The government has confirmed that households will be offered £5,000 grants to install low-carbon heating through a new £450 million Boiler Upgrade Scheme in its much-anticipated Heat & Buildings Strategy.
The strategy, which is being published tomorrow (19 October), also commits to a new target that by 2035 no new gas boilers will be installed for home heating.
New grants of £5,000 will be available from April next year for homeowners installing low carbon heating systems through the new three-year Boiler Upgrade Scheme.
The grants are designed to bridge the gap between the costs of installing gas boilers and more expensive low carbon heating devices, such as heat pumps.
The strategy is being paid for out of the £3.9 billion for decarbonising heat and buildings, which was pledged in the 2019 Conservative manifesto.
The funding, which covers 2022 to 2025, also includes £338 million for the Heat Network Transformation Programme.
A further £950 million has been earmarked for the Home Upgrade Grant, which is targeted at low-income households living in highly energy inefficient homes.
In addition, there is £1.4 billion for the Public Sector Decarbonisation Scheme and £800 million for the Social Housing Decarbonisation Fund.
The funding backs up the government’s confirmed ambition that all new heating systems installed in UK homes from 2035 will be low carbon.
The strategy says the 14-year transition period for meeting this 2035 target means that “no-one will be forced to remove their existing fossil fuel boilers”.
It also says that a call for evidence will be published on shifting levies from electricity bills over the next decade, with decisions due to be made in 2022.
The strategy confirms that the government will take a decision on hydrogen’s role in heating homes by 2026 but says that it will support those installing heat pumps on the grounds that the technology will play a “key role” in all scenarios.
A £60 million Heat Pump Ready innovation programme will be launched to help find ways of making the devices smaller, easier to install and cheaper to run.
Greg Jackson, chief executive and founder of Octopus Energy, claimed that when the new Boiler Upgrade Scheme is launched in April, his company will install heat pumps for “about the same cost” as gas boilers.
He said: “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.
“Today we’ve crossed a massive milestone in our fight against climate change and to reduce Britain’s reliance on expensive, dirty gas.”
Michael Lewis, chief executive of Eon UK, expressed confidence that with the with the right policy framework in place, the cost of a heat pump can be reduced by “up to half” over the coming years.
He said: “Once we have mass demand, commercial innovation in installation and economies of scale will take over to reduce costs and give customers greater confidence in what is already a tried and trusted technology for many around the world.”
Keith Anderson, chief executive of Scottish Power, said: “Ready access to support grants will kick-start the demand for electric heating, allowing the industry to accelerate the delivery of electrification and quickly bring down upfront costs through innovation and growing the supply chain. Other policies will also be needed to address distortions in energy bill costs and create a level playing field between a heat pump and a gas boiler.
“By the end of the decade, with the right policies in place, the combined initial and ongoing costs of a heat pump can be as cheap as a gas boiler.”
Kwasi Kwarteng, secretary of state for business and energy, 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.”