The government has awarded more than £5 million to Ideal Heating as the first award from its Heat Pump Investment Accelerator competition, announced on 21 November 2024 as part of a package of measures under the Warm Homes Plan1. The Department for Energy Security and Net Zero said the funding would kickstart a homegrown heat pump industry, boost the UK's energy security and support hundreds of low-carbon jobs1.
The announcement also set out changes to the Clean Heat Market Mechanism, which will be introduced in reformed form on 1 April 2025, with what the government described as new changes to give manufacturers time to scale up supply chains1. The government said support would be available for each heat pump installation required under the mechanism in 2025 to 20261. Separately, the one-metre rule requiring planning permission for air source heat pumps in England will be removed from early next year, with rules still in place around listed buildings1.
On grants, the government confirmed a £7,500 heat pump grant for homeowners in England and Wales through the Boiler Upgrade Scheme, with an extra £30 million for the scheme this financial year and the budget almost doubling to £295 million for the next financial year1. The scheme recorded its highest number of applications ever in October, according to Ofgem1. The government said a heat pump can save families around £100 a year compared with a gas boiler by using a smart tariff effectively, and that insulating more homes could save homeowners around £200 per year1.
Around £3.2 billion of investment in warmer homes is expected across 2025 to 2026 from government, social housing providers and supplier obligations, reaching up to 300,000 households1. The government gave this breakdown of expected upgrades:
| Route | Homes upgraded | Funding |
|---|---|---|
| Warm Homes: Social Housing Fund | up to 60,000 | £374m |
| Warm Homes: Local Grant | up to 9,000 | £88m |
| Boiler Upgrade Scheme | up to 39,000 | £295m |
| ECO4 and Great British Insulation Scheme | up to 200,000 | £1.4bn to £1.6bn |
An initial £3.4bn was committed in the Autumn 2024 Budget for the Warm Homes Plan covering 2025 to 2026 to 2027 to 2028, with approximately £1bn allocated to 2025 to 20261. The government also estimated £600m to £700m in co-funding from social housing providers in 2025 to 20261. For comparison, it cited around 120,000 homes upgraded in 2023 to 2024, including around 14,000 installing low carbon heating under the Boiler Upgrade Scheme and around 80,000 treated under ECO4 and the Great British Insulation Scheme1.
Jason Speedy, Ideal Heating's Chief Operations Officer, said:
"This funding is a vote of confidence in our business and our position at the forefront of the industry's move to low carbon heating solutions. It will enable us to accelerate our plans for heat pump production and complements the broader programme of investment across our operations as we lead the industry to a greener, low carbon future."
Why it matters for households
The award to Ideal Heating is a manufacturing investment rather than a household grant, so it does not change what a homeowner pays. Its relevance to a household lies in supply: the government frames the funding as a way to build domestic heat pump production capacity, which bears on how quickly and at what cost units become available to installers1. The planning change in England removes a step that, according to figures from Octopus cited in the announcement, causes 34% of those who order a heat pump to be discouraged or drop out for reasons attributed to planning permission1.
For a home's energy independence, the package combines two levers. One is reducing the heat a home needs, through insulation routes such as the Warm Homes: Social Housing Fund and Warm Homes: Local Grant, which the government links to potential savings of around £200 per year1. The other is shifting the source of that heat away from gas, through the Boiler Upgrade Scheme grant and the Clean Heat Market Mechanism, which is intended to increase the availability of heat pumps1. The government also said it is consulting on increasing energy efficiency standards for new boilers and heat pumps, which it says would save households with a new gas boiler £30 a year on running costs1.
What happens next
The reformed Clean Heat Market Mechanism takes effect on 1 April 20251. The removal of the one-metre rule for air source heat pumps in England is due from early next year, with listed building rules unchanged1. The government said it will consult on boosting minimum energy efficiency standards for all rented homes by 2030, a measure it says would lift over one million households out of fuel poverty1. The National Housing Federation said it looks forward to working with the government ahead of next year's Spending Review on the design of the full Warm Homes Plan1.