Save costs, protect the climate Replacing a heating system: costs, financing and trends

Private household heating accounts for almost a quarter of energy consumption in Switzerland. This shows that a modern heating system is an important step toward reducing CO₂ consumption and consumption costs. Each type of heating has very different advantages and disadvantages. Some types of heating are only suitable for certain buildings or can only be installed as part of an energy-efficient renovation project. We explain the most important criteria to help you make the right choice.

Heating installations are complex. As well as the heating system itself, there are also elements such as radiators or underfloor heating. The insulation of the building and the condition of the windows also have an effect on the efficiency of the heating.

The easiest solution is to replace your old heating system with a similar, more modern system. However, when renovating a heating system, it is advisable to make sure that you choose an environmentally friendly alternative. Even so, replacing the actual heating system is rarely sufficient. Other parts of the heating system often need to be renovated, for example by installing underfloor heating instead of radiators. In addition, you may need to improve the insulation of the building or install new windows to achieve the best results.

The first question every homeowner should ask themselves is which type of heating is best for them. District heating or gas heating systems require corresponding networks.

It is also important to consider how appropriate the heating system is for the building structure. In a new, energy-saving building that may even meet the Minergie standard, a heat pump is the obvious choice. If the financial situation allows, it is worth considering renovating older buildings with poor insulation. This will reduce CO₂ emissions.

At first glance, the appliance costs of an air-to-air heat pump are only slightly higher than for oil and gas heating systems, while the annual energy costs are significantly lower. However, caution is advised when calculating the cost of a brine-to-water heat pump, as this requires the installation of elements such as ground collectors or probes, which is usually expensive. You should also make sure that the building has a high energy efficiency rating. This is crucial when fitting a heat pump. The energy efficiency class is specified in the cantonal building energy certificate (GEAK).

Sometimes, a heat pump can only be installed as part of an energy-efficient renovation project. To ensure an objective comparison, the total costs must always be taken into account.

Installing a heating system is a task for qualified professionals. Do-it-yourself is strongly discouraged. Certain types of work, for instance involving gas installations, pose a significant risk. Maintenance also belongs in the hands of professionals. Regular checks are necessary to ensure that the best possible settings have been chosen to achieve maximum efficiency.

Which regulations must be taken into account when replacing a heating system?

The Swiss electorate approved the “Climate and Innovation Act” in June 2023. The aim is for Switzerland to become CO2-neutral by 2050. One of the measures that will help achieve this is for outdated oil, gas and electric heating systems to be replaced. Instead of banning fossil fuel heating systems, Switzerland is promoting the installation of heat pumps and other climate-friendly solutions by providing 200,000,000 francs per year until 2030.

However, the cantonal energy laws are authoritative. Model cantonal provisions (MuKEn) apply in most cantons: anyone wishing to replace a gas or oil heating system 1:1 with a fossil heating system must either implement selective measures to improve the energy efficiency of the property or cover at least 10 to 20 percent of the energy requirements with renewable energies.

In practice, this requirement often prompts homeowners to switch to a climate-neutral heating system. Individual cantons such as Zurich or Basel-Stadt have more far-reaching regulations in their cantonal laws. In these cantons, the replacement of an old heating system with a new fossil fuel boiler is now only possible in exceptional cases. The next edition of the harmonized cantonal regulations will probably go in a similar direction.

How much does a new heating system cost?

At 5,000 to 10,000 francs, the cost of purchasing a new condensing boiler is comparatively low. There are installation costs on top of this amount. Even this investment is sufficient to encourage many people to continue operating their existing oil or gas heating system for the time being. A more comprehensive renovation project, including a new oil tank and chimney renovation, will work out more expensive. Switching from oil heating to gas heating costs around 10,000 to 20,000 francs (all figures refer to a standardized one-family house). Implementing the cantonal guidelines usually also has a price – i.e. observing compensatory measures such as installing a photovoltaic system.

Homeowners who want to heat ecologically in the future have to reckon with higher initial investments. Converting to a clean heat pump costs at least 30,000 francs for an average one-family house. Depending on the initial situation, for example if complex boreholes are needed for geothermal probes, the investments are much higher and can even double, representing up to 60,000 francs. The investment costs are likely to rise, at least temporarily, due to increased demand for heat pumps and general supply bottlenecks.

How high are the usage costs for different types of heating system? Is environmentally friendly heating more economical in the long term?

An estimate of future usage costs depends a great deal on price trends for the associated energy source. However, there are no reliable long-term price forecasts for oil, natural gas or electricity. We have taken average prices of 115 francs per 100 liters of heating oil and at least 16 centimes per kWh of natural gas for our calculations. Both figures are therefore around 20 percent above the level observed at the end of 2021, but below the current market price. We also expect electricity prices to rise in the future. A long-term average of 33 centimes per kWh would give an electricity price that is around 50 percent higher than the current level. None of the energy prices are official UBS forecasts.

Our example calculation is based on an unrenovated single-family house with an annual energy consumption of around 18,000 kWh: the annual expenditure or usage costs of an oil heating system, including the purchase of oil, maintenance and CO2 tax, are around 4,400 francs. At around 4,500 francs, a gas heating system comes off slightly worse. Converting to renewable energy with a heat pump (powered by electricity) is significantly cheaper – despite the assumption of a sharp rise in electricity prices. The annual usage costs, including electricity consumption, are only around 2,000 francs.

This is economically viable in single-family houses that have already been made much more energy efficient: with residual energy requirements of around 10,000 kWh per year, the cost advantage of a heat pump is still considerable – ecological heating is then around 40 percent less expensive. However, it takes longer to amortize the initial additional investment.

What are the options for financing sustainable heating?

The new UBS Energy Mortgage offers particularly attractive interest conditions for replacing a fossil fuel heating system with a climate-friendly heating system, installing solar panels or fitting a photovoltaic system. The mortgage is designed as a fixed-rate mortgage, and you can choose between terms of two to ten years. The offer is aimed exclusively at private customers, and the minimum amount is 25,000 francs.

From a financial point of view, it is a very worthwhile investment. In many cases, the mortgage is likely to be self-supporting, as the interest payments and amortization can be financed with the savings made on the usage costs of the energy system.

Will the use of heat pumps remain more economical in the future?

Yes. The assumptions concerning the average price level of energy sources already factor in a sharp rise in electricity prices compared to the current figures. The long-term financial advantage of a heat pump over fossil fuel heating systems in renovated properties is only likely to disappear if electricity prices continue to rise sharply from the current level of just under 22 to around 50 centimes per kWh. For unrenovated buildings, an even greater increase in electricity prices would be needed to turn the tide in favor of fossil fuel heating systems.

Which heating system is the most economically viable?

The economic advantages are particularly striking for older, unrenovated single-family houses with relatively high energy consumption. In most cases, replacing an oil heating system should pay for itself in less than ten years.
The initially high investment costs of a heat pump are amortized by lower annual usage costs. If potential cantonal subsidies of up to 10,000 francs and tax benefits are also included in the calculation, the investment is even amortized after as little as three to five years. Owners also benefit from the longer service life of the heating system and low service costs. In comparison, longer amortization periods can be assumed for residential buildings that have already been renovated.

As soon as the investment costs exceed 40,000 francs, it takes 20 years before switching to a heat pump pays off. If subsidies are obtained so that the investment costs are lower, the amortization period is reduced to less than 15 years.

Is it worth delaying the replacement of an old oil or gas heating system?

Until now, there has been a certain consensus that components should be replaced at the end of their service life for ecological and economic reasons. For heating systems or façades, this would be after around 15 or 20 years, depending on the component. However, more recent analyses show that this assessment is too generalized.

A study by the environmental organization WWF comes to the conclusion that it makes sense to replace components sooner: the authors of the study conducted a comprehensive life cycle assessment to take into account the manufacture, operation and disposal of each heating system. They also allowed for the fact that the ongoing emission of CO2 is potentially damaging to the climate. Their findings show that anyone who still has an oil or gas heating system in their building should switch to a heat pump, pellet or district heating system “as soon as possible” from an environmental perspective.

The current sharp rise in fossil fuel prices mentioned above is another argument. Besides this, the legal and technical requirements are gradually becoming stricter. So there is a lot to be said for replacing an oil or gas heating system sooner rather than later. In addition, a future ban on these heating systems could cause capacity bottlenecks in the construction industry and push up renovation costs.

How can energy costs be reduced even more?

Energy consumption in older residential buildings can be significantly reduced with relatively inexpensive and simple measures. Simply replacing old windows or doors can reduce annual energy consumption by up to 30 percent. Further measures, such as renovating the façade and fitting thermal insulation, can also have a positive impact on the energy footprint. The use of solar energy is another possible measure. A photovoltaic system can reduce the electricity costs of a single-family house by more than two thirds.

What is more, the ancillary costs are less dependent on energy prices. A photovoltaic system is doubly worthwhile in combination with a heat pump, as the electricity produced is then also used to operate the heat pump. However, the actual profitability calculation depends on the individual case and on cantonal subsidies.

How high are the subsidies for replacing an old heating system?

Most cantons provide subsidies for carrying out energy-efficient renovation projects and replacing old heating systems. However, policies and funding programs vary greatly from canton to canton. Owners can hope to receive an average lump sum of around 10,000 francs for the installation of brine-to-water and water-to-water heat pumps, which are considered to be particularly sustainable. Cantons such as Basel-Stadt and Zug are especially generous. Owners can obtain information from the relevant specialist offices in each canton.

What other financial advantages will there be to heating ecologically in the future?

You can benefit from considerable additional tax advantages depending on your income or marginal tax rate. The cost of converting to a renewable heating system can generally be deducted in full from your income tax, regardless of whether the measure is taken as part of a building maintenance project or as a value-enhancing investment.

Owners of properties that have undergone energy-efficient renovation will also benefit from higher sales prices in the medium and long term. This is because a state-of-the-art property usually achieves a higher resale value than unrenovated properties.

The renovation of the structure of an existing building is certainly an important prerequisite for the use of heat pumps and other climate-friendly technologies. As soon as the necessary renovation work has been completed, the advance of heat pumps will gain momentum. In view of climate protection and high oil and gas prices, a long-term future for oil and gas heating systems is not foreseeable.

There are also interesting approaches over and above heat pump technology. The installation of solar thermal systems for generating hot water has been tried and tested for decades. District heating, geothermal energy or cogeneration plants (combined heat and power) will also become more widespread. It is to be hoped that the spirit of invention will continue to point the way toward environmentally friendly, affordable heating.

There are very few indications that energy prices will fall in the future. Pressure in relation to environmental and climate protection is also unlikely to decline. In order to avoid high costs for energy-efficient renovation, homeowners should continuously invest in (energy-efficient) renovation and modern heating systems, and deduct the permissible costs from their taxes.

This will avoid any investment backlog associated with expensive comprehensive renovation. Installing a heat pump also makes particular sense if the building structure is in good condition. The future lies in combining effective insulation with alternative heating systems.