Heat Pump Types Overview
Heat pumps extract environmental heat from air, ground, or groundwater and convert it into heating energy for your home. The principle is the same for all types: a refrigerant absorbs environmental heat, is compressed by a compressor, and releases the heat to the heating system. The three most common types differ in their heat source, costs, and efficiency.
The air-to-water heat pump is the most widely installed type with a market share of over 80 percent. It extracts heat from outdoor air and is relatively simple to install since no ground drilling or wells are needed. However, its efficiency fluctuates with outdoor temperature: on cold winter days, when heating demand is highest, the coefficient of performance is at its lowest.
The ground-source heat pump (brine-to-water) uses the constant temperature of the ground as its heat source. From a depth of about 10 meters, temperatures remain steady at around 10 degrees Celsius year-round. This makes it more consistent and efficient than an air-source heat pump. There are two variants: ground probes (vertical boreholes up to 100 meters deep) and horizontal collectors (laid at 1.5 meters depth). Ground probes require little space but are more expensive; horizontal collectors need a large, undeveloped garden area.
The water-to-water heat pump uses groundwater as its heat source and achieves the highest efficiency values, since groundwater maintains a stable temperature of 8 to 12 degrees year-round. However, it requires a production well and an injection well, water rights permits, and sufficient groundwater quality. This makes it the most complex but also the most efficient option.
Installation Costs 2026 by Type and Region
The total cost of a heat pump consists of the unit itself, installation, connection work, and potentially the heat source development. In 2026, you should expect the following approximate costs: An air-to-water heat pump costs 15,000 to 25,000 euros including installation. A ground-source heat pump with probes runs 20,000 to 35,000 euros, with drilling costs (50 to 80 euros per meter) making up the largest share. A water-to-water heat pump costs 25,000 to 40,000 euros including well drilling and permits.
Regional price differences can affect costs by 10 to 20 percent. In southern Bavaria, Hamburg, and the greater Munich area, labor costs are highest. In eastern German states, you can expect 10 to 15 percent lower installation costs. In addition to pure installation costs, there may be additional expenses: radiator replacement (2,000 to 5,000 euros), hydraulic balancing (500 to 1,500 euros), buffer storage (1,000 to 3,000 euros), and removal of the old heating system (500 to 2,000 euros).
BAFA Subsidies 2026: Combining Base Funding and Bonuses
The Federal Funding for Efficient Buildings (BEG) offers attractive grants through BAFA for installing a heat pump. The base subsidy is 30 percent of eligible costs (maximum 30,000 euros for single-family homes). Additionally, there are two bonuses that can be combined.
The Climate Speed Bonus is 20 percent and is granted when replacing a functional fossil heating system (oil, gas, or storage heaters) that is at least 20 years old or subject to mandatory replacement under the Building Energy Act. The Income Bonus is 30 percent and applies to homeowners with a taxable household income of no more than 40,000 euros per year. All bonuses can be combined, but the total subsidy rate is capped at 70 percent. With eligible costs of 30,000 euros and a subsidy rate of 70 percent, you receive a maximum grant of 21,000 euros.
Important to know: The BAFA application must be submitted before work begins, contracts with installers may only be placed after the application is received, and payment is made after completion of the work and submission of proof of use. Additionally, you can use the KfW complementary loan (program 358 or 359) for low-interest financing of remaining costs.
Operating Costs: Electricity vs. Gas and Oil Comparison
The annual operating costs of a heat pump depend on three factors: the building's heating demand, the seasonal COP, and the electricity price. A typical single-family home with 20,000 kWh heating demand and a seasonal COP of 3.5 uses about 5,700 kWh of electricity per year. At an electricity price of 30 cents per kilowatt-hour, this results in annual heating costs of approximately 1,710 euros.
For comparison: The same amount of heat from a gas boiler (90 percent efficiency) at a gas price of 12 cents per kilowatt-hour costs approximately 2,670 euros per year. An oil boiler at 11 cents per kilowatt-hour runs about 2,440 euros. The heat pump thus saves 730 to 960 euros in heating costs in the first year alone. With fossil energy prices rising at 3 percent per year, this advantage grows annually.
A special money-saving tip: Many energy suppliers offer special heat pump tariffs that reduce the electricity price to 22 to 26 cents per kilowatt-hour. In return, the supplier may switch off the heat pump for a maximum of 2 hours daily. In practice, this is hardly noticeable thanks to the buffer storage. With a heat pump tariff, annual costs drop to approximately 1,425 euros.
Seasonal COP: The Most Important Metric Explained
The seasonal COP indicates how much heat energy a heat pump generates on average from one kilowatt-hour of electricity over an entire heating season. A COP of 3.5 means: for each kilowatt-hour of electricity used, the heat pump delivers 3.5 kilowatt-hours of heat. The remaining 2.5 kilowatt-hours come from environmental heat and are essentially free.
Typical COP values 2026: Air-to-water heat pumps achieve 2.8 to 3.5, with newer models using R290 refrigerant (propane) at the upper end. Ground-source heat pumps reach 3.5 to 4.5, thanks to the constant ground temperature. Water-to-water heat pumps achieve 4.0 to 5.0 as the most efficient variant.
The COP depends heavily on the building: A well-insulated house with underfloor heating (low flow temperature of 35 degrees) achieves significantly higher COP values than a poorly insulated old building with small radiators (high flow temperature of 55 to 70 degrees). Each degree less flow temperature increases the COP by approximately 2 to 3 percent.
Which Buildings Benefit Most from a Heat Pump?
In principle, a heat pump can be worthwhile in most buildings, but its economic viability depends on certain prerequisites. Ideal conditions are found in new buildings and well-renovated existing buildings with underfloor heating, good insulation (EnEV 2009 or better), and low flow temperatures below 45 degrees Celsius.
A heat pump is also possible in old buildings if the building envelope is improved beforehand. Important measures include: insulating the facade and roof, replacing old windows with triple glazing, and potentially enlarging heating surfaces (larger radiators or additional underfloor heating). Our calculator takes insulation status into account and adjusts the effective COP accordingly.
A heat pump would not be recommended for buildings without any insulation (pre-1970, unrenovated) with flow temperatures above 60 degrees, as the COP drops below 2.5 and operating costs may equal or even exceed those of a gas boiler.
Heat Pump and Solar Panels: The Perfect Combination
Combining a heat pump with a PV system is particularly financially attractive. Instead of feeding PV electricity into the grid for 8 cents per kilowatt-hour, you use it directly for the heat pump and save the grid purchase price of 30 cents per kilowatt-hour. With a self-consumption share of 30 percent (a realistic value; with battery storage even 50 to 60 percent), the effective electricity price drops considerably.
Calculation example: With 5,700 kWh electricity demand for the heat pump, 30 percent PV self-consumption (1,710 kWh at 8 cents) and 70 percent grid purchase (3,990 kWh at 30 cents), electricity costs amount to only 1,334 euros instead of 1,710 euros. That is 376 euros in additional annual savings. Additionally, CO2 emissions for the PV share are practically zero, further improving the heat pump's environmental footprint.
Example Calculation: Single-Family Home Built 1990
Let us take a typical single-family home: 130 square meters living area, built 1990, average insulation, current gas heating with 20,000 kWh annual consumption and 2,400 euros heating costs. The owner decides on an air-to-water heat pump at an offered price of 18,000 euros.
Subsidy: BAFA base subsidy 30 percent on 18,000 euros (= 5,400 euros), plus Climate Speed Bonus 20 percent (= 3,600 euros), since the old gas boiler is over 20 years old. Total subsidy: 9,000 euros. Net cost: 9,000 euros.
Operating costs: With an effective COP of 3.0, electricity demand is 6,667 kWh. At 30 cents per kilowatt-hour, that is 2,000 euros per year, 400 euros less than the previous gas costs. With 3 percent annual energy price increases, the investment pays for itself in approximately 10.5 years. CO2 savings: Instead of 4,020 kg CO2 per year (gas), only 2,440 kg (electricity mix), saving 1,580 kg, equivalent to about 72 trees.
Conclusion and Recommendation
A heat pump is in most cases an economically and environmentally sensible investment. Thanks to the generous BAFA subsidies in 2026 (up to 70 percent), net costs are manageable, and annual savings on heating costs significantly shorten the payback period. Use our calculator to run through your personal situation: with just a few inputs, you receive a detailed cost-benefit analysis including subsidies, payback period, and CO2 balance.