Great analysis: gas heating or heat pump: here's what you should know before deciding

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Thermondo, Germany's largest heating installer, no longer sees a future in gas heating. But is the heat pump already the most profitable alternative? FOCUS online checked and recalculated the numbers.

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What happened?

“Thermondo sold the last fossil fuel heater in February 2024,” the heating installer announced in a press release. In the future, the company wants to focus exclusively on heat pumps,
Focus on photovoltaics and other technologies for climate-neutral living. Thermondo had already removed diesel heaters from its range six months ago.

This makes the Berlin company the first major player in the German heating market to say goodbye to fossil fuel appliances. Large heating manufacturers such as Bosch, Vaillant and Stiebel Eltron together invest several billion euros to expand their heat pump business, but at the same time continue to offer gas heating systems.

Why the gas heating business should no longer be worth it

For Thermondo, moving away from fossil fuel heating is an economic decision. The installer does not believe that it is worth offering both types of heating (gas heaters and heat pumps) in the future. Of course, this is partly a bet on market development, but partly also an educated guess.

Due to the Building Energy Act, which comes into force this year, the pure gas heating business will inevitably decline in the future, as new appliances must run on at least 65 percent renewable energy. Although this does not exclude hybrid solutions consisting of a gas boiler and a climate-friendly alternative, and in certain circumstances new gas heaters can also be installed, their number will inevitably decrease.

The rise in the price of CO2 will make natural gas more expensive every year

Even if the installation of gas heaters were still allowed as before, the market would probably change. Due to the rising price of CO2, which will make natural gas more expensive each year, and the likely permanent loss of cheap imports from Russia, the price of gas will inevitably rise. On average, the federal government and several institutes expect the price to be about 50 percent higher in the 2030s than today.

Heat pumps, on the other hand, run on electricity. The price of electricity is expected to drop in the long term due to the energy transition, although the Federal Ministry of Economy and other institutions do not expect any miracles in this regard. By 2040, prices should be on average about 7.5 percent lower than current prices. As we start from a very high price level, the price of electricity will continue to be high.

There is also a difference when purchasing a new device. While heat pumps and all other climate-friendly alternatives that meet the 65 percent target are subsidized by the state with up to 70 percent of the purchase costs, a new gas heating system would have to pay for it yourself. Furthermore, manufacturers and analysts assume that heat pump prices will fall considerably in the medium term. This happens, on the one hand, because so many manufacturers enter the market with so many devices that a price war will inevitably arise and, on the other hand, because the production of devices is increasingly more efficient and, therefore, cheaper. . .

Is it worth it financially to install a heat pump?

Under the circumstances, this largely depends on the type of heat pump you want to install. We compare the costs of purchasing, installing and operating a typical gas heater with typical heat pumps of various types over a 20-year life, based on the current gas price of an average of 10.5 cents and the current price of electricity an average of 36 cents per kilowatt hour.

Therefore, a single person with an annual consumption of 5,000 kilowatt hours would have to pay 26,235 euros for a new gas heater plus its operation and maintenance during this period. Couples with a consumption of 10,000 kWh amount to 36,770 euros, families with a consumption of 20,000 kWh amount to 57,840 euros.

Whether a heat pump is cheaper depends on many factors, such as the type of heat pump and the amount of financing you receive to install it. For example, we expected 50 percent financing. You can achieve this through core funding plus the speed bonus or low income bonus. You will receive a minimum of 30 percent funding and a maximum of 70 percent is possible.

On average, a heat pump will be cheaper, but each case is different

With this average support, groundwater heat pumps work best. Here you pay about 13,000 euros less in 20 years than with gas heating. Geothermal heat pumps with ground level collectors are also slightly cheaper than the gas version, and deep probe geothermal heat pumps are around the same price. In contrast, air heat pumps of all types are much more expensive. This is because the latter operate very inefficiently and only generate about 3 kilowatt hours of heating energy from one kilowatt hour of electricity. Water and geothermal heat pumps have values ​​up to 5.

However, these are all average values. If you are thinking of installing a heat pump, you will have to calculate it carefully for your individual case. However, as a general rule, heat pumps with an annual efficiency factor of four or more are usually cheaper than gas heaters.

How will this develop in the future?

The base case assumes that gas and electricity prices will remain stable for the next 20 years. But, as shown above, they won't. If we take into account the forecasts, i.e. a 50 percent increase in the price of gas and a 7.5 percent decrease in the price of electricity, the result looks completely different. In this scenario, gas heating would undoubtedly be the most expensive alternative. Even air heat pumps are cheaper over their lifetime, although not by much. Today, more advantageous alternatives would further extend your advantage. In this scenario, groundwater heat pumps would cost only about half as much as gas heating systems.

Should I switch to a heat pump now?

Our analysis is just an example of a calculation using average numbers. You should carefully consider whether it is worth switching to a heat pump or another type of heating in your particular case. Depending on the situation, a heat pump may be the best alternative, but perhaps also biomass heating, pellet heating, district heating or other options. These days, maintaining an existing gas heater can also be financially advantageous.

Basically, the calculation shows that heat pumps will be economically viable in the medium term, not only compared to fossil heating systems, but also to other climate-friendly alternatives. State funding applies to all climate-friendly heating systems. Manufacturers therefore have the option to select and offer the most efficient variant, and almost all have decided on heat pumps as a series production product.

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