Boiler Upgrade Scheme could constrain clean heat market

There is a risk that the government’s Boiler Upgrade Scheme (BUS) could act as a constraint on the clean heat market, Energy UK has warned.

The industry trade body was responding to a consultation on the introduction of a Clean Heat Market Mechanism (CHMM) to support the development of the market in low-carbon heating products, principally heat pumps.

Energy UK said it supported proposals for a more gradual ramp up in the volume of clean heating units being installed to allow time for the supply chain to likewise ramp up its capacity, including installers upskilling into low carbon heat.

Yet it issued a warning about the current capacity of the government’s £450 million BUS which offers households £5,000 grants to install low-carbon heating.

The trade body said: “There is a risk that the BUS could act as a constraint on the market, due to the CHMM seeking to grow the market, but the number of BUS vouchers remaining consistent at 30,000 each year.

“In the later CHMM scheme years, this could result in customers holding off on purchasing a heat pump so that they can wait until the next BUS scheme year to take advantage of the vouchers.”

Energy UK also suggested the government should consider additional demand-side policies that boost sales of heat pumps such as by consulting on changes to the BUS.

The changes could include a means-tested approach to funding, bringing hybrids within the scheme’s scope and increasing the level of grant funding for specific technologies.

Earlier this year it was revealed that nearly two-thirds of the £150 million budget allocated for the first year of the BUS will be clawed back by the Treasury after going unspent.

Figures from Ofgem showed that £60.3 million worth of BUS vouchers had been issued by March 31, marking the end of its first year of operation.

This left £89.6 million remaining of the year one budget for the scheme, around 60% of the total.