For many households that want a low-carbon heating system, they will need to upgrade their current heating system (e.g. radiators and pipework) as well as possible upgrades to the fabric of their home such as insulation. The current funding landscape separates these two aspects, with different schemes and eligibility criteria. A complex and unapproachable subsidy landscape and lack of funding to increase the efficiency of existing systems may be preventing some uptake of the current boiler upgrade scheme.
What we've heard
The current BUS scheme is rigid in the schedule of work, where heating system upgrades are required to happen at the same time the heat source is upgraded, alongside works to the fabric of the property for some households. Complexity in funding can also be a barrier for households. Preparing homes so that they are deemed “heat pump ready” can rely on separate funding streams such as The Great British Insulation Scheme or ECO.
The current subsidy landscape can be difficult for homeowners to navigate, especially when they may be under time pressure to install a new heating system, for example, if their boiler has unexpectedly broken down.
When starting to consider heating upgrades, a household's first point of call for advice can be their existing heating engineer, who is often not incentivised to point towards low-carbon heating options.
This problem may affect a large proportion of UK homes. Analysis of EPC and English Housing Survey data by Ned Lamb and Professor David Elmes from Warwick Business School, University of Warwick, estimates “that the proportion of privately owned homes that are ‘heat pump-ready’ is only 11% of the housing stock.” They believe this presents “The risk that homeowners seek Boiler Upgrade Scheme support only to find out they need to spend significantly more than the cost of the heat pump and its installation. Alternatively, heat pump installations proceed in homes that are scheme-eligible but not ‘heat pump ready’ which leads to poor performance in service.”
During stakeholder workshops, we heard similar comments from the industry. The current BUS scheme is seen as generous in terms of covering the heat source replacement. However, the system works, labour and other rectifying work in the home tipped the balance and may result in households not proceeding with a heat pump installation.
“The BUS is generous, however, there needs to be more consideration of the preparatory work that needs to go on, but for the heat source, it is enough.”
“A subsidy could be focused on heat pump readiness or low-temp readiness, especially if networked systems took care of the upfront costs of heat supply.”
“From an industry perspective, and for customer value, it’s better for major heating system improvements to be designed with the heat pump and installed together but households should have the option to split them up.”
We also heard that for smaller businesses tying together funding for fabric improvements or other energy efficiency improvements may be beneficial for their customers. Some inspiration may be taken from the structure of subsidy schemes like ECO that enable multiple measures through a single subsidy scheme. Homes eligible for the ECO4 or Home Energy Scotland (HES) scheme do have some flexibility regarding the separation of secondary measures including heating system upgrades, fabric measures, and heat pump installation.
“To support consumers in making their home more energy efficient, we would recommend additional incentives when doing multiple measures… £1000 for loft, cavity wall, external wall, internal wall insulation, or solar PV, when done in combination with a heat pump… maximum efficiency improvement would be encouraged.”
Germany may offer some inspiration for how to incentivise the preparation of systems for low-carbon heating sources. In response to the Ukraine war and the energy crisis, Germany legislated that all property owners with a natural gas heating system must:
- perform a heating system test to assess its efficiency
- optimise the heating system based on the test results to improve performance and potentially reduce energy consumption.
As this policy launched in 2022, it's still too early to assess its long-term impact. However, its swift introduction in response to the energy crisis suggests potential short-term benefits. Focusing on optimising existing systems could lead to immediate carbon emission reduction and cost savings, even before widespread heat pump adoption takes hold.
During a series of semi-structured interviews, we asked UK homeowners about their views of splitting or scheduling the work involved in upgrading the system and their home. Responses were mixed.
“I'm not convinced the subsidy is the issue. It's already quite generous. The barriers are the costs, hassle and whether it is worth doing financially [If you’re coordinating other fabric or home improvement works with the same company or contractor], 3 months is not that much time. What if the builder goes on holiday in August?”
“Any work on existing heating systems should be seen as an opportunity to upgrade heating emitters. Upgrading heat emitters in existing systems should be incentivised. This provides a near-term carbon reduction as well as long-term system upgrade benefits.”
“My instinct would be to get everything done all at once as the process should be quite disruptive… would be quite intrusive.”
Existing UK building regulations now legislate that a design flow temperature of 55℃ would lend itself to low carbon heating. However, this only applies if a system is newly installed or fully replaced in an existing building, including the heating appliance, emitters and associated pipework. It also results in a marked difference between the design temperature for gas systems and the 45℃ design temperature for heat pumps.
What barriers do we need to overcome?
For households
- There is a prescribed route to installing a heat pump under BUS that may not work for all.
- Energy bills are an immediate concern, can bills and resultant emissions be lowered without a whole system and heating source replacement.
- The installation of a new heat source is seen as very disruptive.
- The subsidy landscape is seen as confusing and complex to navigate.
For Industry
- Balancing servicing existing fossil fuel systems with promoting new low-carbon solutions creates a dilemma for engineers who might face pressure to maintain traditional systems. This could result in subsidies not being signposted.
- Incentives to decarbonise are only currently accessible through low-carbon heating engineers. Could a wider workforce help the transition?
Concepts/recommendations
On preparing systems and separating works
- What if the existing gas-heating workforce had a greater role in preparing systems for low-carbon heating? The existing gas workforce is a trusted source of advice for homeowners. They are currently not incentivised to point towards schemes such as BUS. Could subsidising system upgrades make gas installers more likely to lead towards LCH?
- What if the rules around fossil fuel heating systems were tightened so that all systems headed towards low flow temperatures?
- What if all work on existing heating systems was seen as an opportunity to upgrade heating emitters? What if, when serviced, all fossil fuel systems were to be assessed, and recommendations made for preparative work to accommodate a low-carbon heating source?
- What if we can make distress purchases easier? Could the preparation of systems for a low-carbon heat source increase the likelihood of homeowners buying a heat pump when their gas boiler breaks?
Figure 2. Could subsidising preparatory work for low-carbon heating result in an easier switch to a heating source switch?
On improving the navigability of funding
What if...
- The successful, focused nature of BUS was transferred to other technologies, system preparation or other energy efficiency measures?
- There was a more approachable and user-friendly way to navigate low-carbon heating schemes?
- Greater emphasis was placed on preparing heating systems for low carbon heat in EPC recommendations?
