The government announced on 30 March 2023 that it intends to extend the Boiler Upgrade Scheme until 2028, a three-year extension of a scheme that opened to applicants on 23 May 20221. The announcement was made as part of the "Powering Up Britain: Net Zero Growth Plan"1. Ofgem, which administers the scheme, records the announcement in its first annual report for the scheme year running from 23 May 2022 to 31 March 20231.
The scheme provides a grant of £5,000 towards an air source heat pump, or £6,000 towards a ground source heat pump or biomass boiler, for households and small non-domestic property owners in England and Wales2. Ofgem's report states that the scheme had budget to fund up to 90,000 installations by 20251. By the end of March 2023, 9,983 grants worth almost £50.2 million had been paid, following 15,768 initial applications and 11,998 vouchers issued worth almost £69.1 million1. Of the grants paid, 96.3 per cent were for air source heat pumps, 2.4 per cent for ground source heat pumps, 1.1 per cent for biomass boilers and 0.1 per cent for shared ground loop ground source heat pumps1. Fossil fuelled heating systems accounted for 74.1 per cent of the systems replaced, with gas boilers at 46.3 per cent and oil boilers at 22.9 per cent1.
The Department for Energy Security and Net Zero gave its reasoning for the extension:
"We recognise that industry would like to have more certainty on future funding for heat pumps post-2025. The recent review into Net Zero also recommended that the BUS should be extended. Therefore, the Department of Energy Security and Net Zero is announcing that we intend to extend the scheme until 2028."
The Heat Pump Association welcomed the extension, saying it would help the scheme "take full advantage of money available to help households with the initial up-front costs of installing heat pump systems", and noted it hoped to see a more detailed government response to issues raised in the House of Lords review into the BUS and an indication of the funding available to consumers3. Mitsubishi Electric said the extension was welcome but "must be accompanied by a concerted effort between the industry and government to help citizens understand how to take-up these grants"4. Which? reported that the grant is worth up to £5,000 towards a heat pump5.
Alongside the extension, the government announced a £30 million Heat Pump Investment Accelerator to boost heat pump manufacturing and supply3, and the Great British Insulation Scheme, aimed at homes with lower energy efficiency ratings in council tax bands A to D2. Which? reported that up to 80 per cent of people whose homes are in band A-D will qualify, 300,000 more than under the present scheme, and that the scheme will begin in spring and run until March 20265. The Heat Pump Association also noted the announcement included news that gas and electricity costs will be rebalanced to speed up electrification for households and businesses3.
Why it matters for households
The extension means the grant funding route for a heat pump or biomass boiler is intended to remain open beyond the original three-year window that ran to 20251. For a household weighing up the upfront cost of a heat pump, the grant reduces the capital outlay, though the amount available and the eligibility rules are unchanged by the announcement itself2. The scheme applies in England and Wales and covers households and small non-domestic properties2. Ofgem's figures show that most grants paid in the first year went to homes replacing a fossil fuelled heating system, most commonly a gas boiler1. The separate insulation scheme targets the fabric of the home rather than the heating system, and Which? reported that the energy-saving improvements could save £300 to £400 per year on energy bills5. The rebalancing of gas and electricity costs, which the Heat Pump Association said would make the cost difference between fossil fuel boilers and heat pumps more comparable, has not been set out in detail; Which? reported that electricity is currently around three times more expensive per unit than gas and that the government says it will set out plans in the next year3.
What happens next
The extension is stated as an intention, with the scheme running until 20281. Ofgem's report notes the government's target of deploying 600,000 heat pumps per year by 20281. The Heat Pump Association said it hopes to see a more detailed government response to the House of Lords review into the BUS and an indication of the amount of funding available to consumers3. The Great British Insulation Scheme was reported to begin in spring and run until March 2026, with a gov.uk application portal launching in summer and legislation to follow5. The amount of funding available to consumers under the extended BUS has not been reported3.
Sources5 cited
- BUS Annual Report - 2022-23, ofgem.gov.uk
- Three year extension of boiler upgrade scheme | The Institution of Gas Engineers and Managers (IGEM), igem.org.uk
- The Heat Pump Association welcomes announcements by the Government today to speed up the UK’s Net Zero pathway - HPA UK, hpauk.org.uk
- Powering Up Britain report comment | Mitsubishi Electric, les.mitsubishielectric.co.uk
- Are you eligible for an insulation grant? - Which?, which.co.uk