What Now For Heat Pump Funding in 2021?

The Green Homes Grant closed to new applications on March 31st 2021. The grant scheme had run since September 2020 and provided vouchers of up to £5,000 for primary measures including insulation and low carbon heating systems. Now that it’s gone, where do things stand for heat pumps? If you are considering a low carbon heating system, is it still a viable option without the grant?

You’d be forgiven for thinking that the obvious answer is no. I mean, they were handing out £5,000 just three weeks ago and now they’re not.

That’s not the whole picture though. The Green Homes Grant got a lot of coverage but funding was already available for renewable heating systems through the Domestic Renewable Heat Incentive (RHI). And that scheme is still in place.

The Domestic RHI covers renewable heating technologies including:

  • Air Source Heat Pumps
  • Ground Source Heat Pumps
  • Biomass Boilers
  • Solar Thermal (water heating)

So that renewable heating system you were thinking about with the Green Homes Grant, you can still get government financial support. You might be surprised to learn, that it will probably be more than the £5,000 that was available through the GHG. Often significantly more.

Estimated RHI Payments for Some Typical Example Homes

Air Source Heat Pump

House Type SPF RHI Payment
Mid Terrace 2 bed
Heat: 8,059 kWh
Water: 2,067 kWh
2.5 £4,620
3.0 £5,180
3.5 £5,530
3 Bed Semi
Heat: 8,085 kWh
Water: 2,680 kWh
2.5 £5,390
3.0 £6,020
3.5 £6,440
4 Bed Detached
Heat: 12,719 kWh
Water: 2,796 kWh
2.5 £7,000
3.0 £7,700
3.5 £8,400

Ground Source Heat Pump

House Type SPF RHI Payment
3 Bed Semi
Heat: 8,085 kWh
Water: 2,680 kWh
2.8 £11,200
3.3 £11,900
3.8 £12,600
4 Bed Detached
Heat: 12,719 kWh
Water: 2,796 kWh
2.8 £14,700
3.3 £16,100
3.8 £16,800

The downside with the Domestic RHI is that your payment doesn’t come up front, it is paid quarterly over 7 years. With the RHI, householders need to come up with the full installation cost of the system but can then look forward to regular payments coming for the next 7 years. On top of that, you’ve got the savings on your heating bills that will last for the lifetime of the system.

I guess how attractive that is will depend somewhat on your personality. £5,000 vouchers certainly got a lot of attention and appealed to a lot of people but making an investment now and looking forward to seeing the grant income come in for years and knowing that you are isolated from the mounting energy bills, there are lots of people who like that idea too. The key difference is to access the benefits of the RHI, you need to be able to afford the up front investment.

An air source heat pump system is going to cost somewhere probably in the range of £9,000 to £12,000 depending on the size of your home and the complexity of the installation. The good news here is that if you can afford the upfront cost, the Domestic RHI is very likely to pay more of that cost than the Green Homes Grant and of course, in both cases you get the benefit of any savings on fuel costs. Ground Source Heat Pumps will be significantly more expensive to install but as can be seen above, also get much higher payments through the scheme.

Notes:
We calculated the example RHI payment amounts above, using the BEIS Domestic RHI Calculator and included a variety of SPF values to better reflect the characteristics of heat pump systems currently being installed. For more on SPF see COP and SPF for Heat Pumps Explained.

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