Octopus Energy launches heat pump as cheap as a gas boiler as battle with British Gas intensifies

Octopus Energy has announced that they are launching a heat pump the same price or cheaper than a typical gas boiler as a price war with rival British Gas intensifies.

Buying and installing Octopus’s new self designed heat pump will cost homeowners as little as £2,500.

It comes weeks after British Gas separately announced it would fit heat pumps for as little as £2,999, kicking off a price war. Octopus currently charges £3,000 and upwards.

Installing a heat pump can currently set homeowners back by between £7,000 and £13,000 when costs such as home adaptations are factored in. A government voucher can knock £5,000 to £6,000 off the final bill.

Octopus said the overall cost of its new heat pumps will start at £2,500 when government grants are included. However, most consumers are expected to end up paying between £3,000 and £3,500, depending on the size of their home.

That is roughly on par with what it costs to install a typical gas boiler – and cheaper in some cases.

Heat pumps draw warmth from outside air and run on electricity, an increasing proportion of which comes from green sources such as wind and solar power. They are seen as the future of home heating as Britain moves towards net zero.

However, adoption has so far been slow because of the prohibitive cost and the home adaptations that are needed in many homes to make them effective.

Official figures show the Government’s boiler upgrade scheme only issued 7,600 vouchers out of a total 30,000 available for this financial year. The scheme was launched at the end of May 2022.

A price war among major suppliers could help bring down costs. Greg Jackson, Octopus’s chief executive, said engineers have shrunk the cost of manufacturing the heat pumps, reducing the total cost to consumers.

“It’s designed to be lower cost hardware, lower cost to install and to be able to cover a bigger percentage of UK homes. It’s a serious breakthrough,” he said of Octopus’ new device.

Mr Jackson said: “At the moment, if we have to buy a heat pump, typically we are looking at £3,000 for the hardware. This will now enable us to get hold of them for £1,500.

“It’s a bunch of major leaps forward and we can keep on pushing prices downward from there.”

The new heat pump was designed by engineers at the Octopus research and development centre in Slough and staff at RED, a Northern Irish heat pump business which the company acquired last year.

Octopus has begun to manufacture the devices and plans to launch them in the second half of this year. It plans to sell the heat pumps both to its own customers and third parties.

The Government wants to rapidly increase the number of heat pumps being installed, as part of efforts to replace gas boilers to cut carbon emissions.