Thousands of homes missing out on government heat pump subsidies worth up to £6,000

Tens of thousands of homes are missing out on government grants for heat pumps worth up to £6,000, while critics are labeling the scheme a ‘money freeze’ for the wealthy.

The government has earmarked £150 million to subsidize 30,000 homes and small businesses each year to install heat pumps or biomass boilers.

These are billed as greener alternatives to gas boilers, which around 85 per cent of UK homes rely on for heating and hot water.

But the government scheme is underused, with just 8,584 heat pumps and 106 biomass boilers installed between May 2022 and March 2023 – less than a third of the target.

Meanwhile, the Boiler Upgrade Scheme has been criticized for giving the wealthy a tax break and rebate for installing heat pumps, while poorer households lose out.

The scheme is part of the government’s plan to phase out fossil fuel heating systems, such as gas boilers, by 2025.

The scheme offers a subsidy to cover part of the costs of installing a heat pump or biomass boiler.

What are the shortcomings of the boiler upgrade scheme?

Trade organization the Energy and Utilities Alliance (EUA) has accused the scheme of not working for many people living in energy-inefficient homes.

According to the EUA, the average cost of installing an air source heat pump under the scheme is £13,000.

The government grant is capped at £5,000 for an air source heat pump, meaning a homeowner will typically need to find £8,000.

For more expensive ground pumps, installation can cost between £15,000 and £35,000.

The government provides a £6,000 grant for these types of pumps, so the homeowner foots the bill for the remaining £9,000 to £29,000.

The EUA said recent figures from the Department of Energy Security and Net Zero show four times more homes received the £5,000 heat pump subsidy in the tourist hotspot of St Ives, Cornwall (133 payments) than the UK’s second city Britain, Birmingham, with its 1.1 million inhabitants (30 payments).

Indeed, many inner-city areas have only received a handful of vouchers, including some without, while Cornwall as a whole has received 429 vouchers.

Mike Foster, chief executive of the EUA, said: ‘The data clearly show that the scheme is designed to help the better off get a £5,000 cash freeze, paid for by the taxpayer, while millions live in fuel poverty and struggle to to pay. their accounts.

“The scheme doesn’t work for many and is an expensive way to help a few.”

The area with the most ground source heat pump installations was in the southwest with 29 percent.

The highest number of air source heat pump installations was also in South West England at 19 percent.

In addition to the subsidy, no VAT is due on heat pumps placed under the scheme – or installation costs.

That means those wealthy enough to have the discounted heat pumps installed in the first place will get a further 20 per cent off, saving thousands of pounds.

The Department for Energy Security and Net Zero expects annual use of heat pumps to reach at least 600,000 per year by 2028.

A spokesman for the department said: ‘The Boiler Upgrade Scheme will increase the use of heat pumps, upskilling staff and provide a boost to the supply chain, which will reduce costs over time.

‘Additional support is also available to low-income and vulnerable households through schemes such as the Home Upgrade Grant, the Local Authority Delivery scheme and the Social Housing Decarbonisation Fund.’

What is the cheapest way to purchase a heat pump?

The cheapest heat pumps on the market are supplied by British Gas and Octopus Energy.

In February, Octopus unveiled an air source heat pump that can be fitted to most homes for £2,500 to £4,000.

Octopus’ main rival for low-cost heat pumps is British Gas, which in January said it would cut heat pump costs to just £2,999 per customer.

However, both schemes are contingent on the homeowner getting a Boiler Upgrade Scheme voucher of up to £6,000 and then upgrading that.

How to proceed with heat pumps and the regulation?

The government has brushed aside criticism of the Boiler Upgrade Scheme and hopes heat pump costs will fall by up to 50 percent by 2025, driven by competition and better technology.

The National Infrastructure Commission, which advises the government, warned last month that ministers had made “negligible progress” in replacing gas boilers with greener alternatives.

One report states: ‘[The] The government has set the ambition that at least 600,000 heat pumps per year must be installed by 2028, while in 2021 there will only be 55,000 – 1.5 million gas boilers have now been installed.’

The EUA’s Foster said the government should put taxpayer money into better insulation – not heat pumps.

“The new Chancellor is currently paying 30,000 households £5,000 each, but [for that money] he could put attic insulation in 312,500 homes instead,” Foster said.

That would mean permanent savings of £355 a year in energy bills for the average home, according to the Energy Saving Trust.