Government’s heat pump scheme could run out of vouchers as demand rises

On average, the number of homes installing a heat pump using the scheme has grown by around 10% month-on-month [1]. If these rates continue, as many as around 150,000 heat pumps could be installed over the first three years of the scheme, meaning that the 90,000 vouchers available could be over-subscribed by more than 50%.

The scheme was meant to come to an end in March 2025, however, as part of the Government’s recent ‘Energy Security Day’ the BUS was extended for another three years until March 2028 [2]. If the level of funding is kept the same, with 90,000 vouchers available over the three-year extension, then these extra vouchers could also be spent well ahead of schedule, potentially selling out as early as mid-2025.

Jess Ralston, Energy Analyst at ECIU, said: “The gas industry has said that the North Sea will continue to decline in the coming years so unless we start to rapidly shift away from gas boilers now, we’ll become even more dependent on foreign gas imports. With electric heat pumps, it’s increasingly British wind and solar energy that are providing the power.

“It's still relatively early days for the scheme, but if demand continues to grow as it has, government will need to choose between boosting the scheme so that it reaches its full potential, or not – which could leave us more dependent on gas imports.”

Over the course of the extended BUS (2022 and 2028), heat pumps installed in UK households, including those outside of the BUS as monitored by the Microgeneration Certification Scheme (MCS) [3] such as self-builds and other homes not covered by the BUS, could displace gas equivalent to that used in over 6.5 million homes in a year, or contained within over 90 LNG tankers carrying foreign gas.

The BUS was billed to start in April 2022, but the launch was delayed by a month, and the installer portal was not made live until November 2022, so the scheme has only been fully up and running since then [4]. In addition, after pressure from the heating industry, the Government launched a public information and advertising campaign in 2023, so the scheme could potentially be even more popular than today.

Improving public awareness of heat pump technology and funding available, as well as supporting new and existing installers to train and upskill could help to keep up the current pace of installations and avoid a cliff edge for industry. If that is achieved, the UK’s target of 600,000 heat pump installations per year could be met as early as mid-2025 using data from the MCS. Moreover, total installations of heat pumps could surpass 1 million heat pumps installed in homes in total by 2026 if momentum is kept up, in a significant step towards moving away from gas heating and lowering the UK’s dependence on foreign gas imports.

In the UK, Octopus Energy and British Gas have recently announced that they will reduce the costs of fully installed heat pumps, including the Boiler Upgrade Scheme grant, to as low as £2,500 and £2,999 respectively [5]. Currently, heat pump manufacturing sites in the UK include those in Cornwall, Derbyshire, Northern Ireland and Scotland [6].

Almost two-thirds of households in Norway have heat pumps, and there are over 20 million installed in Europe in total [7]. A recent UK Government study showed that heat pumps are highly efficient, typically 3x more efficient than gas boilers, in the UK to -6C [8]. An earlier study also found that “There is no property type or architectural era that is unsuitable for a heat pump”, “from Victorian mid-terraces to pre-WWII semis and a 1960s block of flats”. [9]

Potentially as a result of soaring gas bills and a push for energy independence, globally heat pumps have been tipped as a major technology for reducing reliance on Russian gas and an area of economic growth. Both the EU and US have backed heat pumps in their Inflation Reduction and Net Zero Industry Acts respectively [10].

Previous ECIU analysis has found that the global gas crisis added an additional £50-60bn cost to the UK in the 12 months from 24^th February 2022 [11].