Households in England and Wales to be offered new £5,000 Government grant from April 2022 to help replace gas boilers with heat pumps

The Government scheme aims to reduce emissions but also cut the cost of fitting heat pumps so that more households can afford them. The idea is to ensure that low carbon, more efficient heating systems, such as heat pumps, will be no more expensive – and in many cases cheaper – to buy and run than gas boilers. 

But the scheme will operate on a first come, first served basis with the Government offering payments for 30,000 heat pumps every year for three years. You'll also have to stump up the difference if costs come to more than the £5,000 grant.

The move comes after a failed Government attempt to help homeowners make their homes more energy efficient via the Green Homes Grant. The scheme, which launched in September last year, gave people a similar option to apply for £5,000 towards new heating systems. However, MoneySavingExpert.com founder Martin Lewis branded the scheme a "massive flop", saying late last year that it was too complicated to access. The Government later closed the Green Homes Grant to new applicants in March 2021.

This new grant won't be available until April next year, but below is an overview of how the scheme will work. We've requested more information from the Government and will update this piece once we know more.

Who is eligible for the £5,000 grant scheme?

Most homeowners, public landlords and private landlords in England and Wales will be able to participate in the scheme. The grant won't, however, be available to those in social housing and new-build properties.

Northern Ireland has a different energy system, while the scheme won't be available to those in Scotland.

Will everyone get £5,000?

Most households (up to the 30,000/year cap) that join the scheme will receive a £5,000 grant for air-sourced heat pumps. Houses that need heat pumps where heat is sourced from the ground will, however, receive £6,000 as they are more expensive. It is expected, however, that the majority of houses will require air-sourced heat pumps.

This cash is designed to help cover the cost of everything from the pump to the installation, including any required changes to your home. For example, you may need to have new radiators installed that work with heat pumps. You will, however, be expected to pay for any shortfall on the final bill – see below.

Does £5,000 cover all installation costs?

The £5,000 is unlikely to cover all installation costs and you're expected to foot the bill for the balance. Heat pumps (and their installation) cost between £10,000 and £12,000 on average. The idea is that you will end up paying roughly the same amount as you would for a gas boiler.

The price of the heat pump depends on the size of your home, the supplier you go with, and the type of heat pump installed.

Depending on the supplier's rules, you may be able to pay for any remaining balance in instalments.

How do I apply?

Households don't apply for the grant – you'll first need to engage with a heat pump installer, which will then apply to energy regulator Ofgem for the grant on your behalf. Once your application has been reviewed, Ofgem will issue a voucher confirming the grant amount.

The installer will then have a set amount of time to complete installation from the date of the voucher being issued. This will likely be three months for most installations.

Once completed, the installer will generate what's called a microgeneration certification certificate that confirms eligibility criteria have been met. This is then submitted to Ofgem. The regulator will then pay the grant amount directly to the installer and you will be billed for the remaining amount.

It is possible for you to get a quote on a heat pump and its installation ahead of April next year, however, you will not know for sure if you will receive the one-off £5,000 grant until the scheme has been launched.

Until then, you could make use of the current Domestic Renewable Heat Incentive scheme. Under this scheme, households who purchase a heat pump could be offered a grant that is paid in instalments over seven years. The amount you get depends on the type of pump you purchase, how much energy you use and your living and financial arrangements. It is possible that this grant comes to more than £5,000.

Can I cancel?

You'll have 14 days to cancel after signing the heat pump contract. You can also cancel at any point before signing the contract if you're unhappy with how much the quoted work will cost.

What is a heat pump?

Heat pumps run on electricity and work in a similar way to a fridge in reverse, they extract energy from the air or the ground. They then move heat from one area to another to warm it up.

This is different to gas and oil boilers, which literally boil water to work, releasing carbon into the atmosphere every time you use them. The hot water from boilers flows through pipes to the various radiators in your home, warming them up.