More than £60m of heat pump funding lost after going unspent

Less than two thirds of the annual Boiler Upgrade Scheme (BUS) budget has been spent despite a 50% increase in the grant value.

Figures released by Ofgem reveal that the heat pump installation support scheme paid out £88.8 million worth of grants in the year ending March 31 2024.

That is less than two-thirds of the £150 million annual budget, meaning £61.2 million will now be clawed back by Treasury.

It is the second year in succession that the BUS has not hit its target with just £51 million worth of grants dished out in the 10 months that the scheme was up and running during 2022/23.

Ofgem’s latest monthly statistical update shows that 23,871 BUS vouchers have been redeemed since the scheme’s launch in May 2022.

Taking away the 9,981 vouchers redeemed in the first year of the scheme, this means that there were 13,890 redemptions during 2023/24.

This works out at an average of 1,158 redemptions per month during the second year of the BUS compared to 998 in the scheme’s first year.

The figures also show that 14,836 BUS vouchers were issued during 2023/24, at a monthly average of 1,236 vouchers compared to 1,170 in 2022/23.

The government has earmarked £150 million per annum for the scheme, which offers grants to households replacing fossil fuel boilers with heat pumps, from 2022 to 2025.

That annual budget is set to rise with a total of £1.54bn allocated to the scheme between 2025/26 and 2027/28, meaning more than £500 million will be available for heat pump grants each year.

The size of individual grants was increased from £5,000 to £7,500 by prime minister Rishi Sunak last November in a bid to boost uptake of the scheme.

The following two months saw a marked increase in the number of applications, leading to suggestions from supporters of heat pumps that the annual budget could in fact be blown before the March deadline.

Commenting on the figures, Mike Foster, CEO of Energy and Utilities Alliance (EUA) – which actively campaigns against heat pump support – said that “despite literally throwing money at the scheme” and increasing the grants to £7,500, applications have “picked up but not enough to hit their own target”.

He said: “The increased subsidy does mean fewer heat pumps get installed because the cash limit each year is fixed at £150 million. Next year the target will be down to just 20,000 units.”