New grants of £5,000 will be available from April next year to encourage homeowners to install more efficient, low carbon heating systems – like heat pumps that do not emit carbon when used – through a new £450m three-year Boiler Upgrade Scheme. 

The £450m Boiler Upgrade Scheme is part of more than £3.9bn of funding announced as part of the UK government’s new Heat and Buildings Strategy, which aims to set out how the UK will decarbonise its homes, commercial, industrial and public sector buildings as part of setting a path to net zero by 2050.

Leading industry figures have described the new strategy as an important step forward, but have also called for much greater ambition and urgency to meet the challenge of decarbonising the UK’s housing stock.

And campaigners and opposition groups have slammed the strategy, with Labour’s shadow business secretary Ed Miliband describing it as a “meagre, unambitious and wholly inadequate response.”

The newly announced £3.9bn will fund the next three years of investment through the Social Housing Decarbonisation Fund, the Home Upgrade Grant scheme, the Boiler Upgrade Scheme and the Heat Networks Transformation Programme, and reducing carbon emissions from public buildings through the Public Sector Decarbonisation Scheme.

Ministers say this will significantly reduce the UK’s dependency on fossil fuels and exposure to global price spikes, whilst supporting up to 240,000 jobs across the UK by 2035.

The government and industry will also work together to help meet the aim of heat pumps costing the same to buy and run as fossil fuel boilers by 2030, with big cost reductions of between a quarter and a half by 2025 expected as the market expands and technology develops.

This will support the government’s new target for all new heating systems installed in UK homes by 2035 to be either using low-carbon technologies, such as electric heat pumps, or supporting new technologies like hydrogen-ready boilers.

Prime minister Boris Johnson said: “As we clean up the way we heat our homes over the next decade, we are backing our brilliant innovators to make clean technology like heat pumps as cheap to buy and run as gas boilers – supporting thousands of green jobs. Our new grants will help homeowners make the switch sooner, without costing them extra, so that going green is the better choice when their boiler needs an upgrade.”

Business and energy secretary Kwasi Kwarteng said: “Recent volatile global gas prices have highlighted the need to double down on our efforts to reduce Britain’s reliance on fossil fuels and move away from gas boilers over the coming decade to protect consumers in long term. As the technology improves and costs plummet over the next decade, we expect low carbon heating systems will become the obvious, affordable choice for consumers. Through our new grant scheme, we will ensure people are able to choose a more efficient alternative in the meantime.”

Over the coming years, industry leaders expect electric heat pumps will cost the same as gas boilers to buy and run. UK manufacturers are already making electric heat pumps more attractive to consumers and more affordable and the government wants to incentivise consumers to make the switch as quickly as possible.

To ensure electric heat pumps will be no more expensive to run than gas boilers, ministers want to reduce the price of electricity over the next decade by shifting levies away from electricity to gas. A call for evidence is expected to be published with decisions made in 2022.

Greg Jackson, CEO and founder of Octopus Energy, said: “This Heat and Buildings Strategy will help kick-start a cheap clean heating revolution, by bringing prices down for households and allowing companies to invest in scaling up their clean heating operations. When the new scheme launches in April, Octopus Energy will install heat pumps for about the same cost as gas boilers.

“Octopus has already committed £10m investment to its research and development and training centre dedicated to the decarbonisation of heat, and has begun training engineers at the rate of 1,000 per year. But this is just the beginning. By scaling up the technology and supply chain in Britain, innovative companies like ours will soon be able to fit and run heat pumps without any government support, bringing us one step closer to making the UK the Silicon Valley of Energy and creating thousands of clean energy jobs throughout the country.”

Sir John Armitt, chair of the National Infrastructure Commission, said: “While we welcome government’s ambition to improve the energy efficiency of homes and other buildings, the continued lack of specific targets for the number of insulation installations makes it difficult to measure progress. It remains to be seen whether the range of schemes set out in the strategy will be able to deliver at the pace required.”

Labour’s shadow business secretary Ed Miliband said: “As millions of families face an energy and cost of living crisis, this is a meagre, unambitious and wholly inadequate response. Families up and down the country desperately needed Labour’s 10 year plan investing £6bn a year for home insulation and zero carbon heating to cut bills by £400 per year, improve our energy security, create jobs and reduce carbon emissions. People can’t warm their homes with yet more of Boris Johnson’s hot air but that is all that is on offer.”

Click here to download the UK’s Heat and Buildings Strategy.