Is a £7,500 grant enough of an incentive to install a renewable heating system?

With the drive to Net Zero, the government has been experimenting with initiatives to encourage uptake of energy saving measures and renewables over the past few years with mixed success, but is the current offer of a £7,500 grant going to be enough?

Let's take a closer look at some of those initiatives:

Green Deal

There’s the Green Deal which provides loans to homeowners for the installation of energy saving measures identified following a Green Deal Assessment. So, appealing to some but sadly, loans must be repaid.

Renewable Heat Incentive scheme

The most generous scheme was the Renewable Heat Incentive (RHI) with a non-domestic scheme launched in 2011 that paid businesses a fixed tariff for every kW hour of heat consumed, paid over a 20-year period, which closed to new applicants in March 2021.

This was followed by a domestic scheme which ran from April 2014 to March 2022. It paid a fixed tariff for every kW of energy consumed, capped at the heat demand shown on a property’s EPC, and was paid over a 7-year period. Under this scheme many homeowners recouped the whole cost of the installation of their heat pump, biomass boiler or solar thermal panels, and a lucky few who applied before the EPC cap was introduced, made a profit, which to my mind was morally somewhat questionable.

Green Homes Grant Scheme

Next came the ill-fated Green Homes Grant Scheme which offered homeowners grants of up to £5,000 towards the cost of insulation measures or low carbon heating systems. It was administratively very burdensome for installers and homeowner uptake was very low. Introduced in September 2020, the scheme was due to be extended to March 2022 but having been judged a failure, it was scrapped in March 2021. We had just one customer who applied for and benefitted from the scheme!

Boiler Upgrade Scheme

Its successor, the Boiler Upgrade Scheme, launched in May 2022 and has allocated funding of £450m confirmed over three years. Initially it paid grants of £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, so significantly less generous than the RHI grants had been. This was increased to a flat rate of £7,500 for air source and ground source heat pumps in October 2023, with grants for biomass boilers staying at £5,000. With the additional cost of groundworks for a ground source heat pump system, £7,500 doesn’t really touch the sides.

This scheme is open to both domestic and non-domestic customers who are replacing fossil fuel heating systems. The only other requirement is that the property has an Energy Performance Certificate with no outstanding recommendations for loft or cavity wall insulation.

Eligible new builds (self-build properties) are also eligible, but only if they are owned by an individual, not a company.

Here at Yorkshire Heat Pumps, we have seen quite a bit of interest in the BUS scheme, and it is bringing in new prospects, but many of these are people buying just on price. As installers, we favour premium heat pumps manufactured by the likes of Stiebel Eltron and NIBE as their efficiency, reliability and sound levels are all excellent, so we’re unlikely to be the installer of choice for such customers.

A proportion of our customers are actively considering renewables as part of a major renovation project or self-build and they would probably opt for the energy efficiency of a heat pump with or without the grant, so for them the £7,500 is a bonus. For others the £7,500 grant contribution takes a heat pump from ‘out-of-my-league luxury’ to ‘just affordable’.

In praise of the BUS scheme, it is relatively straightforward administratively with applications made on behalf of the home or business owner via a portal. We apply for a voucher and once eligibility has been established and a voucher issued, we then have three months to install and commission an air source heat pump or six months to install a ground source heat pump before submitting the voucher redemption. We can apply where an EPC has recommendations for fitting or increasing loft insulation, or fitting cavity wall insulation but cannot redeem the voucher until such measures have been completed and a new EPC obtained. In a small number of cases, we might need to submit evidence of exemption from having to install cavity wall insulation in the form of a surveyor’s letter of declaration. This might be because the fabric of the walls is unsuitable for cavity wall insulation or due to Listed Building status.

The grant is then paid to the installer, either to deduct from the final invoice, or to pay back to the customer where works have all been completed and the installation fully paid for. Given that there may be a delay between completing the installation and being able to redeem the voucher - while waiting for insulation works and a new EPC for example - this can cause cashflow headaches for installers, so for us we generally prefer the latter approach.

Installer training grants

One other welcome initiative is the periodic government funding to training providers who are then able to discount renewables training courses for installers. With such ambitious heat pump targets - 600,000 installations per year by 2028 and with actual installations running at just 55,000 per year by mid-2023 - there is a way to go, so up-skilling installers is an absolute must.

So, is it enough?

If you’d like to explore whether a heat pump is right for your home and which technology to choose or would like a ballpark estimate to determine affordability before committing yourself to an installation, do contact us by email or give us a call on 01423 788699 and we will be happy to have a ‘no obligation’ chat.

Send us your contact details and the property address so we can look up your EPC, or in the case of a new build, send over your plans, and we will get in touch to talk through the options and next steps.

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