Summary
Adveco considers the reasons behind staying on commercial gas water heating in the face of pressure to become more sustainable. From regulatory tensions to cost considerations, gas remains a viable option for many commercial organisations retrofitting systems today and seeking greater sustainability in the future...
While natural gas remains the dominant energy source for the existing commercial building stock, in the United Kingdom, the application of gas-fired appliances for water heating in commercial properties must be able to navigate a complex period of transition. As of 2026, the regulatory landscape is defined by the pressures of maintaining operational costs, safety and achieving the UK’s current legally binding Net Zero targets by 2050. Whilst the policy trajectory is decisively moving toward electrification and low-carbon alternatives, gas remains an important consideration for most commercial organisations with existing buildings.
Data from the Department for Energy Security and Net Zero (DESNZ) indicate that there are approximately 1.8 to 2 million non-domestic buildings in the UK. Of these, an estimated 65% to 70% are connected to the gas grid, utilising natural gas for space heating, hot water, or both. Despite the growth in heat pump adoption, at a compound annual growth rate (CAGR) of over 11%, gas-fired appliances still commanded approximately 37% of the total heating equipment market share in 2025. This persistent reliance is due to the high ‘peak’ hot water demands of commercial facilities—such as hotels, hospitals, schools, restaurants and leisure centres—where traditional gas-fired storage and instantaneous water heaters offer a power density that early-generation electric alternatives struggled to match economically.
Today, the government’s Heat and Buildings Strategy outline a transition that avoids the scrappage of functional equipment. Instead, policy is focused on ‘natural trigger points’, essentially the moment an old appliance reaches the end of its life. The government signalled its ambition to phase out the installation of all new natural gas boilers by 2035, but it is important to note that businesses will not be forced to remove existing, working boilers before their natural end-of-life. Modern appliances have an expected 15-plus years of efficient operation. This effectively extends gas water heating use through to the 2050 deadline for commercial buildings.
That said, policy evolution is likely to increase pressure on commercial organisations to consider transition before 2050. The Future Homes and Buildings Standard (FHBS), which is scheduled for full implementation by the end of 2027, by tightening carbon emission targets (Target Emission Rate or TER), makes it nearly impossible to specify a traditional gas boiler or water heater in a new commercial building without extensive carbon offsetting or hybridisation. The standard also requires all new buildings to be zero-carbon ready, meaning they must not require further retrofit work to become carbon neutral as the electricity grid continues to decarbonise. This effectively prevents any new commercial property from being gas-connected, with the rare exceptions for commercial/industrial properties with ‘very high’ demands for hot water.
For existing properties, the current primary regulation governing the installation of gas-fired water heaters is Approved Document L (Volume 2) of the Building Regulations, which focuses on the conservation of fuel and power in ‘buildings other than dwellings.’ Under the most recent updates, all new gas-fired water heaters must meet stringent minimum heat generator seasonal efficiencies. For direct-fired gas water heaters, the minimum efficiency is typically set at 91% (Gross Calorific Value). This effectively mandates the use of condensing technology, which captures latent heat from flue gases that would otherwise be wasted.
Policy trajectory for commercial decarbonisation remains focused on tightening energy efficiency standards (EPCs) of existing commercial buildings to accelerate the transition to low-carbon heating. Commercial landlords, for example, are already subject to MEES, which currently prohibits the leasing of buildings with an EPC rating below E. The government’s stated target is to raise this requirement to EPC B by 2030. Since gas-fired water heating significantly impacts a building’s carbon score, many landlords may be forced to move away from gas to meet these rental standards.
Why stay on gas water heating?
Despite the push for greater sustainability, there remains regulatory tension as operators of commercial buildings must address health, safety, technical and cost constraints. There are also questions over new and nascent water heating technologies.
By the end of 2026, the UK government is expected to make a strategic decision on the role of hydrogen in the gas grid, and most modern commercial gas water heaters are already capable of running on a 20% hydrogen blend. However, the prevailing policy trend suggests that while hydrogen may serve heavy industry, the vast majority of commercial office and retail space will be directed toward district heating networks – where they exist – or more likely heat pumps and the increasingly decarbonised electricity of the grid.
While the carbon data heavily favours electrification, commercial facilities face specific technical hurdles when transitioning away from gas-fired appliances. Many older commercial properties lack the electrical headroom to support large-scale heat pump arrays. Upgrading a local substation can be a multi-year, six-figure project that can quickly lead to sustainability goals being shelved. An ASHP setup with equivalent peak-load capacity also requires significant external space for fans and internal space for large thermal storage tanks, which can, again, stall projects if available space is lacking.
Critically, commercial hot water systems must comply with ACOP L8 (the Control of Legionella Bacteria). This requires that water must be stored at 60°C and distributed so it reaches outlets at 50°C (55°C in healthcare). Gas-fired appliances easily achieve these high temperatures. Heat pumps often require booster immersion heaters or specialised, and arguably highly flammable, poorly legislated refrigerants to reach 60°C efficiently. For this reason, many designs will now utilise a hybrid approach using heat pumps for the pre-heat (up to 50°C working flow) and gas or electric immersion for the final high temperature kill cycle. For small to medium sized business, pre-sized compact hybrid water heating systems, such as Adveco’s award-winning FUSION concept, are the perfect solution. But for greater commercial demands, a bespoke approach is demanded that is likely to be complex and therefore demanding of capital investment.
If we take a 50-room hotel as an example, the primary barrier is often not the equipment itself, but the ancillary upgrades required. Because heat pumps deliver energy more slowly than gas, you need larger water cylinders. This requires not only larger, more expensive cylinders, but it may also require hidden costs, such as the reinforcing of floor structures, widening access or repurposing storage rooms. A gas system also requires minimal electricity. A heat pump array for 50 rooms may require a 100A – 150A 3-phase supply. If the building is already at its limit, due to the presence of a commercial kitchen or EV chargers for guest parking, a grid upgrade from the DNO (Distribution Network Operator) can add anything from £20,000 to 250,000+ to the project, with costs spiralling higher still in urbanised and built-up locations.
In our hotel scenario, the choice between gas and electric is as much about infrastructure as it is about energy. Hotels have a high, localised hot water demand (with morning shower peaks) that requires significant power. With an assumed daily hot water demand of approximately 3,000–4,000 litres, we can compare initial investment (capital expenditure) and running costs (opex) for a gas-fired condensing system compared to one based on ASHP.
Gas-fired water heaters are both lower cost to purchase and simpler to install. That installation phase, which is likely to be a couple of days for gas, will be extended by up to as much as two weeks for ASHP and plantroom work. So ASHP systems will typically cost in the region of three and a half times as much as a gas water heater to procure and install.
In terms of operational costs, fuel, maintenance and lifespan need to be considered. Both systems, leveraging the latest, efficient technologies, can expect to have similar lifespans. ASHP will be expected to operate for 15-20 years, and although gas water heaters may have a shorter lifespan, typically 12-15 years, regular maintenance can see operational lifespan well exceed these timeframes. The maintenance costs of both technologies are relatively similar by the time gas and F-gas safety checks are run, and parts and filters are replaced. The real question comes down to annual fuel/energy costs. Admittedly, there is a great variety of tariffs on the market, and these will change over time, but current commercial energy tariffs in the UK are characterised by relatively stable, lower wholesale gas prices alongside high electricity costs. As of early 2026, the average unit cost of energy per kWh is 7p for gas, compared to 27p for electricity. This factor of 4 has been relatively stable in recent years, and although ASHP can deliver 300% efficiency to close most of the gap, to drive greater heat from ambient temperature air to achieve necessary operational flow temperatures requires greater electrical energy input, reducing the cited overall efficiency.
Although the ASHP will run somewhat more expensive than a gas-fired water heater, the addition of a primary heat source to meet safe operational temperatures and peak demands can drive system operations costs to as much as three or four times that of gas for the same overall results. Many commercial buildings will therefore try to utilise smart tariffs to run heat pumps overnight at lower rates to ‘charge’ larger thermal stores, thereby bringing ASHP running costs below those of gas. Such storage for our hotel would need to be considerable, again demanding further capital investment in a system to meet ongoing daily demands and peaks.
As a result, gas-fired water heating is truly advantageous in terms of delivering cost-effective operations and lower capital investments when compared to heat pump-based systems. High-temperature water up to 85°C is achievable as standard, and easily maintainable above 60°C, meeting ACOP L8 compliance, thus guaranteeing operational safety. When owner/operators have multiple buildings requiring renovation, this becomes a key decision factor. If three buildings can be transitioned to low-carbon electrical systems, or for the same investment and operational outlay, 12 buildings can be refurbished to high-efficiency gas. It is easy to see why many continue to opt to retain gas, despite it being a fossil fuel.
What may change that decision ultimately is the value placed on sustainability gains. At 91% and above efficiency, gas-fired water heaters will typically generate, according to 2025/2026 DESNZ emission factors, in the region of 201g of CO₂ per kWh of heat compared to 43g to 60g by the heat pump operating at 250% – 350% (COP 2.5 – 3.5). Gas provides the baseline against which heat pump emission reductions of 70-80% will be measured. A heat pump system will also have zero carbon tax liability and may gain a bonus from low-carbon incentivisation. As we have seen already, government policy, such as MEES, is only likely to increase the carbon tax liability on gas, as the government seeks to curb the ongoing use of fossil fuels and steer the country toward net-zero commercial operations.
Given the relatively high CAPEX of heat pumps, many commercial operators are adopting a hybrid strategy. This involves keeping a smaller gas-fired unit for ‘peak lopping’ while a heat pump manages the base load throughout the day. This reduces the required electrical upgrade and lowers initial investment while still cutting carbon emissions by 60–70%. Further reduction in both operational costs and emissions is also attainable for both gas and heat pump systems if solar thermal is introduced as a truly renewable system pre-heat, or mid-heat source.
If you are managing a property with an ageing gas-fired system, switching to a high-efficiency gas appliance provides trusted, lower-to-operate options. Whilst not contributing as strongly to decarbonisation goals, gains can still be made, especially with hybrid solar/gas or even heat pump/gas systems. With current policy advocating a fabric-first approach, reducing the overall heat loss of the building and installing low-flow fixtures can help towards downsizing the eventual replacement system. This makes the transition to electric heat pumps, heat networks or green gas alternatives more financially viable between 2035 and 2050.
