The UK renewable sector has experienced significant upheaval in the week following Prime Minister Rishi Sunak’s 20 September announcement.
Addressing the nation from outside Downing Street, Sunak revealed a number of delays to key decarbonisation goals, a U-turn which caused an uproar both from those within and beyond the renewable sector. The heat industry received particular attention from the Prime Minister.
“To get to net zero, we need a fairer, better approach to decarbonising how we heat our homes,” said Sunak.
Sunak’s strategy to achieve this includes delaying the imposition of a ban on the sale of oil, liquid petroleum gas (LPG) and new coal for off-gas-grid homes from 2026 to 2035.
Households will also only be required to replace their fossil fuel boiler with a low-carbon alternative after 2035 – a deadline already commonly assumed within the heat industry – and only if the former required replacing regardless. However, the Prime Minister plans to add an exemption even to this so that some households will never be required to install low-carbon heating.
Concluding his address on heat, Sunak unveiled an increase to the cash grants offered by the Boiler Upgrade Scheme (BUS), meaning that those looking to install an air source heat pump, ground source heat pump (GSHP) or biomass alterative will now receive £7,500.
With the dust now somewhat settled, Current± discusses what these changes will mean for the UK with leading figures in the heat sector.
Little change, much confusion
“Despite the noise last week, there was little new policy confirmed, but unfortunately, a good deal of confusion was caused,” Tamsin Lishman, CEO designate of the Kensa Group, a GSHP manufacturer tells Current±.
“A 2035 boiler ban was already the assumption amongst much of the industry, but what we need to see is the legislation that turns it from a date in a speech to something the industry can invest in.”
The need to evolve policy from targets to binding commitments is shared by the Heat Pump Association (HPA).
“The government has once again moved the goalposts for heat decarbonisation in the UK, and this risks damaging investor, installer and consumer confidence in this space unless this re-confirmed end date for fossil fuel boilers is strengthened from being an ‘ambition’ to being a firm commitment,” says a spokesperson from the HPA.
The HPA also notes that delaying the ban on installing new coal heating for off-gas-grid households from 2026 to 2035 is a target seven years later than the recommendations made by the Committee on Climate Change (CCC).
Additionally, the same ban for new oil and LPG boilers installations will be two years later than CCC recommendations.
Is the BUS grant increase sufficient?
One of the more renewable-aligned announcements within Sunak’s speech was the increase in the BUS grant from £5,000 to £7,500.
It’s worth noting that within his speech, Sunak called this a 50% increase, but this would not be the case for GSHPs, which already had a grant level of £6,000, making this a growth of 25%.
Even aside from this, industry players tell Current± that the increase, although welcome, will be insufficient to achieve the UK’s ambitions of installing 600,000 heat pumps annually by 2028.
Ian Rippin, CEO of the Microgeneration Certification Scheme (MCS) points out that as 10,000 grants were paid in the first year of the scheme – totalling over £50 million – there is now only £150 million per year allocated for the scheme until 2028.
This means that, without adding to the overall BUS budget, the increase on individual grants will only support 3% of the 600,000 annual installations by 2028 target.
“Increasing the grant to £7,500 reduces the number of installations that can be supported in each financial year to 20,000,” reveals Bean Beanland, director for growth and external affairs at the Heat Pump Federation (HPF).
“This sort of scale does almost nothing in setting the sector on the pathway towards all of the various interim targets currently set by government and the CCC.”
The HPA provides a number of suggested steps for the government to bolster heat pump deployment through the BUS including:
- Removing the 45kWh limit for shared ground loop systems
- Improving the promotion of available help to consumers
- Committing to budgets for the scheme during 2025-2028
- Providing a rural uplift, akin to Scotland
Another frustration voiced was the continued omission of alternate low-carbon heating technologies within the BUS scheme.
Discussing the heat pump and biomass exclusive subsidy scheme, Johan du Plessis, CEO of tepeo, which develops a direct plug-in gas boiler replacement called the Zero Emissions Boiler, tells Current±:
“What this is really doing is stifling innovation and hampering the speed of decarbonisation by ignoring other technologies like ours that can decarbonise buildings at a lower cost and more quickly,” says du Plessis.
“Subsidies are anti-competitive by design, which means you have to be very careful when you are applying them to a market where you also want competition.”
On the matter of ‘unacceptable costs’
Sunak’s stated that his reasoning for these delays was to avoid an approach “which will impose unacceptable costs on hard-pressed British families.”
Rippin notes that although the MCS has seen an increase in consumers adopting “home-grown energy solutions,” heat pumps still remain more expensive to install than a gas boiler, which, Rippin adds, speaks to the importance of the BUS to make low-carbon technologies “a more affordable and accessible option.”
It’s worth noting that Octopus recently launched its Cosy 6 heat pump, which, if a home already has a “reasonably up-to-date hot water cylinder and a reasonably well looked after heating system,” could be installed for free after a BUS grant.
There are also great strides currently being undertaken by members of the heat industry to continue lowering the cost of heat pumps and make low-carbon heating – and its benefits – more accessible, and government support is paramount to achieving this.
“With the right policies in place, we know that we can drive costs down to the point that before the end of the decade, it will be cheaper to install and run one of our heat pumps than to install a gas boiler,” reveals Lishman.
“Far from raising costs, a heat pump will save people money in the future and the government’s own research shows that all housing types are suitable for a heat pump,” Lishman continues.
“It therefore makes little sense for the government to seek to slow down the pace of the transition or help build the impression that heat pumps are an expensive imposition. All this does is leave people with fossil fuel heating for longer and the additional expense that comes with it.”
Du Plessis, whilst also recognising that upfront cost can be a deterrent to the uptake of low-carbon heat, highlights a number of “government imposed deterrents” including:
- An effective subsidy of gas vs. electricity; 25% of the typical electricity bill is still paying for environmental and social costs with none of this burden on gas.
- The electricity pricing mechanism that sets pricing based on the marginal generator artificially inflates electricity pricing because gas generation is at the top of the cost stack.
- Housing developers are still able to build homes today that will need to be retrofitted with low-carbon heat technologies.
What do the delays mean for the future of electrified heat in the UK?
Upon being asked whether last week’s announcement will affect the approach to heat electrification, the responses were mixed in terms of the subjective damage caused by the delays, but all were united in their commitment to electrify the UK’s heat.
“The announcements will certainly make it more challenging for us. The increase to the subsidy for heat pumps makes it harder for us to compete. With the newly updated subsidy regime, our technology is about double the cost of a heat pump. This makes it hard,” said Du Plessis.
“However, our customers love the plug ‘n’ play simplicity of our product [and] we will keep up the drive to decarbonise the heating sector and sooner or later things will have to change to support technologies like ours.”
The Kensa Group shares a similar determination to reach net zero goals: “The government may have sought to water down commitments on heat decarbonisation but that just makes us more determined than ever to achieve our goals,” says Lishman.
Similarly, organisations supporting the transition to low-carbon heat, such as the MCS, HPA, and HPF, maintain their mission has not changed and efforts won’t be dampened by last week’s U-turn.
Beanland concludes by noting that the HPF will be keeping a keen eye on next year’s general election: “The impact on the Heat Pump Federation is that of driving us to identify where policy gains might yet still be made by this government (and there are a few), and focussing our attention on how best to impact the party manifestos (if we can), how to demonstrate what consumers really think about Net Zero and how to get there, and finally, on how to best communicate with, and influence, the new intake of MPs after the General Election.”
