Low heat pump uptake in UK – Report finds

The number of heat pump installations by December 2023 was less than half of planned projections, while uncertainty regarding the role of hydrogen in home heating is hampering investment and effective planning, a new National Audit Office (NAO) report has found.

Home heating represents 18% of UK greenhouse gas emissions. Government sees heat pumps as the main technology to decarbonise the UK’s 28 million homes over the next decade.

The government wants to see 600,000 heat pumps installed per year by 2028 – an eleven-fold increase on 55,000 heat pump sales in 2022. By 2035, government wants to see up to 1.6 million heat pumps being installed annually.

  • Boiler Upgrade Scheme has achieved lower than expected uptake.
  • Government expects to see an eleven-fold increase in heat pump installations by 2028 based on optimistic assumptions.
  • NAO report recommends steps for DESNZ to improve heat pump rollout as well as calling for earlier clarity over the role of hydrogen in home heating.

But the independent public spending watchdog says the government’s assumptions about levels of consumer demand and manufacturer supply are optimistic. The government’s flagship Boiler Upgrade Scheme has also underperformed, installing just 18,900 heat pumps between May 2022 and December 2023. DESNZ had expected the scheme would deliver 50,000 installations by this point.

A key issue behind lower-than-expected heat pump uptake is their cost to use and install. DESNZ delayed its planned work to reduce running costs, by rebalancing gas and electricity prices, for example by moving some levies and charges from electricity to gas bills. The department says that price rebalancing remains an essential policy but is challenging. Heat pump installation costs also fell more slowly than DESNZ hoped.

The NAO also found that DESNZ has no overarching long-term plan to address the low levels of awareness among households about the steps required to decarbonise home heating.

In response to the Boiler Upgrade Scheme’s underperformance, DESNZ increased the grant available to people replacing boilers from £5,000–£6,000 to £7,500, which has enabled some energy suppliers to offer heat pump installations starting at £500. Applications to the scheme in January 2024 increased by nearly 40% compared with January 2023, though more data is required to determine whether the change is sustained.

DESNZ is considering what role hydrogen will play in decarbonising home heating. The department has so far indicated that it will have a limited role, but it will formally take a decision in 2026.

Trials of hydrogen schemes intended to provide evidence to support the government’s decisions have been delayed or cancelled. Stakeholders told the NAO ongoing uncertainty could slow progress by limiting the ability of local authorities and industry to plan and invest.

Parts of the gas network may need to be decommissioned if natural gas is no longer in use and hydrogen is confined to certain areas of the country. DESNZ is working to develop its understanding of the consequences for gas networks of decarbonising home heating and how decommissioning could be funded.

The NAO recommends government considers providing more certainty on the role of hydrogen in home heating before 2026.

To improve its transparency and accountability on the rollout of heat pumps, the NAO says government should report its progress annually to Parliament.

The public spending watchdog is recommending government develops an overarching long-term consumer engagement plan for decarbonising home heating. And it also recommends that DESNZ accelerates its work to rebalance the cost of energy to improve heat pump uptake.

Gareth Davies, the head of the NAO, said:

“Government needs to engage every household to achieve its objective to decarbonise home heating as part of the transition to net zero. DESNZ’s progress in making households aware and encouraging them to switch to low-carbon alternatives has been slower than expected.”

“DESNZ must draw on its experience to date to ensure its mix of incentives, engagement and regulations addresses the barriers to progress in its current programme of work.”

Katrina Young, Practice Manager (Heat Policy & Local Energy) at Energy Systems Catapult, said: 

“The NAO report is clear in the challenges that need to be overcome if we’re to decarbonise home heating at scale and pace. Policy support has historically been focused on reducing up-front costs associated with heat pumps and insulation. While important, other barriers – such as reducing the running costs of electrified heating compared to a gas boiler – will hold us back. The rebalancing of policy levies and charges on electricity and gas bills is crucial to incentivise low carbon heating technologies. All options on the table, however, have potentially unequal distributional impacts on households, and the extent to which the policy will affect the heating system choice of consumers is uncertain.”

Russell Dean, Residential Product Group Director, Mitsubishi Electric said:

“The report by the National Audit Office’s reiterates that now, more than ever, we must unlock the biggest barrier to large scale heat pump deployment, which is high energy costs. This is essential for us to reach the government’s heat pump installation targets by 2028.

“Rebalancing the cost of electricity and gas and removing levies from electricity bills will result in immediate savings for households looking to make the switch as the rising cost of living places an increasing strain on families across the UK. Failing to do so will be hugely damaging to the decarbonisation of home heating – which accounts for 14% of the country’s current emissions – and the country’s progress towards Net Zero as a whole.

“With over 70% of consumers knowing little to nothing about how heat pump technology works, educating consumers on the importance of heat pump technology will also be crucial to encouraging wider uptake. This will ultimately accelerate adoption, decarbonise home heating and help us hit the all-important Net Zero goal.”