£450m government grants for 90,000 Heat Pumps

£450m government grants for 90,000 Heat Pumps

8:53 AM, 19th October 2021, About A year ago 45

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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.

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12:17 PM, 19th October 2021, About A year ago

Reply to the comment left by Accommod8 at 19/10/2021 - 11:59
Perhaps we were unlucky. But the boiler that we replaced the Veissman boiler which was not a Veissmann was cheaper and we had no problems with it. And we have had no problems with the Worcester Bosch boiler that we replaced that one with either. And that one was also cheaper than the Veissmann boiler.

I don't know about the EPC improvements. As you know we are no longer allowed to recover all of our finance costs. Perhaps that needs another look if the government wants landlords to put in sources of heating that do not directly generate CO2 (the electricity required to power those air-source heat pumps requires power that still generates CO2).


12:41 PM, 19th October 2021, About A year ago

Reply to the comment left by Accommod8 at 19/10/2021 - 11:59
don't be fooled into thinking a grant can help! It worked out cheaper for me to get the work done to upgrade current single glazed units to DG units, in totality than apply for a grant and 'only' pay a third of the cost. The installers add on extra for all the admin time and hassle getting the money back for the grant and works (has to be requested AFTER all works carried out), so for cash flow purposes they are scuppered. As a result they would rather NOT have the work done via grants, so they charge you more in the first place. Also unnecessary scaffolding etc thrown in for good measure to bump up the quote. (apparently I needed scaffolding for ground floor DG fitting!)

While I would LOVE to upgrade all my properties overnight, the reality is that I will have no choice than to wait until I have to, if there are no REAL incentives to do so beforehand. This does not take into account the upheaval for a tenant having work done, nor any substantive cost benefit for them in the short term. Gas to hydrogen boilers the proper step first not jumping straight in to air sourced or ground heat pumps. Impossible in the majority of rentals I suggest anyway.

Darren Peters

12:44 PM, 19th October 2021, About A year ago

Reply to the comment left by Beaver at 19/10/2021 - 11:45
Also, if I’ve understood correctly, a heat pump needs a big water storage tank as it’s not ‘on demand’ heat or hot water. So it’s that balance of heating more than is necessary and wasting energy or not having enough for three showers on after the other.


13:09 PM, 19th October 2021, About A year ago

Reply to the comment left by DSR at 19/10/2021 - 12:41
I also had similar problems when I looked into what grants were available. You couldn't get anything unless you installed cavity wall insulation but cavity wall insulation would have damaged both the properties I was interested in. Cavity walls are there to prevent damp and in some properties that's not where the heat is being lost anyway.


13:34 PM, 19th October 2021, About A year ago

Reply to the comment left by Beaver at 19/10/2021 - 13:09
interesting point about CW insulation preventing damp rather than for insulative purposes.

I have solid walls in all my rentals in a certain area so only option is internal or external insulation (to tick EPC C requirement boxes and I suppose the now current round of eco blurb). All are Grade 2 listed so not viable. I tried to contact council just to make sure this was correct but they have no conservation officer. 'Advice' given from Planning Dept (who I was told would know) was that I need to put in permission to determine this. Explained pointless and costly if I knew that the reality was it was going to be rejected because of G2 status. Advice then to apply for initial planning permission to check I did/didn't need full PP - at £200 a time! I asked if anyone else had applied for initial permission on the same grounds (given the number of G2 listed similar properties in the road, and therefore I would know if a precedent was set) but was told no.

So the upshot is I wont be paying £200 just so I have 'evidence' the Council to say no and therefore I can't install internal or external insulation. I've taken a different tack and am going to use documentation from the Local Conservation group and historical info held by the Council to show that it would be totally detrimental AND against their own conservation requirement to allow any such measures to be given permission in the first place. All this to defend myself against the call for not being able to upgrade the property to a C and to be able to carry on renting it to people on benefits who the council cannot house themselves! I despair!


14:05 PM, 19th October 2021, About A year ago

Reply to the comment left by DSR at 19/10/2021 - 13:34
A friend of mine who also lives in a listed house has solid walls and has been doing renovation work to restore the original windows. Because the house has lime mortar and lime plaster but no insulation somebody had previously put in internal insulation with battons. When they pulled this internal insulation off to do the work to the windows the walls were running with water because it could not get out.


14:38 PM, 19th October 2021, About A year ago

Reply to the comment left by Darren Peters at 19/10/2021 - 12:44
This is an afterthought.

When I first changed my gas boiler for a gas condensing boiler in my PPR I did this partly because I was told it was more efficient and partly because I was told it was a green thing to do. When I did it the original water tank that was in the property was removed and the plumbing was changed. So if I understand this correctly, if I were to remove the replacement gas condensing boiler (cost about £3.5K) and put in an air source heat pump I would at the very least have to put a water storage tank back in.

Mick Roberts

15:08 PM, 19th October 2021, About A year ago

Reply to the comment left by Jessie Jones at 19/10/2021 - 09:37
It's a start & a bit pleasing. Let's hope more to come.

And Jessie is right on the costs & insulation as I built my own house 6 years ago & was gonna' go heat pump way as got 8 bathrooms etc., but the figures din't add up then, even on New build.
So how we gonna' justify it on little 2 bed terraced houses?
Where is the big unit gonna' go in small house?
Are we gonna' see loads of these being nicked mounted outside?

Mick Roberts

15:08 PM, 19th October 2021, About A year ago

Reply to the comment left by DSR at 19/10/2021 - 12:09
Yes DSR, what we gonna' do? I've got many tenants now been in same house over 20 years, some 24 years, they ain't gonna' understand when we say I need to sell cause of EPC Govt law. The extra stay for existing tenants don't cut it with me, that time will fly by. We need tenants to write in & say I would rather be here with EPC D than homeless & eventually paying £200 more pm that I haven't got.


15:08 PM, 19th October 2021, About A year ago

Reply to the comment left by Beaver at 19/10/2021 - 14:05
Looks like to get exemption from 2025 then I shall be looking for a proper surveyor who understands that it is totally detrimental to the fabric of the building (despite common sense showing that quite clearly is is a property has to be able to 'breathe').

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