How does a heat pump work?

A heat pump is a low-carbon heating and cooling system that moves heat instead of generating it, using energy from the air, ground, or water to keep your home comfortable year-round. Factors like energy prices, home insulation, and available incentives all influence how well a heat pump can work for you. This article offers a complete step-by-step guide to how different heat pumps work: a deeper understanding of the technology, components, cost, installation and overall benefits.

What is a heat pump?

A heat pump is an innovative low carbon heating and cooling system that provides year-round comfort for the home. It continues to grow in popularity as societies move away from fossil fuels and towards renewable alternatives. Factors such as rising energy costs, decarbonisation policies and government incentives helped drive sales of over 20 million units worldwide in 2023.

Heat pumps offer both environmental and economic benefits. They can cut household greenhouse gas emissions by up to 75% when powered by renewable energy, with lower running costs over their lifetime.

Unlike traditional boilers that burn fossil fuels, heat pumps extract thermal energy from the air, ground, or water, and transfer it indoors to offer a more sustainable form of heating and hot water.

But that’s not all. The dual-purpose design means the heating process can be reversed to provide cooling in the summer, resulting in heating, hot water, and cooling from a single, compact system.

This versatility, efficiency, and sustainability is helping to change how homeowners approach heating and cooling, with the heat pump emerging as the leading technology in the future of home comfort.

Heat pump basics: Moving heat, not making it

The true genius of a heat pump lies in its ability to move heat, rather than having to make it. Whereas a gas boiler has to actually create heat by burning fossil fuels, a heat pump extracts existing thermal energy from the air, ground or water, and moves it from outside to inside - even when outdoor temperatures are low.

It works in much the same way as a refrigerator, except in reverse. While a fridge removes heat from inside its compartment and expels it into the kitchen (leaving the remaining cool air inside), a heat pump draws heat from outside and delivers it into the home.

Because the process uses existing heat, a heat pump is fundamentally more efficient than systems which burn fuel. You can learn more about heat pumps versus boilers here.

That means, for every 1kWh of electricity, you get 3-5 kWh of heat in return - which is more than five times more energy than you put in.

This efficiency translates into significant energy savings for homeowners, particularly in well-insulated properties, demonstrating why heat pumps are becoming the go-to technology for residential heating around the world.

The main components of a heat pump

Every residential heat pump consists of four essential components that make the heat transfer process possible.

• Refrigerant - the working fluid that powers the cycle
• Heat exchangers – the evaporator absorbs heat from the source, while the condenser releases heat into the home
• Compressor – increases pressure and temperature of the refrigerant
• Expansion valve – reduces pressure to restart the cycle

Step by step: How a heat pump works

A heat pump operates in a continuous four-step cycle.

• Step 1: The refrigerant inside the evaporator absorbs heat from either the air, ground, or water - and vaporises
• Step 2: The compressor increases both the pressure and temperature of the refrigerant, thereby intensifying its energy content
• Step 3: This concentrated heat is transferred via the condenser to the building’s heating system or domestic hot water circuit
• Step 4: The expansion valve lowers the refrigerant’s pressure and temperature, so it’s ready to start the whole process again.

In cooling mode, the process is reversed.

Types of heat pumps: Air source, ground source, water source and hybrid

There are three main types of heat pumps, depending on where they extract their energy: air, ground, and water. There’s also a hybrid option, which combines a heat pump with a traditional boiler for a flexible, transitional solution.

Air source heat pumps (ASHPs)

ASHPs extract ambient thermal energy from the air outside - even in temperatures well below freezing - and turn it into efficient home heating. They can be air-to-air (connected to air conditioning units to heat or cool your home), or air-to-water (connected to hydraulic emitters such as radiators and underfloor heating), providing cost-effective year-round comfort, using minimal electricity.

ASHPs are the most common type of heat pump in residential settings as they are generally very easy to install, with two units (one for indoors, one for outdoors) which can usually be installed without the need for any major structural work.

Another big selling point is energy performance. Modern, inverter-driven, air source heat pump models can produce up to five times as much heat as the electricity they consume.

Ground source heat pumps (GSHPs)

Ground source heat pumps, often also referred to as geothermal heat pumps, tap into the more stable temperatures in the ground - typically around 0-10°C - to provide efficient residential heating and cooling. GHSPs can deliver remarkably stable performance all year round, with up to 400% efficiency in some cases.

GSHPs can cut heating costs by 40-60%, with equipment that often lasts more than 20 years. The main challenges with GSHPs are complexity and cost, as installation involves either trenching horizontal ground loops or drilling vertical boreholes.

However, for homeowners looking at the long-term, developers planning low-carbon homes, or areas with very cold winters where temperatures regularly drop to -30°C, investing in GSHPs pays off through lower operating costs, good reliability and more sustainable building practices.

Water source heat pumps (WSHPs)

Water source heat pumps extract thermal energy from bodies of water such as lakes, ponds, or closed loop wells to provide indoor heating and cooling.

Water source solutions are among the most efficient low carbon heating and cooling solutions available, especially when they are configured in self-contained, modular units, that can serve individual zones.

These systems deliver precise temperature controls and low seasonal operating costs, making them ideal for residential complexes or mixed-use buildings.

Hybrid heat pumps

Heat pumps can be connected to existing gas boilers, allowing homeowners to reduce their gas consumption without replacing their entire heating system.

In a hybrid set up, the heat pump efficiently handles most of the day-to-day heating, while the boiler kicks in during peak demand or extreme cold. Hybrid heating systems often use the gas boiler for domestic hot water, eliminating separate tank requirements.

The dual-source approach automatically optimises the system based on current conditions: heat pumps provide the heating when temperatures are milder or electricity is cheaper, while boilers provide reliable backup during harsh weather.

They’re great for areas where winters are moderate, or just for helping people to start reducing their reliance on fossil fuels.

Air-to-water versus air-to-air heat pump systems

How efficient are heat pumps? Understanding SCOP

The performance of heat pumps is measured using the Seasonal Coefficient of Performance (SCOP). This is a way of expressing the efficiency of a heat pump over an entire heating season and measures the total heat output against the electrical energy consumed – what comes out, versus what you have to put in.

For example, if 1kWh is electricity is used, and 4kWh of heat is generated, that would be a SCOP of 4, achieving an efficiency of 400%.

There are also some simple steps you can take to ensure your heat pump system is working as efficiently as possible. Read more in this article on five ways to optimise your air-to-air heat pump.

Heat pump efficiency vs gas boilers and electric heating

If you’re considering switching to a heat pump, it can be useful to understand how it would compare to your existing gas boiler or electric resistance system from an energy performance point of view, and the SCOP measure can help you do that.

A Daikin heat pump, for example, is capable of converting 300%-400% of the energy put in, typically producing 3-4kWh of heat from 1kWh of electricity.

While modern condensing gas boilers typically operate at much lower efficiencies, ranging from 99-109%.

Heating and cooling with one system

As we mentioned earlier, the beauty of a heat pump is that the process can be reversed to provide efficient cooling in the summer, so you don’t need a separate air conditioning unit.

It’s perfect for European countries where both heating and cooling are needed throughout the seasons, and particularly as summer temperatures continue to rise. To optimise energy consumption in the summer, heat pumps can usually be easily connected to solar panels.

Refrigerants and safety in heat pumps

Refrigerants are the working fluids that enable the transfer of thermal energy as it changes between liquid and gas states. These specialised compounds circulate through heat exchanger coils, evaporating at low pressure to absorb heat, and condensing at high pressure to release it elsewhere.

Safety requirements vary depending on the type, so heat pump technicians should be certified and skilled in understanding proper handling procedures.

Heat pump grants and incentives

As governments work towards net zero targets, a number of grant schemes and financial incentives have been introduced across Europe to help homeowners with the upfront cost of heat pump installation.

The eligibility criteria and size of grants available varies depending on the country. You can read more about that in our guide to local heat pump incentive schemes.

Installation requirements of a heat pump

While the installation requirements of a heat pump depend on the type, here we’ll focus on air source heat pumps (ASHPs), as the most common system for residential homes.

• Noise: The outdoor unit of modern ASHPs operate at around 40-60 decibels, similar to a quiet conversation, but you’ll still need to think carefully about where to place it to minimise any visual and noise impact on your neighbours.
• Planning permissions: European planning regulations generally support the installation of heat pumps under permitted development rights, but you’ll need to check the exact rules around unit sizes and boundary distances with your local planning authority. Additional permissions may be needed for listed buildings and heritage sites.
• Indoor space: The indoor units are typically similar in size to a conventional boiler. You may also need a hot water cylinder for heating water.
• Insulation levels: A professional heat loss calculation will ensure your system is properly sized for your home and insulation levels – good insulation throughout helps to maximise the efficiency of your heat pump.
• Certified installers: Most countries require installations to be carried out by professionally-certified installers, particularly when taking advantage of grant schemes. Find a certified installer near you.

Smart controls and zoning

Another benefit of heat pumps is that they can be integrated with smart home control systems, such as Google Home, so you can manage your home comfort level to suit your lifestyle.

You can create custom schedules, adjust settings remotely, heat different areas of the home independently, and monitor your energy consumption in real time.

Advanced systems will automatically adjust flow temperatures depending on weather conditions, maximising efficiency without you even having to think about it.

Discover more about Daikin’s smart control options and how they can simplify your daily comfort.

Heat pump costs

The cost of buying and installing a heat pump can vary significantly depending on the type. However, operating costs are highly competitive, with average pay back periods of five to 10 years, depending on climate, energy prices and subsidies available.

Discover the potential cost-saving benefits of a heat pump with this indicative heat pump versus boiler running costs comparison.

Maintenance and lifespan of a heat pump

Which brings us on to maintenance and lifespan as two often overlooked, yet important, factors in how heat pumps work and how much they cost.

European-manufactured air source heat pumps typically last 15 to 20 years, while ground source systems can even reach 25 years, which is double the average lifespan of gas boilers.

They are incredibly robust and therefore require minimal maintenance and repair. Annual professional servicing is recommended, including essential tasks such as refrigerant level checks, coil cleaning, system calibration and filter cleaning, where applicable. These routine checks will help ensure the heat pump continues to operate at maximum efficiency for as long as possible.

Is your home suitable for a heat pump?

Heat pumps work well in a wide variety of property types, from new builds to historic renovations.

New builds: When building a new house you have the flexibility of being able to design the optimum home comfort system, including any renewable energy pairings, such as solar PV, battery and EV charging.

Retrofit: Heat pumps can be retrospectively added to many types of property including detached, semi-detached, terraced homes and apartments.

Rural: Heat pumps provide a particularly good solution for rural properties without a gas connection, because it removes the reliance on oil and significantly reduces heating costs.

Learn more in our heat pump suitability guide for existing homes.

Heat pumps and carbon reduction

Of course one of the main reasons heat pump adoption is currently being encouraged is due to their significantly lower greenhouse gas emissions compared to fossil fuel heat sources.

The EU Joint Research Centre calculates that replacing one-third of Europe’s 86 million residential fossil fuel boilers with heat pumps could cut household final energy consumption by 36%, and CO₂ emissions by 28%.

Current heat pump installations across Europe are already avoiding 5.5 billion cubic metres of gas consumption and 112 mega-tonnes of CO₂ emissions annually.

Pairing with renewable energy sources

To really reduce your energy costs, and your reliance on fossil fuels, you could consider pairing your heat pump with other forms of renewable energy sources.

Adding solar PV and battery storage, for example, creates near zero-energy homes, while delivering unprecedented savings and energy independence.

European households with solar PV and heat pump combinations saved 62-84% on energy bills in 2022, with savings reaching €3,700 annually in Germany, Spain, and Italy.

Case study: A family home powered by a heat pump

The Schmidt family in Bavaria replaced their 15-year-old gas boiler with a Daikin air source heat pump system in 2023, achieving remarkable improvements in comfort and cost savings.

Their 150m² detached home, built in 1995 with recent insulation upgrades, previously consumed 18,000 kWh annually for heating, at a cost of €1,800. The €12,000 heat pump installation, reduced to €4,500 after German KfW incentives, now consumes only 6,000 kWh of electricity annually.

With their green energy tariff at €0.28/kWh, annual heating costs dropped to €1,680.

The family now benefits from consistent temperatures throughout the house, with the added bonus of summer cooling, eliminating the need for portable air conditioning units. Mrs Schmidt particularly appreciates the smartphone app control, allowing her to adjust the heating before she gets home from work.

Only minor thermostat upgrades were needed to integrate the system with their existing radiators and the whole install was completed in just two days.

Common heat pump myths explained

Some common heat pump myths persist, despite being either untrue, or technology having moved on. Here’s three we regularly come across.

Myth: Heat pumps don’t work in cold climates.
Reality: There's heat in the air until 1 Kelvin (-273°C). Therefore it's no problem for modern cold-climate heat pumps to operate efficiently in temperatures as low as -28°C using variable speed compressors and vapour injection technology. In fact, they are most common in countries like Sweden, Finland and Norway, where 40% of homes have them.

Myth: Heat pumps are too expensive.
Reality: People don’t always consider the long-term savings offered by heat pumps, as well as the various grant schemes available to offset the initial upfront investment. Heat pumps are cheaper to run and maintain on an annual basis compared to gas boilers, for example.

Myth: Heat pumps can’t produce hot water.
Reality: Heat pumps can be integrated with existing hot water cylinders to heat domestic water to 75°C.

Frequently asked questions about heat pumps

We’ve covered a lot in this article, so far, but here are some final questions that we frequently get asked.

How does a heat pump work in freezing weather
Modern European heat pumps use advanced variable speed compressors and vapour injection systems to operate effectively to temperatures as low as -28°C.

Can a heat pump heat both water and rooms?
Yes. Heat pumps efficiently provide both space heating and domestic hot water, typically heating to 75°C.

Do I need to replace my whole heating system?
No, most installations work with existing radiators and pipework, although some radiators might benefit from upgrading for optimal efficiency.

What about the electricity costs for a heat pump
The 300-400% efficiency of a heat pump means they use three to four times less energy compared to electric heaters. Combined with time-of-use tariffs and solar panels, operating costs are typically lower than gas heating.

How noisy are heat pumps?
Modern units operate at around 38 decibels from three metres away during normal operation, which is quieter than most gas boiler flues and similar to a whisper.

Key takeaways: how does a heat pump work?

Heat pumps are defining the future of European home heating, delivering consistent comfort while significantly reducing carbon emissions and energy costs. By transferring existing heat instead of generating it, they represent one of the smartest and most efficient ways to achieve a sustainable home. As technology advances and adoption grows, they are set to play an even more central role in creating climate-friendly, affordable homes for the future.

• Heat pumps provide efficient, low-carbon heating and cooling by moving heat rather than generating it.
• Multiple types—air, ground, water, and hybrid—offer flexible solutions for nearly any home.
• Heat pumps can cut household CO₂ emissions significantly, especially when paired with renewable energy.
• Heat pumps are shaping the future of sustainable home comfort.

Ready to upgrade?

If you’re ready to take the next step and join Europe’s clean energy revolution, we invite you to explore our comprehensive range of air-to-water, air-to-air and ground source heat pumps. We have tailored solutions for every property type.

Contact your local Daikin dealer to open the door to reduced energy bills, improved comfort and reduced environmental impact, while future-proofing your home against fluctuating fuel costs.