The successor to the domestic Renewable Heat Incentive scheme launches in May, but will the grant be sufficient to encourage uptake of low carbon heating?
Farewell RHI, welcome BUS
The final rush to get the last heat pump installations finished, commissioned and MCS-registered before the domestic Renewable Heat Incentive (dRHI) scheme closed is thankfully now over. It was a high pressure few weeks with customers rushing to get their projects completed in time to apply to the scheme before it closed at midnight on 31st March, to benefit from the scheme’s generous incentive payments.
I think every installer in the country was working flat out, given many were also dealing with a backlog caused by heat pump supply problems. Yes, Brexit is still causing delays in equipment getting to the UK from Europe, and a shortage of microchips from China, caused in part by the ongoing Covid pandemic, only compounded the problem.
Since its launch in April 2014, the dRHI scheme has seen just over 100,000 renewable heating systems installed and accredited (100,828 by 6.2.22), over 65% of which have been air source heat pumps. So, with ambitious carbon reduction targets, there’s a long way to go if domestic renewables are really going to make a significant contribution. The government simply had to act and has announced a new scheme to help encourage uptake of low carbon heating systems: the Boiler Upgrade Scheme (BUS) which is backed by £450m of government funding.
While the BUS grant is less generous to homeowners than dRHI, the upfront payment will help soften the financial blow of switching from a fossil fuel boiler to a renewable energy heating system. And there is more good news. VAT on energy saving materials and equipment has come down from 1st April 2022 from the Reduced Rate 5% to 0% for the next 5 years. The 0% VAT rate had previously only been available for new build properties installing renewables.
So how will the Boiler Upgrade Scheme work?
A Boiler Upgrade Scheme grant will reduce the upfront cost of installing a low carbon heating system, but only where this is replacing an existing fossil fuel system, or in a custom-build property.
To be eligible for the grant the property will need a valid Energy Performance Certificate (EPC), under 10 years old and with no outstanding recommendations for cavity wall or loft insulation.
Biomass boilers are only eligible in rural locations and in properties that are off the gas grid, whereas heat pumps are eligible either on or off the gas grid.
The commissioning date of the system must be on or after 1st April 2022.
Whereas the RHI was paid at a set tariff for every kW hour of heat required to heat a home (using the deemed heat demand from the property’s EPC, capped at 20,000kwh for air source, 25,000kWh for biomass and 30,000kWh for ground source), the BUS grant is a flat £5,000 towards the cost of an air source heat pump or biomass boiler and £6,000 towards the cost of a ground source heat pump.
As installers, we are expected to discount the value of the grant from the total cost of the installation and to include this in our quotation. We apply for the BUS grant voucher on the customer’s behalf, and provide their contact details to Ofgem who will administer the scheme. Ofgem will then email the customer to seek consent for the voucher to be issued to their chosen installer. Timing of the installation will be of the essence, as once issued, the voucher is valid for three months for an air source heat pump and six months for a ground source heat pump. Given the recent heat pump supply problems this could cause headaches for installers and homeowners alike as no extensions or grace periods will be offered – it’s a case of use it or lose it!
While the finer details of how the scheme will operate have yet to be released by the Department of Business, Energy and Industrial Strategy (BEIS), we are told the voucher can only be redeemed once the system has been commissioned and registered on the MCS installation database, so we could find ourselves waiting some time for our final payment, particularly if the installation is part of wider works at the property and if a new Energy Performance Certificate is required. This will present a cashflow headache for small businesses like Yorkshire Heat Pumps, but on the plus side we do expect publicity around the BUS grant to raise awareness of heat pumps among the general public and to generate interest in energy-efficient heating systems, which is particularly important at a time of soaring fuel prices.
But a heat pump still uses electricity, right?
Yes indeed, a heat pump does require electricity to run, but advanced heat pump technology means that a heat pump’s Coefficient of Performance (CoP) is higher than that of a fossil fuel boiler. In simple terms, for every kilowatt of electricity you put into a heat pump you get 3 kilowatts of heat out, or in % terms, a boiler would be 85% efficient and a heat pump 300% efficient!
Add to that the significantly lower CO² emissions from a heat pump and homeowners can take comfort from the fact they will be both saving money with a heat pump and reducing their carbon footprint.
So, we eagerly await the finer details of the BUS. Hopefully more will be revealed in a BEIS webinar outlining the sign-up process later this month ahead of grant applications opening on 23rd May.
If you would like to discuss the suitability of a heat pump for your home, please give us a call on 01423 788699 or fill in the contact form on the website and we will get in touch.