The secretary of state for energy security and net zero, Ed Miliband, has officially permitted Ofgem to over-allocate vouchers for the boiler upgrade scheme (BUS) by up to £50 million in this financial year, to a total of £200 million.
The move is intended to provide certainty that vouchers will continue to be available for the remainder of the financial year.
Ofgem’s annual report on the scheme, published in August, showed that 23,875 vouchers were redeemed from its launch until the end of March 2024, with grants totalling £138.9 million paid towards the installation of low carbon heating systems. July this year saw the second-highest number of applications since the scheme’s launch in April 2022.
According to Jess Ralston, head of energy at the Energy and Climate Intelligence Unit (ECIU), heat pump demand continues to grow in the UK: “The UK was so badly hit by the gas crisis partly because 85% of our homes use gas for heating, a mistake we can’t afford to repeat if there’s a future gas price spike.”
She also said: “Ignoring any potential calls from the gas boiler industry to delay or scrap other heat pump policies like the Clean Heat Market Mechanism will be important for growing the market even further and ensuring that households are no longer exposed to volatility in international gas markets that the UK will never have control over.”
The impact of heat pumps
The latest funding boost for the BUS comes as the Centre for Net Zero, an independent energy research institute founded by Octopus in 2021, published a report that it claims is the “first large-scale, credible evaluation” of heat pumps’ impact on energy demand.
The centre analysed data from Octopus Energy customers to investigate the causal impact of air-source heat pumps.
The report’s key findings point to a significant reduction in energy demand through heat pump adoption, stating that the technology reduces household total energy use by 40% compared to gas boilers.
Further, it showed that a time-of-use heat pump tariff—the study looked at the Octopus ‘Cosy’ tariff—can halve energy consumption during peak evening periods, as well as saving households approximately £318 per year, compared to a household on a standard tariff.
Critically, it found that the BUS provides positive welfare benefits relative to costs, with societal benefits of £1.24 for every £1 of government spending. Still, with the department for energy security and net zero (DESNZ) well behind meeting its target of 600,000 annual heat pump installations by 2028, the Centre for Net Zero also recommends some policies to accelerate adoption.
These include continuing heat pump subsidisation, lowering the cost ratio of electricity to gas and accelerating wider policies to scale flexibility in heat pumps, including rollout of smart meters and sharper price signals for electricity markets.