Heat Pump Running Costs: Flat Rate or Time-of-Use Tariff?
Heat pumps are among the most efficient heating systems for homes, but there’s a lot of talk about the best and cheapest way to operate them. Should you run your heat pump continuously to keep a steady temperature, or would it be more cost effective to use it intermittently?
In this blog post, we’ll discuss the options available to heat pump owners and help you decide what’s best for your home and energy bills. We'll also dive into how different tariffs can impact the running cost of your heat pump.
Samsung GEN7 air source heat pump
To assess the performance and operating costs of a heat pump, we have created four scenarios, each using a gas boiler as the baseline for comparison. In these scenarios, Octopus Energy is the selected energy provider, and we’ve analysed the flat-rate tariff, the time-of-use tariff, and a combination of operational strategies for the heat pump.
We’ve based our figures on a 3-bedroom 1980s property. The home is equipped with cavity wall insulation, 300mm of loft insulation, and double glazing. Its annual energy needs are estimated at 8,400 kWh for space heating and 2,755 kWh for hot water. The heating system includes an 8kW Samsung GEN7 heat pump and a 180L hot water cylinder.
The goal is to determine the most efficient and cost-effective approach to maintaining a warm home.
Alto Energy is a Trusted Partner of Octopus Energy
By the way, if you're considering switching energy providers or want to make the most of your heat pump’s efficiency, we recommend checking out Octopus Energy. Their tariffs are tailored for heat pump users, and signing up through our link helps support us at no extra cost to you.
important information
We’ve based our calculations on the following:
Electricity Tariffs
Flat-Rate Tariff (Octopus 12-Month Fixed): 21.56p/kWh for all usage.
Time-of-Use Tariff (Octopus Cosy):
Low Rate: 12.32p/kWh
Standard Rate: 25.15p/kWh
High Rate: 36.46p/kWh
Gas Tariff
Gas Price: 5.91p/kWh
Standing Charge: 29.25p/day
Baseline comparison
We have based our calculations on a boiler with 92% efficiency, assuming it is a newly installed system paired with appropriately sized radiators to ensure optimal operation in condensing mode. The estimated running costs also account for the daily standing charge.
Estimated running cost: £823.06 per year
Octopus energy: flat rate tariff
One of the simplest, most effective and energy-efficient ways to heat your home using a heat pump is to maintain a consistent and steady temperature throughout both the day and night.
In this scenario, the thermostat is set to the required temperature and left to run with the weather compensation. Weather compensation adjusts the heat pump’s output based on the outdoor temperature, ensuring that the system delivers just the right amount of energy needed to maintain comfort without wasting energy.
The home is using a flat-rate electricity tariff, meaning there are no time restrictions or varying costs based on when the system is in use. This approach provides simplicity and consistency in energy pricing while allowing the heat pump to operate as needed throughout the day and night.
Under these conditions, the estimated annual running cost is £640.17. When compared to the cost of running a traditional gas boiler, this setup provides significant savings of £182.89 per year!
Estimated running cost: £640.17 per year
Estimated saving: £182.89 per year
Octopus Energy: Time-of-use Tariff – Hot Water Time Restriction
In scenario two, we maintain the same underlying principle of heating the home to a consistent, steady temperature to ensure comfort and efficiency. However, in this scenario, we introduce the added benefit of leveraging a time-of-use tariff to optimise the timing of hot water production. By scheduling the heating of hot water to coincide with the tariff’s cheapest periods, we can lower costs without compromising on performance or convenience.
Unlike the hot water heating, the space heating operates without any specific time restrictions. Under this approach, the estimated annual running cost totals £632.98. This represents a modest saving of £7.19 when compared to the costs outlined in scenario one. More importantly, when compared to the running costs of a traditional gas boiler, this scenario yields a substantial saving of £190.08 per year.
Estimated running cost: £632.98 per year
Estimated saving: £190.08 per year
Octopus Energy: Time-of-use tariff – Heating & Hot Water Time Restriction
In scenario three, the space heating system is strategically timed to avoid operating during the expensive period of the tariff. This adjustment means that the heat pump must compress all of its operating hours into the Standard and Low-rate periods, requiring a more concentrated heating effort during these times. To achieve this, the heat pump needs to be set to a higher flow temperature, with a design flow temperature of 55°C when the external temperature drops to -3°C.
Samsung air source heat pump
Timers will also play a role in this setup, as they will need to be programmed to "pre-heat" the home during the hours leading up to the expensive rate period. This approach ensures the house remains warm while minimising costs, although it does result in a slight fluctuation in indoor temperature - typically by about a degree or so.
In some cases, a larger heat pump might be necessary to handle the reduced operating times, particularly during the coldest parts of the year. However, this would only be a factor in extreme weather conditions. For most scenarios, a more practical solution would be to allow the heat pump to operate during the expensive period on those rare occasions when additional heat is urgently required.
Estimated running cost: £617.71 per year
Estimated saving: £205.35 per year
Octopus Energy: Time-of-use tariff - Extreme Time Restriction
It’s important to note, scenario four is largely hypothetical due to the significant practical and financial challenges it presents.
Under these conditions, both the space heating and hot water systems are timed to operate exclusively during the cheap period of the tariff. This approach aims to minimise running costs by restricting the heat pump's operation to just eight hours per day, aligning entirely with the lowest energy rates.
To meet the home’s full energy demand within such a restricted operating window, the heat pump would need to be massively oversized to generate enough heat for the entire 24-hour period. This would also require a large buffer cylinder to store the thermal energy for use throughout the day, as well as an oversized radiator system to distribute the stored heat effectively.
Although the estimated annual running costs in this hypothetical scenario are £469.04, the required initial investment makes it an impractical solution for most households. This underscores the importance of a balanced approach that takes into account both operational efficiency and reasonable upfront costs.
Estimated running cost: £469.04 per year
Estimated saving: £354.02 per year
This table compares the costs of operating a heat pump across the five different scenarios.
Summary
The four scenarios outlined above demonstrate how different tariff types and operational strategies influence the annual running costs of a heat pump. In all cases, the running costs were lower than those of a gas boiler.
Heat pumps are highly efficient at maintaining a consistent indoor temperature and can save homeowners money compared to a gas boiler, even with predictable flat-rate tariffs. Time-of-use tariffs can further reduce costs by scheduling heating during cheaper periods, but extreme time restrictions require oversized systems and heat storage, making them impractical for most homes.
On a side note, Time-Of-Use tariffs offer other benefits like running appliances such as dishwashers, washing machines, dryers, or car chargers during cheaper periods. However, these savings require careful management of your electricity use, and given the modest savings, it may not feel worth the effort.
Ultimately, the best strategy strikes a balance between cost savings and practicality, ensuring warmth without high upfront costs.
Looking to purchase a heat pump?
If you’re considering replacing your fossil fuel system with a heat pump, you could be eligible for the Boiler Upgrade Scheme (BUS). Click the link below to get in touch with us, and we’ll help you find out if you qualify for the grant.