The levelised cost of heat (LCOH) is the total discounted cost of building, running and eventually decommissioning a heat source, divided by the discounted amount of heat it supplies over its life. The result is a single figure, usually in pounds per megawatt-hour (£/MWh) of heat, that can be read as the break-even price the operator needs to charge to recover its costs.
How it differs from LCOE
LCOH uses the same method as the levelised cost of electricity (LCOE), but the output is heat rather than power. That changes what goes into the sum:
| LCOE | LCOH | |
|---|---|---|
| Output measured | Electricity, £/MWh | Heat, £/MWh |
| Typical assets | Wind farms, solar farms, gas and nuclear plants | Boilers, heat pumps, geothermal wells, heat network energy centres |
| By-products netted off | Heat sold from a combined heat and power plant | Cooling sold from a system that heats and cools |
| Main sensitivities | Capital cost, load factor, fuel price, discount rate | The same, plus heat demand profile and supply temperature |
Like LCOE, it leaves out wider costs, such as the pipes of a heat network, unless a study chooses to include them. Two LCOH figures are only comparable if they share the same boundaries, price base and discount rate.
UK figures
There is no single official UK table of LCOH for every heating technology. The most detailed recent government estimates come from a geothermal review carried out by Arup for the Department for Energy Security and Net Zero (DESNZ), published in 2025. For projects starting in 2024, its medium scenarios gave:
- shallow geothermal systems supplying heat only: around £18 to £56/MWh;
- deep geothermal doublets: £84 to £172/MWh.
The review stressed how much the result depends on the discount, or hurdle, rate. Raising it from 10.1% to 18.8% took one deep geothermal case from £126/MWh to £264/MWh. Its indicative comparison with European estimates for air source heat pumps (£75 to £160/MWh) and gas boilers (£75 to £130/MWh) was made at a higher level and should not be read as a like-for-like ranking.
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