Ofgem’s latest price cap landed on 1 July, and the headline is a 13 per cent jump in typical bills. That’s the kind of number that makes anyone with a heat pump, or anyone thinking about getting one, stop and check the sums.
The concept of higher electricity prices sounds like bad news for technology that runs on electricity. However, there’s a twist: the numbers behind the July cap can actually work in favour of heat pumps.
Gas prices rose far more sharply than electricity prices this quarter, which narrows the gap between the two fuels. That gap is an important factor when it comes to heat pump running costs, so it’s worth exploring further. Keep reading to find out more.
What’s changed in the July 2026 price cap?
From 1 July to 30 September, the price cap for a typical dual-fuel household on Direct Debit is £1,862 per year, up from £1,641 in the previous quarter. Ofgem has also revised the typical usage figures it uses to calculate the headline number, resulting in a second, lower figure of £1,663. Both describe the same underlying unit rates, just against different assumptions about how much energy an average home uses.
Those unit rates are the numbers that actually matter for a running cost comparison. Electricity now costs 26.11p per kWh, up from 24.67p. Gas costs 7.33p per kWh, up from 5.74p. In percentage terms, gas rose by around 24-28 per cent this quarter while electricity rose by roughly 5-6 per cent.
What is the ‘spark gap’ and why does it matter for heat pumps?
The industry calls the ratio between electricity and gas prices the ‘spark gap’. A heat pump has to overcome that gap through efficiency. Because it moves heat rather than burning fuel, it can produce three to four units of heat for every unit of electricity it uses. The lower the spark gap, the easier that hurdle is to clear.
Do the maths on this quarter’s cap and the spark gap comes out at around 3.6:1, down from close to 4.3:1 in the previous quarter, which is a meaningful shift. It means a heat pump now needs a lower efficiency multiple to match a gas boiler on cost than it did three months ago, even though every household’s bill has gone up in cash terms.
“When you look at the figures, the headline figure was 13 per cent across a dual-fuel bill, but actually it’s skewed more towards gas than electricity,” says Phil Steele, future technologies evangelist at Octopus Energy. “Gas has increased a lot more than electricity. What that means is that your gas has become much more expensive and the heat pump running off electricity is now cheaper to run than a gas boiler. That spark gap has really narrowed.”
Heat pump vs gas boiler: Running costs compared
Run a well-installed heat pump with a coefficient of performance (COP) around 3.5 against a modern gas boiler on the new standard tariff rates, and the two come out roughly level. Some homes will find the heat pump edges ahead, while others will find it costs marginally more, depending on the specifics of the property and the system.
That ‘roughly level’ result is itself a shift from where things stood a year or two ago, when a wider spark gap made heat pumps a harder sell on running costs alone. It’s also a reminder that the standard tariff comparison is the baseline case, not the best case.
For more about how the costs stack up, read our guide on heat pumps vs gas boilers.
Do off-peak and heat pump tariffs tip the balance?
Standard variable tariffs aren’t the only option, and they rarely make the strongest case for a heat pump. Suppliers including Octopus Energy offer dedicated heat pump and time-of-use tariffs, with cheaper rates overnight or during off-peak windows. Because heat pumps work well running steadily rather than in short bursts, they’re well suited to soaking up electricity when it’s cheapest.
“If you have got a heat pump, being on the standard flexible tariff is probably not the right thing,” says Steele. “You’d be better off going onto our Cosy tariff, which has cheaper periods to improve the economics even more.”
Households on one of these tariffs typically see a clearer cost advantage over gas than the standard tariff numbers suggest. Where the standard tariff comparison sits close to breakeven, a well-matched off-peak tariff usually pushes the balance firmly in the heat pump’s favour.
Do I need insulation for the heat pump to work?
None of these numbers hold if the property is leaking heat as fast as the system can produce it. A heat pump delivers warmth gradually, at lower temperatures than a gas boiler, so it depends on a home that can hold onto that heat. Good loft and cavity wall insulation, plus draught-proofing, all help the system run at a higher COP and stay closer to the top end of that three-to-four-units-of-heat range.
Skip the insulation and the running costs tell a different story. The heat pump has to work harder to compensate, electricity use climbs, and the savings that looked strong on paper start to evaporate.
How to check if your heat pump is running efficiently
Most modern heat pumps report their efficiency, usually as COP or SCOP. COP shows the system’s current or recent performance, while SCOP gives a seasonal average across the year.
“The main thing to be aware of is the difference between COP and SCOP,” says Steele. “In the winter, your COP might be down to 2.8, and you might get worried, especially if you had a heat pump installed in November or December. Seasonal COP averages that out over 12 months. You might get 2.8 in the winter and 3.5 in the summer, so knowing what that seasonal figure is is more interesting than the instant efficiency.”
Is the £7,500 Boiler Upgrade Scheme grant still worth claiming?
Running costs are only half the equation. The Boiler Upgrade Scheme still offers £7,500 towards the cost of an air source or ground source heat pump for homes in England and Wales replacing a gas or oil boiler, and that figure hasn’t changed with the July price cap.
From 21 July, a temporary £9,000 grant becomes available specifically for off-gas-grid homes currently heating with oil or LPG. Homes on mains gas will continue to claim the standard £7,500. For most households, the grant remains a straightforward way to close much of the gap between a heat pump and a high-end boiler on upfront cost, regardless of how the running cost comparison plays out.
So, will a heat pump still save you money after July?
The answer now depends more on your tariff and your home than on the headline price cap rise. On a standard tariff, a well-installed heat pump in a reasonably insulated home sits close to cost-neutral against gas, a modest win for some households, a modest loss for others. Add an off-peak or dedicated heat pump tariff, and the case strengthens noticeably. Add poor insulation or an undersized, poorly commissioned system, and it weakens just as fast.
What’s clear is that the direction of travel is positive. Gas has risen faster than electricity this quarter, narrowing the spark gap that’s long been the biggest obstacle to heat pump economics in the UK. If that trend continues, the running cost argument for switching only gets stronger from here.
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