How heat pumps can cut energy costs by up to 90 per cent

Alan Pears

Alan Pears


Heat pumps are becoming all the rage around a world that has to slash carbon emissions rapidly while cutting energy costs. In buildings, they replace space heating and water heating – and provide cooling as a bonus.

A heat pump extracts heat from outside, concentrates it (using an electric compressor) to raise the temperature, and pumps the heat to where it is needed. Indeed, millions of Australian homes already have heat pumps in the form of refrigerators and reverse-cycle air conditioners bought for cooling. They can heat as well, and save a lot of money compared with other forms of heating!

Even before the restrictions on Russian gas supply, many European countries were rolling out heat pumps – even in cold climates. Now, government policies are accelerating change. The US, which has had very cheap gas in recent years, has joined the rush: President Joe Biden has declared heat pumps are “essential to the national defence” and ordered production be ramped up.

The ACT government is encouraging the electrification of buildings using heat pumps and is considering legislation to mandate this in new housing developments. The Victorian government recently launched a Gas Substitution Roadmap and is reframing its incentive programs towards heat pumps. Other states and territories are also reviewing policies.

Just how big are the energy cost savings?

Relative to an electric fan heater or traditional electric hot water service, I calculate a heat pump can save 60-85 per cent on energy costs, which is a similar range to ACT government estimates.

Comparisons with gas are tricky, as efficiencies and energy prices vary a lot. Typically, though, a heat pump costs around half as much for heating as gas. If, instead of exporting your excess rooftop solar output, you use it to run a heat pump, I calculate it will be up to 90 per cent cheaper than gas.

Heat pumps are also good for the climate. My calculations show a typical heat pump using average Australian electricity from the grid will cut emissions by about a quarter relative to gas, and three-quarters relative to an electric fan or panel heater.

If a high-efficiency heat pump replaces inefficient gas heating or runs mainly on solar, reductions can be much bigger. The gap is widening as zero-emission renewable electricity replaces coal and gas generation, and heat pumps become even more efficient.

Horizontal bar chart showing cost savings for a typical home using electric and split systems for heating compared to gas heating
Data: State of Victoria Gas Substitution Roadmap 2022, CC BY

How do heat pumps work?

Heat pumps available today achieve 300-600 per cent efficiency – that is, for each unit of electricity consumed, they produce three to six units of heat. Heat pumps can operate in freezing conditions too.

How is this possible, when the maximum efficiency of traditional electric and gas heaters is 100 per cent, and cold air is cold?

It’s not magic. Think about your fridge, which is a small heat pump. Inside the fridge is a cold panel called an evaporator. It absorbs heat from the warm food and other sources because heat flows naturally from a warmer object to a cooler object. The electric motor under the fridge drives a compressor that concentrates the heat to a higher temperature, which it dumps into your kitchen. The sides and back of a typical fridge get warm as this happens. So your fridge cools the food while heating the kitchen a bit.

How heat pumps can cut energy costs by up to 90 per cent
Domestic heat pumps can reduce energy costs. Image: Envato.

A heat pump obeys the laws of thermodynamics, which allow it to operate at efficiencies from 200 per cent to more than 1000 per cent in theory. But the bigger the temperature difference, the less efficient the heat pump is.

If a heat pump needs to draw heat from the environment, how can it work in cold weather? Remember your fridge keeps the freezer compartment cold while pumping heat into your kitchen. The laws of physics are at play. What we experience as a cold temperature is actually quite hot: it’s all relative.

Outer space is close to a temperature known as absolute zero, zero degrees Kelvin, or –273℃. So a temperature of 0℃ (at which water freezes), or even the recommended freezer temperature of -18℃, is actually quite hot relative to outer space.

The main problem for a heat pump in “cold” weather is that ice can form on its heat exchanger, as water vapour in the air cools and condenses, then freezes. This ice blocks the airflow that normally provides the “hot” air to the heat pump. Heat pumps can be designed to minimise this problem.

How do you choose the right heat pump for your home?

Selecting a suitable heat pump (more commonly known as a reverse-cycle air conditioner) can be tricky, as most advisers are used to discussing gas options. Resources such as, and the popular Facebook page My Efficient Electric Home can help.

All household units must carry energy labels (see the more stars the better. The independent FairAir web calculator allows you to estimate heating and cooling requirements of a home and the size needed to maintain comfort.

Energy rating label for reverse-cycle air conditioner showing performance for different climate zones
The government is phasing in this climate zone label to replace the old star rating label on reverse-cycle air conditioners. Unfortunately, the phase-in is slow, so many products still do not show climate-related performance differences. Author provided

Bigger heat pumps are more expensive, so unnecessary oversizing can cost a lot more. Also, insulating, sealing drafts and other building efficiency measures allow you to buy a smaller, cheaper heat pump that will use even less energy and provide better comfort.

When using a heat pump, it is very important to clean its filter every few months. A blocked filter reduces efficiency and the heating and cooling output. If you have an older heat pump that no longer delivers as much heat (or cooling), it may have lost some refrigerant and need a top-up.

About the author: Alan Pears is senior industry fellow at RMIT University

This article on focused on the effect of heat pumps on energy costs is republished from The Conversation under a Creative Commons license.

Further reading: Temperature-adapting glass from Singapore could help cut energy costs.

Alan Pears

Alan Pears

Alan Pears is one of Australia's leading energy efficiency experts. He has worked in the sustainable energy and environment fields since the late 1970s, and been an expert adviser to federal, state and local governments across Australia, as well as community groups and the private sector. He is a regular commentator on everything from power-saving fridges to big-picture energy policy on radio, TV, newspapers and online, including appearances on ABC TV shows The New Inventors, Difference of Opinion and 4 Corners. Recent work has included being a judge of the annual Energy Efficiency Council Awards; co-authoring extensive industry energy information resources for the federal government's Energy Efficiency Exchange website and other organisations; and being a consultant and adviser to the not-for-profit Australian Alliance for Energy Productivity. He has worked on a number of projects for the RACE for 2030 Cooperative Research Centre. He is a member of the Board for the Voluntary Carbon Markets Association; and a member of the Advisory Board for the Climate Alliance. Until 2012 he was the Associate Director, RMIT Centre for Design. He was a part-time senior lecturer in environment and planning until mid-2015, and is now a Senior Industry Fellow at RMIT as well as a Fellow at the University of Melbourne's Climate and Energy College. While working for the Victorian government in the 1980s, he helped develop and implement programs such as the Home Energy Advisory Service, public information and education, appliance energy labelling and mandatory building insulation regulations. He has maintained an active involvement in these areas. From 1991 to 2015, Alan was co-director of Sustainable Solutions, an environmental consultancy, and has been involved in building energy and environmental rating and regulation, green building projects, educational software, green appliance development, industrial and business energy and environmental management, and policy analysis. He continues to consult, mainly to community groups, governments and industry associations. He writes for The Conversation.


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