UK Boiler Replacement Scheme: £90m Underspent in First Year Explained

The UK Government's Boiler Upgrade Scheme has fallen short of its ambitious target to replace a significant number of boilers with taxpayer-subsidised heat pumps.

The scheme was allocated a budget of £150 million to fund 30,000 heat pump installations in its first year. However, recent figures from Ofgem reveal that in the first 12 months, fewer than 10,000 households received a £5,000 subsidy voucher, resulting in £90 million of unspent budget being returned to the Treasury.

Despite the initial shortfall, the scheme is set to continue for another two years, with £300 million allocated to encourage the installation of more heat pumps.

Criticism has been levelled at the initiative, with Mike Foster, CEO of the Energy and Utilities Alliance, stating that the government has failed to listen to the majority of people who cannot afford a heat pump, even with subsidies.

Furthermore, he argues that the focus on green spending is wasteful and hampers efforts to improve energy efficiency through insulation measures, which could save more carbon, reduce bills, and provide a better investment for taxpayers.

Last month, the House of Lords' Environment and Climate Change Committee called for improvements to the scheme, emphasising the need for increased public awareness and better assistance for lower-income households. It also highlighted the importance of expanding the installer base to ensure heat pumps are effectively installed and operated in different property types.

Overview of the UK Boiler Replacement Scheme

The UK Boiler Replacement Scheme was introduced by the government with a budget of £150 million to fund the installation of 30,000 heat pumps in its first year. This initiative aimed to reduce carbon emissions and promote energy efficiency in homes across the country. The scheme offered a £5,000 subsidy voucher to eligible households to help cover the cost of a heat pump installation.

However, recent data released by Ofgem reveals that during the first 12 months, the scheme experienced significantly low uptake with less than 10,000 households receiving the subsidy. As a result, £90 million of the allocated budget was left unspent and will be returned to the Treasury.

Despite this setback, the scheme is scheduled to continue for another two years, with an additional £300 million allocated to support the installation of heat pumps.

Industry experts, such as Mike Foster from the Energy and Utilities Alliance, have voiced concerns over the scheme's effectiveness and the need for the government to listen to the majority of the population who may not be able to afford a heat pump, even with subsidised funding. Insulation measures have been suggested as a potential alternative for reducing carbon emissions and providing a more accessible solution for homeowners.

Last month, the House of Lords' Environment and Climate Change Committee called for an urgent overhaul of the Boiler Upgrade Scheme, recommending the expansion of the grant's coverage to a wider range of income categories to benefit more households.

The committee also highlights the importance of an upskilling and expansion of the installer base, ensuring heat pumps are effectively installed and run in various property types, thus contributing to the overall success of the scheme in curbing carbon emissions and increasing energy efficiency.

Reasons for £90m Under Spending

Lack of Awareness

One contributing factor to the under spending of the Boiler Upgrade Scheme is the lack of public awareness about the programme. The House of Lords’ Environment and Climate Change Committee observed that the promotion of the scheme has been insufficient, causing many eligible households to miss out on the opportunity to receive the £5,000 subsidy voucher for heat pump installations. More effective communication and marketing strategies are needed to improve public awareness about the available incentives.

Eligibility Criteria

Another reason for the under spending is the rather restrictive eligibility criteria set for the scheme. The House of Lords’ Environment and Climate Change Committee recommended rethinking the level of assistance provided, particularly for lower income households. It is crucial to review and potentially broaden the eligibility criteria to reach a wider demographic, making the scheme more accessible to those who could benefit from the installation of heat pumps but are currently excluded from the subsidies.

Complex Application Process

The application process for the Boiler Upgrade Scheme has also been noted as a barrier to accessibility. A convoluted and time-consuming process may deter potential recipients from pursuing the subsidy, which in turn means that the allocated funding remains unspent. Streamlining the application process could increase the uptake by making it more appealing and accessible to eligible households.

Challenges in Installer Base

The ability to meet the demand for heat pump installations is contingent upon having a sufficiently skilled installer base. The House of Lords’ Environment and Climate Change Committee cited concerns over the scale and expertise of the current installer base, stressing the need for up-skilling and expansion to ensure heat pumps are effectively installed and run in various property types. By addressing these challenges, the Boiler Upgrade Scheme can better utilise its allocated funding to achieve its intended goals.

Impact on Energy Efficiency and Emissions

National Targets

The under-spending of the Boiler Upgrade Scheme's first-year budget has potential implications for the UK's efforts in reducing emissions and improving energy efficiency. With only 10,000 households receiving the £5,000 subsidy voucher, the targeted 30,000 heat pump installations have not been achieved. This may hinder the nation's progress towards meeting its climate goals and transitioning to greener energy solutions.

Household Savings

For households that have participated in the Boiler Upgrade Scheme, the installation of heat pumps can contribute to significant energy efficiency improvements and reductions in carbon emissions. According to Ofgem, these benefits include:

• Lower energy bills due to heat pumps being more efficient than traditional boilers

• A reduction in household carbon footprint

• Increased property value as a result of a more energy-efficient home

However, with only 10,000 households receiving the subsidy voucher so far, the potential for individual household savings and decreased emissions remains limited.

It is crucial for policymakers to consider the feedback provided by trade bodies and the House of Lords' Environment and Climate Change Committee in order to improve the scheme's efficiency and public outreach.

By addressing the barriers hindering heat pump adoption, especially in low-income households, the Boiler Upgrade Scheme may have a better chance of achieving its targets while contributing to the United Kingdom's overall energy efficiency and emissions reductions goals.

Comparison with Previous Schemes

The Boiler Upgrade Scheme (BUS) has faced challenges in meeting its target number of boilers to be replaced with heat pumps. This section briefly compares BUS with the Green Homes Grant and Energy Company Obligation schemes, which have also aimed to make homes more energy-efficient and reduce carbon emissions.

Green Homes Grant

The Green Homes Grant, launched in September 2020, provided vouchers towards the cost of improving energy efficiency and installing low-carbon heating in residential properties in England. However, the grant was criticised for its administrative issues, resulting in difficulties for homeowners and installers.

Similar to the BUS, the Green Homes Grant underperformed its goals. While it aimed to help 600,000 households, only around 50,000 vouchers were issued. The scheme was eventually scrapped in March 2021, less than a year after launch, due to these shortcomings.

Energy Company Obligation

The Energy Company Obligation (ECO) is an ongoing scheme that began in 2013. Under this programme, larger energy suppliers in Great Britain are required to deliver energy efficiency and heating measures to low-income and vulnerable households. The ECO has had varying levels of success and faced criticisms in certain areas.

While the ECO has supported more than 2.6 million energy-saving measures in over 2 million households since its inception, some have argued that more stringent criteria for eligible properties might have limited the ability of the scheme to reach a wider audience.

Overall, both the Green Homes Grant and the Energy Company Obligation schemes, like the Boiler Upgrade Scheme, reflect the government's efforts to promote residential energy efficiency and reduce carbon emissions. However, each of these initiatives has faced challenges in effectively reaching their respective goals.

Recommendations for Improvement

The Boiler Upgrade Scheme has experienced a shortfall in meeting its first-year target for replacing old boilers with taxpayer-subsidised heat pumps. To improve the scheme, it is essential to address some key areas, including the simplification of the application process, targeted marketing campaigns, and expanding eligibility criteria.

Simplified Application

One of the primary reasons for the underspending of the allocated budget for the Boiler Upgrade Scheme has been the complexity of the application process. To encourage more households to take advantage of the programme, the government should streamline the application process by removing bureaucratic hurdles and making it user-friendly.

This can be achieved by:

• Developing an easy-to-use online portal for homeowners

• Reducing the amount of paperwork and documentation required

• Offering guidance and support to applicants through dedicated helplines or online chat services

Targeted Marketing Campaign

Another way to expand the outreach of the Boiler Upgrade Scheme is by launching a targeted marketing campaign to raise public awareness about the benefits of the programme. By educating the public on the environmental and cost-saving advantages of upgrading to heat pumps, more households might be encouraged to participate.

An effective marketing campaign could include:

• Advertisements in print and digital media platforms

• Partnerships with relevant trade bodies and industry associations

• Social media campaigns and influencer partnerships to promote the scheme to a wider audience

Expanded Eligibility

Currently, many low-income households are unable to afford the installation of heat pumps, even with the grant offered by the Boiler Upgrade Scheme. By expanding the eligibility criteria and increasing the support available to such households, more homeowners could benefit from the programme, ensuring a broader impact.

To achieve this, the government could consider:

• Offering larger grants to low-income households

• Introducing interest-free loans or flexible financing options

• Partnering with energy suppliers to provide additional incentives or discounts on installation costs

Addressing these areas of improvement could help the UK Government optimise the Boiler Upgrade Scheme and maximise its impact on reducing carbon emissions and lowering energy bills for households nationwide.

Conclusion

The Boiler Upgrade Scheme, backed by the UK government, faced challenges in its first year, with only a third of the allocated funding spent on installations. Out of the £150 million budget for the first year, just around £60 million was spent, leaving £90 million unspent and eventually returned to the Treasury.

Despite intentions to support the installation of 30,000 heat pumps, only about 10,000 households received the £5,000 subsidy voucher. The remaining two years of the scheme still have £300 million allocated for driving heat pump installations.

Several factors contributed to the shortfall, such as the affordability of heat pumps even with subsidies, and the need for improved public awareness of the incentives. The House of Lords’ Environment and Climate Change Committee recommended an overhaul of the scheme, including better support for lower-income households and a focus on growing the installer base for efficient heat pump systems.

Ultimately, addressing these challenges will be essential to achieve the scheme's future goals and maximise the potential benefits for both the environment and the UK's economy.