Oil and gas · Oil and home heating
Heating oil vs heat pump: costs for an off-grid home
For homes away from the gas grid, the choice is not just the price of oil against the price of electricity. This guide converts both systems into a cost per useful kWh of heat and explains the installation and grant differences.
Updated 23 September 2026 · energy.org.uk editorial team
The short answer
A heat pump can use much less purchased energy than an oil boiler because it moves heat rather than creating all of it by burning fuel. It can also remove the need for oil deliveries and an oil tank. However, installation may require an outdoor unit, a cylinder, emitter changes and a higher upfront budget.
An existing efficient oil boiler may sometimes have a lower short-term running cost, depending on the delivered oil price and electricity tariff. The right calculation uses the home’s useful heat demand, the boiler’s real seasonal efficiency and the heat pump’s predicted SPF.
At a glance
| Question | Heat pump | Heating oil boiler |
|---|---|---|
| Fuel | Electricity plus environmental heat | Delivered kerosene heating oil |
| Billing | Metered continuously through the electricity account | Bought in deliveries, often at changing spot prices |
| Storage | Usually hot-water storage for an air-to-water system | Oil tank plus fuel stock on the property |
| Efficiency measure | Annual SPF | Seasonal boiler efficiency |
| Local emissions | No combustion at the home | Carbon dioxide and other combustion products at the home |
| Maintenance | Heat pump and wet-system checks | Boiler servicing, tank condition and fuel system checks |
| Current England/Wales grant | Up to £9,000 for an eligible off-gas-grid oil- or LPG-heated property until 31 March 2027 | No equivalent grant to replace an oil boiler with another oil boiler |
Convert oil into useful heat
Heating oil is sold by the litre, while electricity is sold by the kilowatt hour. Convert both into useful heat before comparing them.
A practical convention used by Cambridgeshire County Council is 10.3 kWh of fuel energy per litre of heating oil. The exact figure varies with fuel specification and whether gross or net calorific value is used, so the calculator should identify this as an assumption.
useful heat per litre = 10.3 kWh × boiler seasonal efficiency
oil cost per useful kWh = oil price per litre ÷ useful heat per litre
At 85% boiler efficiency, one litre would deliver about 8.76 kWh of useful heat under that convention. Use the household’s actual delivered price including VAT and fees, not a national headline that may exclude location or order size.
Calculate heat-pump running cost
heat-pump cost per useful kWh = electricity unit rate ÷ SPF
annual heat-pump electricity use = annual useful heat demand ÷ SPF
An installer should calculate the proposed system’s design SPF for the property. A generic brochure coefficient of performance is not a substitute for annual performance based on local weather, flow temperature and hot-water demand.
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Heating oil vs heat pump running costs
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How this was calculated
We estimate how much heat your home needs in a year: from your own fuel use if you gave it, otherwise from typical use for the type and size of home, anchored on Ofgem's typical household gas use.
Your current system turns fuel into heat at about 85% efficiency. A heat pump typically delivers about 2.8 units of heat for each unit of electricity across a year, in line with UK field trials, and a little less for hot water.
Prices: current Ofgem price cap, GB average, Direct Debit, for electricity and gas. Standing charges are left out unless you choose to remove gas. Installation costs are not included.
Method version 1.0, checked 2026-10-02. Ofgem typical use · Electrification of Heat trial
Installation cost and the current grant
Energy Saving Trust currently gives about £12,000 as a typical air source heat-pump installation cost, before any support. Property-specific work can push the quote above or below that figure.
The Boiler Upgrade Scheme is open in England and Wales. From 21 July 2026 until 31 March 2027, eligible off-gas-grid properties heated by oil or LPG may receive £9,000 towards an air-to-water or ground-source heat pump. The standard grant for an eligible air-to-water or ground-source heat pump is £7,500. The additional £1,500 is not available merely because a home is rural: it must meet the scheme’s current fuel and gas-connection conditions.
Scotland and Northern Ireland use different support arrangements. Check the relevant national scheme before estimating your installation cost.
Practical differences for an off-grid property
Fuel deliveries and price timing
Oil users choose when and how much to order, subject to tank capacity, supplier availability and minimum deliveries. The price paid can depend on region, order size and timing. A heat pump replaces that purchasing pattern with metered electricity use.
Tank condition and space
Keeping oil means retaining a compliant tank and safe delivery access. Replacing it with a heat pump may free some space, but the new system needs a suitable outdoor position and most air-to-water systems need a hot-water cylinder.
Electrical supply
Rural properties should confirm the electrical supply is suitable. The installer may need to coordinate with the distribution network operator. A power cut affects most modern oil heating controls and pumps as well as a heat pump, although the electrical demand and backup arrangements differ.
Heat emitters and controls
An oil boiler may have been set to run at a high flow temperature. A heat pump usually performs better at a lower temperature for longer periods. The property may need larger radiators, improved controls or other system changes to deliver the same comfort efficiently.
Building fabric
A heat pump does not require a perfect home, but reducing avoidable heat loss can allow a smaller system and lower flow temperature. Ask for the heat-loss calculation first; then decide which insulation or emitter changes are necessary and cost-effective.
Which option may suit your home?
A heat pump may be a strong option if:
- the oil boiler or tank is due for replacement
- the current grant materially reduces the quote
- the home can be heated comfortably at an efficient flow temperature
- you want to remove fuel deliveries and on-site combustion
- there is suitable outdoor and indoor space
- you can obtain a clear system design with a credible predicted SPF
Retaining or replacing oil may be the practical short-term choice if:
- the existing equipment remains safe and efficient and the heat-pump project is not yet affordable
- urgent fabric, electrical or emitter work must happen first
- there is no compliant or practical location for the proposed heat-pump equipment
- the quoted design does not demonstrate that every room will reach its target temperature
Use the comparison as a sequence, not just a yes-or-no choice. A household may first reduce heat loss, improve controls and collect a year of oil-use data, then seek comparable heat-pump designs.
Questions to ask before switching
- How many litres of oil have we actually used in each of the last three years?
- Does that oil serve space heating, hot water, cooking or more than one building?
- What room-by-room heat loss has been calculated?
- What SPF and flow temperature does the proposed system use?
- Are radiators, pipework, cylinder and electrical work included?
- Who will decommission or remove the boiler and tank, and is oil disposal included?
- Has the installer confirmed the exact grant eligibility in writing?
- What will the home do for heating and hot water during installation?
Frequently asked questions
Is a heat pump cheaper than heating oil?
It depends on the delivered oil price, boiler efficiency, electricity tariff and heat-pump SPF. Convert both to cost per useful kWh rather than comparing pence per litre with pence per kWh.
Can a heat pump heat an older rural house?
Potentially, yes, if it is designed around the property’s heat loss and emitters. Age alone does not decide suitability. The required output, flow temperature, insulation opportunities, radiator sizes and installation constraints do.
Can an oil-heated home get the £9,000 grant?
An eligible property in England or Wales that is heated by oil or LPG and has no mains gas connection may qualify for the enhanced amount until 31 March 2027. The installer and property must satisfy all current scheme rules.
What happens to the oil tank?
Agree in writing whether the quote includes pumping out remaining fuel, safe disconnection, cleaning, removal and site making-good. Tank work should be handled by competent specialists.
Should I use one oil delivery to estimate annual demand?
No. Delivery size is not the same as consumption, and weather varies. Use several years of invoices or measured tank data where possible, adjusting for any other oil uses.