@rob-of-york 

Another good question.  Until now most quotes were in practice obfuscated by new cylinder and replacement radiators, but it is now becoming more common to omit these, so I think thing may start to become a bit more transparent!

There are some legitimate factors:

• MCS overheads (dont know how much)
• Survey
• electrical circuit
• bits and bobs (filter, flexi pipes, control unit if not included in base price, etc
• concrete base for outdoor unit
• Routing of pipework from outside can be challenging
• Configuration/balancing (almost nobody bothers balancing meaningfully with a boiler)
• Risk
• Probably lower success rate with quotes

In fairness you also currently need to be a whole lot smarter to design and install an ashp system successfully than are some of the muppets that install boilers.  There is a premium to pay for that.  

Does that account for it, Perhaps someone from the industry would like to comment!

Posted by: @jamespa

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There are some legitimate factors:

• MCS overheads (dont know how much)
• Survey
• electrical circuit
• bits and bobs (filter, flexi pipes, control unit if not included in base price, etc
• concrete base for outdoor unit
• Routing of pipework from outside can be challenging
• Configuration/balancing (almost nobody bothers balancing meaningfully with a boiler)
• Risk
• Probably lower success rate with quotes

It seems a quite comprehensive breakdown. I will try to build on it 

• MCS overheads - maintain the certification, create all the paperwork.   
• Survey - could be seen as MCS. I believe they cannot do work without a survey. For gas there's no insistence on any survey
• electrical circuit - Not too different from gas, but some heatpump manufacturers have additional requirements. 
• bits and bobs (filter, flexi pipes, control unit if not included in base price, etc - clearly more than gas, some installs may require more pipework. Also the controls are usually more capable than gas and need wiring, sometimes manufacturers insist it needs to be done by a qualified electrician
• concrete base for outdoor unit - Clearly gas does not need it, but installation on wall bracket removes much of the cost  
• Routing of pipework from outside can be challenging - yes, giving the noise restrictions, heatpumps tend to have a longer pipework run to the back of the building. With gas, the only restriction seems to be to not point at a window. 
• Configuration/balancing (almost nobody bothers balancing meaningfully with a boiler) - agreed, a heatpump low operating temperature and the fact electricity is 3-4x more expensive than gas means this needs more attention than gas. But if the client agrees to b e left with all valves opened, it is not onerous. 
• Risk - I think this is only related to maintaining MCS, since the risk to an installer is probably similar to gas installs 
• Frequently the heatpump install is replacing a combi boiler and a HWC is needed. 
• Probably lower success rate with quotes - yes, the customer journey is much more complex than for gas, so the rate from estimate to actual completed work must be much higher than for gas.
• I would also add that it generally takes a lot longer to address customer queries and to explain how to operate it. Perhaps as heatpump customers are more informed. 
• I believe the fact staff needs training to be able to do the heatpump install also increases cost  
• The other factor is competition. With a gas boiler install, the competition is higher as there are more people qualified to do the installs.  

A few more thoughts:

I think MCS and the BUS grant require an insurance backed guarantee for two years - that needs to be funded.

Whereas a gas system can be designed by rule of thumb and over sizing is not an issue, a quality HP design requires an accurate heat loss survey. Most installers, for reasons of time, need to invest in third party software to minimise design time and maximise accuracy. Most software packages require subscriptions to be paid for usage and, from what I have been told, that is becoming pretty expensive both in hardware and in actual software costs. These cost needs to be recovered. 

The very act of of doing a heat loss survey, creating the report in a format suitable for customer consumption (largely automatic, admittedly) and then a, possibly, lengthy dialogue with the customer as to what it all means, is more time (and hence, cost) which needs to factored. 

There is, possibly, more post installation time required to address teething problems, interaction with the customer, submission of reports to MCS and for obtaining the money from the BUS grant. The onus is upon the installer to get the grant, not the customer.

General mitigation of risk - with a gas boiler, if it doesn't warm the house or certain rooms are cold, just go back, wack things up a bit and tweak a few valves. With a heat pump, if you get it wrong you could end up in very deep water. There will always be installations that don't meet customer expectation or which don't meet the installer expectation either. The time and material cost of mitigating such issues need to be built into the operating cost of the business. In general, that becomes a transparent levy on all work undertaken.

@ian33a 

great point on the estimating software (and potentially the heat loss software). I have the sense that this enables a lot of sales - as the concept of paying for a survey without a prior free estimate is bound to be a showstopper.

As for getting the grant, I believe this was made straightforward (and we had various contracts making us liable for the grant value in case the application failed).  

Posted by: @ian33a

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Whereas a gas system can be designed by rule of thumb and over sizing is not an issue

Only because we have all tacitly accepted that paying 10% more than we need for running it is OK, and it doesnt matter if the 'condensation' feature which was so heavily promoted in the early 2000s doesnt actually function because the system has been misconfigured.!

When energy prices go up 5% its a disaster, but we are (almost) all happy 10% more than we need to for our gas heating.  Go figure!

One area where the whole process seems to be broken to me is the lack of separation between (i) heat loss survey and (ii) installation. These require two very different skill sets and could be done by different companies.

From a customer perspective, it would be far better if the homeowner could pay for a single heat loss survey that provides the total heat loss broken down into thermal conduction, thermal bridging, and ventilation losses, as well as the room-by-room heat loss values, and also suggested radiator upgrades to achieve various target radiator temperatures at the design temperature. This could be paid for once and remain valid for a long period of time provided that no retrograde steps were taken with the insulation. Companies could specialise in providing this service, and they would be the only ones paying for the expensive software needed, but would make good use of it as that would perhaps be the only job that they do. Their reputation would depend on how well they do the heat loss surveys, and they would get plenty of practice at it, and be able to invest in the expertise needed. This should, one would hope, result in higher quality. 

Once a heat loss survey had been paid for, the customer could take this to multiple installers, and they could visit the property and quote for an appropriate heat pump and installation. The time that the installer needs to spend on a quote that is potentially not taken up would be much shorter, and they wouldn't need to invest in the expensive software and expertise to do heat loss surveys when most of their time is spent doing installations. The customer would not need to pay for the heat loss survey multiple times to get a set of competitive quotes. 

It seems to me that the current arrangement is anti-competitive, which benefits no one, especially the consumer who is either forced to pay multiple times for heat loss surveys or make a decision on who to go with without obtaining a set of competitive quotes.

@Rob-of-York, as James says, this is a really good (and valid) question, because I can completely understand a lot of the explanations installers give for why heat pumps cost more than boilers, but I’m still perplexed by some of the pricing I see.

There are obviously legitimate additional costs. A decent heat pump job should involve a proper survey, room-by-room heat-loss work, system design, emitter assessment, electrical work, commissioning, balancing, controls setup, a mountain of MCS/BUS paperwork, warranty provision and considerably more thought than simply replacing one boiler with another. As @JamesPa and others have pointed out, part of the reason boiler replacements can look so cheap by comparison is that we’ve spent decades accepting heating systems that were barely designed at all. Stick in an oversized boiler, make sure the radiators get hot and everyone goes home. Heat pumps are far less forgiving of that approach. We will all know and accept this.

But even allowing for all of that, some numbers still make me scratch my head. Out of curiosity recently I put the details of a bungalow we used to live in through Heat Geek’s online estimator. It was under 100m2, a very straightforward property, the estimate required no new cylinder and only one radiator change, yet the indicative price came back at more than £10,000. I appreciate completely that an online estimator isn’t a final survey or quotation, and I’m not singling Heat Geek out because they are very open about doing things properly, but I remember looking at it and thinking, £10k+ for that? Where is all that money actually going?

That’s really the part of this discussion that interests me. I have absolutely no issue with excellent installers making a good living and charging properly for skilled work. In fact, I’d rather pay more for somebody who knows exactly what they’re doing than save £2,000 and spend the next decade regretting it. Having said that, we paid at the top end and still got a subpar install (but that's a conversation for another day). But I’d still like the cost stack to be much more transparent. If a relatively simple installation costs £12,000, tell me how much is equipment, materials, labour, electrical work, design, MCS/BUS administration, warranty and aftercare. I suspect homeowners would be far more accepting of the price if they could actually see what they were buying.

I also think @JamesPa makes a strong point around all the work installers do before they ever win a job. Proper surveys and designs cost money, and somebody ultimately has to pay for the ones that don’t convert. That leads me back to something I’ve become increasingly interested in... why are heat loss assessment, system design and installation still almost always bundled together?

I’d much rather see a homeowner commission a proper independent design that belongs to them factoring in heat loss, room-by-room figures, emitter requirements, design temperatures, hydraulic requirements and the basic system specification. They could then take that to three competent installers and ask them to quote for delivering it. The installer should obviously be able to challenge something they believe is wrong before accepting responsibility, but at least everyone would be pricing broadly the same job rather than three businesses each carrying the cost of producing their own design simply to compete for the work. I don't know how others feel about that.

It could also help with another issue I have with the current market. If we’re being asked to accept a significant heat pump premium because these installations require better design, greater competence and more careful commissioning, then surely the resulting installations should be consistently excellent. Yet we still see homeowners paying premium prices for fairly mediocre systems. That’s where the argument becomes much harder for me to accept. Specialist pricing should buy specialist outcomes, but these two things seldom align.

BUS complicates things further. I’m not saying the grant is simply being swallowed by installers, because I don’t have evidence to make that accusation, but a £7,500 contribution inevitably changes the psychology of pricing. The homeowner sees the amount they have to find after the grant, while the taxpayer is still paying the rest. That makes transparency more important, not less.

Good topic.

The concept of one agency doing the heat loss survey and another agency doing the installation is an interesting one.

In theory, I agree that it is a good idea but, in the latter stages of my working life I owned and ran a home improvement company. Admittedly, the work that we did seldom attracted the prices of a heat pump installation but, would I have accepted the findings of a third party and blindly installed based upon what they quoted while accepting all of the during and post installation risk? I would have been insane to do that and never would !

We are currently in a situation where one installer is advocating a certain heat loss and has designed a system with his calculations as the centre of the proposal and will run the whole job and own it. We also have a heat loss survey from a consultant who suggests a heat loss which is about 30% higher than the first installer. He is saying that he stands by his numbers and his business model is  to engage a third party installer to deliver a working solution but that the installer will take all responsibility for the installation and the ongoing support. So, he just walks away having, effectively, secured a viable sales conduit. This scenario, IMHO,  is close to the concept of agencies just doing heat losses.

The first approach , I can accept as a viable business proposition. The latter approach doesn't sit comfortably with me as a consumer. That I have done my own heat loss and I come out almost slap bang in the middle of the two surveys just muddies the waters further ! 

If a consultant advocates something, I strongly believe that they should take on the risk or have a design provision in the contract to protect both the third party installer and the end customer.

@ian33a A definition of a consultant: A person who asks to borrow your watch to tell you the time.

@toodles That's about right: early in my my main career I did a lot of consulting work in the technology industry. I was pretty inexperienced in those days and what I learned with one customer I then leveraged with another while not letting on that I had just learned what I was selling as a service. The trick was to stay one step ahead of whoever you were selling your services to. 

In the HP segment, the majority of the residential customers have little or no knowledge of what they want to buy and what is important, so the market is a viable proposition for consultants who appear to be experts. Trouble is, if those consultants come up against people (be they customers or installers) with knowledge, understanding or can apply practicality, the house of cards can quickly come tumbling down.

@ian33a Indeed, when I was having my Tesla Powerwall #2 installed, the company installing were the same as the one who installed my ASHP a few months earlier and the engineers remembered me. At one point one of them said to me that it was refreshing to meet a customer who understood the equipment and knew what they wanted as usually, their customers who were mostly considerably younger than myself had little or no idea or knowledge of the equipment being installed. 😳 Regards, Toodles.