British Gas starts price war with Octopus over heat pumps

BRITISH GAS has kicked off a price war for heat pumps as the drive to replace gas boilers gathers pace.

Britain’s largest household energy supplier said it will price match any offer by a rival company for accredited installations.

It has set a starting price of £2,999 per installation for an air source heat pump – which is £1 lower than the £3,000 starting prices for a standard installation offered by rival Octopus Energy.

That price does not reflect the total cost of installing heat pumps, as it factors in government grants currently on offer for £5,000 to £6,000 per installation. The Government wants to rapidly increase the number of heat pumps being installed, as part of major efforts to replace gas boilers to cut carbon emissions.

Heat pumps draw warmth from the outside air and run on electricity, an increasing proportion of which comes from green sources such as wind and solar power.

A price war among major suppliers could help bring down costs which have been considered prohibitively high for many households.

Andrew Middleton, managing director of British Gas’s new net zero business division, said: “Heat pumps are an essential part of the UK’S journey towards a decarbonised future. We recognise that many households are being cautious with their spending in the current climate and want to do all we can to make this technology more affordable – so that those customers who can make the move to low carbon heating feel compelled to do so now.”

British Gas, which is owned by the FTSE 100 company Centrica, said it has installed 2,300 heat pumps so far.

Ministers want 600,000 heat pumps to be installed each year by 2028, compared to about 40,000 in 2021.

Under the Government’s Boiler Upgrade Scheme, homes can get grants of £5,000 for an air source heat pump, £6,000 towards a ground source heat pump and £5,000 for a biomass boiler. Lord Callanan, business and energy minister, said: “It is fantastic that homeowners across England and Wales will benefit from the clean, efficient energy that heat pumps deliver and at a much more competitive price than they would have been sold for just a few years ago.”

Octopus Energy, now the country’s third largest household supplier after its takeover of Bulb last month, said it was “delighted” at the competition on heat pump sales.

Rebecca Dibb-simkin, global product director at Octopus Energy, said: “We often disagree with the incumbents but on this occasion we’re delighted – unleashing market forces is what’s needed to quickly bring down prices and roll out heat pumps across the country. We’re more than happy to enter a price war over green heating with British Gas – bring it on.”

Home heating is currently one of the largest sources of carbon emissions, as most homes are heated by methane gasfired boilers.

This will need to change in line with the Government’s legally binding target of net zero carbon emissions by 2050.

As well as heat pumps, boilers fed by clean-burning hydrogen are also being considered as a possible alternative.

This is further behind than heat pumps, however, as hydrogen is not yet produced in large volumes and tests are still being carried out to determine how easily it can be used.

As the country’s largest household energy supplier, British Gas sells gas and electricity to more than 7.4m households. The division’s profits are expected to have dipped during 2022 due to warmer weather.

However, at the group level parent company Centrica last week forecast an eightfold rise in annual profits for 2022, boosted by higher wholesale gas and electricity prices.