New grants will support early movers to switch to heat pumps

New Heat and Buildings Strategy suggests that costs for gas and electricity options will converge in time.

The UK government’s new, and equally long-awaited, Heat and Buildings Strategy, was published the day before the wider Net Zero Strategy. In it, the government sets out its plan to incentivise people to install low-carbon heating systems in a fair and cheap way as they come to replace their old boilers over the coming decade. If successful, this would significantly reduce the UK’s dependency on fossil fuels and exposure to global price spikes, whilst supporting up to 240,000 jobs by 2035.

New grants of £5,000 will be available from April next year to encourage homeowners to install more efficient, low-carbon heating systems – such as heat pumps – through a new £450mn three-year Boiler Upgrade Scheme. These grants mean people choosing to install a heat pump may pay a similar amount as if they were installing a traditional gas boiler, says the government. The £5,000 is for air source heat pumps and £6,000 will be available for the ground source variant.

However, the figures mean that the scheme will only be able to support the installation of 90,000 heat pumps over three years – similar to current installation rates.

No-one will be forced to remove their existing fossil fuel boilers, says the government – instead the 14-year  transition period will see UK households gradually move away from fossil fuel boilers in an affordable and fair way, when the time comes to replace their old boiler.

The Boiler Upgrade Scheme is part of more than £3.9bn of new government funding for decarbonising heat and buildings, which includes the Social Housing Decarbonisation Fund, the Home Upgrade Grant scheme, the Boiler Upgrade Scheme and the Heat Networks Transformation Programme, as well as the Public Sector Decarbonisation Scheme, says the government.

The government says it will work with industry to help meet the aim of heat pumps costing the same to buy and run as fossil fuel boilers by 2030, with cost reductions of between a quarter and a half expected by 2025 as the market expands. This will support the government’s target for all new heating systems installed in UK homes by 2035 to either use low-carbon technologies, such as heat pumps or new technologies such as hydrogen-ready boilers.

Over the coming years, industry leaders expect electric heat pumps will cost the same as gas boilers to buy and run, says the government. UK manufacturers are already making heat pumps more attractive to consumers and more affordable, and the government wants to incentivise consumers to make the switch as quickly as possible.

And, to ensure 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 bills. A call for evidence on this is expected to be published, and decisions made in 2022.

The government will make a decision on the potential role for hydrogen in heating buildings by 2026, after learning from its Hydrogen Village pilot.

Business and Energy Secretary Kwasi Kwarteng said: ‘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.’

Reaction to publication of the Heat and Buildings Strategy was mixed, with confusion about whether the government is still fully committed to ending the use of gas boilers by 2030 or 2035. The UK Green Building Council (UKGBC) said that the strategy failed to address its key priorities – a large-scale domestic retrofit programme, and new energy performance standards that rely on actual, rather than projected, energy use.

Meanwhile, the Energy Systems Trade Association (ESTA) was disappointed with the lack of attention to demand-side energy efficiency measures, particularly for non-domestic buildings. Finally, the fuel poverty charity National Energy Action (NEA) said that the strategy: ‘falls short in helping the poorest households in the least efficient homes.’