£450m government grants for 90,000 Heat Pumps

£450m government grants for 90,000 Heat Pumps

8:53 AM, 19th October 2021, About 3 years ago 45

Text Size

Landlords don’t hold your breath as the Government announces £3.9 billion for decarbonising heat and buildings. Of this only £450m is allocated for grants of £5,000 to replace old gas boilers with new heat pumps. This would equate to 90,000 installations over 3 years for England and Wales.

Currently, an air source heat pump costs between £6,000 and £18,000 so assuming a grant was available it is anticipated the average cost to an end-user after the grant would be £2,500.

There is also no detail yet on qualification criteria for these grants and if it will include landlords as well as homeowners, but it is likely that an insulation upgrade will also be required.

It is hoped the scheme will kick-start economies of scale improvements for the industry and start bringing down the cost of heat pumps.

The full government press release is below:

Low carbon more efficient heating systems such as heat pumps will be no more expensive – and in many cases may end up cheaper – to buy and run than gas boilers, under government plans being announced today (Monday 18 October).

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.

New grants of £5,000 will be available from April next year to encourage homeowners to install more efficient, low carbon heating systems – like heat pumps that do not emit carbon when used – through a new £450 million 3-year Boiler Upgrade Scheme. These grants mean people choosing to install a heat pump will pay a similar amount as if they were installing a traditional gas boiler.

The £450 million Boiler Upgrade Scheme is part of more than £3.9 billion of new funding being announced today by the government 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.”

Recent volatile gas prices across the world have demonstrated the need for the UK to build a secure, home-grown energy sector which supports households to reduce their reliance on fossils fuels such as using gas boilers, while protecting consumers and businesses from unforeseen price spikes.

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

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.

Greg Jackson, CEO and founder of Octopus Energy, said: “This Heat and Buildings Strategy will help kick-start a cheap clean heating revolution, by bringing prices down for households and allowing companies to invest in scaling up their clean heating operations. When the new scheme launches in April, Octopus Energy will install heat pumps for about the same cost as gas boilers.

“Octopus has already committed £10 million investment to its research and development and training centre dedicated to the decarbonisation of heat, and has begun training engineers at the rate of 1,000 per year.

“But this is just the beginning. By scaling up the technology and supply chain in Britain, innovative companies like ours will soon be able to fit and run heat pumps without any government support, bringing us one step closer to making the UK the Silicon Valley of Energy and creating thousands of clean energy jobs throughout the country.”

Electric heat pumps are more efficient, safer and cleaner than gas boilers and can help make homes more comfortable with less energy. Today we’ve crossed a massive milestone in our fight against climate change and to reduce Britain’s reliance on expensive, dirty gas.

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.

Share This Article


Jessie Jones

9:37 AM, 19th October 2021, About 3 years ago

It currently costs quite a bit more to run a heat pump than a gas boiler for a typical home. I don't think that there will be many tenants who are keen on shelling out more money to heat their home.
The quoted costs of retrofitting a heat pump into older houses is not very honest. Floors may have to come up to insulate them and to run larger pipes, both upstairs and downstairs. Additional Insulation costs for solid walls can run from 10k to 20k, especially if work is needed to extend the roof over the new insulation and for end terraced houses.
My view is that a more realistic cost of installing a heat pump is likely to be closer to £30k than £6k after all the additional work is done.
And it will increase the cost to the tenant.
I'm all for reducing our carbon footprint, but we also need to be realistic about it.


10:22 AM, 19th October 2021, About 3 years ago

I agree with Jessie. Heat pumps only work with a well insulated house. Basically, they resemble a sort of reverse a/c unit, cooling down the outside and heating up the inside. They make a noise and feature a box on the wall outside like an a/c unit. Could also possibly create noise problems in blocks of flats etc.


10:31 AM, 19th October 2021, About 3 years ago

There was a man on television last night who had installed a ground source heat pump into his house which cost £15K, plus some photovoltaics which cost £5K. If the costs of installing an air source heat pump quoted here are correct then note that I had to replace a gas boiler in my rental property last year and also one in my PPR this year and in both cases the cost was about £3.5K. If the running costs of the air-source heat pump are higher in my rental property then the tenants would not want it. If the running costs of an air source heat pump in my PPR are higher than my gas boiler then there would be no point in my doing this until the boiler reaches the end of its lifespan as it has only just been put in.


10:54 AM, 19th October 2021, About 3 years ago

With solid floors downstairs which you would not wish to touch (e.g.parquet flooring) and few properties with solid upstairs floors, the performance from your existing radiators of an air source heat pump is limited. You may have to size up your rads, if that's doable. They're intended for underfloor heating really.
Our quote was £16k, so we went with an efficient Veissmann condensing gas boiler this year at £5,500. Running cost quote was a bit more to operate, plus servicing charges of near £200 p/a., which adds up over the life.

Should be fine for new build.

Darren Peters

11:07 AM, 19th October 2021, About 3 years ago

I think heat pumps will be the diesel scandal of the 2030s. Ie we’ll be encouraged in that direction only for it to transpire that they are such a bad idea they need to be phased out - after lots of unfortunates have ripped their house apart sorting the insulation and bigger radiators.

For the next 14 years if any gas boiler fails I’ll replace with the most efficiency new one and hope that hydrogen becomes viable.

Being less dramatic a better analogy would be those little neon bulbs that were meant to replace incandescent at £10 a pop. Took forever to get bright, didn’t get that bright and then along came LEDs - in hindsight it would be better to keep the incandescents til LEDs came along and skip the expensive stop gap

Reluctant Landlord

11:28 AM, 19th October 2021, About 3 years ago

I shall be in no rush at all to do anything. While clearly the end goal of reducing emissions is important, as ever the practical application is much to be desired.
I tried to get insulation done/upgraded in the last 'great idea' across all my rentals.
Ended up being an exercise in futility. While grant money will be dangled like a carrot, it means nothing if the installation costs (ramped up by the only 'approved' fitters you can use) completely outweigh the REAL cost of installation, combined with the probably increased bills for tenants - this is a non starter for me.
If I have to replace anything now it will be done on as ever on the Cost V Ease of installation basis and best performance basis.
Now Boris, try and find something else to 'pimp up' before COP 21 to show you are good environmentalist....


11:40 AM, 19th October 2021, About 3 years ago

Reply to the comment left by Accommod8 at 19/10/2021 - 10:54
I've installed a Veissmann boiler in the past and it failed because it had an aluminium back plate with steel bolts fitted into it but no protection for the steel bolts. The pressure of the boiler caused the steel bolts to pull through the aluminium causing the boiler to fail when it was just outside warranty. I now have Worcester Bosch boiler. Efficient doesn't always mean robust or reliable.


11:45 AM, 19th October 2021, About 3 years ago

Reply to the comment left by Darren Peters at 19/10/2021 - 11:07
I think the issue with heat pumps is that the heat from the air or the ground is not free: With air-source heat pumps you still need the power to compress the air and if the resultant heated water is at a lower temperature than what would come out of a gas boiler you still need a more effective way to get the heat into and around the house. So I would think that for most properties you might need to rip your house apart to put in a more effective distribution system and you would still need the photovoltaics to get the running costs down to something similar to a gas boiler.


11:59 AM, 19th October 2021, About 3 years ago

Reply to the comment left by Beaver at 19/10/2021 - 11:40
Think you've been unlucky, just as we had problems with our Worcester Bosch which we replaced.

On a related note, will landlords have to start forking out for EPC improvements without grants from 2025 in order to comply? Most tenants won't want to know about rent increases to cover that investment.

Reluctant Landlord

12:09 PM, 19th October 2021, About 3 years ago

Reply to the comment left by Beaver at 19/10/2021 - 11:45I will have my day in court if necessary explaining why I need to evict a tenant so I don't fall foul of being fined for not being able to meet a completely unachievable C rating...

1 2 3 4 5

Leave Comments

In order to post comments you will need to Sign In or Sign Up for a FREE Membership


Don't have an account? Sign Up

Landlord Tax Planning Book Now