Return On Investment For Air Source Heat Pumps

The installation of an air source heat pump system can be a substantial upfront investment, and there will be ongoing running costs for the electrical energy consumed.

Understanding the total life costs and the expected return on investment can help a homeowner make an informed decision before having a heat pump installed.

The return on investment for an air source heat pump can be approximately 10 years. With an average lifespan of about 20 years, a heat pump can deliver net savings after the initial investment is recuperated.

The average return on investment for a standard residential air source heat pump can vary between installations and can depend on factors such as purchase and installations costs, local electricity prices, climate, demand, and how well a heat pump is maintained.

Our air source heat pump was installed when our house was built, and we’ve been using it for over 5 years.

Our air source heat pump that we’re still looking to return the initial investment on

While we won’t have yet recuperated the initial cost of buying a new house with a pre-installed new air source heat pump, we understand that heat pumps are a long-term investment and the ability to help save money in the future over the lifetime of a heat pump should be considered.

We discuss more about the return on investment for air source heat pumps, the ROI for our own heat pump and the factors that can influence how quickly initial costs can be made back.

Return On Investment For Air Source Heat Pumps

The return on investment (ROI) for a newly installed air source heat pump (ASHP) system will vary between each situation but it can be possible to return the initial investment within 10 years, with the potential for a heat pump to last another 10 years before needing to be replaced.

To help understand savings, heat pumps should be compared to other heating systems.

According to the Northeast Energy Efficiency Partnerships, an air source heat pump can save $459 per year when compared to electric resistance heating, thanks to ASHPs typically being two to four times more energy efficient than electric resistance heaters.

The gross savings can be around $948 when compared to an oil furnace. However, if the oil system remains and is used sporadically, the annual savings is around $300.

We cover how much an air source heat can cost to purchase, install and run in another article, but expect a heat pump system to cost in excess of $5,000 (£4,250) to have installed, with just over $1,000 a year in running costs.

With a typical saving of $500 on your heating and cooling costs per year from using an air source heat pump over another type of system, an ASHP can pay for itself within 10 years.

On average, you can expect the initial investment into an air source heat pump system to be returned in ten years

As a rule of thumb, you could expect a 10% return on investment each year.

However, this can depend on a range of factors that we discuss further in this article.

A larger and more efficient heat pump can be a greater initial cost investment but could also save more money given the higher utility bills for an equivalent conventional setup.

Furthermore, the return on investment can be provided quicker if you can reduce the upfront costs by using local incentives such as tax rebates or other government schemes.

For example, in the UK the current incentive is the Boiler Upgrade Scheme where homeowners could be eligible to get £5000 off the cost and installation of an air source heat pump.

By reducing the upfront cost of an ASHP purchase and installation, the return on investment can be achieved more quickly. Incentives such as the above can provide a significant help to ROI.

A local installer will be able to advise on any incentives to have an air source heat pump installed near you.

Government incentive schemes can help to reduce the cost of buying and installing an air source heat pump and therefore allow the return on investment to take less time

However, costs shouldn’t be cut too far with an air source heat pump as choosing a lower priced heat pump that isn’t fit for purpose will be much less efficient and can negate any upfront cost savings through inefficient operation.

Factors Affecting Air Source Heat Pump ROI

While the return on investment for air source heat pumps could be achieved within 10 years, or even quicker if taking advantage of installation incentives, there are number of things that can affect how quickly investment into an ASHP can be returned.

Factors that can affect the return on investment time and cost amount for an air source heat pump can include:

  • The cost of purchase and installation
  • Whether any financial or other incentives were used
  • The size and power output of heat pump
  • The size of house, the number of occupants and the demand for heating, cooling, or hot water
  • The cost of electricity in the local area, and therefore the running costs of a heat pump
  • Whether any local domestic electricity production is used, such as solar panels
  • The efficiency of the heat pump
  • The local climate throughout the year
  • Whether a heat pump is to be used for cooling as well as heating
  • Whether a heat pump is also to be used to provide domestic hot water
  • How well a heat pump is maintained
  • The state of the existing heating, cooling or hot water systems and whether any indoor upgrades are also required
  • The existing level of insulation in a home

The cost of purchase and installation of an air source heat pump system will ultimately set the goal for the total investment amount that needs to be returned.

A higher starting price can mean it can take longer for this initial investment into a heat pump to returned.

For larger houses with greater internal space, a larger air source heat pump with greater power output can be required. This can also be the case when there are an increased number of occupants within a house over the typical and therefore an increased demand for any of the features that a heat pump is able to provide, such as hot water, heating or cooling.

This may increase purchase costs but it’s important that a heat pump isn’t undersized as it can lead to a range of other issues from overworking.

On the other, local financial incentives for installing a heat pump system can help to bring this initial cost down, and in some cases quite significantly. A greater ROI can be achieved over the lifetime of a heat pump when initial costs are lower.

This doesn’t mean that the lowest cost heat pump and installer should be used however, as more efficient models from reputable brands, which may cost more to purchase, can help with ongoing running costs.

Heat pumps from reputable brands such as ours may cost more to purchase but could be more efficient and help lower running costs

Local electricity energy costs can influence the return on investment for an ASHP.

Air source heat pumps are electrical appliances and run solely on electricity. Higher typical energy prices can mean increased running costs, which in turn can make it take longer for the initial investment into a heat pump to be returned.

It can be possible to use solar panels with an air source heat pump to help minimize running costs, albeit with solar panels also increasing initial costs.

Another factor that can affect the ROI for heat pumps can be the efficiency of the heat pump.

Efficiency refers to how well a heat pump can produce heat energy from the electrical energy consumed and is often referred to as the Coefficient of Performance (COP), or SCOP for efficiency over a season.

The Energy Efficiency Ratio (EER) provides efficiency for cooling, again with the seasonal factor SEER.

The higher the efficacy rating, the less energy can be consumed to meet the same internal temperatures. ROI can be attained quicker when using a highly efficient heat pump, although such heat pumps may demand a higher initial price tag.

Air Source Heat Pump Plate
The COP for our heat pump can be high in the most ideal conditions

Our article on air source heat pump efficiency covers this topic in more detail.

Climate can also be another factor.

There’s less heat stored within outside air at colder temperatures. A heat pump will therefore have to work harder to extract the heat to produce the same internal temperatures, increasing electrical energy usage.

The COP of most standard air source heat pumps will therefore dip in colder temperatures as a result. In very cold climates it can be harder to return the investment on an ASHP as quickly.

If an air to air heat pump is to be used for cooling as well a heating then this can increase running costs over the year. However, a heat pump to be used for cooling could negate the need for another cooling system to be used in a home.

If an air to water heat pump (like the one we have) is to also be used to provide domestic hot water then this can also increase running costs over a year, but could save money compared to using another system, such as a gas boiler/furnace, to provide hot water.

Air Source Heat Pump Water Heater Tank
Air to water heat pumps can also be used to provide hot water when paired with a hot water tank

An air source heat pump should be maintained in line with the manufacturer’s guidelines to help prolong its life expectancy, help reduce faults and help reduce running costs.

ASHPs should ideally be serviced at least once per year, with the user keeping on top of cleaning and debris removal periodically throughout the year. If poor maintenance is followed it can reduce the life and performance of a heat pump and therefore the ROI.

Air Source Heat Pump Side
Ongoing maintenance and care of a heat pump is important to help keep running costs as low as possible

When installing an air source heat pump in a home, an installer will need to inspect the existing internal heating, hot water or cooling apparatus to check whether it will be compatible with a heat pump.

Heat pumps work differently compared to other heating systems and deliver heat more slowly at lower temperatures.

The internal heating equipment therefore needs to also be efficient, otherwise internal temperatures won’t be able to sufficiently rise. Examples can include using underfloor heating and modern radiators with large surface area to release heat more effectively.

Air Source Heat Pump Radiator
The internal heating apparatus used with an air source heat pump needs to be effective, otherwise a heat pump can struggle to heat a home and use more energy

The same can be said for home insulation, where if it isn’t at a sufficient level then heat can leave a home too quickly for temperatures to rise.

If both the indoor heating apparatus and home insulation needs to be upgraded, then this can increase installation costs.

Air Source Heat Pump Return On Investment

Speak to local installers and get a range of quotes to fully understand the initial costs required to serve your home with an air source heat pump, the typical running cost for the proposed heat pump system, and therefore the anticipated return on investment for that system.

Further Reading

Are Air Source Heat Pumps Cost Effective?

Are Air Source Heat Pumps Worth It?

How Much Electricity Air Source Heat Pumps Use

Is An Air Source Heat Pump Expensive To Run?

Air Source Heat Pump Electrical Requirements

How Long Do Air Source Heat Pumps Last?