Homes and small businesses in England and Wales will be able to claim a discount off installation costs from a fund that will allocate $188 million annually as part of the subsidy program.

The UK government has launched a three-year, GBP 450 million ($564 million) incentive program offering discounts of up to GBP 6,000 from the installation cost of replacing fossil fuel boilers with heat pumps.

Households and small businesses in England and Wales can secure GBP 5,000 off the cost of replacing an oil or gas boiler with an air source heat pump or GBP 6,000 for a ground source device.

The GBP 5,000 discount is also available for the cost of installing a biomass boiler, although the government press release issued in May to announce the program added such devices would only be eligible “in limited circumstances,” without adding further details.

Same-cost aim

The government is aiming for price parity with fossil fuel boilers by 2030 and said the grants would help drive down costs between 25% and 50% against conventional boilers by 2025.

Greg Jackson, CEO of utility Octopus Energy, was quoted in the press release. He said: “Heat pumps are up to four times more energy efficient than gas boilers but they need to come down in price. The government’s new scheme will not only reduce the cost – often to the same price as a boiler – but it’ll kick-start an industry so that, sooner or later, we won’t need subsidies.”

The government has already brought in a five-year moratorium on the VAT applied to the cost of installing heat pumps and biomass boilers as part of a package of measures to help households through the current cost-of-living crisis.

Under the scheme, which applies to installations made since April 1, the heat pump installer completes the application and applies the discount.

The program will have a GBP 150 million annual budget until the end of March 2025.