Is the BUS working or failing?

Is the extension of the Boiler Upgrade Scheme (BUS) until 2028 a sign that it’s working, or failing?

If you’re an optimist, a sign of something being extended could show it’s a success, and the demand means it needs more time to fulfil its potential.

If you’re a cup half empty person, it could mean that its life is being lengthened to give a failing initiative a better chance to show some success.

No picnic

It’s pretty self-evident that the Boiler Upgrade Scheme has not been a picnic by any means- in fact it’s been a dog’s breakfast so far.

The aim was to replace gas boilers with heat pumps, with the help of a £150m Government subsidy, earmarked for 30,000 installations gaining a £5,000 grant each.

The first year of the scheme (2022-23) saw only a third of those installations happen, and unallocated money is now heading back to the Treasury.

Some factions within the industry (notably the Energy and Utilities Alliance) have taken potshots at the scheme, including attacking its perceived handing of taxpayer cash to those who ‘didn’t need it,’ rather than helping insulate the homes of the most in need of energy performance.

A storm of criticism

The Department of Energy Security and Net Zero is determined to continue with the policy however, and has decided to extend the scheme for three further years, following a damning report on the progress, encouraged by the House of Lords.

The Chair of the House of Lords’ environment committee chair Baroness Parminter was unforgiving in her assessment.

However she later gave some credit to the Government for its response to the report, saying the announcement to extend the scheme was one of several welcome measures to try and address the storm of criticism.

What went wrong?

According to the Lords’ Environment and Climate Change Committee’s inquiry in February 2023, the takeup of grants had been “disappointingly low.”

Baroness Parminter told the Secretary of State that if the current takeup rate continues, only half of the allocated budget will be used to help households switch to low-carbon heating systems.

This would have the result that a “healthy market of installers and manufacturers will not be in place in time to implement other low-carbon heating policy measures smoothly, and the Government’s 2028 target is very unlikely to be met.”

Baroness Parminter was careful to back heat pumps as the focus of the initiative, and said the UK must now catch up with other European countries on their deployment.

She summed up the main issue with the initiative is the upfront costs of installing a heat pump, despite the £5,000 grant, which “make them out of reach for most lower income households.”

Of course, trying to rollout such a scheme during a cost of living crisis is probably the worst possible timing imaginable.

Financial support

Here’s the rub, until the Government steps in with low-interest loans for customers, there’s unlikely to be a big shift in take-up.

Middle-income households aren’t buying in numbers either, and Government low-interest loans like Scotland is currently doing need to be seen south of the border.

Various financial products could be employed to help, including supporting energy efficiency improvements such as to the building fabric, and ‘heat-as-a-service’ products.

The committee asked pointedly however: “What consideration has been given to offering Government-backed low-interest loans, and how is Government supporting the private sector to develop new financial products and heat-as-a-service offers which could help households meet heat pump installation costs?”

We are yet to have answers, although the Government has said the continuing scheme will have “new, additional funding each year until 2028,” although whether or not this just means the existing grants is unclear.

In the meantime, a range of financial products are being made available by suppliers of heat pumps.

Encouraging more take-up

The Secretary of State Lord Callanan has replied to Baroness Parminter, including confirmation that the current marketing campaign will be “enhanced” to try and encourage more take-up, and that the Department would “continue to review” the levels of the grant, and “consult on whether to make a change to the EPC requirements” around heat pump installations, which have been cited as a further cost barrier, and a “not always accurate” assessment of energy performance.

We haven’t even discussed the backlog of demand for installers, if the takeup does suddenly mushroom (as it must if we are to hit the 2028 ban on gas boilers without some kind of ‘fudged’ outcome).

Manufacturers and energy suppliers are investing hugely in training installers, but the demand has to be there.

Give low income families a HUG

From Lord Callanan’s letter, it appears that Government has largely given up on the idea of low income families retrofitting heat pumps for now.

He says: “We will deliver low carbon heating upgrades to over half a million low income and fuel poor homes in the coming years through our Social Housing Decarbonisation Scheme, Home Upgrade Grant (HUG) and Energy Company Obligation Scheme.

Under HUG Phase 2 there are separate funding pots per household for energy efficiency upgrades and low carbon heat such as heat pumps.”

The Government wants to reduce costs of heat pumps by 25% minimum by 2025, and is “working with industry.” It wants them to be as cheap as gas boilers by 2030, but what is doing to assist industry in this aim?

Are we going to catch the BUS to get to the goals in time, or in the end will we revert to another completely different form of transport incentive for our nationwide journey to low carbon heating systems?

James Parker is editor of Architects DataFile and Housebuilder & Developer