- More and more homes are choosing heat pumps, thanks to government subsidies
- But installations will need to increase rapidly to reach the target of 600,000 a year by 2028.
Heat pump installations have failed to meet Government targets for the second year in a row, and critics say high prices continue to discourage consumers.
The Government’s Boiler Improvement Scheme (BUS) provides grants of up to £7,500 to households to install a heat pump in their properties.
The latest figures show the scheme paid out £88.8m in 2023/24, against a budget of £150m. Last year, BUS paid out £51m.
Last October, the Government increased the subsidy level for heat pumps from £5,000 to £7,500 for aerial and ground varieties. The average subsidy awarded by the BUS is £5,819.
Tweaks: The Government has increased the level of grants available to those installing a heat pump, with most applicants replacing gas boilers, but the overall outlay remains high.
High costs continue to deter many households from purchasing a heat pump, according to Mike Foster, executive director of the Energy and Utilities Alliance.
Foster said: “You can’t ignore the elephant in the room: the high capital cost of installing a heat pump.” The average figure is £33,300 for heat pumps installed under the BUS. If your grant is £7,500, you will have to find the rest yourself.
‘That is a major barrier. There aren’t many people who have that kind of money at their disposal and want to spend it on a heat pump and not some other way they’d rather spend their hard-earned money.’
The BUS is managed by energy regulator Ofgem, which said the BUS grant increase was designed to help with the high cost of installing heat pumps.
An Ofgem spokesperson said: “Sentiment among installers and relevant trade associations has been very positive regarding processing times for both application review and payments.
‘In the first month after the increase (November 2023), the number of people applying through the BUS increased by 52 percent compared to the same period last year.
“This increase in demand has continued over the past few months, with March 2024 still seeing a 45.8 percent increase in applications compared to March 2023.”
Energy companies are racing to bring out less expensive heat pumps, with the two cheapest coming from British Gas and Octopus Energy.
But Foster believes there is a natural limit to how cheap heat pumps can be made and thinks prices may not fall much further.
“The argument that prices will go down as volumes increase is a false argument,” he said. ‘These products are already products marketed worldwide.
«The price in France or Germany is no different to that of a heat pump in the UK. The only way costs could be reduced is when installers get used to installing more heat pumps and can do it a little faster, so labor costs could be reduced.’
A spokesperson for the Department of Energy Security and Net Zero said: ‘Demand for heat pumps continues to grow, with figures for February showing requests were up 75 per cent compared to the same month last year.
“We remain committed to installing 600,000 heat pumps a year by 2028, supported by almost £2 billion to help achieve this.”