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Government places heat pump grants at centre of Heat and Buildings Strategy

Heat pumps, such as the Daikin Altherma (pictured), are one way of decarbonising heating in homes. Image: Daikin

Heat pumps, such as the Daikin Altherma (pictured), are one way of decarbonising heating in homes. Image: Daikin

The government is to offer grants of £5,000 for the installation of heat pumps from April 2022 as part of a new £450 million scheme to upgrade domestic heating infrastructure.

The Boiler Upgrade Scheme is one of the headline commitments outlined in the Heat and Buildings Strategy, published today (19 October 2021) which also detailed the government's plan to work with industry to meet the aim of heat pumps costing the same to buy and run as fossil fuel boilers by 2030. Cost reductions of between 25 - 50% by 2025 are expected as the market expands and technology develops.

A call to evidence on reducing the price of electricity over the next decade by shifting levies away from electricity to gas is also to be published, with decisions made in 2022.

This follows reports that ministers were considering proposing the shift to help incentivise the uptake of heat pumps last month, as well as calls from utilities.

Energy secretary Kwasi Kwarteng said that recent volatile gas prices highlighted the need to "double down on our efforts to reduce Britain’s reliance on fossil fuels and move away from gas boilers over the coming decade to protect consumers in long term”.

The new funding is to support the government’s ambition for all new heating systems installed in UK homes from 2035 to be low carbon.

But Octopus Energy’s Centre for Net Zero (CNZ) has released modelling which claims to show that if funding remains capped at £450 million, it will only support up to 90,000 households in total. A minimum of 560,000 British households would switch to heat pumps over the duration of this timeframe if they had access to the grant, the modelling shows.

In the CNZ's analysis, 30 million properties across GB were modelled to estimate the distribution of costs to retrofit an air source heat pump rather than focusing on the cost for an ‘average’ household that currently dominates discussions. The cost of fitting heat pumps is heavily influenced by factors including the size of the home and its EPC rating, it found.

Lucy Yu, CEO of Centre for Net Zero, said that while the grant should be welcomed, the £450 million cap will leave demand unmet.

"If ministers are serious about getting the numbers of heat pumps into people’s homes that will keep us on track to achieving net zero, they must consider increasing the available funding rather than cutting off demand," Yu said.

The £5,000 grants follow the Green Homes Grant scheme, which offered vouchers for the installation of low carbon technology including heat pumps. The scheme shuttered early after a raft of administrative challenges, with just 20% of the scheme's £1.5 billion of funding spent.

Other measures announced in the Heat and Buildings Strategy include;

  • Over £3.9 billion of new funding for decarbonising heat and buildings. This is to fund the next three years of investment through the Social Housing Decarbonisation Fund, the Home Upgrade Grant, the Heat Networks Transformation Programme, the reduction of carbon emissions from public buildings through the Public Sector Decarbonisation Scheme and the Boiler Upgrade Scheme.
  • A new £60 million Heat Pump Ready innovation programme has also been announced, with this part of the £1 billion Net Zero Innovation Portfolio. This scheme will provide funding to drive technological innovation which will make heat pumps smaller, easier to install and cheaper to run over the coming years.
  • The government is also to make a decision on the potential role for hydrogen in heating buildings by 2026, by learning from its Hydrogen Village pilot.

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