Question 2: Should we maintain the current requirement for a valid EPC with no outstanding recommendations for loft or cavity wall insulation? Yes/No. Please provide evidence to support your response.

No.

The requirement for a valid EPC with no outstanding recommendations for loft or cavity wall insulation acts as a potential barrier to utilisation of the BUS and hence heat pump adoption, by reducing the pool of households who join the scheme, and for some households, increasing the cost of installing a heat pump.

Well-insulated properties reduce energy bills for households by reducing a home’s heat demand, but insulation is not a fundamental requirement for the efficient operation of heat pumps. Insulation primarily affects the amount of heat a home needs, not the efficiency of its heating system. Poorly insulated homes will consume more energy whether they are heated by a boiler, heat pump or other heating system. While reducing heat demand is good, it has a limited bearing on whether a heat pump will work efficiently in the property.

Heat pumps can work in poorly insulated homes, provided they are properly sized and installed. Heat pumps are widely used in commercial premises, and sometimes in historic buildings, which typically have much higher heat demands than homes. A recent survey conducted by Nesta showed that two-thirds (67%) of heat pump owners were satisfied with their running costs and 59% of boiler owners were satisfied with theirs. Of these respondents, 51% of heat pumps owners had an EPC rating of C-D and 15% had an EPC of E-G. Building fabric upgrades were common amongst those installing heat pumps, 36% installing loft insulation and 23% wall insulation, but they were by no means universal.

Requirements for insulation may also make it harder for households to switch to heat pumps if their existing heating system fails. A study about efficient heating by Ipsos Mori and the Energy Saving Trust showed that 30% of heating system replacements occur when an old system breaks down. An additional 28% of systems are replaced when they’re on their last legs and are either likely to break down soon or to require frequent repairs. Outstanding requirements for insulation could prevent boilers from being replaced with heat pumps at this point.

Homeowners can install insulation measures after the heat pump has been installed with very few drawbacks. However, heat pump installations should be designed to be suitable for a property in its current state rather than for a predicted state post additional insulation measures. New initiatives such as the Great British Insulation Scheme will make funding for insulation measures even more accessible, but some may decide to carry out this work after the installation of the heat pump itself.

The main drawback to installing a heat pump prior to completing all recommended insulation measures is that the heat pump will be slightly oversized. However, there is not a large difference in cost between heat pumps of different sizes and heat pumps can be resized. A home may have installed larger radiators than needed, but this will then allow a lower flow temperature to be used if more insulation is added.

Rather than a blanket requirement for specific insulation measures to have been carried out, it is more important that a high-quality technical survey is carried out for each heat pump installation, providing expected running costs based upon the homeowner’s current tariff as well as a comprehensive heat loss calculation. MCS provides consumer protection to homeowners who feel they were given inadequate advice or had installations below an acceptable standard. If homeowners receive adequate guidance as to their expected running costs, they should be permitted to access BUS funding.

Prior to the energy crisis, the running costs of heat pumps were typically higher than for a gas boiler, due to the high ratio of electricity to gas prices - the ratio peaked at 6:1 in the October 2020 - March 2021 price cap. This made installing insulation alongside a heat pump more important, because the reduction in heat demand from insulation could help to prevent running costs from rising.

However, the electricity:gas price ratio has now dropped below 4:1, enabling a well installed heat pump to have similar running costs to a gas boiler. Although this ratio will continue to change, forecasts suggest that it will stay in a range where a good heat pump installation should not increase bills. Government policy should aim to further decrease the electricity:gas price ratio in future, by measures including rebalancing environmental and social levies on electricity. Nesta has called for the UK government to guarantee that the electricity:price ratio will not exceed 3 in future, via a mix of policy reforms and taxes and subsidies if necessary.

Question 3: If you consider the EPC requirements to be a barrier to uptake, what specifically do you consider to be the issue: a) Requirement to have a valid EPC b) Requirement to have a valid EPC with no outstanding recommendations relating to loft or cavity wall insulation c) Other

We think the issue is: B) Requirement to have a valid EPC with no outstanding recommendations relating to loft or cavity wall insulation.

We agree that properties should have a valid EPC when applying for the BUS. The continuation of a valid EPC for access to BUS is still an important criterion so that a record of property characteristics for those fitting heat pumps can be retained.

However, the requirement to have no outstanding recommendations relating to loft or cavity wall insulation is a barrier that could be removed to stimulate uptake of the grant.