Costs to install cleaner, more efficient heating solutions have been slashed by thousands of pounds as consumers can now receive grants through the government’s new £450 million Boiler Upgrade Scheme.

Homeowners across England and Wales can now benefit from £5,000 grants to fit clean heating systems when they come to replace their oil and gas boilers. This includes clean heating systems installed from 1 April this year.

Heat pumps are now much cheaper and more competitively priced against gas and oil boilers than ever before and thanks to these grants, it will be significantly cheaper for consumers to install a heat pump and closer to the cost of installing a traditional gas boiler, whilst improving the energy efficiency of their homes, reducing their energy bills and cutting emissions in the long-term.

The scheme will also help kick-start the British heat pump manufacturing industry, helping government and industry to achieve the aim of bringing down the cost of the technology to ensure they are no more expensive to buy and run for consumers than fossil fuel boilers by 2030 when more households will be looking to make the switch.

With the market for electric heat pumps set to rapidly expand in Europe over the coming years, there is also a huge export opportunity for British firms in research and development, production, supply chain and installation over the next decade, creating well-paid jobs across the country.

It will contribute to the 175,000 green skilled jobs we expect to be delivered by 2030 through the BUS and other government commitments made in the Heat and Buildings Strategy.

Energy Minister Greg Hands said:

The Energy Security Strategy showed our strong commitment to powering Britain with homegrown renewable and nuclear energy.

Thanks to the government’s Boiler Upgrade Scheme, heat pumps using this clean, cheaper electricity will be the cheaper, obvious choice for households choosing to replace their fossil fuel boiler.

It will also kick-start a British manufacturing industry that will help bring down prices even further whilst creating huge investment and job opportunities.

Scheme funding will be available through a simple application procedure that installers carry out on behalf of property owners, with the up-front funding taken off their quote.

The grants are in addition to the 5-year long 0% rate of VAT on the installation of heat pumps and biomass boilers, announced as part of a package of measures to help ease the cost of living.

With a global spike in oil and gas after unprecedented pressures on global markets, the government is committed to ensuring households are better protected from unforeseen rises in fossil fuel prices by encouraging them to gradually move away from using gas and oil to heat their homes.

The scheme has a committed budget of £450 million over 3 years from 2022-2025, with an annual budget allocation of £150 million and property owners will be able to get:

• £5,000 off the cost and installation of an air source heat pump
• £5,000 off the cost and installation of a biomass boiler
• £6,000 off the cost and installation of a ground source heat pump

In its landmark Heat and Buildings Strategy, the government committed to working with industry to help meet the aim of heat pumps costing the same to buy and run as fossil fuel boilers by 2030, with big cost reductions of between a quarter and a half by 2025 expected as the market expands and technology develops.

The Boiler Upgrade Scheme is designed to kickstart the mass rollout of heat pumps across the country in a similar way that government grants have accelerated the uptake of electric vehicles.

Business and Energy Minister Lord Callanan said:

We want to make it easier and more cost-effective for homeowners to move away from using expensive fossil fuels for heating. The Boiler Upgrade Scheme means they can make the switch to more efficient, greener alternatives today in an affordable and practical way.

This scheme makes it a straightforward process for consumers and installers to access significant funding so that, added to the zero rate of VAT on installations, heat pumps are an attractive proposition when looking to replace a gas or oil boiler.

In the Heat and Buildings Strategy, the government also confirmed its intention that by 2035, all new heating systems installed in UK homes will either be low-carbon technologies, such as electric heat pumps, or will support new technologies like hydrogen-ready boilers, where we are confident we can supply clean, green fuel.

No-one will be forced to remove their existing boiler, with this transition of the next 13 years seeing the UK’s households gradually move away from fossil fuel boilers in an affordable, practical and fair way. The new Boiler Upgrade Scheme grants are helping to make heat pumps an affordable option for homes and small businesses across England and Wales. Government-funded studies by the Energy Systems Catapult have recently shown that there is no property type or age that is unsuitable for a heat pump.

As well as not having to use expensive fossil fuels, heat pumps are also more efficient to run, able to deliver more than 3 units of heat for every unit of energy input, while traditional gas and oil boilers deliver less that one unit of heat per unit of energy.

CEO and founder of Octopus Energy Group Greg Jackson said:

Heat pumps are up to four-times more energy efficient than gas boilers but they need to come down in price. The government’s new scheme will not only reduce the cost – often to the same price as a boiler – but it’ll kickstart an industry so that sooner or later we won’t need subsidies. The scheme is super simple and we are already seeing it help families move to cheaper green heating.