It’s still early days for the Boiler Upgrade Scheme (BUS), the government’s three year plan to help homeowners in England and Wales afford the upfront costs of installing a heat pump by offering them grants of £5000 to have air source heat pumps installed, and £6000 for aground source heat pump installation. Phil Hurley, MD of NIBE, reflects on the road ahead to a heat pump future.
After four months of operation, Ofgem published the first credible statistics for the Boiler Upgrade Scheme (BUS) in August. Many will remember the early days of the scheme which was plagued by delays in the release of installer guidance and administration issues. Although, it feels like the scheme has turned a bit of a corner, I expect it will still be a bumpy road ahead.
The scheme showed great promise and the industry was unsurprisingly warm to it. It replaced the Domestic Renewable Heat Incentive (DRHI), providing an upfront payment rather than annual incentives. This change in structure was welcomed, but we were concerned about the drop in incentive level. Despite this, the BUS saw encouraging numbers of applications from the time the applications portal was open at the end of May until the 30th of September, with 7231 applications received.
A slow start was expected but things will need to ramp up quickly if the 90,000-installation target is to be achieved. Only 2891 payments have been made to installers so far. Although, I appreciate vouchers have a 3-month validity period, I think it is an ambitious aim for the 87,109 remaining vouchers to be redeemed and all installations completed by April 2025 without a real push from industry and the government. At this rate, we would need to be hitting of 2809 per month to make up for lost time!
Low public awareness
A successful scheme requires an engaged installer base, and current statistics from BEIS indicate there are only 847 active BUS installer accounts from a pool of over 1300 MCS-certified heat pump installers. With around 40% of these installers not engaged with the scheme, there is a real need to promote the BUS more widely. To date, there has not been a proactive government marketing campaign. A recent study by Kingfisher found that only 22% of homeowners and tenants had heard of the BUS compared to 42% that had heard of the Home Upgrade Grant. Our installers have emphasised the need for enhanced public awareness of the scheme.
With a commitment to phase out fossil fuels from off-grid areas in the 2020s, most people would have expected that the BUS would target rural areas. However, evidence is suggesting that heat pumps are an increasingly popular option for homes on the gas grid, given recent energy price increases and the competitiveness of heat pumps. For me, the most interesting trend within the data was this shift. Who would have thought 12 months ago that over 51% of installations would be replacing existing gas boilers?
Air source dominance
Throughout the eight years of the DRHI, only 14% of air source heat pump (ASHP) installations and 5% of ground source heat pump (GSHP) installations replaced an existing gas appliance. This change is great news as it reaffirms NIBE’s position that heat pumps are a go-to technology to replace inefficient gas boilers as well as high-carbon off-grid fuels.
It is clear that ASHPs are dominating the scheme, accounting for 96% of applications. Whilst this is good news for ASHP installers, it shines a light on the challenges facing the GSHP sector. Under the DRHI, 17% of heat pump applications were for GSHP systems. The drop in numbers is alarming but not surprising given the reduction in incentive level compared to that seen by households applying for DRHI support. GSHPs are more expensive and more complex, but the efficiency benefits are significant and the government cannot afford to leave this technology behind.
Is the grant good enough?
When considering the incentive level, it is important to acknowledge that the market has also suffered significant inflationary price increases as evidenced by the average ASHP cost increasing from £10,500 under the DRHI to £12,922 under the BUS. The grant level must be adjusted to address this as these price increases linked to factors are outside of the control of installers and manufacturers.
If the scheme is to mirror the success of the DRHI, it is critical that the new government takes the heat pump industry seriously. Otherwise, the scheme risks halting before it gets going. I firmly believe that gathering the right intelligence on what is happening on the ground will be crucial to giving us all a more accurate picture. This will in turn give us a better idea of where the industry should place its focus so that we can inch closer to bringing greenhouse gas emissions to net zero by 2050.
NIBE will continue to monitor the application rates and feedback from our installer base to influence the government’s approach. We must ensure that the transition is accelerated and not slowed down and that the road ahead is smooth.
