A new report from the National Audit Office has found that government plans to significantly ramp up the installation of heat pumps in homes across the UK by the end of the decade are falling well short of targets.

The number of heat pump installations by December 2023 was less than half of planned projections.

The NAO report analysed progress under the government’s flagship Boiler Upgrade Scheme which aims to replace traditional gas boilers with low-carbon alternatives such as heat pumps. It found that installations under the scheme has significantly underdelivered against expectations, with just 18,900 heat pumps installed between May 2022 and December 2023 when 50,000 were projected.

More widely, the NAO report says government assumptions that 600,000 heat pumps could be installed annually by 2028 – an eleven-fold increase on 2021 levels – appear overly optimistic based on current rates of consumer demand and supply from manufacturers.

A major factor holding back the rollout according to the report is the higher up-front costs of installing a heat pump compared to a standard gas boiler.

Furthermore, government attempts to better balance costs between gas and electricity through mechanisms like price rebates and levies have been delayed, and installation costs have also fallen slower than anticipated.

The NAO also found government lacks a coordinated long-term strategy to improve public awareness of low-carbon heating alternatives and the changes needed to homes.

In response to the Boiler Upgrade Scheme’s underperformance, DESNZ increased the grant available to people replacing boilers from £5,000–£6,000 to £7,500, which has enabled some energy suppliers to offer heat pump installations starting at £500. Applications to the scheme in January 2024 increased by nearly 40% compared with January 2023, though more data is required to determine whether the change is sustained.

However, the NAO says more certainty is still needed on whether hydrogen could play a bigger role than expected in home heating. DESNZ has indicated that this role will be “limited”, but it will formally take a decision in 2026.

The report also recommends government develops an overarching long-term consumer engagement plan for decarbonising home heating and that DESNZ accelerates its work to rebalance the cost of energy to improve heat pump uptake.

Gareth Davies, the head of the NAO, comments: “Government needs to engage every household to achieve its objective to decarbonise home heating as part of the transition to net zero. DESNZ’s progress in making households aware and encouraging them to switch to low-carbon alternatives has been slower than expected.”

“DESNZ must draw on its experience to date to ensure its mix of incentives, engagement and regulations addresses the barriers to progress in its current programme of work.”

Katrina Young, practice manager (heat policy & local energy) at Energy Systems Catapult, adds: “The NAO report is clear in the challenges that need to be overcome if we’re to decarbonise home heating at scale and pace. Policy support has historically been focused on reducing up-front costs associated with heat pumps and insulation. While important, other barriers – such as reducing the running costs of electrified heating compared to a gas boiler – will hold us back. The rebalancing of policy levies and charges on electricity and gas bills is crucial to incentivise low carbon heating technologies. All options on the table, however, have potentially unequal distributional impacts on households, and the extent to which the policy will affect the heating system choice of consumers is uncertain.”

Jess Ralston, energy analyst at the Energy and Climate Intelligence Unit (ECIU), says: “The NAO detail a sorry saga of the government’s efforts, or rather lack of them, in moving households to clean heating. Some of these spring from a failure to act, for example by not promoting the Boiler Upgrade Scheme to homeowners or rebalancing levies from electricity to gas bills. Others come from dithering and U-turns by no.10, such as the move to delay the Clean Heat Market Mechanism which only benefits the big boiler manufacturers and keeps the UK reliant on gas for longer.

“These all have consequences; heat pump uptake is slow, uncertainty is hampering investment, and our energy independence as a country is weaker as we’ll have to import more gas as the North Sea continues its decline. Citizen’s Advice say scrapping the Clean Heat Market Mechanism would ‘hurt’ households by leaving them vulnerable to volatile international gas prices.

“Industry, consumer groups and now government advisors are all urging the Government to learn from its mistakes, develop a clear long-term policy to correct them, and stand up to lobbying from the incumbent gas industry if there is to be any hope of turning this progress around.”

Russell Dean, residential product group director at Mitsubishi Electric, says: “Today’s report reiterates that now, more than ever, we must unlock the biggest barrier to large scale heat pump deployment, which is high energy costs. This is essential for us to reach the government’s heat pump installation targets by 2028.

“Rebalancing the cost of electricity and gas and removing levies from electricity bills will result in immediate savings for households looking to make the switch as the rising cost of living places an increasing strain on families across the UK. Failing to do so will be hugely damaging to the decarbonisation of home heating – which accounts for 14% of the country’s current emissions – and the country’s progress towards Net Zero as a whole.

“With over 70% of consumers knowing little to nothing about how heat pump technology works, educating consumers on the importance of heat pump technology will also be crucial to encouraging wider uptake. This will ultimately accelerate adoption, decarbonise home heating and help us hit the all-important Net Zero goal.”

Read the full report: Decarbonising home heating