23rd May sees the launch of the Government’s Boiler Upgrade Scheme. Will this finally herald the long-awaited mass uptake of heat pumps as domestic heating systems?
To get the lowdown, we spoke with industry observer Dr Paul Welsby, who has worked in the field of heat pumps and heat pump technology for over 40 years.
Firstly, why are heat pumps in the news again?
Fundamentally, it all stems from the Government’s stated objective to fight climate change and to bring the UK to a position of Net Zero greenhouse gas emissions by 2050.
Residential heating and hot water production is one of the main contributors to the current level of UK carbon emissions. According to the provisional statistics recently published by the Department for Business, Energy and Industrial Strategy, in 2021 the Residential sector was responsible for emitting 68 million tonnes of carbon dioxide equivalent (mt CO2e). This equates to almost 20% of all the carbon dioxide emissions in the UK and is mainly from the localised use of gas for heating and cooking.
Decarbonising energy in buildings is the key element in the Government’s Heat and Building Strategy published in October 2021. This strategy reinforces the thought that current technology of gas boilers for heating homes and providing hot water has no sustainable future and it effectively signals the death knell for localised fossil fuel heating, setting a phase out date of 2035 for gas boiler installations.
Whilst there are a range of alternative low carbon technologies around, the Government’s favoured option for providing domestic heating and hot water in new homes is heat pumps. As a step towards Net Zero emissions, they estimate that the UK will need to have at least 600,000 heat pumps installed by 2028.
How do heat pumps work and why are they a better alternative than gas boilers?
The important thing to remember about heat pumps is that they are not heat generating devices. They are devices that are capable of moving heat from one place to another, and by a neat trick of thermodynamics they are able to increase the temperature level of the heat they have moved.
There are different types of heat pumps, but the most commonly used one is the Mechanical Vapor Compression (MVC) system that uses a closed working fluid arrangement driven by an electrically driven compressor which links two heat exchangers, one in the heat source area and one in the heat output zone.
The basic operation of a heat pump is essentially the same as a refrigerator or an air conditioner. Think about a ‘fridge, it doesn’t generate cold, it simply takes heat from the inside of the ‘fridge and moves it into the general area of the kitchen (hence the back of a refrigerator is always warm).
In the case of a heat pump, it takes heat from outside of the building (this can be from outside air or from the ground) and upgrades the heat releasing into the inside of the building generally in the form of hot water.
As there is an element of “free heat” from the outside, a heat pump produces more heat than the electricity it uses, so it is extremely efficient. Consequently, it offers significant carbon savings over a gas boiler and can offer potential savings on the household energy bill. Current heat pump technology offers carbon savings of up to 65% compared with a gas boiler. This saving is expected to increase significantly as heat pump technology is honed and as the UK’s power supply continues to decarbonise.
They sound too good to be true. Why does every home not use a heat pump?
The main issue is the capital cost difference between a heat pump and a boiler. This has limited their uptake in domestic applications and particularly in the retrofit sector.
Heat pumps have been used in larger commercial applications for years. Commercial properties commonly use reverse cycle air to air heat pumps which can heat in winter and provide cooling in summer. The capital cost difference between a heat pump and a boiler can be more easily addressed in a business environment as decisions are often made based on business financial measures. In a domestic application, not everyone has capital to invest in greening their homes.
Additionally, there have been technical issues with heat pumps in terms of the hot water temperature levels achievable, which makes them difficult to retrofit in existing homes, and they exhibit a reduction in capacity and efficiency in cold weather. These deficiencies have been addressed by using a combination of heat pump and gas boiler in a so-called Hybrid heat pump system. Whilst overcoming technical issues, this is an even more costly arrangement and is clearly not a zero-carbon solution.
The cost factor becomes even more significant when a ground source heat pump is considered because of the additional complexity of the installation.
One of the aims from Heat and Building Strategy is for the Government to work with manufacturers to enable heat pumps to achieve cost parity with gas boilers by 2030.
So, what are the Government doing to encourage the use of heat pumps in homes today?
Whilst the target of 600,000 heat pump installations by 2028 may seem a tall order given the current reliance on gas boilers in the domestic heating market, the Government hope to drive heat pump installations up initially via new build homes. There is a logic to this strategy, as a heat pump is easier and cheaper to design and fit into a new build than it is to retrofit to an existing home.
The Future Homes and Buildings Standard will be introduced in 2025 to complement revised Building Regulations, which will require all new homes to have carbon emissions some 75% to 80% lower than those built to current standards. As an interim step, new Building Regulations will be put into place in June this year which will require new homes in England to produce around 30% less carbon emissions. These moves are, in a roundabout way, effectively saying “use a heat pump in all new build homes”.
The Government have stated that they would like to see 300,000 new homes built per year by the mid-2020s, so using a heat pump in all new homes would see a good proportion of the target 600,000 installations achieved.
That seems a logical move for new builds, but what about existing homes?
Making heat pumps more attractive for existing homes is a more difficult proposition, mainly because of the upfront cost issue I mentioned previously.
The Government has been trying to encourage homeowners to convert to heat pumps since 2014 when they launched the domestic Renewable Heat Incentive (RHI). Through this scheme they have provided households with financial support towards the higher cost of a heat pump. They have had some success, but not as much as they would have liked due to the way the scheme was implemented. Under the RHI, the household pays for the heat pump upfront and then claims the capital back after installation based on their energy use over seven years. Clearly, under this scheme the uptake has been limited to those fortunate enough to be in a position where they have the capital to fund the installation in the first place.
Recognising this limitation, the Government announced that they would be replacing the RHI scheme with their Boiler Upgrade Scheme (BUS). £450m has been set aside to fund the BUS over a 3-year period.
The RHI officially ended on 31 March and the BUS officially launches on 23 May, but the new scheme will allow backdated submissions for installations commissioned from 1 April onwards. The main difference being that the BUS provides homeowners with upfront funding to offset the cost of installing a range of low carbon equipment, including air and ground source heat pumps.
In short, the BUS offers £5,000 off the cost and installation of an air source heat pump and £6,000 off a ground source heat pump. It also offers £5,000 off a biomass boiler for properties in rural areas or not connected to the gas grid. All applications must have a valid EPC and the householder must use an MCS certified low carbon installer to carry out the work who will administer the grant application on the householder’s behalf.
The scheme is only available to households in England and Wales and, not surprisingly, is not available for new build properties.
As a final spoonful of cream on the cake, in his recent Spring Statement the Chancellor announced that VAT on the supply and installation of certain energy efficient systems would be cut from 5% to zero from April 2022 for at least 5 years. It goes without saying, this applies to heat pumps.
What has been the reaction to the Boiler Upgrade Scheme?
Generally, the industry reaction has been favourable, and the BUS has been welcomed by the heat pump and energy supply industries. The heat pump industry has been asking for this kind of upfront funding scheme for a while and there is no doubt that the BUS is a big step up from the RHI. It is anticipated that the successful inroads made via the RHI will be built upon with the introduction of the BUS.
There has been some concern raised particularly by the Heat Pump Association (HPA) that the £6,000 grant offered for ground source heat pumps may not be enough to develop the market for this particular technology considering the relatively high additional installation costs. The Government appear to be taking the view that in proportion to the overall cost the ground source grant has been set at the correct level. However, they have been set a relatively higher proportional figure for air source installations, as they feel air source offers more potential to develop the retrofit domestic heat pump market.
Paul Welsby received his PhD from The University of Salford in the early 1980s for his work on various aspects of heat pumps. He then went on to work at British Gas where he was responsible for pioneering the development and uptake of gas-fired heat pumps and air conditioners. Paul then spent the remainder of his career at Shorts Industries Limited, who were amongst other things responsible for distributing heat pumps and air conditioners from Japan and Korea and gas-powered heat pumps from Italy. Recently retired, Paul is still actively studying the evolving market for this carbon saving product.