Heat pump incentives may not increase uptake, say advisers

A £450MILLION green subsidy scheme to encourage people to get rid of their gas boilers may end up paying people who would have bought heat pumps anyway, the Government’s climate change advisers have warned.

From April, the scheme will offer homeowners grants of up to £5,000 to cover the cost of installing a low-carbon heat pump or biomass boiler.

The three-year scheme is expected to help fund around 30,000 installations each year, and 36,000 heat pumps installed without incentives in 2020.

In its analysis of the scheme yesterday, the climate change committee said: “The extent to which these installations will boost sales, rather than fund people who would have bought a heat pump anyway, is unclear.”

The Government wants 600,000 heat pumps to be installed each year by 2028, but high costs, lack of familiarity and low installer numbers are likely to hamper it. Heat pumps can cost £10,000 to install – but manufacturers say these figures could be cut in half within the next few years – and can require additional insulation work.

The concern came as the committee assessed the Government’s heat and buildings strategy, released last year, which outlines plans to decarbonise homes and office buildings.

Some 85 per cent of homes are heated by gas boilers, contributing around 14 per cent of UK emissions, which the Government has committed to reducing to net zero by 2050.

The committee said the strategy was “not yet comprehensive”, and failed to account for 18 per cent of the necessary emissions reduction by 2035 and highlighted a lack of funding for energy efficiency to help people insulate their homes. The Government has scrapped funding for energy efficiency measures, except in social housing and public buildings, in the wake of its failed £1.5billion Green Homes Grant scheme.

Chris Stark, chief executive of the committee, said the importance of decarbonising homes had increased as the cost of fossil fuels had risen.

“With the shocking oil and gas price spike, this is suddenly one of the most important consumer issues – most homes and offices are currently heated with fossil fuels,” he said.

The committee called on the Government to continue with plans to move environmental and social levies from electricity bills to gas bills, despite the cost of gas reaching record highs.

“Plans to rebalance levies between gas and electricity will need to reflect the present circumstances, but must make progress to enable the desired shift away from gas in the longer term,” the committee said.

The relatively high cost of electricity has meant heat pumps are more expensive to run than gas boilers. The levies, expected to be around eight per cent of dual fuel bills when the new price cap comes into force in April, are likely be shifted on to gas bills.

Juliet Phillips, of think tank E3G, said: “A retrofit drive is needed to lower bills, reduce fuel poverty and boost green jobs – but as the climate change committee’s new report rightly identifies, the Heat & Buildings Strategy fell short of providing this impetus.”