On 7 July, the Energy and Utilities Alliance (EUA) produced a report on ‘The cost of retrofitting heat pumps in the UK’.
A heat pump is a dual heating and cooling system which operates by extracting heat from the external ground, air or water and transferring it into a building using electricity to move heat rather the generating it through combustion. For every unit of electricity consumed, a heat pump can produce up to three units of heat making them highly efficient and, as the electricity grid transitions to renewable energy sources, reduces the carbon emissions associated with heating and hot water.
The EUA report found that nine in ten retrofitted heat pumps are now reliant on tax subsidies, amounting to a half a billion-pound bill for the taxpayer.
Richard Beresford, Chief Executive of the National Federation of Builders (NFB) said: “Fossil fuel heating is on the way out, therefore the Government needed to facilitate a transition to electric heating and hot water. and heat pumps are an obvious solution. However, because the previous government ignored the most popular global heat pump system, air to air, criticisms that taxpayer funds could be better used are fair.
Thankfully, the Labour government heard our recommendations to include air to air heat pumps in the Boiler Upgrade Scheme (BUS) and the data shows that this cheaper, more efficient system is already seeing grant applications.”
The EUA reports that heat pumps installed in 2025/26 will deliver carbon savings at a cost of £437 per tonne of carbon, a cost that is significantly higher than the government’s own valuation. It concludes that these figures position heat pumps as one of the most expensive carbon reduction strategies for the taxpayer which causes the EUA to question their ‘value for money’.
Rico Wojtulewicz, Director of Policy and Market Insight at the NFB, said: “The heat pump industry is a cottage one, therefore the sector needed pump priming and the Boiler Upgrade Scheme (BUS) has done that. However, it is right to point out that four years on and the cost of installations remains broadly the same and rose when the grant was increased from £5,000 to £7,500.
The inclusion of air-to-air heat pumps was an important step, not just because they are cheaper and supported by a large installer base – but because it opens the door for complementary solutions, for example, meeting hot water needs met via thermal batteries. This better understanding of decarbonisation in practice will have a knock on to other regulations, for example energy efficiency, renewables and overheating, plus support innovation.
In our view, the next step is for the Government to makes changes to the Clean Heat Market Mechanism (CCMM), so that fossil fuel boiler manufacturers can meet the requirement to sell X number of ASHPs via the currently excluded air to air systems.”
