The Boiler Upgrade Scheme, What You Need to Know

We’re joined by the renewables Director of VitoEnergy, Richard Hiblen to look at the boiler upgrade scheme or ‘BUS’.  Richard has been specifying and installing heat pumps for 12 years and is a co-designer of the BUS framework.

Have you read up on the new boiler upgrade scheme?

Richard: Well actually I was a co-designer of the digital aspects with Ofgem of the boiler upgrade scheme but consulted all the way through.

What is the Boiler Upgrade Scheme?

Richard: So the boiler upgrade scheme is an upfront grant available to all homeowners and self-builders to custom builds where they get an upfront deduction from the capital cost of the installation and this is done via a voucher scheme. 

Is the Boiler Upgrade Scheme only for heat pump installations?

Richard: No, it is also biomass boilers but they've made it really difficult because it's only for the really hard-to-heat homes.  I think they're talking about circa 100 to 110 watts per square metre heating demand, so we're talking grade 1 listed, solid brick, single glazing, and where it's difficult to use existing infrastructure for emitters and so then you're allowed to put in a biomass boiler, but there are lots of criteria you've got to jump through.

How much does the Boiler Upgrade Scheme grant pay? 

Richard: £5,000 for biomass or Air Source Heat Pumps, the only slight difference is on ground source when it's £6,000. 

What do consumers need to be able to access the BUS scheme grant? and what is meant by 'voucher scheme'? 

Richard: The consumer obtains quotes only from MCS registered installation companies.  These companies must hold the specific MCS certificate for the technology that you're looking to have installed.  You cannot go to a solar PV installer to get an air source heat pump, he can't do it even if he is MCS.  So that's the first thing.

Once you've found your chosen installer, they will apply for the grant for you.  This is done digitally through Ofgem or the government website. 

The final payment of the invoice (£5,000) will be paid directly to the installer from the government once the MCS installer has covered all the particular paperwork and processes.  The end-user never has to stump up the full amount. That's an unfortunate bit for the installers to manage their cash flow. 

This is currently projected to be paid within two weeks to the installer, but, once you are advised to move forward with the work, you've got three months to do the work.  This is going to be a problem certainly for the self-builders and those doing large renovations when you're looking at lots of different trades coming in and you are relying on screeding dates, dates of windows being delivered, and so forth.  Being able to accurately say ‘right by three months' time I would have commissioned and completed’ but it's gonna be tough.

Could you pick an installer and start with some of the work, then do the heat pump part later to get around the 3-month time limit?

Richard: I think it will come out in the wash so I don't know.  They say they will only extend on exceptional circumstances, if you lose the voucher at the end of the three months you can reapply so it's not always lost.  

They're also limiting the number of vouchers every year that are being sent.  I think there could be some issues where you book in some work and if the vouchers for that period have all been taken, you go in a queue for the next period. 

Again if you're doing large renovation works or a self-build that's going to be really tough to say okay ‘hold the build because we've got to wait six months until the voucher comes through’ so I can see problems.  It's probably going to take some while for the installers to become confident that they're going to be receiving it.

When does the Boiler Upgrade Scheme start?

Richard: The scheme actually goes live on the 23rd of May, but there's some allowance for installations that want to go ahead before then.  However, starting before launch means you won't be able to tell if their applications will be rejected so that is a risk.

Why does the Boiler Upgrade Scheme Grant exist?

Richard: Really simple.  The UK has legally signed up to reduce CO2.  If we don't meet our targets we're fined every time, I don't know the current rates.  I can remember when I last looked it was about £35 a ton.  

The amount of tons we're over is hundreds of billions of tons.  So it's about mitigating.  Look, if we do nothing, we have a £10 billion fine to pay; or we can spend £8 billion on heat pumps.  So it is finding the best bang for buck that you can by giving out grants to reduce CO2 and mitigate not having the fines that we're legally signed up to.

How long will the BUS Scheme Grant run?

Richard: At the moment it is running for three years up to 2025.  I don't think that'll be enough by the way but in 2025 they are introducing building regulations for heat pumps, so now the carrot is gone and the sticks in. 

If you want to build a house you will have to meet these CO2 targets, which in effect makes putting a fossil fuel boiler impossible.  

People think gas boilers are banned from 2025 in new builds but that's not true, but the regulations under part L will make it so difficult to install a gas boiler that you just won't bother because you will not get planning. 

Will people HAVE to replace their boilers for Heat pumps?

Richard: No, it's just an incentive to do with the new 2025 regulations.  At the moment they're trying to generate a ‘carrot’ with the boiler upgrade scheme.  ‘Do this and we'll give you this’ that will turn to a stick now in 2025.  

Now we know that affects new builds, but arguably that's 300,000 properties a year by 2028. They want to do 600,000 a year!  However, gas boilers are being outlawed by 2032 according to the clean heat policy.  So the new regulations will look after half of our 600,000.  

Under the RHL scheme, they did around 20,000 in total. The Boiler Upgrade Scheme is offering around 30,000 a year, I'm not sure how we're going to get from 30,000 to 300,000? A tenfold increase in three years without another incentive for existing homes?

Why should I consider the Boiler Upgrade Scheme grant to install an air source heat pump? 

Richard: The primary reason should be your CO2 footprint.  Obviously, that's going to have to be bolstered by the fact it's sensible to run running costs, but additionally, all properties are going to have to upgrade at some point.  

You can leave your property with a gas boiler in when you go to sell it, but you'll be selling it to buyers that know it's going to need upgrading at some point.  Or you can upgrade your property now.  

The future is that buildings are going to move towards heat pumps or a variation thereof.  Yes there will be some properties that have gas but most properties these days can have a heat pump so it's just one of those things that you're eventually gonna have to grade up too, like an electric car, they're going to take over eventually. 

Should everyone start considering upgrading to a heat pump? 

Richard: Well the government policy under the clean heat and clean heat scheme is that by 2032 gas boilers are being outlawed.  That isn't to say that if you've got a gas boiler you've got to take it off the wall, they just will not be for sale. 

Heat Geek: Additionally what's going to be helping, as Richard mentioned earlier on, is that at the moment gas is levied quite a lot.  Because there are no environmental taxes on gas due to historically being relatively green and actually quite low carbon footprint compared to electricity.  

Electricity had a lot of our environmental levies on it which you paid for in your bills.  They've been talking about moving these levies from electricity to gas for a very long time and they want to have it all moved by 2028.  So your cost per electricity which is typically a lot more than gas is going to start evening out.  It is widely known this has been coming for years, there's no conspiracy, this is what this is aimed for because we want the greener thing to be the cheaper thing!

Richard: I suppose the only thing I would add, that actually Ofgem found out under the RHI feedback, is that CO2 only affects about two percent of people's buying decisions.  I think that's increased actually.  But I think it is about having better control, so a lot of load shifting is going to happen with the grid, and heat pumps can take hold of this, especially the domestic hot water aspect.

So I think combis are definitely going to be a thing of the past. Water storage at home is going to have to come back, but it's going to be cheaper than gas because your cylinder is a battery.  Octopus I know is looking at this, British Gas is looking at this, so this is a way for them really to get very low domestic water costs.

I think that the drive will be high gas prices and also the sellability of the property.  There has been talk about relating some green levees back to people's EPCs and being controlled by the local authorities.  In fact, this was being trialled and down the road in Guildford!

So again, I've spoken to Westminster about this very subject and they do see that as a way, again as a bit of a carrot and stick, of changing your council tax to have a reflection of your EPC status.  The hope here is that actually, the incentive becomes reducing your energy at home making your house more energy-efficient which means you save every year on your council tax.

Heat Geek: Just a quick note on something Richard mentioned.  Load shifting there is when the electrical grid has too much power being fed into it (because there's lots of wind and solar or whatever at the time) and not enough people drawing.  So they'll give you a cheap rate of electricity rather than just dumping it into the ground (because that's what they will do with electricity if they can't shift it, they can't overload the grid, so they have to dump it into the ground) so they'll give you cheaper electricity to charge up your hot water tank to increase the temperature in your home, etc. 

Who has the financial risk in a BUS Scheme heat pump installation?

Richard: I think it's going to be difficult managing that three-month period to ensure that the jobs are signed off and commissioned because the installer is making that commitment.  

The installer is cash-rolling it for £5,000, if they've now got to wait because all the vouchers are taken or if there's a hold upon the build, it puts a lot of potential risk in their hands! 

Who is regulating the BUS Scheme grant?

Richard: I think the good news is that Ofgem is looking after it, and they've got a really good pedigree of grants now.  Whereas the green homes grant scheme was passed to ‘some minister's wife’ and paid a lot of money to put in an awful system that didn't work from day one. 

Ofgem's consultation, I've got to say, has been excellent.  They do really get involved, listen to feedback, and take it on board.  I think they want it to be as seamless and smooth for the consumers as possible.

Will the Boiler Upgrade Scheme grant work?

Richard: I think in line with the other policies that they're doing, plus the high inflation on energy prices at the moment, and the fact they're moving the green levy that is heavily loaded on electricity over to gas.  These things are going to make actually an air source heat pump installation very attractive.  

An air-source heat pump with a SCOP of 3.2 is going to be cheaper to run than a gas boiler which is going to be quite nice because now you're not you're talking about what's a payback on a gas boiler, not on an air source heat pumps as all of a sudden that's the cheapest to run. 

Heat Geek: Absolutely and the new air source heat pumps are looking between SCOPs of 3.5 to five. 

Richard: Really I would say Heat Geek’s minimum is a SCOP of 3.5 unless we are tied by the customer.

Heat Geek: The target is five of course, and we will always give that option.  

The main issue is typically the lack of installers though, unfortunately, the paperwork is just too heavy, so finding people who can access these grants is going to be difficult even though it's going to be much more simple and seamless on the consumer side otherwise. 

The issue we've had with all these grants previously is the installer's side.  The vast majority (I think it's about 80% of installers) now are self-employed.  They can't do all of the paperwork, or they can but they'll struggle, surrounding the MCS regulations and the renewable consumer code paperwork.  So typically you'll only find bigger companies that can cope and don't give the attention to detail heat pumps deserve typically in my opinion. 

Recap

Headline points: 

• Bus boiler upgrade scheme is for air-source heat pumps and ground-source heat pumps
• You get five or six grand, respectively
• There are also some grade one listed properties that can have biomass installed, and you get £5,000 
• You need to find an MCS engineer 
• MCS is the registration body that any renewable installer has to sign up to install their specific project 
• We could be MCS for heat pumps but we're not MCS for solar PV for example, you have to make sure you get their specific technology
• The installer applies for this and receives the money, and so its deducted from the installation bill 
• There are three months from application to the commissioning date of the appliance to commission the system
• It's going to be a smoother experience from a documentation point of view for the consumer

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