Heat pumps for business premises

A heat pump extracts heat from the air, ground or water outside your building and concentrates it to heat your premises, rather than burning gas or oil. Businesses look at them to cut carbon emissions, get off gas, or make use of the Boiler Upgrade Scheme grant. This guide sets out how the running cost stacks up against a gas boiler, what the grant covers, and the planning, connection, VAT and business rates rules to check before you commit.

What is a commercial heat pump and how does it work?

A heat pump uses electricity to move heat rather than to generate it directly, so it produces more heat energy than the electricity it consumes. The three main types used on business premises are:

• Air source heat pumps (ASHP): take heat from the outside air. They are the most common type, cheaper to install than ground source, and can be fitted almost anywhere there is outdoor space or a suitable wall.
• Ground source heat pumps (GSHP): take heat from pipework buried in the ground, either in boreholes or horizontal trenches. They cost more to install because of the groundworks, but generally run more efficiently, since ground temperature is steadier than air temperature.
• Water source heat pumps: take heat from a river, lake, canal or borehole, where one is available nearby.

How much heat a heat pump produces per unit of electricity is described by its coefficient of performance (CoP), and its efficiency averaged across a whole heating season by its seasonal performance factor or seasonal coefficient of performance (SCOP). A higher number means more heat for the same electricity. The Boiler Upgrade Scheme requires a minimum SCOP of 2.8 for a heat pump to qualify, and real-world performance depends heavily on how well the system is designed, sized and installed, and on the flow temperature it runs at.

Is a heat pump cheaper to run than a gas boiler for a business?

It depends on the gap between your gas and electricity unit rates, and on how efficiently the heat pump actually runs. Gas costs less per kWh than electricity, so a heat pump has to make up the difference by producing several kWh of heat for every kWh of electricity it uses.

DESNZ’s figures for non-domestic customers in early 2026 (provisional, including the Climate Change Levy, excluding VAT) put small businesses at:

Fuel	Price (p per kWh)
Gas	4.77
Electricity	28.76

At those rates, electricity costs roughly six times as much as gas per kWh. A heat pump running at a seasonal performance factor of 6 would roughly match a gas boiler on running cost; below that, it costs more to run; above it, less. Our business heating costs guide walks through a worked example comparing a gas boiler, a heat pump and direct electric heating on the same building, using DESNZ’s price data as the inputs.

A few things move that comparison in a heat pump’s favour:

• A smaller gap between your gas and electricity rates. Check your own contract rather than relying on the averages above; our business electricity prices and business gas prices pages track current market rates.
• Lower flow temperatures. Heat pumps run most efficiently supplying water at 35 to 45°C rather than the 70°C-plus a gas boiler and older radiators are often set to. Underfloor heating or oversized radiators help.
• Good building fabric. A well-insulated, well-sealed building needs less heat overall, and copes better with the lower flow temperatures a heat pump prefers.
• Time-of-use tariffs. If your electricity contract has cheaper overnight or off-peak rates, you may be able to shift some heating demand to those periods. See our time-of-use tariffs guide.

Ask any installer to show their heat loss calculation and the SCOP they expect for your specific building, not just a manufacturer’s lab figure, and get that in writing.

Buildings that suit a heat pump best tend to share a few features: reasonable insulation, radiators or underfloor heating that can run at a lower flow temperature, and outdoor space or ground for the unit or ground loop. An old, poorly insulated building with high-temperature radiators can still take a heat pump, but may need fabric improvements or larger emitters first to get a good SCOP, which adds to the upfront cost.

How much does a commercial heat pump cost to install?

DESNZ publishes installed cost data from the MCS database, but its published cost statistics for heat pumps cover domestic retrofit installations, not non-domestic ones, so there is no official average figure for business installations to quote here. Cost on a commercial job depends heavily on the building’s heat loss, how much pipework or ductwork needs replacing, whether groundworks are needed for a ground source system, and the size and number of units required.

To compare quotes on a fair basis:

1. Ask each installer for a heat loss calculation for your building, not just a price per unit.
2. Get the expected SCOP and the design flow temperature for each quote, so you can compare like for like.
3. Check what is included: the heat pump itself, any buffer tank or cylinder, controls, and any work to radiators, pipework or ductwork.
4. Ask whether the quote is net of the Boiler Upgrade Scheme grant or before it.
5. Check the manufacturer’s and installer’s warranty terms.

Can my business get a grant for a heat pump?

Yes. In England and Wales, the Boiler Upgrade Scheme (BUS) gives eligible small and medium non-domestic buildings £7,500 off an air source or ground source heat pump, or £5,000 off a biomass boiler, paid directly to your installer. The scheme is run by Ofgem. Conditions include:

• Your property must have a valid Energy Performance Certificate.
• You must be fully replacing an existing fossil fuel heating system (such as an oil or gas boiler) or certain electric heating systems, not adding a heat pump alongside one that stays in use.
• The heat pump’s capacity must not exceed 45kWth, or 300kWth where several properties share one ground loop, which covers the great majority of small and medium business premises.
• The installation must be carried out and certified by an MCS-certified installer.
• Biomass boilers are only eligible for properties that are both in a rural location and not connected to the gas grid; heat pumps do not carry that restriction.

BUS does not currently fund hybrid systems that pair a heat pump with a fossil fuel boiler. Grant amounts and eligibility have changed more than once since the scheme launched, so check Ofgem’s current guidance for property owners before you apply, and ask your installer to confirm the figure that applies to your application. Our energy efficiency grants guide lists other current support by nation.

Do you need planning permission for a heat pump on business premises?

Usually yes. The permitted development right that lets a home install an air source heat pump without planning permission is set out in Class G of the General Permitted Development Order, and its title makes the scope explicit: “installation or alteration etc of air source heat pumps on domestic premises.” It does not extend the same automatic right to non-domestic buildings.

That means a heat pump on an office, shop, workshop, warehouse or other business premises will usually need a planning application, subject to your local planning authority’s own policies. Ask early, since this can add weeks to your project timeline, and factor it into any quote or installation date an installer gives you.

Do you need approval from the network operator?

A heat pump is an electrical load, not a generator, so it doesn’t need the same DNO connection process as solar panels or other generation. But a heat pump can meaningfully increase how much electricity your premises draws, particularly if it replaces gas heating. If the new demand could push you close to or over your agreed supply capacity, your electricity distributor may need advance notice or your connection may need upgrading. Ask your installer to check your incoming supply and, if in doubt, contact your local distribution network operator before you commit. Our guide to what a DNO is explains who runs the network in your area.

What tax and business rates rules apply to a commercial heat pump?

Climate Change Levy

Electricity used to run a heat pump is subject to the Climate Change Levy at the same main rate as any other business electricity: 0.801p per kWh from 1 April 2026. If your business holds a Climate Change Agreement, the same discount applies. See our Climate Change Levy guide for the current rates and who can get a reduction.

VAT

HMRC’s reduced VAT rate for energy-saving materials, including heat pumps, applies to residential accommodation and to buildings used solely for a relevant charitable purpose. Installing a heat pump in an ordinary business premises is standard-rated at 20%. A VAT-registered business can usually reclaim VAT on its purchases in the normal way. Our VAT on business energy guide covers the rates that apply to the energy you buy once the heat pump is running.

Business rates

In England, eligible plant and machinery used for on-site renewable generation and storage, including air source and ground source heat pumps, is exempt from business rates until 31 March 2035. If your premises are in Scotland, Wales or Northern Ireland, the position is set separately, so check with your local authority or the relevant valuation body.

What should you check before buying a commercial heat pump?

1. Your building’s heat loss and current heating demand. This drives both the size of system you need and how well a heat pump will perform.
2. Your gas and electricity unit rates. The narrower the gap, the better a heat pump compares with gas on running cost.
3. Planning permission. Confirm with your local planning authority whether an application is needed before you commit to a timeline.
4. Your electrical supply capacity. Ask your installer to check whether your incoming supply can take the extra load.
5. The Boiler Upgrade Scheme. Confirm current eligibility and grant amounts with an MCS-certified installer before you get quotes.
6. Radiators, pipework or ductwork. Ask whether existing emitters need upsizing to work well at a heat pump’s lower flow temperature.
7. Your lease, if you rent. Check whether you need the landlord’s consent for the installation and any external unit.

A heat pump is one of several routes to lower-carbon heat. For how it sits alongside on-site generation, see our commercial solar panels and renewable energy for business guides, and for the basics of cutting your heating bill without new equipment, see cutting business heating costs. Once you know what heating system you need, compare business energy quotes to make sure the gas or electricity that powers it is fairly priced.

Frequently asked questions