Energy Efficiency Update

Statement

Today, I am announcing updates on the Boiler Upgrade Scheme (BUS) and the Clean Heat Market Mechanism (CHMM). I am also announcing that we are publishing the government response to the Improving Boiler Standards and Efficiency Consultation.

Boiler Upgrade Scheme

The BUS provides grants to encourage property owners to replace existing fossil fuel heating with more efficient, low carbon heating systems. On 23^rd October, we increased the grant levels for heat pumps to £7,500, making the BUS one of the most generous schemes of its kind in Europe. Since then, applications have risen sharply. October, November and January have been the highest 3 months for BUS applications ever, and December applications were up 49% on December 2022. The latest figures for January 2024 were a 39% year-on-year increase on January 2023 - showing that our approach is working. Up to the end of January 2024, 33,424 applications have been made to the scheme and it has paid out 20,497 vouchers to properties across England and Wales, amounting to just over £113 million.

Today we are publishing our response to the consultation on proposed changes to the BUS. The response addresses changes proposed by stakeholders including the Environment and Climate Change Committee, aimed at broadening the pool of properties eligible for the Scheme. We will:

1. Remove the requirement for a property to have no outstanding Energy Performance Certificate recommendations for loft and cavity wall insulation – although government guidance remains that properties should be appropriately insulated. This will address concerns about forcing hard-pressed families to carry out insulation upgrades to be eligible for the scheme by instead empowering them to decide what is right for them.
2. Increase the capacity limit for shared ground loops from 45kW to 300kW. This will address concerns that the cost of groundworks for ground source heat pumps is a significant barrier to deployment and this change will spread the costs of ground infrastructure, making them a more affordable solution for consumers.
3. Expand the definition of biomass boilers eligible for the scheme to include those which have a cooking function, provided it is integrated and cannot be controlled separately to the heating function of the property. This will allow a wider range of biomass boiler models under the scheme, thereby widening consumer choice.
4. Introduce flexibility into the regulations to be able to vary the grant levels more quickly for specific types of property, in future, if needed in response to changing market conditions or future regulation.

Clean Heat Market Mechanism

The Government remains fully committed to supporting the transition to low-carbon heating, including the aim for 600,000 heat pump installations per year by 2028. Today we are publishing an addendum to the Government’s Response to the Clean Heat Market Mechanism consultation, which was published on 30 November 2023.

In line with our proportionate and pragmatic approach to net zero, we are committed to supporting families to make changes to their homes in a way that does not force them before they are ready or saddles them with unnecessary costs. That’s why we increased the Boiler Upgrade Scheme grant by 50%. Our plan is working, as the sustained increase in applications to the scheme shows.

We have recently seen unjustified price hikes for gas boilers by some manufacturers with considerable market power. These pricing decisions have called into question whether the home heating industry, which has four companies dominating 90% of the market, is working as well as it should and delivering the best outcome for consumers. We are calling for the Competition and Markets Authority to conduct a review of the home heating appliance market to understand whether any weakness in competition is contributing to prices being higher than they would be in a well-functioning market.

The Government has scrapped the implementation of the Clean Heat Market Mechanism until April 2025, adjusting the launch from 1 April 2024 to 1 April 2025. In doing so, the target levels for 2025/26 (set at 6% of relevant boiler sales), and other aspects of the scheme’s design and implementation, would remain as set out in the Government’s November 2023 consultation response.

Improving Boiler Standards and Efficiency Consultation: Government Response

The government response to the Improving Boiler Standards and Efficiency Consultation sets out updated proposals to improve gas boiler system efficiency which will reduce household energy bills. In addition, only if a decision is taken in 2026 that hydrogen will play a substantive role in heat decarbonisation will the Government move to require domestic gas boilers be hydrogen-ready and then only from 2030. The response also set out plans to enable the installation of high-quality, efficient hybrid heat pumps.

We plan to implement most proposals via an update to ecodesign and energy labelling regulations, which would apply in Great Britain. We intend to publish a consultation on draft legislation to give effect to these proposals in due course.