How much can you save on your energy costs with a heat pump?

There are many reasons to choose a heat pump. That’s why Daikin has created the whitepaper Drivers to Heat Pump Adoption by European Households, offering fact-based insights to help consumers make an informed decision. It explores key factors such as energy cost savings, government incentives, environmental impact, policy developments, and how heat pumps integrate with renewable energy solutions to future-proof homes.

In this article, we’ll focus on how a heat pump can help reduce your energy costs through improved efficiency and lower reliance on fossil fuels.

How a heat pump works

The fundamental difference between a heat pump and a gas boiler lies in how each system produces heat. A gas boiler burns fuel, a process that, even in the most modern condensing boilers, wastes a proportion of the energy consumed.

A heat pump does not generate heat at all. Instead, it moves heat from the outside air or the ground into your home using a small amount of electricity. This is the same principle at work in a refrigerator, operating in reverse.

There are two main types of heat pump available to homeowners. Both operate on the same principle but draw heat from different sources: air source heat pumps and ground source heat pumps.

Find out more here.

Why efficiency matters: it costs you less

A modern air source heat pump typically delivers three to four units of heat for every unit of electricity it consumes. This ratio is known as the Seasonal Coefficient of Performance (SCOP), and it is what makes heat pumps so much more energy efficient than conventional heating systems. A gas boiler operating at 90% efficiency converts just under one unit of heat for every unit of gas burned.

Even the best gas boiler cannot match a heat pump's thermodynamic advantage.

How heat pumps reduce your energy bill

Your electricity consumption increases when you remove a gas boiler and replace it with a heat pump, but the reduction in your gas bill more than offsets this in the vast majority of cases, and that is exactly what the data shows.

To understand why, consider the numbers. Using standard industry assumptions, for every 10,000 kWh of space heating a home requires, a gas boiler operating at 90% efficiency needs approximately 11,111 kWh of gas. A heat pump performing the same job at a SCOP of around 4.2 needs only approximately 2,395 kWh of electricity. That is roughly an 80% reduction in the raw energy input required, and it is the core reason why, even though electricity currently costs more per kWh than gas, the overall heating bill is lower with a heat pump.

What about cold weather performance?

A concern that often comes up is whether heat pumps perform reliably in winter. Modern air source systems are engineered to operate efficiently at very low outdoor temperatures. Daikin's range, for instance, is designed to deliver effective heating down to -25°C. In the European climate, where temperatures rarely approach such extremes even in the coldest winters, this means cold snaps do not undermine the savings case. Output and efficiency do reduce at lower temperatures, but today's systems are built to manage this gracefully.

Projected savings over 10 years

One of the more detailed analyses of heat pump operating costs comes from the whitepaper Drivers to Heat Pump Adoption by European Households. It compares the projected running costs of a heat pump and a gas boiler over a 10-year period.

The comparison is based on a standardised scenario: a home with an annual space-heating demand of 10,000 kWh. This is broadly equivalent to a new-build home of around 200 m² or a mid-sized renovation project of up to 120 m² with a lower energy performance rating (around EPC class E). The model assumes underfloor heating for the heat pump system and radiators for the gas boiler.

Under these assumptions, the model shows that a heat pump delivers lower running costs than a gas boiler throughout the entire 10-year period, with savings increasing over time.

It is important to note that these results are based on a set of assumptions about future energy prices and policy developments.

Year-by-year savings: key findings

• Approximate cumulative running-cost savings: Around €2,600 over 10 years when comparing a heat pump with a gas boiler.
• Typical annual running-cost savings: Approximately €240-€314 per year, increasing over time in the modelled scenario.
• What is being compared: These figures compare annual heating running costs (energy costs only) for a heat pump and a gas boiler. Purchase, installation, maintenance and financing costs are not included.

Key modelling assumptions: Based on EU27 average energy prices (Eurostat), a 10,000 kWh/year heating demand, and projected impacts of ETS2 and carbon taxation.

These figures are based on a standardised modelling scenario rather than a prediction of actual household costs. Actual savings will vary depending on factors such as your home's energy performance, local energy prices, available incentives, climate, system design and installation quality.

For the full methodology, modelling assumptions and detailed year-by-year projections, please refer to the downloadable whitepaper.

Why do savings increase over time?

Although forecasted prices after 2032 are beyond the scope of this project, it is worth noting how after 2035 the effect of ETS and Carbon Taxation will play an even greater role in rendering fossil fuels more expensive for European households.

A heat pump is not only cheaper to run today; it is also designed around the energy market Europe is moving towards. As electricity increasingly comes from renewable sources and fossil fuels face additional carbon costs, the long-term economics of heat pumps become even more compelling.

Factors that affect how much you save

Every household is different and the following variables can have a significant influence on your actual energy savings:

• Your existing heating system:
  The older and less efficient your current boiler, the greater your starting savings will be. An ageing, non-condensing gas boiler is being phased out across Europe, and replacing one with a heat pump delivers a larger step-change in efficiency than upgrading to a newer condensing model first.
  
• House size and layout:
  The size and layout of your home directly affect how much you could save. Larger homes benefit most from a heat pump's efficiency, particularly where heat demand is spread evenly across open-plan spaces. Homes with many small or poorly connected rooms can experience uneven heating, making the system work harder. Ceiling height, number of floors, and overall heat distribution all play a role, as does correct system sizing. An undersized heat pump will struggle to meet demand, while an oversized one creates its own inefficiencies and unnecessary running costs.
  
• Your home's insulation:
  The better a home's insulation, the lower the heat loss, and therefore the less hard the system needs to work. Good loft insulation, cavity wall insulation, and double glazing all contribute to higher efficiency and lower running costs. If your home currently has poor insulation, improving it before or alongside heat pump installation is likely to be the best financial decision you can make.
  
• Your heat emitters:
  If your home has radiators sized for a high temperature gas boiler, they may need to be upgraded or supplemented to allow the heat pump to run at its most efficient.
  
• Local energy prices:
  Gas and electricity prices differ significantly across and within countries. The ratio between gas and electricity prices in your specific market determines your actual saving. In markets where this ratio is more favourable, for example, where electricity is relatively cheap or gas is particularly expensive, savings can exceed the EU average.

Do heat pumps help with standing charges?

Standing charges are the fixed daily fees your energy supplier charges for maintaining your connection to the gas and electricity networks, regardless of how much energy you actually use.

If you switch to a heat pump and decommission your gas supply entirely, you eliminate your gas standing charge altogether. This benefit is often overlooked when households calculate their expected return.

That said, not every household chooses to eliminate gas entirely. Some retain it for cooking or as a backup for domestic hot water. In those cases, both standing charges continue to apply. The decision about whether to fully decommission the gas connection is worth discussing with your installer and energy supplier.

Choosing an electricity tariff that works for a heat pump

Because a heat pump runs entirely on electricity, your choice of electricity tariff has a direct and meaningful impact on your running costs. This is one of the most practical levers available to you, and one that is often underused.

Time-of-use tariffs

Time-of-use tariffs charge different rates depending on the time of day. Off-peak periods, typically overnight, from around 11 pm to 7 am, can be significantly cheaper than daytime rates. A well-programmed heat pump can take advantage of these periods by pre-heating your home's thermal mass or your hot water cylinder during cheap-rate hours, reducing the share of energy consumed at peak prices.

Some energy suppliers now offer tariffs designed specifically for heat pump users. These recognise that heat pumps consume electricity in longer, steadier blocks rather than in sharp peaks, a pattern that is cheaper for the grid to supply, and which some providers reward with better rates. It is worth comparing deals from multiple suppliers before installing, and revisiting this comparison every year when your tariff comes up for renewal.

Monitoring your energy use and cutting costs with smart controls

Keeping track of your heat pump's energy consumption is one of the simplest ways to protect your savings. Most modern units offer built-in monitoring via a display or app, giving you real-time and historical data so you can spot inefficiencies, or early signs of a fault, before they start costing you more.

Pairing this with a smart meter unlocks further savings. Smart meters are typically required to access time-of-use tariffs, where electricity is significantly cheaper during off-peak hours. Smart controls, like those available with Daikin systems, can then automatically schedule heating and hot water for those lower-cost windows, and a smart thermostat can refine this further by learning your routine and adapting accordingly. Together, these tools can meaningfully reduce your monthly electricity bill without any compromise on comfort.

Combining a heat pump with solar panels

For households looking to reduce their electricity costs further still, pairing a heat pump with a rooftop solar PV system is one of the most effective options available. Because a heat pump runs on electricity, using solar power generated by your own system rather than exporting it to the grid can reduce the amount of electricity you need to purchase from the grid.

Heat pumps and solar panels do not have perfectly aligned seasonal profiles: solar PV generates most electricity in summer, while space heating is predominantly a winter need. However, the combination can still increase the use of solar-generated electricity throughout the year, particularly for domestic hot water production, which is needed year-round.

Battery storage can further increase self-consumption by storing surplus solar power generated during the day for use in the evening.

Daikin Europe's research on the synergy between solar PV and heat pumps, shows that the self-consumption ratio (the share of solar generation used directly by the household rather than exported) can be meaningfully increased by intelligently pairing the two systems.

Government grants and financial incentives

Government grants and incentive schemes can significantly reduce the upfront cost of installing a heat pump. Across Europe, many national, regional and local authorities offer financial support to encourage the adoption of low-carbon heating technologies.

The type of support available varies by country and may include grants, tax incentives, low-interest loans or other funding mechanisms. Eligibility criteria, funding levels and application processes also differ and can change over time.

Before making a decision, it is worth checking which schemes are currently available in your area and whether you qualify. Local incentives can have a significant impact on the overall cost of installation and the payback period of a heat pump.

What is the payback period for a heat pump?

The payback period, the time it takes for your cumulative energy savings to cover the upfront installation cost, is one of the most commonly asked questions about heat pumps.

The answer is that it varies, depending on installation cost, the savings achieved each year, and whether a grant has been applied.

For a household replacing an old, inefficient gas boiler in a well-insulated home, payback periods of 7 to 12 years are realistic. Households replacing oil or LPG systems, where the fuel cost savings are larger because those fuels are more expensive than natural gas, can see faster payback.

Real homes, real savings

The savings figures in this article are based on modelled averages for a standard house. Individual results vary, and the best way to understand what a heat pump would mean for your specific home is to request a professional assessment.

In practice, Daikin-certified installers carry out a detailed home survey before installation. They assess factors including your current heating system, your home's insulation level, the condition of your radiators or underfloor heating, and your hot water setup. From this, they can give you a realistic estimate of the savings and payback period specific to your property, rather than relying on EU or national averages.

Installing a heat pump also has a positive effect on your home's energy performance certificate rating, which, in turn, can increase your property's market value.

Conclusion

The evidence is clear: a heat pump consistently costs less to run than a gas boiler, and those savings grow as gas prices rise under the effect of carbon taxation. For a typical EU household with a 10,000 kWh heating demand, the cumulative saving on energy costs amounts to approximately €2,602 over 10 years based on EU27 average prices, and the trajectory beyond that period points firmly upward. The actual saving for your home will depend on insulation, your existing system, your tariff, and local prices, but the structural advantage of a heat pump over a gas boiler only strengthens over time. If you're ready to explore what this means in practice, a free home assessment from a qualified installer is the best place to start.

Key takeaways

• Heat pumps deliver immediate and growing cost savings. Based on the model used in this article, a typical home could save around €2,602 over 10 years compared to a gas boiler, with savings expected to increase over time.
  
• Lower energy use is the main reason for lower bills. For a 10,000 kWh heating demand, a heat pump requires around 80% less raw energy input than a gas boiler, helping offset higher electricity prices.
• Heat pumps are significantly more efficient than boilers. A modern heat pump typically produces 3–4 units of heat from 1 unit of electricity, while even efficient gas boilers produce less than 1 unit of usable heat per unit of gas consumed.
• Heat pumps work by moving heat rather than generating it. By extracting heat from the air or ground instead of burning fuel, they take advantage of a fundamentally more efficient heating process.
• Actual savings depend on your home and setup. Factors such as insulation levels, system sizing, energy tariffs and local energy prices all affect results, making a professional assessment the best way to estimate potential savings.