Solar panels vs heat pumps

Heat pump or solar panels? Both types of renewable energy system can reduce your carbon footprint, improve your home’s energy efficiency – and save you money on your energy bills. 

To help you reduce your bills, we've compared various ways to heat your home - for example fan heaters versus oil heaters or the cost difference between electric heaters and radiators. But if you're looking at ways to improve your home's energy efficiency, then you may also be looking at solar panels and heat pumps. But which one will reduce your costs the most? We put them head to head.

How heat pumps work

Heat pumps use electricity to extract heat from the air and pump it into your home. This thermal energy can be used to heat your water supply and keep your home warm. Heat pumps manage to produce so much thermal energy that they can dramatically reduce your dependence on your energy provider and therefore save you money on your energy bills. 

As all gas boiler installations will be banned across the UK by 2035, you may want to consider installing a heat pump sooner than later.

How solar panels work

Put simply, solar panels generate electricity which can be used to help power electrical systems in your home. 

And solar panels have never been such a popular option: more than 3,000 solar systems are being installed each week, according to trade body Solar Energy UK.

The pros of heat pumps

• Heat pumps are much more efficient than a gas boiler and produce three or four times the energy they use.
• Heat pumps are durable, require minimal maintenance and last 20 years or more before they need replacing. 
• The government’s Boiler Upgrade Scheme is offering £5,000 grants towards heat pump installation until April 2025 .
• Energy firms Octopus Energy and Eon supply and install heat pumps: this is a good option if you struggle to find a local installer (see “cons of heat pumps”) or need reassurance from a familiar firm for the new technology. Note that Octopus is working towards making it cheaper overall in the near future. 
• Heat pumps emit no carbon dioxide, nitrogen dioxide or particulates. This can help to improve the air quality inside and outside the home.

Heat pumps are much more efficient than a gas boiler

© Alamy

The cons of heat pumps

• An air source heat pump costs between £7,000 and £13,000 according to the Energy Saving Trust. With the government’s £5,000 grant it will still cost a significant amount.
• Necessary additional upgrades will add thousands of pounds to the overall cost. As the UK has some of the least energy efficient housing in Europe, it’s likely your home will need better insulation, double glazing and/or different radiators. 
• Heat pumps use electricity and are therefore pricey to run. Electricity is almost four times more expensive than gas per unit so energy bills can actually increase after installing a heat pump.
• Heat pumps only produce heat and cannot generate electricity so can only provide energy for certain systems within your home.
• It’s difficult to find an installer and they are often booked for months. The heat pump industry is still small in the UK.
• Heat pumps do not warm a home as quickly as a gas boiler. Naturally cold homes will heat up much more slowly.
• Heat pumps can be tricky to install in homes with combi boilers which will need to find space for a hot water cylinder.
• Some homes do not have outside space for a pump.
• Heat pumps can be noisy due to their fans.

The pros of solar panels

• Solar panels could reduce your annual energy bill by £450, according to The Eco Experts.
• You can sell electricity back to the National Grid or an energy supplier via the Smart Export Guarantee, and typically earn £73 per year this way. On average you can sell it to the National Grid for 5.5p/kWh. If you’re an Octopus customer you can sell it to Octopus for 15p/kWh, the best deal on the market right now. Meanwhile, EDF pays 5.6p/kWh to its customers and 1.5p to customers of other suppliers. E.On pays 5.5p/kWh to its customers and 3p per to other customers. British Gas pays 3.2p/kWh to all customers irrespective of supplier, Shell and SSE 3.5p and Scottish Power 5.5p.
• Solar panels now pay for themselves within six years at the current energy price freeze, according to Solar Energy UK. This timeframe will fall when energy prices rise in April 2023.
• You can buy solar panels via your local council and group-buying schemes such as Solar Together. This aims to provide more competitive pricing.
• Solar power allows you to generate most of your electricity for lights and appliances. 
• Solar power can even power an electric car. The average British car drives 5,300 miles a year, according to the National Travel Survey. At 0.35kWh per mile, you’ll need 1,855kWh of solar power or around two thirds of what a typical solar panel system generates annually. (Though you’ll need to buy and install an electric car charger at an extra cost of around £1,000)
• Solar power systems are easy to fit, even on old homes. 

The cons of solar panels

• The average solar panel system for a three-bedroom house costs £5,420, according to the Eco Experts. The Energy Saving Trust has an online calculator to work out your home’s likely installation costs, potential annual energy bill saving, potential CO2 saving and potential lifetime net benefit.
• A battery costs £4,500, according to the Eco Experts. You’ll need one to use your solar energy at night and would be self-sufficient in the event of a power cut. Batteries can last about 15 years.
• Solar power doesn’t quite cut it when it comes to heating. Put simply, you need an extra source of hot water to help.

Financial cost and benefits for a three-bedroom house

We’ve looked at the costs and benefits involved for a three-bedroom house considering the installation of solar panels or heat pump.

If the homeowner opts for a heat pump they can expect to spend £5,000 with the Boiler Upgrade Scheme (and probably several thousands of pounds extra on better insulation and/or different radiators) and consequently make a £185 average annual saving on their gas bill – or £3,700 over 20 years. This is based on gas prices increasing by 50% over that period.

If the homeowner opts for solar panels they can expect to spend £5,420 (plus another £4,500 if they buy a battery) and consequently make a £450 average annual saving on its electricity bills plus sell excess energy to the grid for £73, making a total annual saving of £523 – or £10,460 over 20 years.

Solar panels vs heat pumps? The verdict 

Both renewable energy systems have similar installation costs but solar wins big. Josh Jackman, energy expert at Eco Experts, says: “Heat pumps will definitely eventually come down in price, but solar will still be the better choice for a long time.”