Heat pump funding pot tipped to be ‘blown’ before deadline

A leading advocate of heat pumps has suggested that the current funding pot which provides grants to the public “could be blown” before the end of March 2024.

Bean Beanland, director for growth & external affairs at the Heat Pump Federation, told Utility Week that the combination of increased grants coupled with more competitive tariffs could see the remaining £113 million Boiler Upgrade Scheme (BUS) budget used up before the current funding round ends.

From the start of this week (23 October), the maximum value of a BUS grant has been increased to £7,500 for both air source heat pumps and ground source heat pumps.

Previously the maximum grant for an air source heat pump was capped at £5,000 while grants of £6,000 were previously available for ground source heat pumps.

Beanland said: “For the first time ever we are in with a chance of getting rid of all the [grant] vouchers before the end of the funding round.

“Combining increased grants with more competitive tariffs has made the proposition of a heat pump more attractive than it has ever been.”

He added: “The likes of British Gas, Octopus, EDF, Ovo, Eon and so on are all trying to take advantage of the increased grant level to attract new consumers.

“To do this they are trying to out compete one another by offering more attractive tariffs which will only drive greater uptake in heat pumps.”

To avoid a dip in heat pump installations, Beanland said he would like to see the government either increase the current funding pot or release funding already allocated for the next financial year earlier should this year’s budget be used up.

He added that energy efficiency minister Lord Callanan has previously assured industry stakeholders that he would be lobbying for next year’s funding to be brought forward if it was needed.

The Budget for the 2024/25 financial year is currently set at £150 million.

At the end of the first round of the BUS (which ran from April 2022 to March 2023), £89.6 million of the £150 million budget went unspent and was clawed back by treasury.

In August, before prime minister Rishi Sunak increased the grant level, Utility Week analysis showed that uptake of BUS grants had again “hit a ceiling” with the current funding pot again at risk of going unspent.

Voucher applications have consistently sat between 1,300 and 1,600 a month for the past year. However, latest government figures released for September show that there was a 13% month-on-month decrease in voucher applications.

The Department for Energy Security and Net Zero attributes the decrease directly to Rishi Sunak’s announcement that the grant level would increase.

Commentary released alongside the BUS figures adds: “Since applications for grants opened for the scheme on 23 May 2022, there has been a total of 24,088 BUS voucher applications received up to the end of September 2023, the majority of which were for grants towards Air Source Heat Pump installations (96%).

“Month-on-month the number of applications in September 2023 decreased by 13% from the previous month (from 1,419 applications in August 2023 to 1,231 in September 2023).

“This is a likely response to the Prime Minister’s grant change announcement on 20 September 2023, where new applicants are delaying their applications until higher grant levels come into force on 23 October 2023.”

Beanland said that the dip is to be expected and he added that “a lot of people” who secured a BUS voucher at the lower rate are now forfeiting them and reapplying at the higher rate.

He said that the real impact of the higher grant level might not be apparent until the figures for November are released in December. However, he also said that people may be unwilling to switch their heating method during the winter so the true impact of the increased grants may not be seen until next Spring.

Beanland also welcomed the government’s response to the Committee on Climate Change’s (CCC’s) annual assessment, published earlier this week.

The government’s response identifies heat pumps and heat networks as “the primary means for decarbonising heating over the next decade” and states that “no one should hold back on installing a heat pump or connecting to a heat network on the basis that hydrogen may become an option later”.

In particular, Beanland welcomed the government’s statement which categorically rules out the possibility of hydrogen heating in properties which are off the existing gas grid.