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Heating costs: gas vs oil vs electric storage heaters

This guide is intended to provide general guidance only. It is not intended to give you advice on your personal financial circumstances. You should seek independent professional advice if you’re unsure about anything mentioned in this guide or what choices to make.

The cheapest way to heat a house is with Gas and it has been for a long time. That’s probably the main reason why 23 million homes in the UK have gas boilers, compared to only 2 million using electric storage heaters, and 1 million oil fired boilers (DECC).

But that’s just the simple answer. In this guide, we're going to take a closer look at the difference in heating costs between gas boilers, electric storage heaters, and oil-fired boilers - and then look at ways to keep your heating bills in check. Whether that’s by adopting a new technology (like VCharge Heat from OVO) to transform your storage heaters, or by making simple adjustments to your thermostat.

Gas trumps electric storage heaters and oil boilers

The average UK home uses gas for central heating and spends about £550 each year on space heating alone (DECC). Providing the same amount of usable heat with an oil boiler costs about £700. With electric storage heaters on the lower Economy 7 tariff (12-7am), the costs would be about £900, while using standard rate electricity would cost a whopping £1,950.

The reason for the significant differences in the costs of each heating type can be summarised into: first, the different cost of each type of energy; second, the difference in efficiency with which each fuel type is converted to usable heat.

We’ve brought these two rather slippery concepts together in one simple chart which compares the cost of a unit of usable heat.


gas, oil, electricity heating costs compared


The basic point is this: using electricity is a shockingly expensive way to heat your home unless you have a heat pump of some sort.

At 16p/kWh per unit of usable heat, electric heating is three and half times more expensive than an efficient combi boiler using gas. Even on an Economy 7 tariff, electric heating is around 9p/kWh and that is only for demand constrained within the off-peak window at night. For daytime use, you're stuck with an even higher rate than a regular electricity user.

On the gas grid: If you live on the gas grid and have central heating, it is almost never a good idea to use electric radiators or space heaters. If you are trying to save money, you're better off shutting down less-needed radiators and timing the use of your heating better.

Off the gas grid: This is when things get more complicated. Most homes off the gas grid use heating oil or electric storage heaters for central heating, with woodburners also common for room heating. Air source heat pumps (ASHP) are also becoming more common. If you are stuck with electric storage heating then it is crucial to ensure that most of your heating is done on the lower Economy 7 tariff, otherwise it will cost you a fortune.

In contrast, the costs of gas oil and kerosene aren’t as bad as they were a couple of years ago, so you just need to control them wisely as you would a gas boiler. If you have a woodburner, you can use it in a manner that heats the rest of the house in order to keep bills in check. Wood-burners are still more expensive than gas unless you have a cheap source of wood.

Of course, we need to remember that 80% of energy used for space heating in the UK comes from gas, with just 8% coming from oil and 7% coming from electricity (DECC). So us Brits are no fools when it comes to our choice of heating. Still, there are plenty of things we can do to cut our heating bill while keeping comfortable.

Let’s look at five options, starting with the easiest to implement.

1) Switch to a better energy tariff

By far the simplest way to turn a £600 heating bill into a £500 one is to switch to a better energy tariff. This strange opportunity exists because the market for consumer energy has become split into two markets. One for loyal customers that get stuck on expensive variable tariffs, and one for people who shop around that  - and much better deals.

In recent years the benefit of switching has grown to over £250 (see below).


energy cost comparison with big six energy suppliers


Not only could shopping around help you to reduce what you pay for your heating, but it might also help cut 10-20% off your bills in general. But you won’t really know until you get a quote. These days, getting a quick quote is a simple as entering your postcode.

2) Control your heating

If you live in a house with superb insulation (like a Passive House) then controlling your heating in the winter is dead easy. You just stick the thermostat on 20℃ and let your system do its thing. Do the same thing with a leaky Victorian home, and it’ll cost a fortune.

If you own the home and are staying a while, then investing in better insulation is a great idea - and we’ll touch on that in a minute. But if you are a tenant and/or don’t have the cash for investing in insulation at the moment, then getting to grips with your heating controls is your next best bet.

Reducing the average temperature in your home by 1°C (1.8°F) will generally reduce heat loss by around 10%, and thus heating bills by the same amount. Of course, that doesn’t mean you have to endure a cold house.

Here are three ways you can make this work for you.

  1. The first is to simply lower your thermostat setting by one degree and see how you go. If on occasion you feel cold, just bump it up. Every degree will help.
  2. The second is to time your heating sensibly. You don’t need a warm house when you’re sleeping or if you’re at work. That will just increase heat loss. Time the heating so that you wake up, and arrive home, to warmth. Chill out in between!
    Best settings for your thermostat
  3. Lastly, you can heat rooms differently. Some rooms need to be warm, like living rooms and bathrooms - but, having a hot bedroom while you’re watching telly downstairs might just be a waste of energy. Using radiator valves to zone your rooms like this can save a lot of money.

3) Upgrade your clunky storage heaters

If the above advice sounds sensible, but you feel it’s impossible for you because you own storage heaters – we bring good news. You can now upgrade your storage heaters to make them easier to control and more cost-efficient – and all for a minimal cost.

The VCharge Heat service fits a ‘dynamo’ gadget to each storage heater which connects with a smart meter, so for the very first time, tenants and homeowners can control their storage heaters through an app on their phone, or by calling our VCharge team. This means you can be warm when you choose to be – setting individual rooms to be a  certain temperature at a certain time. You can also say goodbye to feeling too hot in the morning and too cold in the evening, and – because the system is so efficient – you won’t waste money on supplementary plug-in electric heaters.

VCharge Heat is brought to you by our team here at OVO, so it does mean that you need to switch to energy suppliers to us. But it could save you a lot of energy and money in the long-run.

In short, that’s because:

  • We use cheap, off-peak electricity to charge your heaters at different times of the day.

  • Even if you’re already on an E7 tariff, we’ll move you to a cheaper E10 tariff that gives you an extra 3 off-peak hours a day when your heater can charge.

  • Your heaters will be programmed to use less energy on warmer days through ‘weatherization’, which means your costs are reduced even further.

You can find out more about this revolutionary VCharge service, here.

4) Insulate, insulate, insulate

Before you consider investing in a new boiler or heating system, it makes sense to ensure that your insulation is up to scratch. To help you understand why this is the case, let me give you an example of how heat loss affects bills.

Take a typically sized UK house of about 76 m2 (818 ft2). If it is a poorly insulated Victorian home, it will cost more than £1,000 a year to maintain a temperature of around 20℃ throughout the winter. For a newer property that meets the modern building standard of insulation, maintaining the same temperature should be achievable for £500 a year. With a super insulated Passive home it should be possible to maintain a temperature of 20℃ for less than £100 a year, maybe as little as £50.

Improving the level of insulation on an existing property is a completely different proposition to insulating a new build. In fact, doing it sympathetically and cost effectively is a real art form. Engaging a professional is a good idea if you are doing a serious retrofit, but if you are just trying to decide on which technologies to start with, the chart below should help you out.


estiamtes for insulation and bayback in years


This graph shows an estimate of the payback time from different technologies (or how long it takes for the energy savings to pay off the upfront investment for each type of insulation). Although, we should be careful about taking the numbers too literally - due to the large number of assumptions in each calculation. Some things are obviously a good investment. Technologies like loft insulation, DIY draught proofing and cavity wall insulation pay back very quickly. So if you can do them, you should.

The mid range payback of 5-15 years for things like floor insulation, loft top-ups and professional draught proofing are also attractive. Particularly if they will also improve your comfort considerably. Expensive technologies like external wall insulation, double glazing and thermal doors have very poor pay back times. So, if you are considering them, it should be more about comfort or aesthetics rather than potential energy savings.

5) Change your heating system

Wall-mounted gas condensing boilers make up about 90% of the market share for new heating systems in the UK. If you are on the gas grid and in the market for a new heating system, then a good combi boiler is probably your best bet. If you have a large household and want to run multiple showers, you may want a gas system with tanks.

If you switch from an old inefficient boiler to a new condensing version, it might save you around £300 a year - although that depends largely on how much energy you use, and how inefficient your old boiler is. It certainly makes sense to opt for a new boiler if your old one is becoming unreliable and has increasing maintenance costs.

What about off the gas grid? According to consumer focus, there are 3.9 million households without gas heating in the UK. Of these, half a million have a gas supply but do not have gas heating, 1.3 million are near the gas network but unconnected, and 2 million are fully off-grid with little prospect of being connected.

If you are one of the half a million with a gas supply but no gas heating, then switching to a gas system is sensible. For the other 1.3 million, looking into the cost of getting connected to gas is a good idea.

For those truly off the gas grid, things are tricky. Heating oil currently looks like a good option, but you will remain exposed to oil prices. Just a couple of years ago, the cost of oil was almost double that of natural gas per unit of heat. You should also consider upfront costs. For example, the running price of a ground source heat pump is superb, often cheaper than gas -  but GSHPs have an upfront cost of over £10,000, they require considerable excavation work, and will often require a specific type of radiator or underfloor heating. This is why you rarely see GSHPs outside of new builds.

And remember, if you’re tied down with electric storage heaters, you can always look into upgrading them with VCharge Heat. By fitting your existing heaters with a ‘dynamo’, VCharge gives you control of your heaters by room; setting the times and temperatures to both suit your lifestyle and cut your bills.

Here are some examples of the installation costs of different heating systems, largely taken from the Energy Saving Trust.

  1. Electric heating: £1,000-£2,000
  2. Storage heating: £1,500-£2,500
  3. Gas combi boiler: £2,000-£3,000
  4. LPG boiler: £3,000-£5,000
  5. Oil fired boiler: £4,000-£6,000
  6. Air source heat pump: £6,000-10,000
  7. Wood pellet boiler: £9,000-15,000
  8. Ground source heat pump: £11,000-15,000

Please don’t be fooled by the cheap install costs of electric heating. As we stressed at the start of this piece, electric heater running costs are extortionate - and should be avoided wherever possible. Service costs across most technologies tend to be £100 - £200 per year, so you don’t need to factor them in nearly as much as installation and running costs.

6) Remember comfort is king

Throughout this guide, we have focussed rather relentlessly on what you can do to cut your heating bills. But trying to lower your bill isn’t always the most important thing. In fact it can be a false economy at times. When you are making decisions about your home’s heating bills, always consider comfort.

The most blatant example of this conflict is double-glazed windows. If you looked purely at the payback for moving from single to double-glazed windows, no one would ever install them. But when you consider how much they improve comfort near the window, or reduce the penetration of road noise, they become a much more attractive proposition.

The graphic below attempts to show what happens to heat losses and heating demand when you take insulation to the extreme, exemplified by the German Passive House standard.


heat gains and losses by house type


A Passive House (Passivehaus) requires just 15 kWh/m2a of heating energy, while a modern home requires ten times this - and a leaky Victorian home needs 20 times more energy. As I mentioned earlier, in terms of gas heating in an average - sized home, this is equivalent to roughly £50, £500 and £1,000 heating bills a year respectively.

However, building a home that meets the lofty insulation standards of a Passivhaus typically adds 5-10% to the cost of building a home. So based on saving £500 in heating costs, compared with the modern standard, it would take decades for the investment in a Passivhaus to pay back in terms of energy savings alone. But that’s short-sighted. Take one step inside a super insulated home in winter and you’ll realise it's worth every penny in superior comfort alone - not to mention the lowered bills or increased property value. It is simply an investment in superior comfort. And we should all think of insulation like that - as an investment that ensures we get more comfort from the heating we pay for.

Wrapping it up

We hope you enjoyed this guide to heating bills. Here’s a quick summary to remind you of the key takeaways:

  • Electric heating is very expensive compared to gas
  • If you have storage heaters you can cut costs by installing VCharge Heat. 
  • Switching providers can cut energy bills by more than £200
  • Timing heating well will reduce your heating bill

*Source and notes for graphs and table

Energy cost comparison for heat:p/kWhth

Source: Nottingham Energy Partnersip, March 2015

The rising price of loyalty to the Big Six, accessed 02/08/12 and every subsequent Thursday to the 12/02/15. Data uses Ofgem standard consumption (profile1) 2 for dual fuel users, averages across all regions.

Estimates for insulation technology paybacks:years

Note: Assessment based gas heating, UK technology costs and energy prices 2013

Source: Own calculations, Energy Saving Trust, Green Deal

Heat gains and losses by house type:kWh/M2a

Note: Typical values for Northern European Country

Source: PHPP, own calculations

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