. Although the cost trends analysis obtained a significant amount of data from outside the UK, the single-year cost and percentage cost reduction data mainly concentrate on the United Kingdom.

The results for percentage cost reduction data reveal median average reduction values of 20% for total installed costs by 2030, 31% for non-equipment costs, and 17% for equipment costs.

Single-year installed cost results show that total installed costs have remained relatively stable over time, with very modest declines on average between 2010 and 2030 for both air-source and ground-source heat pumps. The study puts the value for air-source heat pumps at 5%, but it doesn’t mention the exact value for ground-source heat pumps. The median value cost reduction from the early 2020s to the early 2030s is estimated to be around 24%, from €11,000 ($12,000) to €8,400 for air-source heat pumps, and from €16,700 to €15,700 for ground-source heat pumps.

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According to its Heat and Buildings Strategy, the UK government aims to reduce the costs of installing a heat pump by at least 25% to 50% by 2025. It is also targeting cost parity between heat pumps and gas boilers by 2030 for overall buying and running costs.

The authors of the report estimate that achieving cost parity in air-source heat pump installed costs would require a 70% reduction, assuming a current cost of GBP 3,000 ($3,730) for gas boilers and GBP 10,000 for air-source heat pumps.

“A reduction in total installed costs of 70% by 2030 is over three times greater than the median average percentage cost reduction forecast in our review of 20%, and almost double the highest single figure of 38%,” the researchers said.

However, they noted that expanding heat pump grants and loans like the Boiler Upgrade Scheme to cover most UK installations can significantly reduce this gap, bringing down the required percentage cost reduction to achieve cost parity to around 40%.

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