Thousands of households are expected to miss out on Government vouchers to install heat pumps in their homes after the slow roll-out of a flagship net zero scheme.
The Treasury is expected to “claw back” millions of pounds previously allocated under the Boiler Upgrade Scheme, which gives homeowners grants to replace gas boilers with eco-friendly alternatives, such as heat pumps.
The Department for Business, Energy and Industrial Strategy (BEIS) has said it expects to miss its annual target to issue 30,000 vouchers to households to help with the cost of installing the low-carbon heating system.
As a result, BEIS has spent just a third of the £150million it was allocated by the Treasury for the first year of the scheme.
But instead of rolling the underspent funding over into next year, BEIS has said it expects to be forced to return the money to the Treasury, meaning up to 20,000 households could miss out on receiving support.
In an answer to a written parliamentary question on what would happen with the unspent funding, Energy and Climate Minister Graham Stuart said BEIS has “explored options to carry over unused budget from year 1 of the scheme” but did not expect this to be possible due to the Treasury’s “accounting rules”.
Latest figures for the scheme, which launched in May last year, show the Government had issued just 9,889 vouchers out of its 30,000 target by the end of January, two months before the deadline.
Ministers have vowed to launch a new advertising campaign to encourage better take up of the vouchers, after being criticised for low public awareness of the benefits.
Juliet Phillips, Senior Policy Advisor at climate change think tank E3G, told i the Treasury’s policy of forcing departments to return funding not spent by a certain deadline was “not fit for purpose” for dealing with the climate emergency.
“Climate change is a long-term problem which needs long-term funding solutions,” she said. “Clawing back underspend from the Boiler Upgrade Scheme flies in the face of the UK’s ambitions to reduce energy demand and meet net zero, and we encourage the government to revisit this decision.”
Bean Beanland, director of growth and external affairs at the Heat Pump Federation, told i he was “seething” that the Treasury was “clawing back” funding from the scheme, adding that the Government should not blame industry for the scheme’s failures.
It comes after the House of Lords Climate Change Committee published a letter to the Government on Wednesday warning that the Boiler Upgrade Scheme was “failing”.
The committee blamed a number of factors for the slow take-up of the scheme, including a lack of awareness amongst the public and the high upfront costs for households.
Under the scheme homeowners can get up to £5,000 to help them with the cost of installing a heat pump, but have to meet the rest of the costs themselves. It is estimated that the total cost of installing a heat pump sits between £7,000 and £14,000.
What is a heat pump and can it save me money?
Heat pumps are a low carbon alternative to gas boilers that use electricity to extract and boost warmth from the outside air to heat your home.
The Government has a target to begin install 600,000 heat pumps in homes per year within the next five years as part of the transition to net zero, however at present just 50,000 are installed per year.
Installing a heat pump typically costs between £7,000 and £14,000, however some energy companies are working to make them more affordable.
Octopus Energy recently unveiled an air source heat pump that it said would cost homeowners as little as £2,500 to install, around the same as a typical gas boiler installation.
The cost of running a heat pump depends on how energy efficient your home is, as well as the cost of electricity.
Electricity is current more expensive than gas, with the Government capping the cost of electricity at £0.34 per/kWh compared to £0.10 per kWh. However, heat pumps are more energy efficient than gas boilers because the amount of heat they produce is more than the amount of electricity they use.
Octopus Energy estimates that replacing a gas boiler with a heat pump could save households up to £557 per year.
However, Mr Beanland said the Government must do more to lower the price of electricity in order to promote wider take up of the technology.
Mr Beanland agreed that the scheme has been poorly promoted by the Government.
“Senior Government people never really got behind the scheme,” he said, adding that some customers have been reluctant to sign up as they believe the programme will be scrapped before they get a chance to use their voucher.
The problems with the Boiler Upgrade Scheme are reminiscent of other failed Government programmes, including the Green Homes Grant scheme, which was scrapped in 2021 after achieving less than 5 per cent of its target.
Mr Beanland warned that other similar Government programmes are also at risk of having to return their funding to The Treasury.
This includes the Home Upgrade Grant scheme, which gives funding to low income households to help them install energy efficiency upgrades, and funding released last Autumn to train people to work in the low-carbon heat sector.
“There’s a lot of people desperately trying to spent the money, but I think there is risk that that will be underspent because we’ve been here before with other schemes. So I think there’s a really important principle here that the Treasury needs to get their heads round,” he said.
BEIS and the Treasury have been approached for comment.