Nesta, described in its own announcement as an innovation charity, published a report on 14 March 2024 examining how policymakers could improve current and future subsidy schemes for low-carbon heating1. The same day it responded to two government announcements: changes to the eligibility rules of the Boiler Upgrade Scheme and a consultation on postponing the Clean Heat Market Mechanism1.
The Boiler Upgrade Scheme provides grants of up to £7,500 to people in England and Wales for low-carbon heating systems such as heat pumps1. In its consultation response, the government stated that the scheme will remove the requirement to have no outstanding recommendations for loft and cavity wall insulation on a valid Energy Performance Certificate1. Nesta said it had called for that change1.
On the Clean Heat Market Mechanism, the government launched a consultation on postponing the launch of the scheme to 1 April 20251. The mechanism requires boiler manufacturers to sell a quota of heat pumps, starting with 4 for every 100 boilers they sell in the first year, rising to 6 for every 100 from 20251. Manufacturers that cannot meet the quotas can buy credits from companies selling heat pumps, or pay a fine of £3,000 per missing heat pump1.
Madeleine Gabriel, director of sustainable future at Nesta, said:
"The strength of the Boiler Upgrade Scheme is that it is a straightforward offer with relatively few restrictions on eligibility. The Government's announcement today removes further barriers to uptake meaning that even more homes will be eligible to use the grant to install a heat pump."
The report itself sets out problem statements rather than detailed recommendations, and states that the project "has stopped short of diving into in-depth recommendations for improvements to the scheme"2. Its findings include that the scheme is "generous for the ASHP and early adopter/able-to-pay market, but there are equitability concerns about how many homeowners may be able to access the grant"3. Analysis using MCS data found median installation cost ranged from £9,550 to £13,790 across bungalows, detached, semi-detached and flats, and only 11% of privately owned homes were described as heat pump ready3. On awareness, the report says "Awareness of the BUS scheme is currently low, households believe they may be ineligible as other schemes are means-tested"4. It cites a Citizens Advice survey from August 2022 which found that, from 2,000 adults, only 33% were aware of the scheme, with 10% fully aware and 23% partially aware4. The report notes that survey was conducted in relatively close proximity to the initiation of the scheme in April 20224.
The report also compares support elsewhere, listing France's éco-PTZ zero percent interest loans of up to €50,000, Germany's KfW low-interest loans of up to €60,000, the Netherlands' National Heat Fund providing zero or low interest, depending on household income, of up to €65,000, and Scotland's Homes Energy Scotland zero-interest loans of up to £7,500 for heat pumps3.
Why it matters for households
The eligibility change matters to any household whose EPC carries outstanding loft or cavity wall insulation recommendations, because that condition has stood between them and a grant of up to £7,5001. The report's figures suggest the grant does not always cover the full cost: with median installation costs between £9,550 and £13,790, a gap can remain for homes needing supplementary work such as new heat emitters, insulation or piping3. For a home's energy independence, the practical question is how much of the upfront cost a household must meet itself, and whether running costs are affordable afterwards, both of which the report raises as barriers3. The awareness findings point to a different constraint: households that never learn the grant is not means-tested cannot use it, whatever its size4. The delay to the Clean Heat Market Mechanism concerns the supply side, and Nesta's stated worry is that it sends the wrong signal to a market that needs stability to attract investment1.
What happens next
The consultation on postponing the Clean Heat Market Mechanism to 1 April 2025 was launched on 14 March 20241. Nesta states its long-term objective from future phases is to work with policymakers to improve current and future subsidy schemes that increase the number of households benefiting from subsidies and adopting low-carbon heating systems2. No further dates are given in the published material.
Sources4 cited
- Nesta responds to changes to Boiler Upgrade Scheme and Clean Heat Market Mechanism | Nesta, nesta.org.uk
- Future subsidies for heat pumps | Nesta, nesta.org.uk
- Statement 4 | Nesta, nesta.org.uk
- Statement 5 | Nesta, nesta.org.uk