Boiler Upgrade Scheme – can ASHPs be a game-changer in saving you money?
Air source heat pumps (ASHPs) are a renewable heating technology that moves existing heat energy from the outside air (even when it's freezing) into your home. They are more efficient than conventional heating systems as they deliver more heat than they consume. Typically, one unit of electricity generates three units of heat.
Heat pumps allow consumers to make major savings in Norway, Finland and Sweden - known for their harsh winters. Even if the air outside drops below 0°C, air source heat pumps are effective at extracting outdoor heat and transferring it indoors to warm the house. The fact that Nordic countries, known for their harsh winters, are among the biggest users disproves the often-held assumption that the technology does not work when the temperature plummets.
Heat pumps are recognised as one compact unit stationed outside of the home, complete with radiators and pipework inside the home, as well as heating controls and a hot water cylinder which resemble a typical central heating system. It’s important to note that heat pumps cannot be fitted inside the property, so they require some space. However, they are typically the same size as an external air conditioning system, and modern units are more compact and quieter than ever.
Are they suitable for everyone?
Heat pumps can be beneficial for a variety of properties. Their effectiveness depends on the heating system that you are replacing, the size of your home and its insulation and ventilation levels, as well as the make and model of the heat pump.
Households which do not use gas as their primary source of heating are likely to see the greatest financial benefit, as they typically use an expensive alternative fuel. Coal fire systems, oil boilers or storage heaters can be expensive to run, so switching to a heat pump almost guarantees that you will make significant savings. If you currently use mains gas (not LPG), savings will largely be dependent on the prices of gas and electricity and the efficiency of your system.
How much does a heat pump really cost?
The government has recently announced a grant of £7,500 for homeowners to help them replace their fossil fuel heating systems with low carbon heat pumps. This grant was increased from £5,000 on October 22nd, as part of the government's efforts to reach their target of installing 600,000 heat pumps by 2028. The sentiment was to provide more financial assistance to homeowners to meet the government’s net zero goals, and this needed to be a subsidiary significant enough to encourage homeowners to make the switch from gas boilers. If you are interested in learning more about the grant and how to get started, keep reading.
How to save £7,500 on a heat pump install
On average, it can cost between £10,000 and £13,000 to install an ASHP, which can be a hefty upfront cost for homeowners looking to cut gas costs and go greener. The discount of £7,500 puts a significant dent in this expense and can become even more ideal, for example, if your gas boiler is starting to falter.
The £7,500 grant covers air source heat pumps and ground source heat pumps (including water source heat pumps and shared ground loops), OR £5,000 towards a biomass boiler.
To encourage an uptake in heat pumps, the government has adjusted the rules for installing renewable energy systems.
Previously, restrictive criteria mandated that heat pumps required planning permission unless they were placed at least one meter away from the property boundary. However, in the Chancellor’s Autumn statement, these restrictions were revoked. New "permitted development rights" aim to alleviate the previous "blanket restrictions" that posed difficulties for small properties and those with limited land. Initially, the criteria intended to reduce noise concerns. However, heat pump technologies have since developed and noise is now less of a concern, with modern ASHPs producing only a low whirring sound, tantamount to that of a fridge or microwave.-
On 15th December 2023, it was announced that homeowners looking to install a new gas boiler will soon face an additional financial burden, which manufacturers have named a ‘boiler tax’. Essentially, this is an increase in boiler prices to compensate for the fines they incur from the government for falling short of heat pump targets. The government’s scheme is set to incentivise heat pump installations, however Worcester Bosch have said “to cover the costs of these fines and remain in business”, it had “no option but to raise the prices of the boilers we sell to meet what is in effect a boiler tax”. The price increase could see the price of boilers from the first of January increasing by £120 (Worcester Bosch and Baxi models), £110 (Ideal Heating) and £95 (Vaillant). Indirectly impacting on the consumer, this tax is an unfair result of manufacturers attempting to offset the cost of fines. However, if you are thinking of switching your heating system, it is important to factor this cost in.
Key questions & how to apply for the grant:
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Yes, if…
You are a homeowner
Your home has a valid Energy Performance Certificate (EPC) from the last 10 years
Your existing heating system is powered by fossil fuels
You are planning to install an ASHP or GSHP
If you have previously applied for a heat pump grant before 23 October 2023 and your installation has not begun, you can request your installer to reapply for the grant to receive the £7,500 discount.
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As mentioned above, you must have a valid EPC. Additionally, if your EPC makes recommendations for loft or cavity wall insulation, it must be installed and a new EPC generated to progress the application. It is important to note that there are some exceptions to this requirement and an installer will be able to advise you on which apply.
For a heating system to be eligible under the Boiler Upgrade Scheme, it must be installed by an installer certified by the Microgeneration Certification Service (MCS). You can view a list of MCS approved installers here.
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1. Contact a MCS certified installer to get a quote for the work
2. Get confirmation from the installer that you are eligible and agree on a quote
3. The installer will apply on your behalf to Ofgem
4. The value of the grant will be taken off the amount you pay the installer
How can I save money on the running costs of my heat pump?
In addition to using a government grant, switching to an appropriate electricity tariff can discount the price of the energy used to run the heat pump. Given the recent surge in gas prices, which are now 60% higher than they were two years ago, this might seem like an ideal time to switch to a heat pump.
From January 2024, the price cap will be 29p/kWh for electricity and 7p/kWh for gas, returning to the frequently cited issue that heat pumps are too expensive to run. According to Which, a heat pump would have to be three times as efficient to match the running costs. However, using electricity tariffs suited to heat pumps, such as a time-of-use tariff or a heat pump tariff, can make your electricity cheaper than the price cap.
Which’s Dr Rosenow calculates that the Octopus Agile tariff, which allows access to half-hourly energy prices, tied to wholesale prices and updated daily, could save £395 a year.
Or… OVO’s new Heat Pump Plus tariff, which offers a rate of 15p/kWh for the energy used by the heat pump only (and a standard rate for all other energy use), could save from £434 to £560. It is important to note that this is dependent on your previous heating system, as well as the efficiency of the heat pump and its ‘Seasonal Coefficient of Performance’ (SCoP) rating. The SCoP rating is an updated way of measuring a heating system’s efficiency over the course of a year, realistically depicting efficiency and environmental impact. (Daikin)
Good Energy have calculated that on average, an LPG boiler running at 70% efficiency, costs 30% more in annual heating costs than an air source heat pump. Primarily in the past two years, gas prices have become especially volatile and subject to extreme changes, asserting the idea that an air source heat pump could be a worthy and reliable investment going forward.
You could be eligible for a free home energy survey as part of our new Home Energy Advice Team (H.E.A.T) Hub. The survey covers the practicality of installing a heat pump (i.e. the position of the pump, size, hot water cylinder etc.), the estimated running costs, as well as guidance on installation. Additionally, the website has a collection of resources for more information about renewables. Visit the website here to find out more.