Boiler Upgrade Scheme: what you need to know
How it works, which systems qualify and how much funding is available
The Boiler Upgrade Scheme (BUS), which runs from April 2022 until April 2025, is part of the government’s strategy to reduce the carbon emissions of home heating in England and Wales. It replaces the Domestic Renewable Heat Incentive Scheme, which closed to new applicants on 31 March 2022.
According to the Committee on Climate Change, carbon-heavy domestic heating accounts for around 14% of UK greenhouse gas emissions, with 86% of homes in England still using gas central heating.
As part of the Heat and Buildings Strategy, the government aims to phase out the installation of new and replacement natural gas boilers from 2035, to ensure that almost all heating systems are low carbon by 2050. Similarly, the Future Homes Standard was set up to make sure new-build homes are fitted with low-carbon heating and high levels of energy efficiency, and will take effect in 2025.
There’s an emphasis on heat pumps as a solution for greener home heating. Air-source heat pumps (ASHP) transfer warmth from the outdoor air to indoors. Ground-source heat pumps (GSHP) draw warmth from beneath the ground. Both systems run on electricity, and so rebalancing energy prices to ensure that heat pumps are no more expensive to buy and run than gas boilers is an essential part of the scheme being a success.
The Heat and Buildings Strategy recognises that ‘current pricing of electricity and gas does not incentivise consumers to make green choices, such as switching from gas boilers to electric heat pumps’. It goes on to say that, ‘when the current gas spike subsides, we will look at options to shift or rebalance energy levies away from electricity to gas over this decade.’
How does the Boiler Upgrade System work?
Under the Boiler Upgrade Scheme, the government contributes a fixed sum towards the cost and installation of a renewable energy system (similar to the Green Homes Grant). The scheme – available in England and Wales, but not Scotland or Northern Ireland – is backed by £450 million in funding, which should serve 90,000 applications on a first-come, first-served basis.
Low-carbon heating systems installed on or after 1 April 2022 will qualify for support under the scheme, which opens for grant applications and payments from 23 May 2022.
Applicants should find a local MSC-certified installer, who will offer advice on whether an installation is eligible for a grant. The installer will apply for the grant on your behalf, the value of which will be discounted from the price you pay. Then, confirm that the installer is acting on your behalf when contacted by Ofgem, the scheme administrator.
While new-builds generally won’t qualify, custom and self-build homes will be eligible for the Boiler Upgrade Scheme and will not have to provide an EPC. But installations will need to be completed within three months.
Which systems are eligible?
As well as air-source and ground-source heat pumps, biomass boilers are supported, but only in rural areas with populations of 10,000 people or less, and those homes must meet high emissions standards. Water-source heat pumps also qualify for a Boiler Upgrade Scheme grant of £6,000. Hydrogen boilers and hybrid heat pumps do not qualify, and solar thermal systems are not directly supported.
Systems with a total capacity of up to 45kW will be eligible for the Boiler Upgrade Scheme. All applicants must have a valid Energy Performance Certificate (EPC) with no outstanding recommendations for loft or cavity wall insulation. Homes that do will need to be insulated before an application is made. Properties with an EPC insulation exemption can also apply.
Funding will not be available for the replacement of existing low-carbon heating systems, only the replacing of fossil fuel systems (such as oil, gas or direct electric) will be eligible. Applications are still welcome if you’ve received separate funding for energy-efficient upgrades to insulation, doors or windows.
How much is Boiler Upgrade Scheme funding?
Currently, an air-source heat pump costs from £8,000-10,000, and a ground-source heat pump from around £13,000. The Boiler Upgrade Scheme aims to ease this financial burden by making £5,000 grants available for the installation of air-source heat pumps and biomass boilers, and £6,000 for ground-source heat pumps.
Manufacturers and the government are consulting on solutions to drive down the price of heat pumps and make them on a par with fossil fuel boilers by 2030. Providing ministers succeed in reducing the price of electricity over the next decade, by shifting levies away from electricity bills, the running costs should be no higher either. Good insulation helps to ensure a home reaps the most economic benefit.
Issues for heat pump installers
The installer will be responsible for redeeming the BUS voucher, and can open an account for the scheme with Ofgem from 11 April 2022. This addresses criticisms that the Green Homes Grant application process was too complicated for consumers. It does, however, complicate the installer process.
The Heat Pump Association estimates that there would have been around 1,700 installations under the RHI between 31 March and 23 May, when BUS opens for grant applications and payments. During this period, installers – many of which are small businesses – will be expected to shoulder the cash-flow burden of BUS heat pump installations. This could cause real problems if the grant application is declined for any reason.
Can I still install a gas heating system?
‘Currently, yes,’ says a spokesperson for heat-pump training provider, Logic4training. ‘But from 2025, uplifts to Part L of the Building Regulations will require heating systems in new homes to have a maximum flow temperature of 55°C and reduce carbon emissions by 75-80%,’ they continue. ‘Gas boilers may not be the best choice to fit these new standards, so it is likely new-build properties will be heated with renewables.’
But the 2025 ‘boiler ban’ only applies to new builds. Boiler installation in older properties will be phased out from 2035. With the average life-span of a boiler 10-15 years, that’s a whole boiler between now and then.
Is now the right time to get a heat pump?
‘The cost of fuel makes a huge difference right now,’ says sustainable building and energy efficiency expert David Hilton, director of Heat and Energy Ltd. ‘Do the improvements to the fabric of the building first, reduce your gas use, and then in 10 years make another decision on whether it’s the right thing to do to change to a heat pump.’
Of course, BUS closes in April 2025, so it will not be available in 10 years. But if, as the government predicts, market forces drive down the price of heat pumps over the coming years, a financial incentive may not be necessary.
Jan Rosenow, director of Regulatory Assistance Project, an independent organisation dedicated to energy efficiency, and board member of The Coalition for Energy Savings, thinks that heat pumps are already reaching cost parity with gas boilers:
In the UK heat pumps are approaching cost parity with gas boilers but have not reached it yet. Update of my analysis from yesterday.
💷New £5k Boiler Upgrade Grant
🧾 VAT cut from 5% to 0%
📈Energy prices up
— Jan Rosenow (@janrosenow) March 29, 2022
MORE ON HEAT PUMPS & THE BOILER UPGRADE SCHEME
- Heat pumps to phase out gas boilers
- How much does an air-source heat pump cost?
- Should I install a heat pump now?
- Ground-source heat pumps: a buyer’s guide