Heat Pumps for Commercial Properties: What the Installer Won’t Tell You

A Commercial Heat Pump Can Reduce Your Gas Bill by 50–70%. It Will Increase Your Electricity Bill by a Comparable Amount. The Net Saving Depends on the Ratio Between Your Gas and Electricity Unit Rates.

Commercial heat pumps are being vigorously promoted as the heating solution for the Net Zero transition. The technology works — a well-specified and properly installed air source or ground source heat pump delivers 2.5–4 units of heat for every unit of electricity consumed (a Coefficient of Performance, or COP, of 2.5–4). For a UK business currently heating with gas at 7p/kWh, replacing that gas consumption with heat pump electricity at 25p/kWh requires a COP of at least 3.6 to break even on running costs. Whether you achieve that — and what the capital cost recovery period looks like — depends heavily on factors the heat pump installer may not volunteer upfront.

This is not a reason to dismiss heat pumps. The technology is genuinely improving, government incentives exist to support commercial adoption, and in the right premises with the right specification, heat pumps make both financial and environmental sense. But the commercial heat pump conversation requires more rigour than the residential one — and the installer who is also selling you the equipment has a limited incentive to give you the critical analysis you need before committing £30,000–£200,000 of capital.

The Fundamental Economics: Gas Rate vs Electricity Rate

The financial case for a heat pump rests on a straightforward comparison:

Current gas heating cost: Consumption (kWh) × gas unit rate (p/kWh)

Heat pump running cost: Consumption (kWh) ÷ COP × electricity unit rate (p/kWh)

For running costs to be equal: COP required = electricity rate ÷ gas rate

At current typical UK SME rates (gas: 7p/kWh, electricity: 25p/kWh): COP required to break even on running costs = 25 ÷ 7 = 3.57

Modern air source heat pumps achieve seasonal COPs of 2.5–3.5 in UK commercial applications. Ground source heat pumps achieve 3.5–4.5. The critical word is “seasonal” — COP is not a fixed number. It varies with the difference between the outside temperature (heat source) and the system output temperature (heat distribution). On the coldest days in the UK, when heating demand is highest, COP is at its lowest — because the temperature differential between outside air and the heating system target temperature is greatest.

What this means practically: a heat pump that achieves a seasonal average COP of 3.2 will achieve a COP of 1.8–2.2 on very cold days — when you need the heat most — and a COP of 4.0–4.5 on mild days when the heating load is low. The seasonal average is the number that matters for running cost comparison, but the performance on cold days determines whether backup heating is needed and what that costs.

The Distribution System Compatibility Problem

This is the factor that catches most commercial heat pump installations: heat pumps deliver heat at lower flow temperatures than gas boilers. A gas boiler operates at flow temperatures of 70–80°C. Most air source heat pumps operate most efficiently at flow temperatures of 45–55°C; pushing them to 65°C+ significantly reduces COP.

Buildings with high-temperature distribution systems — conventional radiators sized for 70°C flow temperature — cannot simply replace a gas boiler with a heat pump and expect the same heating performance at lower flow temperatures. The radiators don’t emit enough heat at 45°C to maintain comfort conditions in cold weather.

The solutions are:

• Oversized low-temperature radiators: Replace existing radiators with larger ones sized for 45°C flow temperature. Adds capital cost (typically £500–£2,000 per radiator) but maintains the distribution system format.
• Underfloor heating: UFH operates at 35–45°C flow temperature — ideal for heat pump compatibility. In new builds or full refurbishments this is the preferred solution. Retrofit UFH in existing premises is disruptive and expensive.
• Fan coil units: Commercial fan coils can be configured for lower-temperature operation and are often the most practical retrofit solution in commercial premises — they can deliver adequate heat output at 45–50°C flow temperature and can be installed without the disruption of floor replacement.

The distribution system upgrade cost is additional capital that belongs in the heat pump ROI calculation but is sometimes omitted from installer proposals. A heat pump quote that doesn’t address distribution system compatibility — in a building with standard gas boiler radiators — is an incomplete proposal.

The Planning and Grid Connection Layer

Commercial heat pump installations face two additional hurdles beyond technical specification:

Planning consent: Air source heat pumps (ASHPs) have visual and acoustic characteristics that may require planning permission in some commercial settings — particularly in urban locations, conservation areas, and premises where the outdoor unit placement would affect neighbours. The permitted development rights for ASHPs in commercial premises are more restricted than for domestic installations. Allow 4–12 weeks for planning determination if required.

Grid connection capacity: A commercial heat pump sized to replace a gas boiler system adds significant electrical load to a property that previously had no electrical heating. A 100 kW heat pump input (delivering 250–400 kW of heat output at various COPs) requires 100 kW of electrical supply capacity — which may exceed the current agreed supply capacity of a commercial premises that previously ran an all-gas heating system. A DNO capacity check and potentially a grid connection upgrade (cost: £15,000–£80,000, timeline: 6–18 months) may be required before installation can proceed.

Government Incentives: The Boiler Upgrade Scheme and Beyond

The UK government’s Boiler Upgrade Scheme (BUS) provides grants for heat pump installation in both domestic and smaller commercial premises. As of 2024–25, the scheme provides £7,500 for air source heat pumps and £7,500 for ground source heat pumps in eligible properties.

The BUS is not available for all commercial properties — eligibility criteria apply around property type, current heating system, and EPC rating requirements. For larger commercial installations, the Industrial Energy Transformation Fund (IETF) and various Heat Network Investment Project (HNIP) mechanisms provide alternative support routes.

The commercial heat pump incentive landscape changes with each spending review. Current incentive availability should be confirmed with the installer and cross-checked against government guidance before factoring into the financial model — schemes open and close on timescales that outpace the procurement process for commercial installations.

When Commercial Heat Pumps Make Clear Financial Sense

There are specific commercial premises configurations where the heat pump business case is straightforwardly positive:

New build commercial properties: Designed with low-temperature UFH from the outset, correct insulation levels, and an electrical supply specified to support heat pump operation. The distribution system upgrade cost is zero because the system was designed for heat pumps. This is where the economics are strongest.

Premises with already-low gas consumption but high grid electricity: Businesses with small or efficient heating requirements but significant electricity loads (data centres, some manufacturing, LED-lit modern retail) have a different gas-to-electricity ratio than typical premises — the heating cost saving may be proportionally smaller but the overall energy management picture may still support heat pump transition.

Properties where gas supply is expensive or unreliable: Rural commercial properties on off-gas-grid supply (using oil or LPG) have a different baseline heating cost than mains gas users. LPG at 9–12p/kWh and oil at 6–9p/kWh (subject to significant price volatility) create a different break-even calculation that frequently favours heat pumps.

Larger portfolio operations with long-term decarbonisation commitments: Property companies, hotel groups, and institutional landlords with Net Zero targets may accept longer payback periods on individual installations in the context of a portfolio decarbonisation programme — where the environmental and regulatory compliance value of heat pump deployment is part of the return, not just the running cost saving.

What the Installer Won’t Always Tell You

Before committing to a commercial heat pump installation, ask specifically:

• What is the seasonal COP modelled for this specific site, using the local climate data and this building’s heat loss calculation?
• Is the existing distribution system compatible with low-temperature operation? If not, what is the upgrade cost?
• Does the current grid connection have sufficient capacity for the heat pump electrical input? Has a DNO capacity check been completed?
• What backup or top-up heating provision is included in the specification for very cold periods when COP falls below the break-even threshold?
• What does the maintenance contract cover and what does it cost annually?

If these questions haven’t been addressed in the proposal, the proposal is incomplete.

The Energy Contract Dimension

Switching from gas to heat pump heating changes your fuel mix fundamentally: gas consumption falls significantly, electricity consumption rises significantly. This change in your energy profile should be reflected in your energy contracts:

• Your gas contract may reduce to a much smaller annual volume — which affects your contract options and the available rates
• Your electricity contract needs to reflect the increased consumption — with the potential benefit that higher volume improves your unit rate
• The timing of this transition relative to your contract renewal dates matters — you don’t want to be locked into a large gas contract for a fuel you’re no longer consuming at the same rate

We help clients plan the contract transition around major energy system changes like heat pump installation — ensuring contracts are structured to reflect the new fuel mix from the point the system is commissioned.

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