As well as reducing CO₂ emissions, a heat pump can use three to five times less energy than an efficient gas boiler. However, an often-heard argument when considering replacing a gas boiler is that the house needs to be well-insulated for the heat pump to work.

Heat pumps do work best in a well-insulated house because their heat output is at a lower temperature than a traditional boiler, and they perform best when providing a consistent heat output with minimal heat losses. If a house loses a lot of heat through the fabric or air leakage, the heat pump needs to produce more heat and therefore have a larger capacity to achieve and maintain the desired level of thermal comfort. So, the best option is to both insulate the house well and install a heat pump, with the synergy between the two providing the greatest benefits. To offer the same level of comfort, a well-insulated home also requires a smaller heat pump than a poorly insulated house, which can be cheaper to buy as well as to run.

However, new IEA analysis of heating systems finds that even in poorly insulated homes, heat pumps provide energy savings compared to gas boilers, as the efficiency gains are so significant. Shifting from a 92% highly efficient gas boiler (minimum performance according to the current UK regulation) to a high efficiency air- or ground-source heat pump, using the United Kingdom as an example, results in 60-70% of energy savings for a solid walled house (with no insulation). Adding high levels of insulation along with the heat pump can lead to an impressive 90% reduction in annual energy demand for heating. 

Due to their higher efficiency, heat pumps consume less energy than gas boilers to produce the same amount of heat. However, whether switching from one to the other lowers energy bills depends on the difference in gas and electricity prices. In countries where electricity and gas prices are similar, such as Sweden, heat pumps can greatly reduce bills – by 60-90%, depending on the level of insulation. In countries where electricity is two to four times as expensive as gas, like in France, heat pumps can still reduce energy bills, but the gains will be smaller, especially in poorly insulated homes. In countries where electricity is more than quadruple the price of gas, such as the United Kingdom, switching to a heat pump results in much smaller financial benefits – and can in some cases even lead to higher bills, though this can be mitigated through improving the insulation of the building envelope. As pricing mechanisms change to favour low-carbon electricity instead of gas, the financial benefits of heat pumps can become even greater.