Grants and Subsidies Available to Offset the Heat Pump Installation Cost

Announcements made this month by the Prime Minister will be welcome news for homeowners considering their heat pump cost – with subsidies available from the government of up to £7,500 to help replace an older gas boiler.

The ban on sales of new oil and gas boilers has also been postponed until 2035, providing a wider window of opportunity for those interested in the efficiency and sustainability of an upgraded, eco-friendly heating system.

Today, we’ll explain the average cost of heat pump installations, the variables influencing your budget, and which grants or subsidies you may be eligible to claim as a credit or partial payment contribution.

Heat Pump Installation Cost Explained

A Heat pump system is a green alternative to conventional boilers that heat our homes and hot water. There are two main types of heat pumps, called a ground-source and air-source unit:

• • Ground source heat pumps require larger outdoor units and external space capacity, extracting heat from the ground.
  • Air source heat pumps are suited to almost any home and comprise a more compact unit, absorbing ambient heat from the air.

As a low-carbon heating method, the government has been rolling out various initiatives – some with more success than others – to encourage homeowners to consider replacing an inefficient boiler system with a heat pump.

It is also important to note that a heat pump can significantly reduce your long-term energy bills. Higher-end heat pump models can improve heating efficiency by as much as 300%, compared to a maximum efficiency rating of around 90% assigned to top-of-the-line A-rated gas boilers.

Average Costs of Fitting a Heat Pump in the UK

The cost of fitting a heat pump varies, depending on the type of heat pump you choose, any improvements required to your insulation and radiator systems, the level of preparation and repair work, and whether you decide to fit underfloor heating.

Average costs also differ with the size of your property, the number of occupants, the average internal temperature you wish to maintain, and the type of heat pump you select. As an indication:

• • Depending on the variables we have discussed, an air source heat pump for a typical two- or three-bedroom property will cost from £3,000 with grants, for the supply and installation.
  • Fitting a ground source heat pump for the same home would cost from £14,000 and up to as much as £45,000 for the most efficient and high-capacity models.

A qualified renewable heating engineer can recommend heat pump models, installation placements and associated work that falls within your budget – many households do not necessarily need an extremely powerful heat pump to meet their requirements.

Financial Support With Heat Pump Installation Costs

Heat pumps are becoming the most popular way of upgrading older central heating systems. Still, many homeowners find that the cost of the installation work is higher than they might expect to pay for a conventional replacement boiler.

Support schemes are intended to provide an incentive, making the cost of investing in a new heat pump comparable or lower than the budget required to fit a new gas or oil boiler.

The Boiler Upgrade Scheme

The Boiler Upgrade Scheme (BUS) is a government initiative extended in March until 2028. Part of the Heat and Buildings Strategy, the programme aims to cut the carbon emissions produced by residential properties, in turn lowering the carbon footprint of each home.

Until very recently, the scheme offered a voucher worth up to:

• • £5,000 for an air source heat pump
  • £6,000 for a ground source heat pump

Following the revisions to the government’s environmental policies, a household fitting an air source heat pump could now claim up to £7,500 – equivalent to the average cost of the work.

However, the BUS has been criticised due to its limitations. For instance, a property must have an Energy Performance Certificate issued within the last ten years and have no recommendations to improve the insulation in the loft or cavity walls. Successful claimants need to redeem the voucher within a maximum of three months and have the installation work completed within the same period.

Until now, only 4,500 households have been able to access the vouchers, a significant shortfall against the targets set by the government of 60,000 installations per annum.

The Energy Company Obligation Scheme

Another potential support initiative is called the Energy Company Obligation, or ECO4. This program launched in April 2022 and is expected to remain open until March 2026.

Designed for use by energy suppliers, local authorities and companies within their supply chains, ECO4 targets low-income households and those considered in fuel poverty due to the inefficiency of their homes and the costs of adequate heating.

Similarly to the BUS, there are a series of caveats and restrictions on who can apply to the scheme. The current eligibility criteria state that funding support may be offered where:

• • Tenants or homeowners have a heating system considered inefficient, rated as D or below.
  • The residents receive some form of government benefits, such as income support or child benefit, OR
  • The residents are categorised as low-income – they may not be eligible for ECO4 funding support but might be considered for the ECO+ or ECO4 Flex schemes.

Most households must be referred by their local authority to access financial assistance with repairing boilers, upgrading insulation or replacing a heating system with a heat pump or biomass boiler. However, some energy suppliers will contact eligible customers.

How a Reputable Heat Pump Installation Provider Can Help Reduce Costs

We’ve run through the schemes currently available to reduce the cost of installing a heat pump but recognise that these may only be relevant to a small proportion of households.

It is also worth reiterating that the cost of a heat pump should always be matched to your objectives – based on an assessment of your heating and hot water requirements, the efficiency and location of your property, your boiler replacement budget, and the number of people living within the home.

Our advice is always to contact a local expert who can deliver professional, independent recommendations and advise whether there is the potential to reduce your installation costs, whether by applying for one of the schemes mentioned or by making informed choices about the heat pump you select.

Following the installation, you should see your utility bills fall quickly. While a heat pump requires electricity to function, a good quality pump emits three to four units of heat for every individual unit of energy consumed – compared to less than one unit for a gas boiler.

That results in a saving of up to £545 per year depending on the heat pump you choose and the performance of your old gas boiler, with estimated savings over a unit’s lifespan of 20 to 25 years of over £13,000.

Please contact the Gas Worx team if you would like further advice about any of the information shared here, or to arrange a convenient time to chat about your heat pump installation options.