Boiler Upgrade Scheme gets £1.5bn boost in bid to ease heat pump transition

Pictured: A home fitted with an air-source heat pump. Image: OVO Energy

Monday (18 December) saw some £1.5bn added to the Scheme, which originally launched in late 2021 with a £450m budget.

The change comes after Prime Minister Rishi Sunak expanded the maximum amount of grant funding each household could claim under the Scheme earlier this year, from £5,000 to £7,500.

Sunak stated at the time that the upfront cost of a heat pump was still a deterrent to many homes and argued that the general public should not have to bear the burden of net-zero transition costs – particularly in a cost-of-living crisis.

The UK Government is aiming for 600,000 heat pumps to be installed in homes and businesses each year by 2028, up from 55,000 in 2021. It has repeatedly been warned by its own climate advisors that it is not on track to deliver, and Ministers must make more concerted efforts to grow the UK’s skills base and manufacturing capacity to bring down costs.

The extension to the Boiler Upgrade Scheme forms part of a wider £6bn package to accelerate energy efficiency improvements and electric heating uptake. This package includes finance for businesses and the public sector as well as for homes.

The £6bn was initially announced at the Autumn Statement 2022 and will be allocated between 2025 and 2028. Chancellor Jeremy Hunt said: “Investing in energy efficiency, combined with energy security, is the only way to stop ourselves from being at the mercy of international gas prices, one of the main drivers of inflation.

“This investment will support households and businesses across the country to make greener choices in a way that doesn’t add a burden to working people.”

What’s on offer?

For homes in England, a new £400m energy efficiency grant scheme has been promised for a 2025 launch. This is on top of the Great British Insulation Scheme confirmed for England, Scotland and Wales this September. Further details are sparse at the moment for the scheme, which is unnamed at present.

Separately, £500m has been earmarked for a new local authority retrofit scheme. Councils will be tasked with supporting 60,000 low-income households with insultation and other energy efficiency measures.

Social housing providers, meanwhile, will be able to access a share of an additional £1.25bn funding pot for the long-running Social Housing Decarbonisation Fund post-2025.

The package also includes more than £500m for heat networks. The Heat Network Efficiency Scheme, which funds improvements to around 100 existing heat networks, will benefit from an additional £45m. And the Green Heat Network Fund will receive an additional £485m. This money will be used to extend networks, develop new networks and accelerate the uptake of low-carbon heat sources to serve these networks.

Lastly, the Industrial Energy Transformation Fund has had £225m earmarked for the three-year period. The Fund supports manufacturers and heavy industrials with onsite solutions such as electric heating; waste heat capture and energy storage.