Home Heat Pumps, Explained: How They Work, What They Cost, and Where Sales Grew in 2024-2025
Heat pumps deliver about 280% efficiency versus a gas boiler’s 90%. Here is how COP and SCOP are measured, what installation costs, and where sales grew.
A heat pump is a heating and cooling system that moves heat rather than generating it by combustion, using electricity to extract heat from outdoor air, ground, or water and transfer it indoors. Global heat pump sales declined 1% in 2024 after a 10% drop in the first half of the year, according to the International Energy Agency’s (IEA) Global Energy Review 2025, with performance diverging sharply by region: Europe’s sales fell 21% — the largest annual regional decline on record — while US sales rose 15%, with heat pumps outselling gas furnaces there for the first time on a full-year basis. This guide explains how heat pump efficiency is measured, what installation typically costs, and what changed in 2025 for the incentives that affect that cost.
How a heat pump works
A heat pump uses a refrigerant cycle — the same underlying principle as a refrigerator or air conditioner, run in reverse for heating — to extract ambient heat and concentrate it at a higher, usable temperature. Air-source heat pumps draw heat from outside air, even in cold conditions, and are the most common type installed in homes. Ground-source (geothermal) heat pumps draw heat from stable underground temperatures via buried pipe loops, which delivers more consistent efficiency but at substantially higher installation cost. Because a heat pump moves existing heat rather than creating it from a fuel source, it can deliver more energy as heat than it consumes as electricity.
How heat pump efficiency is measured: COP and SCOP
The Coefficient of Performance (COP) measures how many units of heat a heat pump delivers per unit of electricity it consumes at a given moment — for example, a COP of 2.8 means the unit delivers 2.8 times as much heat energy as the electrical energy it uses. The Seasonal Coefficient of Performance (SCOP) averages that ratio across an entire heating season, accounting for colder periods when a heat pump works harder and delivers a lower moment-to-moment COP. UK air-source heat pumps average a SCOP of around 2.8, equivalent to roughly 280% efficiency, compared with a typical gas boiler’s efficiency of about 90% — meaning a gas boiler delivers slightly less heat energy than the fuel energy it burns, while a heat pump delivers substantially more heat energy than the electrical energy it consumes.
Compare your own running costs
This tool applies the SCOP (2.8) and gas boiler efficiency (90%) figures above to your own energy prices and heating demand, to estimate annual running cost for each. Enter prices in whatever currency and unit you pay in (e.g. price per kWh for both electricity and gas) — the comparison holds regardless of currency.
What a heat pump costs to install
In the United States, the average installed cost of an air-source heat pump is approximately USD 15,393 before incentives and USD 14,153 after applicable incentives, according to EnergySage marketplace data, with costs ranging from roughly USD 8,000 in lower-cost states to USD 33,000 in higher-cost states such as New York. Ducted systems average USD 14,529, ductless mini-split systems average USD 25,957, and hybrid systems that pair a heat pump with an existing furnace average USD 14,353. Ground-source systems cost substantially more to install due to the underground loop work required, though exact figures vary widely by site conditions.
What changed for US incentives in 2025
The US federal Section 25C tax credit, which had offered up to USD 2,000 annually toward qualifying heat pumps, water heaters, and other efficiency upgrades, was repealed effective after December 31, 2025, under the budget reconciliation law referred to as the “One Big Beautiful Bill,” signed in 2025. The related Section 25D residential clean energy credit had its expiration accelerated from 2032 to December 31, 2025, under the same legislation. Both changes remove federal incentives that previously reduced the net cost of a heat pump installation in the US; state and utility-level rebates are unaffected by the federal repeal and vary by location.
The EU’s heat pump deployment target
The European Commission’s REPowerEU plan, proposed in May 2022, set a target to double the EU’s heat pump deployment rate to reach 10 million cumulative individual heat pump installations over 2023-2027. Europe’s 21% sales decline in 2024 — driven, per the IEA, by high electricity prices relative to natural gas, regulatory uncertainty, and slowed construction activity, with Germany down roughly 50% and France down 25% — puts that target at risk, though the IEA’s 2025 analysis notes that US and Japanese markets grew over the same period, and that “supportive policy frameworks, affordability, and market certainty” remain the determining factors for sustained heat pump growth globally.
What remains unresolved
Neither the IEA nor national data sources reviewed here confirm updated 2025 full-year sales figures for Europe as of this guide’s publication; the IEA’s most recent detailed regional breakdown covers 2024. Whether Europe’s decline continued, stabilized, or reversed in 2025 — and whether US federal incentive changes will slow the US market’s 2024 growth — are both open questions that later editions of the IEA’s Global Energy Review will address.
Sources: Global Energy Review 2025, EnergySage marketplace data, REPowerEU plan
Featured image: photo by alpha innotec on Pexels (free Pexels license).
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I specialize in sustainability education, curriculum co-creation, and early-stage project strategy. At WINSS, I craft articles on sustainability, transformative AI, and related topics. When I’m not writing, you’ll find me chasing the perfect sushi roll, exploring cities around the globe, or unwinding with my dog Puffy — the world’s most loyal sidekick.
