UK Plans £ 200 Annual Subsidy for Heat Pump Households Under New “Warm Homes” Scheme

Annual Subsidy for Heat Pump

UK: Households in the UK with eco-friendly heat pumps could receive £200 (USD 270) off their annual energy bills under a proposal backed by Labour’s Ed Miliband and reportedly being developed by the Department for Energy Security and Net Zero. The scheme would provide a 15% reduction in energy costs for families with heat pumps, funded by a new £13.2 billion (USD 17.82 billion) “warm homes” fund announced by the Chancellor. The plan is aimed at encouraging the shift from gas boilers to low-carbon heating, but concerns have been raised that it may disproportionately benefit middle-income households. The average cost of installing an air-source heat pump is around £13,200 (USD 17,820), compared to £3,000 (USD 4,050) for a gas boiler, and while a £7,500 (USD 10,125) upfront grant is already available, uptake has been slow. The £200-a-year subsidy, covering both new and existing installations, including around 300,000 homes, is intended to offset the higher running costs of heat pumps due to electricity prices being nearly four times higher than gas.

The subsidy would initially cost taxpayers between £80 million (USD 108 million) and £100 million (USD 135 million) in the first year, funded via a new levy on gas bills, with costs expected to increase as more households adopt heat pumps. A public consultation is scheduled for October, with a parliamentary bill required to enact the changes. Additionally, the government is preparing a “warm homes obligation” for 2027 to fully fund heat pumps, solar panels, and home batteries for the bottom 30% of income earners. For higher-income households, private financing options such as low-interest loans and subscription packages are under consideration. Officials are also working on introducing a formal “consumer guarantee” by 2035, ensuring that installing and running a heat pump will be cheaper than using gas.

Source: Express