UK government feels heat in a bid to achieve net zero goals

Harley Haddow’s Sarah Peterson dissects the future of heat pumps, with calls to government to expand funding.

Sarah Peterson
10 October 2022

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It was hoped to be a key tool in the race to achieve net zero goals, but have heat pumps delivered on their touted promise? While they continue to be a hot topic, a combination of escalating utility prices, the cost-of-living crisis and supply chain issues could put a spanner in the works, and derail even the best of schemes. 

Introduced to help in the journey to net zero emissions whilst also tackling fuel poverty through the Boiler Upgrade Scheme, the government has allocated £450m for heat pump installation grants across UK households.

Open to domestic and small non-domestic properties in England and Wales, the scheme began this year and will run up to 2025. In Scotland, individuals have access to the Home Energy Scheme, a loan for heat pumps available to domestic only. 

However, an installation goal of 600,000 heat pumps a year by 2028 may not be achievable due to current under funding as the £5,000 government grant includes a cut in VAT from 5% to zero. It has been reported that this will come into effect at the end of March 2027 and the 5% rate will return to households. 

While millions of pounds have been dedicated to the boiler upgrade scheme, only 90,000 households will realistically be able to benefit from the proposed grant.

Heat pump installation is predicted to potentially cost taxpayers an eye-watering £115bn and provide households around £5,000 each for installation. 

Despite the grant being used as a means of support, households will still be left with installation costs if opting for a new air source heat pump which costs approximately £10,500 to install. 

There will also be additional costs to run the heat pump which surpasses the current cost of gas boilers by 20% to 30%, not all of which are immediately obvious when taking up the grant support. With the current energy price forecast the cost of electricity has the potential to increase even further, pushing the running costs even higher.

Whilst heat pumps can be a solution for achieving net zero, the industry will have to look within to ensure they have the right resources when it comes to installation and maintenance. Those in construction will need to ensure that their workers are equipped with the required skills to carry out the work needed. 

This will include training for staff to build their existing skills and will require developing green skills. Green skills can be described as knowledge and abilities needed to provide a resource efficient society. The government is working on schemes to support the current skills gap to allow the acceleration and roll out of this low carbon heating revolution.

Understandably, the government wants to take the necessary steps to net zero but not every household will be able to sustain this. Funding needs to be extended as three years to roll out a new system will not be nearly enough time to meet targets.

On the other hand, it is important to take the holistic approach when it comes to installation as we don’t want to install too quickly without considering different factors. 

We must consider if installation is a viable option for households such as whether there is enough insulation in the property to limit energy consumption (and running cost) and if it can produce sufficient energy for the heat pump to meet the heating demand. This is particularly important for older less energy efficient properties that are not immediately conversant with a low carbon heat source.

In addition, further incentives will be required to encourage heat pump installation and make it accessible for all including designated heat pump tariffs from utility providers which offer a reduced electricity running rate if individuals are running a heat pump.

In the latest update regarding heat pumps, funding has started to be introduced for building insulation incentives which will make the switch to a heat pump more viable. 

However, funding will need to be extended to cover the whole cost, including fabric improvement measures, to make the pump worthwhile. 

We expect the heat pump roll out to progress for those financially stable to install them. However, those who will have little choice but to continue to use their gas boiler until suitable government grants are introduced.

Sarah Peterson is energy and sustainability director at Harley Haddow.