- More and more households are opting for heat pumps, with government subsidies helping
- But installations will need to increase quickly to reach the target of 600,000 per year by 2028
Heat pump installations have failed to meet government targets for the second year in a row, with critics saying high prices are still putting consumers off.
The government’s Boiler Upgrade Scheme (BUS) provides grants of up to £7,500 to households to install a heat pump in their home.
The latest figures show the scheme paid out £88.8m in 2023/2024, against a budget of £150m. Last year the BUS paid £51m.
Last October the government increased the level of grants for heat pumps from £5,000 to £7,500 for air and ground variants. The average grant provided by the BUS is £5,819.
Tinkering: The government has increased the level of grants available to those having a heat pump installed, with most applicants replacing gas boilers, but overall expenditure is still high
According to Mike Foster, CEO of the Energy and Utilities Alliance, high costs still deter many homes from purchasing a heat pump.
Foster said: ‘You can’t ignore the elephant in the room: the high capital cost of installing a heat pump. The average amount is £33,300 for heat pumps fitted under the BUS. If your subsidy is €7,500, you will have to arrange the rest yourself.
‘That’s a big barrier. There aren’t many people who have that kind of money at their disposal and then want to spend it on a heat pump and not spend their hard-earned money in any other way.”
The BUS is run by energy regulator Ofgem, which said the increase in the BUS subsidy was to help offset the high cost of installing heat pumps.
An Ofgem spokesperson said: ‘Sentiment among installers and relevant trade associations is very positive about the processing times for both application assessment and payment.
‘In the first month after the increase (November 2023), the number of people applying via the BUS increased by 52 percent compared to the same period last year.
“This increase in demand has continued in recent months, with March 2024 still seeing a 45.8 percent increase in applications compared to March 2023.”
Energy companies are competing to bring cheaper heat pumps to the market, with the two cheapest coming from British Gas and Octopus Energy.
But Foster thinks there is a natural limit to how cheap heat pumps can be made, and thinks prices won’t fall much further.
“The argument that prices will fall as volumes increase is a false argument,” he said. ‘These products are already globally traded products.
‘The price in France or Germany is no different than that of a British heat pump. The one area where costs could come down is if installers get used to installing more heat pumps and can do it a little quicker, which could reduce labor costs.”
A spokesperson for the Department for Energy Security and Net Zero said: ‘Demand for heat pumps continues to grow, with February figures showing requests up 75 per cent compared to the same month last year.
‘We remain committed to installing 600,000 heat pumps per year by 2028, supported by almost £2 billion to help achieve this.’