When does a care-home heat pump make financial sense?

A heating decision that reaches beyond the plant room

A care home's heating project has two financial lives. The first is the quotation: equipment, installation and an anticipated reduction in expenditure. The second begins when the home must operate the system through changing weather, resident needs, maintenance visits and its next electricity renewal. A sound investment has to work in both.

Our recommendation for this September review is to compare complete services. The question is how much it will cost to provide the required warmth and hot water, reliably, over the period the operator expects to use the building. That allows heat pumps, improvements to existing systems and enabling building work to be assessed on a common basis. It also exposes proposals that appear attractive because important costs sit elsewhere.

Start with useful heat, rather than the gas bill

Ask for an estimate of annual useful heat demand and a separate assessment of peak demand, with their assumptions explained. The annual figure supports running-cost appraisal; the peak assessment informs equipment sizing and the ability to maintain service. They answer different questions.

A fuel bill is evidence of purchased energy. Before using it to size a replacement, establish which activities it serves. Space heating, domestic hot water, cooking and distribution losses may be mixed together. Changes in occupancy, an extension or a different service model also need an explanation. A designer should reconcile their assessment with consumption records instead of treating either calculation or historic spending as sufficient alone.

Include proposed fabric improvements in this conversation. If a roof or window programme will materially change demand, ask whether the heating design anticipates it. Conversely, do not postpone a failing system indefinitely while an unfunded refurbishment remains only an aspiration. Request a staged option with explicit dependencies.

Make the performance boundary visible

A quoted efficiency needs a boundary. Ask what electricity is included in the projected seasonal performance: compressors, circulation, controls, defrosting and supplementary heating. Request the same clarity about useful heat measured at the output. Comparisons become unreliable when one proposal includes additional equipment and another leaves it outside the calculation.

Request separate consideration of space heating and hot water. The proposed temperatures, heat emitters, storage arrangements and demand pattern deserve a care-specific design discussion. Ask what happens during the busiest periods and whether any supplementary energy has been included in the cost model.

Water safety is an independent design constraint. HSE guidance requires assessment and control of legionella risks and recognises the linked risk of scalding in care settings. ^{[4] [5]} Our recommendation is to involve the people responsible for those controls before a heating specification is approved. Altering storage temperatures or operating routines simply to improve an energy calculation is not an acceptable financial assumption.

Compare prices at the point of purchase

The September edition of DESNZ Quarterly Energy Prices was published on 29 September. It supplies historical price context, not a current quotation for a particular care home. ^[1] Use the programme's wholesale monitor to understand market movement, while building this appraisal from the actual electricity and fuel terms the provider can obtain.

A useful first comparison is the cost of delivered heat. For an existing boiler, divide the relevant fuel price by an evidenced seasonal efficiency assumption. For a heat pump, divide the relevant electricity price by the projected seasonal performance using the agreed boundary. This is a screening calculation, not the whole business case.

For illustration only, electricity at 24p/kWh and gas at 6p/kWh, with an assumed boiler efficiency of 80%, produce a crossover seasonal performance of 3.2. This is arithmetic using invented example inputs, not an observed tariff, promised heat-pump result or forecast. It excludes capital, maintenance and other costs. Replace every input before applying the method to a home.

Keep the tax basis consistent. A recoverable tax charge and an irrecoverable one do not have the same effect on cash expenditure. Obtain the provider's finance treatment rather than importing household assumptions.

Put the whole project into the investment paper

Ask for a cost schedule covering electrical capacity, distribution alterations, emitters, hot-water equipment, controls, access, reinstatement and commissioning. Identify surveys, design work and contingency separately. Clarify who pays if the network connection requires more work than anticipated.

Include operating costs beyond purchased energy: planned maintenance, replacement components, monitoring, call-outs and any retained fuel connection. Show a base case and a reasonable downside sensitivity, with each changed assumption named. An appraisal that works only at one energy-price relationship needs that dependency made visible.

Compare against a credible alternative. If the existing plant is nearing replacement, the relevant decision may be the additional cost over a necessary replacement, alongside the different future operating costs. If plant remains serviceable, early replacement has another economic starting point. Avoid claiming the entire avoided replacement cost when it was not actually due.

Treat funding as a verified input

Ofgem's current Boiler Upgrade Scheme information covers eligible residential and non-residential properties in England and Wales. Eligibility depends on the property and system; it is not a universal care-home entitlement. ^[2] Government guidance also specifies capacity limits and excludes hybrid arrangements from that scheme. ^[3]

Request written confirmation of the applicable route, eligible costs, ownership, technical requirements and project timing before subtracting support from the budget. Show the investment with and without unconfirmed funding. A group cannot safely multiply one property's possible award across its estate, and a tenant should resolve the landlord's role before assuming it controls an application.

Funding can improve an otherwise suitable project. It does not remove the need to demonstrate operational suitability or justify the remaining expenditure.

Buy continuity and evidence alongside equipment

Ask how the home will maintain essential service during installation, failure and planned maintenance. The answer should identify temporary arrangements, responsibility, access and response times. Ask the registered manager to assess the installation plan against residents' routines before procurement closes.

Set the evidence requirements before handover: meter locations, performance boundaries, trend records, user training and access to settings. A supplier report is easier to assess when the provider already knows what it will measure independently. Agree how an adverse result will be investigated and when performance will be reviewed through the first heating season.

For a group, use one appraisal template but retain a separate design and consent record for each property. For a single home, commission enough independent explanation to challenge the assumptions. The immediate next step is a short evidence brief, not a commitment to a technology: demand, existing plant condition, ownership, purchasable tariffs, full project cost and continuity requirements. Together, those establish whether a detailed heat-pump proposal deserves the provider's next investment decision.

For the next leadership meeting

Two questions to resolve.

1. Which costs and auxiliary electricity are outside the advertised efficiency and installation price?
2. Would this project still be justified if funding or energy prices differ from the base case?