Heat Pumps vs Solar Panels: Which Saves You More on Energy Bills? – Kiplinger’s Personal Finance

Which is best for energy saving? We put heat pumps vs solar panels to the test. Both can improve your home’s energy efficiency, reduce your carbon footprint and, crucially, save you money on your energy bills.

Heat pumps use electricity to extract heat from the air and pump it into your home. This thermal energy can be used to heat your water supply and keep your home warm. They produce so much thermal energy that they can dramatically reduce your dependence on your energy supplier and save you money on your energy bills. 

Meanwhile, solar panels generate electricity that can be used to help power the electrical systems in your home.

Since the passage of the Inflation Reduction Act, Americans also have access to generous tax credits that can reduce the cost of these energy-smart home improvements. 

Below, our colleagues at The Money Edit put heat pumps vs solar panels in a head-to-head test.

Pros of heat pumps

• Heat pumps emit no carbon dioxide, nitrogen dioxide or particulates. They can help to improve the air quality both inside and outside the home.
• Heat pumps are much more efficient than gas boilers and produce three or four times the energy they use.
• Heat pumps are reliable, require little maintenance and may last 20 years or more before they need replacing. 
• The Inflation Reduction Act offers $2,000 tax credits toward the installation of electric or natural gas heat pump water heaters, electric or natural gas heat pumps, and biomass stoves and boilers.

Cons of heat pumps

Heat pumps also have several downsides:

• An air source heat pump costs between $2,000 – $5,500, with installation costing anywhere from $4,000 – $8,000, according to Forbes. Even with the government’s $2,000 tax credit, the system could still cost you a pretty penny upfront, before energy savings come into play over the life of the heat pump.
• Heat pumps use electricity and are therefore pricey to run. Remember, electricity is three to four times more expensive than gas per unit, so energy bills can actually increase after getting rid of a boiler. However, according to MIT Technology Review, “heat pumps can reach 300% to 400% efficiency or even higher, meaning they’re putting out three to four times as much energy in the form of heat as they’re using in electricity.”
• Heat pumps only produce heat and cannot generate electricity so can only provide energy for certain systems within your home.
• Heat pumps do not warm a home as quickly as a gas boiler. Naturally cold homes will especially heat up much more slowly. And according to MIT Technology Review, if the difference in temperature between inside and outside increases, a heat pump will have to work harder to gather heat, so efficiencies drop.
• Heat pumps can be awkward to install in homes with combination boilers, which will need to find space for a hot water cylinder.
• Heat pumps can be noisy due to their fans though manufacturers are working to make them quieter.
• Some homes do not have a suitable outside space for a pump.

Pros of solar panels

Since 2010, the cost of solar panels has fallen by more than 60%, according to the Solar Energy Industries Association. There are lots of positives to installing solar panels.

• Solar panels could reduce your annual energy bill by $1500 per year, according to Forbes.
• Solar panels now pay for themselves within eight years, offering 17-22 years of energy savings over the life of the system.
• Solar power allows you to generate most of your electricity for lights and appliances. 
• Solar power can also power an electric car. You’ll need an average of 5-12 solar panels to charge your vehicle, according to Solar.com.
• You can sell electricity back to the grid or an energy supplier. Over 40 states allow for some kind of “net metering,” according to SmartAsset. Translation: households that generate electricity through residential solar projects can receive checks from the power companies for excess energy sent to the grid.
• Solar power systems are easy to fit, even in old homes. 
• Innovations mean you no longer have to put up with ugly black glass.

Cons of solar panels

• The cost for a solar panel system on an average-size house in the U.S. ranges from $10,000 to $30,000, costing on average $16,715 after solar tax credits.
• The cost of a battery — which you’ll need to use your solar energy at night or when the sun doesn’t shine — will add anything from $213 to $13,000 to the overall installation cost, according to Solar Reviews. But they report that home battery installations usually cost somewhere between $12,000 and $20,000. 
• Solar power won’t quite cut it when it comes to heating. You can easily generate most of your electricity for lights and appliances, but add heating and it gets tricky. Put simply, thermal panels are limited when the sun isn’t constantly shining so you need an extra source of hot water to help.

The verdict

Despite both heat pumps and solar panels having similar installation costs, solar panels will likely save you more money overall. 

Of course, you can save even more money and carbon by combining solar panels with an electric car, battery or heat pump.

Ultimately, before choosing between a heat pump and solar panels, consider:

• If it’s thermal energy or electricity you want to generate
• How much energy you want to generate
• What uses you want to put it to
• How long you want your renewable energy system to last 
• How much you can afford to pay upfront and essentially invest in your home

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