National Audit Office: Low heat pump uptake slowing progress on decarbonising home heating

The number of heat pump installations by December 2023 was less than half of planned projections; uncertainty regarding the role of hydrogen in home heating is hampering investment and effective planning, a new National Audit Office (NAO) report has found.

Home heating represents 18% of UK greenhouse gas emissions. Government sees heat pumps as the main technology to decarbonise the UK’s 28 million homes over the next decade.

The government wants to see 600,000 heat pumps installed per year by 2028 – an eleven-fold increase on 55,000 heat pump sales in 20224. By 2035, government wants to see up to 1.6 million heat pumps being installed annually.

But the independent public spending watchdog says the government’s assumptions about levels of consumer demand and manufacturer supply5 are optimistic. The government’s flagship Boiler Upgrade Scheme has also underperformed, installing just 18,900 heat pumps between May 2022 and December 2023. DESNZ had expected the scheme would deliver 50,000 installations by this point.

A key issue behind lower-than-expected heat pump uptake is their cost to use and install. DESNZ delayed its planned work to reduce running costs, by rebalancing gas and electricity prices, for example by moving some levies and charges from electricity to gas bills6. The department says that price rebalancing remains an essential policy but is challenging. Heat pump installation costs also fell more slowly than DESNZ hoped.

The NAO also found that DESNZ has no overarching long-term plan to address the low levels of awareness among households about the steps required to decarbonise home heating.7

In response to the Boiler Upgrade Scheme’s underperformance, DESNZ increased the grant available to people replacing boilers from £5,000–£6,000 to £7,500, which has enabled some energy suppliers to offer heat pump installations starting at £500. Applications to the scheme in January 2024 increased by nearly 40% compared with January 2023, though more data is required to determine whether the change is sustained.

DESNZ is considering what role hydrogen will play in decarbonising home heating. The department has so far indicated that it will have a limited role, but it will formally take a decision in 2026.

Trials of hydrogen schemes intended to provide evidence to support the government’s decisions have been delayed or cancelled. Stakeholders told the NAO ongoing uncertainty could slow progress by limiting the ability of local authorities and industry to plan and invest.

Parts of the gas network may need to be decommissioned if natural gas is no longer in use and hydrogen is confined to certain areas of the country.8 DESNZ is working to develop its understanding of the consequences for gas networks of decarbonising home heating and how decommissioning could be funded.

The NAO recommends government considers providing more certainty on the role of hydrogen in home heating before 2026.

To improve its transparency and accountability on the rollout of heat pumps, the NAO says government should report its progress annually to Parliament.

The public spending watchdog is recommending government develops an overarching long-term consumer engagement plan for decarbonising home heating. And it also recommends that DESNZ accelerates its work to rebalance the cost of energy to improve heat pump uptake.

Gareth Davies, the head of the NAO, commented:  “Government needs to engage every household to achieve its objective to decarbonise home heating as part of the transition to net zero. DESNZ’s progress in making households aware and encouraging them to switch to low-carbon alternatives has been slower than expected.”

“DESNZ must draw on its experience to date to ensure its mix of incentives, engagement and regulations addresses the barriers to progress in its current programme of work.”

You can read the full report here.