Heat Pumps ‘the most cost effective option’

Electricity powered heat pumps can be used to convert low grade heat from the environment to heat homes very efficiently and the UK government want us all to switch over to using them. The environmental case is strong, and, it seems, so too is the economic case. Air-source heat pumps are ‘by far the most cost-effective, low carbon means of heating European homes’, with household energy bills likely to cost around half that of running hydrogen boilers, according to research by the International Council on Clean Transportation.  

It compares the cost of several low-greenhouse gas (GHG) or GHG-neutral residential heating technologies in the year 2050 including hydrogen boilers, hydrogen fuel cells with an auxiliary hydrogen boiler for cold spells, air-source heat pumps using renewable electricity, and heat pumps with an auxiliary hydrogen boiler for cold spells. 

It concludes that, even if natural gas costs were 50% lower and renewable electricity prices 50% higher, electric heat pumps would still be the front runner option for heating homes in terms of operating costs, compared to hydrogen technologies by 2050. Fossil gas-derived blue hydrogen, produced via Steam Methane Reformation (SMR) and run with Carbon Capture and Storage (CCS) to cut emissions, is a bit cheaper than green hydrogen, produced by electrolysis, but not much. And the SMR/CCS route also has the highest emissions: while pathways using renewable electricity have a near-zero GHG intensity, SMR + CCS hydrogen would ‘reduce GHG emissions by 69%–93% compared to natural gas’, the higher figure assuming, a little speculatively, that substantial improvements are made in the future to reduce the GHG intensity of this pathway. 

Interestingly, while some have seen fuel cells as a way ahead for the hydrogen economy, the ICCT report found that their use with green or blue hydrogen was really pricey, due the high capital cost: ‘All fuel cell scenarios are around three times more expensive as using a hydrogen boiler. We found that a fuel cell using SMR + CCS hydrogen is seven times more expensive than using a heat pump alone with renewable electricity’. 

So, overall, heat pumps win out. Including installation, maintenance, and electricity bills, ICCT estimates that heat pumps would cost around €579 a year for the average single family household in the EU, while the total average costs for a hydrogen boiler would come to around €1,271 each year. That’s a bit surprising given the high initial capital cost of heat pumps, and there are also operational issues. The power output from air-sourced units in cold damp weather can be low. They also put stress on the power grid, unlike green gas, especially if they try to meet peak heat demand. Hence the idea of having an auxiliary hydrogen boiler as a back up, a cold snap booster, in a so-called hybrid heat pump system. That adds a bit to costs, but not much- they still come out looking good. Crucially the study says that, overall, heat pumps would be around three to six times more energy efficient than just running with renewable hydrogen boilers in EU homes, due to efficiency losses in the production, storage, and transportation of green hydrogen. 

ICCT do look at some differing views, including those from the Hydrogen Council and Bloomberg New Energy Finance, who have suggested that hydrogen production costs could be lower, with, for example, electrolyser costs falling, but it does not see fit to alter its conclusions- heat pumps are best, albeit needing some auxiliary help from hydrogen. 

Are they right?

The case for heat pumps is certainly strong. Cambridge Engineering Prof. David Ceborn said in a letter to the Times (25/4/21) ‘producing green hydrogen requires about six times as much electricity as a heat pump’. However, while that may be true, the comparison has to put in its full operational and system development context. As the new energy system evolves, there are some big unknowns, for example in relation to how energy demand will change and how that can be met and managed. If domestic heat demand remains high, there may be problems meeting it, and peaks in particular, using just heat pumps. That’s the justification for hybrid heat pump approach. Otherwise, the power grid network might have to be reinforced, especially if it is also being used to charge electric vehicles at home in the evening.  

Some say it would make more sense to use the existing gas grid repurposed to run on hydrogen, than to build more power grid capacity for occasional peak heating use. It is also argued that it would be better to heat homes in urban areas via district heating networks fed by highly efficient biogas-fired Combined Heat and Power plants. Solar heating is also an option, especially if linked to local heat networks and community-scale heat stores. So while they may be efficient, domestic heat pumps do not have a completely clear field. They may even be challenged by large more more efficient heat pumps feeding urban heat networks, including those using rivers, lakes or the sea as their heat source.  

On the renewable hydrogen supply side, a lot will depend on how much renewable capacity there will be. If a large renewable over-capacity is established, so that renewables can meet most peak demands, at other times there will be substantial surplus renewable output, and plenty spare to make green hydrogen for heating, as well as for meeting other end uses such as for transport and grid balancing. So there could be a lot of cheap, and storable, green hydrogen, and the electric heat pump route, though still likely to be the cheapest option, may look a bit less attractive by comparison. That depends on whether there is a continued fall in the cost of renewables. That would cut the cost of making hydrogen by electrolysis, although of course it would also cut heat pump running costs.

One thing that may shape outcomes and technological success is the rate of adoption of the various options. So far, heat pumps have not been too popular in the UK and the domestic Energy Performance Certificate system doesn’t promote heat pumps in its choice of heating options. That’s odd, given UK heating policy. But maybe it’s because, while efficient and arguably cost effective, heat pumps are expensive and invasive to install- especially the more reliable ground sourced versions. According to the Committee on Climate Change, 19 million heat pumps will need to be installed by 2050 to reach net zero emissions, and hybrid heat pumps (with gas back up) will need to be widely used by 2035. Last year just 30,000 heat pumps were installed in Britain. In addition to the up-front costs, it doesn’t tempt consumers to buy into heat pumps when, as a Times correspondent noted, British gas is selling electricity at 19p/kWh and gas at around 3.5/kWh- and that disparity is an EU-wide issue. 

So where are we now? Although some of the the issues are getting clearer, with the case for heat pumps getting stronger, the wider green heating battle shows no sign of slowing. While heat pumps do have major advantages in some locations, in some cases other heating options may make more sense, and it seems there will be at least an auxiliary role for green hydrogen for back up heating. Hopefully though the lure of blue hydrogen will be ignored!  The debate continues.