The Electricity Price Paradox: Can Heat Pumps Make Economic Sense in Ireland?

Ireland’s heat pump dilemma

At BCR Comply, we want to help deliver building retrofits at scale across Ireland. Electrifying space and water heating is an important part of that transition. Heat pumps can reduce energy use and emissions, but homeowners and businesses also need a financial case they can understand.

The electricity price paradox is straightforward: a technology can use energy efficiently without always being the cheapest way to heat a particular building. High electricity prices relative to alternative fuels can weaken the incentive to switch. That does not make heat pumps universally uneconomic; it makes affordable electricity, suitable buildings and good system design essential to the discussion.

The homeowner perspective: two illustrative scenarios

These are hypothetical examples, not customer testimony or measured case studies. They illustrate decisions a homeowner might face rather than establish typical costs or outcomes.

The reluctant convert

Imagine a homeowner with an oil boiler whose property has been assessed as suitable for a heat pump. Using their own fuel prices and an installer’s realistic seasonal performance estimate, they find that annual heating costs could be similar after switching. A grant may help with the installation, but a limited running-cost saving could still make the decision difficult. Another household, with different tariffs or a less efficient boiler, could reach a different conclusion.

The defensive upgrade

Consider a long-term ground-source heat pump user exploring solar PV to reduce exposure to electricity prices. Self-generated power may reduce purchased electricity when generation and demand coincide, but it requires investment. Winter heating demand and solar output do not necessarily align; sizing, controls, storage, export payments and the household’s usage pattern all affect the economics. Solar is an option to assess, not a guaranteed solution to heating bills.

The running-cost calculation

A heat pump transfers heat rather than simply converting electricity into heat. Its coefficient of performance (COP) is the ratio of useful heat delivered to electricity consumed at particular operating conditions. A COP of 3.5 means 3.5 kWh of heat for each 1 kWh of electricity—not an efficiency “gain” of 350%. COP varies with conditions, including outdoor and flow temperatures. For annual running costs, use a realistic seasonal performance factor for a clearly defined system boundary, including relevant auxiliary electricity, rather than a point-in-time COP.

Illustrative calculation only: at an assumed electricity unit price of 40 cents/kWh, dividing by performance of 3.5–4.0 gives approximately 10–11.4 cents per kWh of useful heat (40 ÷ 4.0 = 10; 40 ÷ 3.5 ≈ 11.4). These are assumptions, not verified September 2026 tariffs, a promised seasonal performance range or an estimate of a household’s total bill.

For a fair comparison, divide the alternative fuel’s price per kWh by the boiler’s seasonal efficiency as a decimal. Oil prices also need conversion from litres to energy units. Do not compare the price of raw fuel directly with the price of useful heat. Annual heat demand, hot water use, distribution losses, controls and actual operating temperatures matter.

Compare tariffs on the same basis, including VAT, discounts and time-of-use rates where applicable. Account for standing charges where they change—for example, a gas standing charge may remain if gas is still used for cooking. Include installation costs after any eligible grants, finance, maintenance, and any necessary insulation, radiator or electrical upgrades. Building heat loss and system suitability should be assessed before choosing equipment. Carbon outcomes also depend on performance and the electricity supplying the system; cost savings and emissions savings are not interchangeable.

International comparisons need like-for-like evidence

Countries differ in their generation mix, network costs, taxes, supports and household consumption. A meaningful tariff comparison needs dated, comparable data covering the same consumption band and tax treatment. Without that evidence, headline country rates can mislead. We have omitted the draft’s unsourced international price table rather than present it as verified September 2026 pricing.

The underlying question remains important: how can Ireland translate investment in wind, solar and the wider electricity system into affordable, predictable energy for households and businesses? Renewable resources offer opportunities, but the cost of networks, balancing, investment and supply also has to be considered.

Wholesale pricing: the taxi rank analogy

Imagine a simplified auction for ten taxi journeys. Eight drivers offer trips at €20 each and two offer them at €200. If nine journeys are needed and the auction pays a uniform clearing price, the accepted offers clear at €200. If only eight are needed, the expensive offer need not set the price. The example illustrates marginal pricing; it is not a description of real taxi fares.

In wholesale electricity auctions, the marginal accepted offer can similarly set the clearing price for the relevant period. Gas-fired generation can influence that price when needed to meet demand, but gas does not always set it, nor must the marginal plant be a peaking plant. Demand, available generation, interconnection and market conditions all matter.

The analogy has limits. Ireland’s electricity trading arrangements include day-ahead, intraday and balancing markets, not one price applied unchanged to every transaction. Wholesale clearing prices are distinct from a generator’s eventual contracted revenue: hedges, power purchase agreements and support arrangements can alter what generators receive. It is therefore inaccurate to say every wind or solar generator always receives a gas-linked price.

Retail tariffs are different again. Suppliers’ purchasing contracts and hedging, network charges, taxes, levies and other costs affect customers’ bills, so a wholesale price change does not necessarily pass through immediately. Renewable electricity tariffs and longer-term clean-power contracts can exist. The policy challenge is how to share the benefits of lower-cost generation while funding a reliable system and managing price risk fairly.

Policy takeaway: affordability and practical delivery

Capital grants can help households take the first step, but predictable running costs also matter for sustained retrofit adoption. BCR Comply advocates affordable electricity alongside clear consumer information, high-quality installation and practical support for retrofit delivery.

Longer-term renewable contracts and measures that reduce exposure to fossil-fuel price volatility deserve consideration alongside network investment and smarter energy use. No single market change guarantees lower bills or delivery of climate targets. Progress depends on combining sensible energy policy with building-specific assessments and well-managed projects.

Talk to BCR Comply

Our software helps retrofit teams organise project information, site evidence and compliance workflows. If you are a property owner, retrofit contractor or housing provider planning energy upgrades, get in touch with BCR Comply to discuss how we can support your project delivery.

Call 071 930 0517, email sales@bcrcomply.com, or find us on Holborn Street, Sligo, Ireland.