The government published its British Energy Security Strategy on 11 April 2022, setting out measures intended to boost Britain's energy security following rising global energy prices and volatility in international markets1. Among the announcements was a Heat Pump Investment Accelerator Competition in 2022, estimated to be worth up to £30 million to make British heat pumps, which the National Insulation Association notes reduce demand for gas1.
The strategy also confirmed that the installation of household energy saving measures will be VAT free for the next five years. This is estimated to reduce the cost to consumers of insulation, double glazing, installing solar panels and heat pumps, saving families £200 off the cost of installation1. The £450 million Boiler Upgrade Scheme was restated within the same document1.
On costs, the strategy included a commitment to rebalancing the costs placed on energy bills away from electricity to incentivise electrification across the economy. BEIS will publish proposals on how to do so in 2022, considering overall system impacts and limiting the impact on bills, particularly for low-income consumers1. The NIA notes that this would also ensure heat pumps are comparatively cheap to run over time1.
Other measures in the strategy include better labelling and product standards for heating, lighting, washing and cooking; a dedicated energy advice offering for smaller businesses; clearer energy performance standards across all buildings phased in over the long term; and accelerated deployment of smart meters in new buildings1. Funding to develop and pilot new green finance products for consumers is to double from £10 million to £20 million, and lenders will work to improve the energy performance of properties under a new scheme1.
On supply, the strategy set a UK hydrogen ambition to double up to 10GW of low carbon hydrogen production capacity by 2030, with potential for fuelling heat, and projected growth of the UK's current 14GW solar capacity up to five times by 2035, alongside a consultation on the rules for solar projects on domestic and commercial rooftops1. Neptune Energy will invest to support the priorities through increasing production from the Duva field in Norway to heat an additional 350,000 homes in that country1.
The NIA observed that whilst key announcements focus more on additional supply, there are also key aspects that cover energy efficiency and demand reduction, but that the vast majority of the announcement is old news1.
"Heat pump manufacturing to be expanded supported by a Heat Pump Investment Accelerator Competition in 2022."
Why it matters for households
The competition is aimed at the manufacturing side, so its effect on households would come through the availability and cost of heat pumps rather than through a direct payment. The VAT exemption on energy saving measures, which the strategy says covers insulation, double glazing, solar panels and heat pumps, is the measure with the most direct bearing on installation costs, with the stated saving of £200 per family1. The commitment to rebalance levies away from electricity bears on running costs, which is the figure that determines whether a heat pump is cheaper to run than a gas boiler over time; the proposals for how to do this had not been published at the time of the strategy1. Households looking at heat pump grants and funding across the UK will find the Boiler Upgrade Scheme restated here, while the wider direction of UK heat pump policy, targets and the rules coming is set by documents of this kind.
What happens next
The Heat Pump Investment Accelerator Competition is to run in 20221. BEIS will publish proposals in 2022 on rebalancing costs away from electricity1. A consultation on the rules for solar projects on domestic and commercial rooftops is also to follow1. No further detail on the timing of the competition, its eligibility rules or its award process has been reported.