New £5,000 grants for heat pumps


19 October 2021

New grants of £5,000 will be available from April next year to encourage homeowners to install heat pumps and other low-carbon heating systems. The Government says the £450 million 3-year Boiler Upgrade Scheme will mean people choosing to install a heat pump will pay a similar amount as if they were installing a traditional gas boiler.

The news was welcomed by industry figures, although climate change charity Ashden felt the policy did not go far enough and described at as a 'missed chance'.

Through the Heat and Buildings Strategy, the government has set out its plan to incentivise people to install low-carbon heating systems in a simple, fair and cheap way as they come to replace their old boilers over the coming decade. This will significantly reduce the UK’s dependency on fossil fuels and exposure to global price spikes, whilst supporting up to 240,000 jobs across the UK by 2035.

The Boiler Upgrade Scheme is part of more than £3.9 billion of new funding for decarbonising heat and buildings. This will fund the next 3 years of investment through the Social Housing Decarbonisation Fund, the Home Upgrade Grant scheme, the Boiler Upgrade Scheme and the Heat Networks Transformation Programme and reducing carbon emissions from public buildings through the Public Sector Decarbonisation Scheme.

The government and industry will also work together to help meet the aim of heat pumps costing the same to buy and run as fossil fuel boilers by 2030, with big cost reductions of between a quarter and a half by 2025 expected as the market expands and technology develops.

This will support the government’s new target for all new heating systems installed in UK homes by 2035 to be either using low-carbon technologies, such as electric heat pumps, or supporting new technologies like hydrogen-ready boilers, where we are confident we can supply clean, green fuel.

No-one will be forced to remove their existing fossil fuel boilers, with this transition of the next 14 years seeing the UK’s households gradually move away from fossil fuel boilers in an affordable, practical and fair way, enabling homeowners to easily make these green choices when the time comes to replace their old boiler.

Prime Minister Boris Johnson said: "As we clean up the way we heat our homes over the next decade, we are backing our brilliant innovators to make clean technology like heat pumps as cheap to buy and run as gas boilers – supporting thousands of green jobs.

"Our new grants will help homeowners make the switch sooner, without costing them extra, so that going green is the better choice when their boiler needs an upgrade.

"The Heat and Buildings Strategy sets out how we are taking ‘no-regrets’ action now, particularly on heat pumps, whilst supporting ongoing trials and other research and innovation on our future heating systems, including on hydrogen. We will make a decision on the potential role for hydrogen in heating buildings by 2026, by learning from our Hydrogen Village pilot. Heat pump technology will play a key role in all scenarios, so for those who want to install them now, we are supporting them to do so.

Business and Energy Secretary Kwasi Kwarteng said: "Recent volatile global gas prices have 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.

"As the technology improves and costs plummet over the next decade, we expect low carbon heating systems will become the obvious, affordable choice for consumers. Through our new grant scheme, we will ensure people are able to choose a more efficient alternative in the meantime.''

Over the coming years, industry leaders expect electric heat pumps will cost the same as gas boilers to buy and run. To ensure electric heat pumps will be no more expensive to run than gas boilers, ministers want to reduce the price of electricity over the next decade by shifting levies away from electricity to gas. A call for evidence is expected to be published with decisions made in 2022.

To help grow the electric heat pump market and expand British manufacturing, a new £60 million Heat Pump Ready innovation programme is being announced, part of the £1 billion Net Zero Innovation Portfolio. The scheme will provide funding to drive technological innovation which will make the systems smaller, easier to install and cheaper to run over the coming years.

Kick-starting Britain’s new heat pump industry is expected to protect and create tens of thousands of new jobs in research and development, production, supply chain and installation over the next decade.

The Heat and Buildings Strategy builds on the Prime Minister’s 10 Point Plan, which outlined how decarbonising households and workplaces could support 240,000 jobs across the sector by 2035, with many thousands more into the future in areas such as manufacturing, developing and installing new low-carbon technologies.

With heat in buildings being one of the largest sources of UK carbon emissions, accounting for 21% of the total, there is an urgent need to deliver a mix of new, low-carbon heating solutions to meet our legally-binding target to end the UK’s contribution to climate change by 2050.

Phil Hurley, chair of the Heat Pump Association, said: "The heat pump industry warmly welcomes these bold steps forward. The industry in the best shape it has ever been, with sales this year already double those seen ever before.

"This announcement is timed perfectly to take advantage of the Heat Pump Association’s recently-launched training course, with the industry now ready to retrain the UK’s army of installers with the capacity to train up to 40,000 per year, to ensure consumers can find a suitably trained and skilled heat pump installer when they need one.

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"Today’s announcement will give industry and installers a huge confidence boost that now is the time to scale-up and retrain in preparation for the mass roll out of heat pumps, as well as making heat pumps as affordable as boilers, so all consumers can soon access and enjoy the benefits of affordable, reliable low carbon heating that stands the test of time.''

Laura Bishop, chair of the Ground Source Heat Pump Association, said: "The Ground Source Heat Pump Association warmly welcomes the release of the Heat and Buildings Strategy. We look forward to a consistent policy environment which will drive growth in our sector and the UK economy on the path towards achieving Net Zero.

"Ground source heat pumps represent a long-term infrastructure asset which delivers unrivalled efficiencies in generating clean heat, and we hope the policy will underpin the mass market roll out we have been anticipating for some time.''

Climate change charity Ashden, however, described the news as a 'missed chance' to kick-start the home heating revolution. It welcomed the grants as a good start, but said the majority of homes in the UK must be made more energy efficient before gas boilers are replaced, otherwise electricity costs faced by households will rocket. 

According to the Climate Change Committee, nearly 11 million homes need to move from gas to renewable heat sources by 2035. The government has set a target of installing 600,000 heat pumps each year by 2028 – whilst the number installed is increasing, just 60,000 were installed last year in UK homes. 

Ashden points out that there are around 1,000 heat pump installers, compared to 96,000 gas engineers, and only a small fraction of the UK’s builders are accredited to retrofit homes. Without a major skills boost, it says it would take centuries, not decades, to change the way we heat our homes.

Iain Bevan, commercial manager of heating & renewables at Daikin UK, said: “We believe that sustainable heating should be accessible for all, and we welcome the funding announced in the Boiler Upgrade Scheme.

“We look forward to finding out more about who will be eligible and which sustainable heating systems are covered.  We believe that hybrid systems, where a heat pump works alongside a gas boiler, should be included as they are a vital stepping-stone for those who are new to renewable technology, and can still reduce household CO2 emissions by as much as 55% compared to a traditional gas boiler.  

“We know that many homeowners will appreciate this up-front funding, but for anyone able to have a heat pump installed before April 2022, we still believe that the Domestic Renewable Heat Incentive is a very good option and will provide a higher level of subsidy over the system’s lifespan.

“Whilst any incentives that remove the financial barriers to heat pump adoption are a positive step, we think the Government should be going further to ensure that the technology can be rolled out at the scale that is needed. We urge the Government to look again at support for home insulation schemes, and to urgently address the fuel levy that continues to subsidise gas rather than electricity.”

Russell Dean, head of residential heating and ventilation at Mitsubishi Electric, said: “Mitsubishi Electric welcomes the Government’s drive to reduce the cost of heat pumps, and its recognition of the role that such technologies can play in the decarbonisation of our housing stock. If we are to stand any chance of reaching our net zero goals, the way we heat our buildings must change and heat pumps are a big part of this. 

“To ensure the costs continue to drop for the consumer we must now see a concerted effort to train up a nationwide network of installers that can deliver on this new opportunity. This can be done by upskilling gas boiler engineers and installers to ensure they are not left behind as the country moves towards a growth in green jobs and heat pumps receive the backing of the big energy network providers.”

Graham Russell, managing director of Viessmann, said: "The future of heat is about a mix of technologies and solutions working in tandem. There is no quick fix or single solution available to decarbonise the UK’s building stock. An array of technologies will have a role to play.

"Given the diversity of the UK building stock and consumer base, we are delighted that the strategy encompasses a mix of policies to promote heat pumps, hydrogen heat, heat networks and energy efficiency as well as new funding giving the industry a framework to push forward with innovative solutions.

"We think it is key that the new schemes announced as part of the strategy, such as the £450m Boiler Upgrade Scheme to replace the domestic RHI, should incrementally drive low carbon heat markets further. 2021 has been a year of growth for the heat pump market and the new scheme should be designed to deliver additional heat pump installations in segments of the retrofit market where heat pumps would not have otherwise been fitted.''

Steve McConnell, director of the Manufacturers of Equipment for Heat Networks Association, said: “Heat networks are an essential part of the decarbonisation approach. The technology is already available, and the carbon savings are being made. The £338 million funding for the Heat Network Transformation Programme is money well spent.”

“Currently there are over 14,000 heat networks in the UK, providing heating and hot water to around 480,000 consumers. This is proven technology that will assist the UK to make carbon reductions, and enable consumers to protect their heating and hot water comfort levels, safe in the knowledge that it is being done in the most efficient way possible.”