Utility Week

16 | JANUARY 2022 | UTILITY WEEK Heat Analysis Heat pump targets may be so much hot air The government says the cost of heat pumps will fall by as much as 50% over the next four years, but industry is divided on whether the push for mass installations will be enough to bring costs down. S ince the announcement of its ambitious target for heat pumps in its Ten Point Plan at the end of 2020, the government has been bullish in its expectations for the technology. Not only is it projecting that both cus- tomer demand and sector capacity will ramp up by a factor of 20 in just seven years, but it is also predicting that by 2025 costs will have plummeted. With upfront costs for air source heat pumps starting at more than £4,000 per household, and ground source heat pumps at more than £7,000, the promise that heat pumps will be at parity with fossil fuel boil- ers by 2030 will be a welcome one to poten- tial customers. However, while some in the industry, such as Octopus Energy, have been vocal about the potential for cost reductions, even vowing to go further and bring upfront costs down to a similar level to gas boilers this year, others in the industry feel both the gov- ernment and industry are promising more than they can deliver. They point to the fact that heat pumps are a mature technology with much higher pen- etration in other countries, so an increase in demand in the UK will not change market fundamentals for manufacturers, especially in the timeframe given by the government. Meanwhile, the government and indus- try claim that moving away from bespoke off-grid installations to focus on better insu- lated, modern homes where installation can be simplified and completed on a mass scale will bring about reductions. Such a strategy will rely heavily on con- sumer uptake, and risks leaving those cus- tomers most in need of cost reductions today out in the cold. A promise to halve costs Alongside the publication of the long- awaited Heat and Buildings Strategy, the government announced its plan to drive down the cost of heat, which included the £450 million Boiler Upgrade Scheme. Under the scheme, 90,000 grants worth £5,000 apiece can be claimed at a rate of 30,000 a year from April 2022 to help cover the cost of installing a heat pump. The government said it was making the grants available to encourage homeowners to install more efficient, low-carbon heating systems at negligible extra cost compared to installing a traditional fossil fuel boiler. The government also pledged to work with industry to "help meet the aim of heat pumps costing the same to buy and run as fossil fuel boilers by 2030". And as well as setting this ambitious target, the govern- ment also set a mid-term target of between a 25-50% reduction in just four years. Energy secretary Kwasi Kwarteng said at the time that costs would "plummet" over the next decade as the "technology improves", a message that was echoed by key industry players such as Octopus, Ovo, Eon and Scottish Power. High density installations One of the ways government is set to work with industry is through a new £60 million heat pump ready innovation programme, which it says will reduce costs by focusing on improving efficiencies in high density installations. High density installations have also been identified by Octopus Energy as the best place to focus its energies to achieve cost reductions. The energy supplier has invested £10 mil- lion to build the UK's first R&D and train- ing centre for the decarbonisation of heat. The centre includes two full-sized three-bed semi-detached houses – one built to 1970 building regulations, and one to modern day – representing around 40% of UK housing stock.

• Cover