The Department for Energy Security and Net Zero has announced further funding for heat pump subsidies, and a revamped Clean Heat Market Mechanism.

The government is hoping that up to 300,000 households will benefit from home upgrades in the next year, as it announces a measures to help deliver the Warm Homes Plan.

An extra £30 million has been hearmarked for the Boiler Upgrade Scheme (BUS) this financial year, while the budget for the next financial year has been almost doubled, to £295 million. The BUS delivers the £7,500 heat pump grant scheme and had the highest number of applications ever in October according to Ofgem.

At the same time, the need for a planning application to install a heat pump in England will be removed from early next year, by dropping the rule requiring them to be installed at least one metre from a property’s boundary.

The announcement also introduces a reformed Clean Heat Market Mechanism from 1 April 2025, with changes aimed to "make sure manufacturers have the time they need to scale up supply chains, making heat pumps an even more attractive choice for households and boosting sales without penalising those buying a new gas boiler".

There will also be government support available for each and every heat pump installation that is required under the mechanism in 2025-26. 

The MCS Foundation has welcomed the plans to compel boiler manufacturers to transition their businesses to sell more heat pumps, and to expand grant schemes for homeowners replacing fossil fuel boilers with heat pumps. 

Mike Foster, Chief Executive, Energy and Utilities Alliance, said: "Minister Fahnbulleh has constructively engaged with industry and British manufacturers, who have warmly welcomed this new approach. By working in partnership, we have an outcome which no longer unfairly penalises business and consumers. That is a big win for households across the country."

Carl Arntzen, CEO of Worcester Bosch, said: "We welcome the announcements from DESNZ on the removal of some of the siting barriers for heat pumps and the extra funding being made available for the Boiler Upgrade Scheme. We are hopeful these measures will enable more homeowners to view heat pumps as a realistic heating alternative."

"We’re also happy the minister has recognised the need to revise the CHMM and that further policy changes are required to increase heat pump demand and adoption in the UK."

Jan Rijnen, Managing Director UK & Ireland, Baxi Heating, said: "Today’s announcement of additional funding for the Boiler Upgrade Scheme is welcome, together with amending planning rules which will help simplify heat pump installations. We are committed to working with government to deploy practical and affordable solutions that help decarbonise homes, with the support of customers, industry, and manufacturers like Baxi. We will continue to work with Government to further improve the Clean Heat Market Mechanism in the years ahead."

Reacting to the confirmation of the Clean Heat Market Mechanism, David Cowdrey, Acting Chief Executive of The MCS Foundation, said: “The Clean Heat Market Mechanism sends a clear signal to the heating industry that decarbonisation with heat pumps is the direction of travel. This is welcome news, especially given that certainty is needed for the small-scale renewables sector to continue to grow."  

About the additional funding for the Boiler Upgrade Scheme for next year, he added: “The Boiler Upgrade Scheme has been a key driver of the rise in heat pump uptake since 2022. The expansion of this key grant scheme is very welcome news and will help take the UK towards the target of installing 600,000 heat pumps a year.  

“To maximise the Boiler Upgrade Scheme’s potential, it should be accompanied by a public communications campaign to support homeowners on their heat pump journey.  

“Measures to reduce electricity prices also remain critical to the expansion of clean heating.”