Price hikes mean it could be time to consider heat pumps, biomass boilers and solar hot water – if you can afford them

At a time of eye-watering energy price hikes, turning our homes into mini-power stations means we can cut bills and carbon emissions by generating a significant proportion of our heating and hot water needs ourselves.

To find out which renewable heat technology works best, the latest Ethical Consumer magazine Buyers' Guide looked at the three main options – ground source heat pumps, biomass boilers and solar hot water.

Ground source heat pumps work by tapping into the energy which is permanently present underground. A long, coiled fluid-filled pipe buried under your garden transfers this energy to a heat exchanger which then makes hot water for heating and for use around the house.

On the plus side, these systems can provide up to 80% of a household's hot water and heating needs. According to sustainable energy consultants CHB Sustainability they can typically save around £70 and 750kg of CO2 a year compared to an average condensing gas boiler.

On the down side, heat pumps cost from £9,000 to £17,000, plus burying the energy-collecting pipe in the back garden – if it's big enough – can be a massively disruptive project. We gave best buys on ethical and environmental grounds to Kensa and Master Therm.

The biggest carbon savings come from biomass boilers, which can slash annual household emissions by up to one tonne. Boilers cost around £11,000, are fridge-freezer sized and ideally have a hopper (store) attached to them allowing the feedstock to be automatically topped up.

The impressive carbon savings come from the fact that the boilers run on some form of wood, which have absorbed CO2 over their lifetime – either logs, wood chips or pellets made from compressed sawdust. Whilst CO2 is released from burning the wood, as long as new trees continue to grow in place of those used for fuel then the process is sustainable.

However there are concerns from groups such as BioFuel Watch, who claim that sustainable sources of wood are becoming increasingly difficult to find. The Biomass Energy Centre is a great source of information on this point.

Another downer is that unlike the other technologies we examined, biomass boilers could actually end up costing you £40 a year more to run compared to a typical condensing gas boiler.

Due to the smoke produced by burning fuel, the use of biomass boilers are restricted in Smoke Control Areas which cover large parts of the country. However a number of boilers are exempted so check with Defra to see which models you can install. Our Best Buys include Eco Angus and Froling.

The cheapest renewable technology we looked at are solar hot water systems, which on average cost around £4,800 to install. Households fitting this technology can expect to make modest carbon savings as well saving around £60 a year compared to a typical condensing gas boiler.

A solar collector the size of a velux window is fitted onto your roof which heats water, which in turn is fed into a hot water cylinder inside your house. Energy is saved as the warmed water only needs a small boost from a conventional boiler or immersion heater to make the water hotter.

As the cheapest and easiest technology to install, if you're looking to buy a renewable-heating system in our view the best option would be to choose a solar hot water system. Our Best Buys included: Filsol and Solartwin.

To encourage more of us to fit these renewable technologies, the government is about to launch the first round of its Renewable Heat Incentive any day now. The scheme's major caveat is that it's only open to those households which have already installed top-notch levels of insulation.

The first phase will consist of a one-off payment toward the cost of buying the kit while phase two, due to launch in October 2012, is expected to take the form of regular payments over 15 years or more for the use of the equipment.

• This article was updated on 19 July to reflect the exemptions to the Smoke Control Areas

• Simon Birch writes for Ethical Consumer Magazine