Heat pump costs: what the "spark gap" report means for you

The short answer: nothing changes on your bill or quote today. Energy UK has published a report calling for government action on electricity prices, but they are proposals, not policy. An air source heat pump typically costs £12,900 installed, with a usual range of £10,000 – £16,700.

What Energy UK is saying

According to Energy UK, the trade body for the energy industry, electricity in Britain is expensive compared with gas. It calls this difference the "spark gap" and says the UK has one of the highest electricity-to-gas price ratios among major economies. That, it argues, is holding back the switch to electric heating.

The report's main proposals are:

• Bring the ratio of electricity to gas prices down from a historic average of 4:1 to 3:1 by 2030, with a longer-term ambition of 2.5:1.
• Move the remaining policy levies off domestic electricity bills.
• Shift the gas standing charge into the unit rate from April 2028.
• Improve access to low-cost green finance and tailored advice for households.

Energy UK estimates that the 3:1 target could lead to at least 250,000 more heat pumps being installed. It also says that moving the levies and the standing charge could save a typical dual-fuel household around £40 a year, or around £300 a year for a household that installs a heat pump.

These are the trade body's estimates and recommendations. The report sets out what Energy UK wants the government to do. It does not announce a change.

What it means for the cost of a heat pump

Two costs matter: the installation and the running costs afterwards. This report is about the second one.

The upfront price is set by labour, the unit, any radiator or pipework changes and the hot water cylinder. We build our figures from labour hours multiplied by local rates, plus materials, then check them against market prices and real quotes. For the full breakdown, see our Air source heat pump guide.

Running costs depend on the price of electricity against gas. If the gap narrowed as Energy UK proposes, heat pumps would become cheaper to run relative to a gas boiler. Until then, the saving is smaller, and in some homes it may not materialise. That is why we advise getting a running-cost estimate from your installer alongside the installation quote.

Support available now

You do not need to wait for new policy to get help with the upfront cost. The current fact sheet is:

• Boiler Upgrade Scheme (England and Wales): £7,500 off an air source or ground source heat pump. The installer must be MCS certified.
• Scotland: a Home Energy Scotland grant of up to £7,500, plus an optional £7,500 interest-free loan.
• 0% VAT on installing energy-saving materials, including heat pumps, insulation, solar panels and batteries, until 31 March 2027.
• Warm Homes Plan (published January 2026): £15bn to 2030, including grants for low-income households and low- or zero-interest loans being phased in.

Our figures include 20% VAT except where 0% applies, so check how your installer has treated it on the quote.

If you are comparing a heat pump with a new boiler

A like-for-like gas boiler typically costs £2,800, with a range of £2,200 – £3,650. The gap to a heat pump is large before grants, and the Boiler Upgrade Scheme narrows it considerably. Running costs then decide the rest. See our New boiler guide for the options.

Remember that any gas work must be done by a Gas Safe registered engineer.

Other work that affects heat pump performance

A heat pump works best in a well-insulated home. Insulation is also covered by the 0% VAT rate for now. External wall insulation typically costs £26,000, with a range of £20,300 – £33,800, for a typical 150 m² of wall; see External wall insulation. Solar panels can offset some of the electricity a heat pump uses: a 6 kWp system typically costs £12,500 (Solar panels).

What to do now

• Do not delay a needed replacement waiting for a policy change that may or may not happen.
• Get at least three quotes, and ask each installer to state the grant, the VAT treatment and the expected running costs.
• Check the installer is MCS certified if you want the Boiler Upgrade Scheme.
• Use our "is my quote fair" tool to compare any quote against our live figures.

We will update this page if the government responds to the report.