The high costs of heat pumps deter customers, the watchdog warns

Households are not replacing gas boilers with heat pumps due to high costs and a lack of awareness, the government’s spending watchdog has warned.

The government wants to end the installation of new gas boilers in most homes by 2035, and instead encourage households to install heat pumps.

Heat pumps use air, water or ground heat to generate electricity, and the government wants 600,000 installed per year from 2028 – an elevenfold increase from just 55,000 in 2023.

But the National Audit Office (NAO) said the high cost of heat pumps and a lack of consumer understanding meant more households were choosing to install heat pumps.

The watchdog said that ‘a key issue behind lower-than-expected uptake of heat pumps is the cost of operation and installation’ and that the government has no ‘long-term plan to address the low level of awareness’ about moving away from gas-powered heating.

The government’s main tool to encourage households to choose heat pumps is the Boiler Upgrade Scheme, which offers grants of up to £7,500 for the installation of air and ground source heat pumps.

But the NAO said the boiler upgrade program has “also underperformed”, installing only 18,900 of the 50,000 heat pumps the government had hoped to install between May 2022 and December 2023.

In October 2023, the government increased the maximum grant for the Boiler Upgrade Scheme from £5,000 to encourage more Britons to install them.

Currently, the installation of a heat pump costs four times more than a comparable gas boiler.

But the government believes the cost of heat pumps should fall as companies compete to install them, and the price of the devices should fall by as much as 50 percent by 2025.

The NAO said the government is ‘relying on optimistic assumptions about a significant increase in consumer demand and supply from heat pump manufacturers’ to meet its target of installing 600,000 of these devices by 2028.

Hydrogen hold up

The watchdog also said the government should hurry and decide whether British homes can use hydrogen to heat their homes or not.

Hydrogen can be used to power boilers in the same way that natural gas currently does. In fact, switching a boiler from natural gas to hydrogen is a simple process per household, but still a major problem for Britain as a whole, with 86 percent of homes connected to the gas network.

The green advantage of hydrogen is that when burned it only produces heat and water, while natural gas produces heat and greenhouse gases, including carbon dioxide.

In October 2023, the Department for Energy Security and Net Zero (DESNZ) said there could be a ‘limited’ role for hydrogen heating, although heat pumps should be the main focus.

The government will provide an update on the use of hydrogen to heat homes by 2026, including how safe and feasible it is.

In the meantime, the government was due to trial hydrogen heating in Whitby in July 2023, but canceled the plan as residents were reluctant to change their heating system.

A smaller trial in Redcar was also canceled in December 2023 because the government could not find enough hydrogen in the area to make the project work.

The uncertainty surrounding possible hydrogen heating is preventing some households from choosing heat pumps, the NAO said.

That’s because it would be much cheaper to adapt an existing gas boiler to burn hydrogen instead of installing a heat pump.

A DESNZ spokesperson said: ‘By helping, rather than forcing, families to install heat pumps, with a 50 per cent increase in heat pump subsidy, we have increased applications by almost 40 per cent.

‘Nearly half of homes in England now have an energy performance certificate of C or higher, up from just 14 percent in 2010. We are investing billions in home improvements, including insulating around 700,000 homes.

‘Our Welcome Home to Energy Efficiency campaign runs on TV, radio and newspapers and reaches 16.6 million households with advice and information on how heat pumps, insulation and solar panels can reduce their emissions and energy bills.’