The most efficient way to heat a commercial building: heating options compared

Efficiency and cost are not the same thing

People searching for the most efficient way to heat a commercial building are often really asking for the cheapest, and the two can point in different directions. Efficiency is how much useful heat you get for each unit of energy you buy. Cost is what that unit of energy costs you. A system can be the most efficient and still cost more to run if its fuel is expensive per kWh.

For the physics:

• Boilers burn a fuel and pass the heat on. The delivered heat per unit of fuel is the boiler’s seasonal efficiency, which is below 100 per cent in practice because of flue and standby losses. This guide uses 88 per cent for a gas boiler as a labelled assumption, not a measurement of your plant.
• Direct electric heating (electric boilers, panel heaters, immersion) converts each unit of electricity into one unit of heat. That is as efficient as it gets for a resistive device, but it is one for one.
• Heat pumps move heat rather than make it, so one unit of electricity can deliver several units of heat. The seasonal figure is the SCOP, defined in the standard BS EN 14825 and explained in the SCOP guide. It is higher at low flow temperature and mild source temperature, and lower when the building needs hot water.

So in energy terms a heat pump delivers more heat per unit of energy bought than a boiler or a direct electric heater. That is a statement about energy, not about money, which is what the next section covers.

The running-cost arithmetic

Cost per kWh of heat is the unit price divided by the efficiency. The prices below are from the DESNZ Quarterly Energy Prices, September 2026 edition (published 29 September 2026): the Q2 2026 all-non-domestic averages of 24.51p/kWh for electricity and 5.28p/kWh for gas. One edition and one customer category are used throughout; your tariff will differ, and a small site should use its own bills.

The break-even SCOP against gas is the electricity price divided by the cost of gas heat: 24.51 ÷ 6.0 = about 4.1. A heat pump has to deliver more than about 4.1 units of heat per unit of electricity to match this gas boiler on energy cost alone at these prices. Whether a given system reaches that on an all-year basis depends on flow temperature and whether it also makes hot water, so this guide does not say a heat pump is cheaper to run than gas as a general statement. It can be, with a cheaper electricity tariff, a high SCOP at low flow temperature, or a gas price higher than the one used here. For the method in full see the running costs guide, and put your own tariffs into the running-cost calculator.

The same formula works for any fuel: cost per kWh of heat = unit price ÷ seasonal efficiency. Direct electric heating at 24.51p is about four times the cost of gas heat on these inputs and is the clearest case where the physics and the money agree.

The options compared

Gas, oil and LPG boilers share the same arithmetic as the gas row above; only the unit price changes. Use the price per kWh on your latest invoice for oil or LPG (convert litres or kg to kWh with the calorific value your supplier states) and divide by the boiler’s seasonal efficiency. This guide does not publish oil, LPG or biomass prices because it uses only the one price edition above for gas and electricity.

• Gas boiler. Lowest unit price per kWh of heat of the options at typical SCOPs on the table (a heat pump matches it only at a SCOP of about 4.1), simple, and quick to replace like for like. It keeps your site on a fossil fuel and the Boiler Upgrade Scheme does not support a replacement boiler.
• Oil and LPG boiler. Same boiler physics, often a higher price per kWh than mains gas (check your invoice), plus storage and deliveries. The comparison with a heat pump is worth running on your own invoices, and the scheme pays more here: the grant is £9,000 for a heat pump replacing oil or LPG with no mains gas, to March 2027 (otherwise £7,500), if the building is within the scheme size limits.
• Direct electric. One unit of heat per unit of electricity. It is cheap to install and expensive to run on these prices. It can make sense for a small, rarely occupied room or a point-of-use hot water need, not as the main heating of an occupied building.
• Heat pump. Highest efficiency in energy terms. Cost to run depends on the SCOP you actually achieve, which depends on flow temperature, emitters and controls. See the flow temperature guide.
• Hybrid. A heat pump handles the base load and a retained boiler covers peaks. The Boiler Upgrade Scheme does not fund a hybrid system, as GOV.UK states. It can help a building whose radiators need higher temperatures; see the hybrid retrofit guide.
• Biomass boiler. Burns wood pellets, chips or logs. Fuel price per kWh and efficiency vary by fuel and plant, so use your supplier’s price in the formula. It needs a fuel store, deliveries, ash handling and, for larger plant, air-quality checks. The scheme lists a separate biomass grant value; check GOV.UK for current eligibility.
• Heat network. A building connects to a shared network and buys heat. Efficiency is the network’s business, and the cost is set by the operator’s tariff and standing charge, so ask for both in writing and compare on a cost per kWh delivered. See the heat networks guide. Availability depends on where you are.

Decision table

How to compare the options on your own site

A fair comparison uses the same basis for every option, and it takes less than an afternoon with the right inputs.

1. Fix the heat demand. Take twelve months of fuel use in kWh and multiply by the existing boiler’s seasonal efficiency to get useful heat. Every option below is then costed to deliver that same heat. The heat pump sizing calculator does the first step and shows the indicative kW.
2. Write down your own unit prices. Electricity and gas in pence per kWh from the latest bills, oil or LPG per kWh from the latest delivery, biomass fuel per kWh from a supplier’s price, and any network tariff plus standing charge. Do not mix price editions or customer categories.
3. Divide by efficiency. Price divided by seasonal efficiency gives cost per kWh of heat. For a heat pump use a SCOP that suits your flow temperature, and run a low and a high case, because it is the least certain number.
4. Multiply by annual heat. This gives the yearly energy cost of each option on the same heat demand.
5. Then add what energy cost does not capture. Capital cost, grant eligibility, maintenance, fuel storage, electrical supply upgrade, noise and planning, and the timing of boiler replacement. Funding and tax are covered in the grants and funding page.

If the result is close, treat the decision as one about risk: which option is least exposed to a price move in the fuel you would depend on, and which fits the building’s emitters and electrical supply without a large upgrade.

What changes the answer

• Your tariff. The averages above are not your bill. A different electricity price moves the break-even SCOP directly: it is the electricity price divided by the cost of gas heat.
• The flow temperature the building needs. Older radiators and fan coils designed for high temperatures can push SCOP down; see how it moves in the flow temperature guide.
• Hot water. Heating a cylinder to a high temperature lowers the seasonal figure; see commercial hot water heat pumps.
• The load profile. A building used all day, in winter, uses more of the system’s capacity than one with short peaks.
• Fuel you have now. Oil and LPG sites compare differently from mains gas sites.
• The existing plant. A boiler near end of life changes the capital comparison, not the efficiency one.
• Electrical supply. A heat pump adds an electrical load that may need a network upgrade. Ask your distribution network operator early.
• Funding. The Boiler Upgrade Scheme only covers buildings within its size limits, and tax treatment is a question for your accountant.

For a first estimate of size from a gas bill, use the heat pump sizing calculator; the heat pump vs gas boiler guide compares the two head to head.