10 March 2025
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Heat pumps are the future of domestic heat. However, high installations costs remain a barrier for homeowners while restricting the potential market for installers. Paul Spence, Technical Manager at Heatly, explores the factors that are inflating the price of heat pumps and explains why current efforts to reduce costs may not go far enough.
The high cost of heat pump installations is one of the biggest barriers to mass adoption, both for installers and their customers. Currently, the market is tilted in favour of big installation companies, leaving small outfits and sole traders struggling to compete, even those who have access to the Boiler Upgrade Scheme (BUS). In addition to the BUS, the Government has put forward strategies to make heat pumps more accessible and affordable, including rebalancing the so-called ‘spark gap’ and policies designed to scale up manufacturing, such as the Clean Heat Market Mechanism, which comes into effect in April 2025. However, what is lacking is consideration for installers. To make heat pumps more affordable and accessible for end users, the priority must be reducing complexity for installers. The current approach involves excessive micromanagement of the heat pump installation journey, creating unnecessary administrative burdens and extra costs.
A fully open market where all installers can compete on an even playing field is essential.
BUS – a good incentive but not accessible for all
The BUS, introduced in 2022 to cover the perceived difference in cost between a gas boiler and a heat pump, has undeniably increased demand. Long term, the aim of BUS was to stimulate the market enough to reduce the cost of heat pump installation by 25 – 50% by 2025 and make installation costs comparable to gas boilers by 2030. When the grant was increased to £7,500 in October 2023, the Government estimated the price of buying and installing a gas boiler to be between £2,500 and £3,000, stating that with the increased funding, a heat pump could be installed for a similar or lower cost. We have certainly seen installations offered for around this price from large companies operating in the sector. However, for the small businesses and sole traders that make up a high percentage of the installer base, this model is increasingly difficult to compete with. Statistics show that despite the uptick in installers gaining heat pump qualifications, there is a disconnect between training and joining MCS. With MCS certification a necessary requirement for accessing BUS, it stands to reason that many heat pump installers may be missing out on this market. But what can be done?
Remove administrative barriers
A recent report1 from the Heat Pump Association suggests that as many as 39% of qualified heat pump engineers do not progress to active heat pump installation under the Microgeneration Certification Scheme (MCS). Of course, some may be working under manufacturers’ umbrella schemes, but this also incurs a cost that is passed on to the end user. Either way, the loss of skills and knowledge at this critical point is an unacceptable waste for a sector that requires urgent growth. We can only guess as to what is putting off so many skilled and knowledgeable installers after qualification, but it is certainly an area that should be explored further so that appropriate action can be taken.
The heat pump market needs to be opened up to all installers, with multiple routes to access the BUS. If we don’t have enough skilled and qualified installers to fit heat pumps, the market will never reach its potential. If installers hold the relevant certification to carry out heat pump work, they should be able to register installations through the manufacturer’s portal or a Government registration scheme which would bypass the blockage in the system where the only way to gain access to the BUS is through MCS. Simplifying the registration process in line with that of gas boilers would remove unnecessary administration costs for installers, a saving that could then be passed on to the end user.
Closing the ‘spark gap’ is not the answer right now
The ‘spark gap’ is the difference in cost between running a heat pump on electricity and a boiler on gas. Alongside upfront costs, it is commonly cited as a barrier to heat pump adoption for homeowners. However, the idea of closing the ‘spark gap’ as a way to reduce heat pump costs and incentivise uptake is misguided. Rather than lowering electricity costs, it would likely involve raising gas prices, unfairly penalising the 26 million homes currently reliant on gas. Without affordable heat pumps and enough skilled installers, this approach would hurt those unable to switch, creating significant financial strain.
It is arguable that heat pumps are already cheaper to run than gas boilers, especially those that have been expertly designed, installed, and commissioned by a highly trained installer. The focus should be on reducing upfront costs and ensuring heat pump systems are designed properly, with an emphasis on encouraging homeowners to improve energy efficiency. Hopefully, incentives under Warm Homes will help poorer households minimise heat loss. Whatever the heating system, where possible a ‘fabric first’ approach will save money long-term and should be the first step in improving the carbon footprints and running costs of UK homes.
Digital tools are changing the game
To help installers improve the accuracy of all-important heat pump system design, the latest digital tools hold the potential to revolutionise the installation process, making heat pumps a more practical and affordable choice for homeowners. Digital tools, such as Heatly, will cover the entire design, installation, and commissioning process from start to finish, with insights for both installers and homeowners. Crucially, this technology will break down the complexity barriers to heat pump installation which may put some installers off, standardising and rapidly speeding up processes such as heat loss calculations. Not only does this save time, but it empowers installers to carry out quality installations that achieve higher efficiencies and cost less to run. Digital tools also offer additional insight to homeowners, for example, by showing how radiators and appliances will look instantaneously or by accurately and instantaneously calculating the cost/benefit of fabric improvements. Installers can provide greater transparency, building trust and helping customers to understand design choices and make confident and informed heating decisions.
The missing link
The current approach to reducing heat pump costs overlooks a key pain point – the installer journey. By stripping away unnecessary administrative and financial burdens and allowing free access to schemes and funding for qualified installers, we can maximise the skills base and reduce installation costs. End-to-end digital tools are part of the solution, however, the barriers faced by installers under the current system must be addressed in order to set the sector on a new trajectory, one that stimulates heat pump deployment rather than stifling it.
Source
1. https://tinyurl.com/32yd5aef
