This year is going to be a big one for energy and home heating. With the world recording its hottest year since records began, and COP28 inching us closer to a global consensus on transitioning from fossil fuels, attention now needs to turn to transforming national and international commitments into action.

The UK’s transition to net zero is more urgent than ever, and heating our homes and workplaces - which accounts for around 20% of our emissions - will be centre stage. Despite environmental issues turning into a political football over the autumn and winter, there were a flurry of developments in UK heat decarbonisation policy at the end of last year.

Even if it doesn’t feel like it from the tenor of recent political debate, the signs look positive for heat decarbonisation in 2024 - but only if we can tackle the one big elephant in the room.

Heat pump subsidies: bigger and better

Funding for the Boiler Upgrade Scheme (BUS) — the main subsidy in England and Wales for getting a heat pump — is set to increase to over £1.5 billion. That’s spread over three years starting from 2025, equating to around £500 million a year.

And although the green rowbacks in the Prime Minister’s speech last September were what caught the headlines, Sunak also used it to announce a £2,500 increase in air source heat pump subsidies, now up to £7,500 per unit.

Overall, these made BUS one of the most generous cash subsidies in Europe, and seems to have resulted in an increase in applications. The new funding package should provide enough money for around 66,000 heat pump subsidies a year in England and Wales until March 2028.

Scotland has been ahead of the UK government on this issue, having increased its heat pump grant to £7,500 back in December 2022, with an extra £1,500 for rural households. Scotland also offers interest-free finance alongside its subsidy, while the Home Energy Scotland scheme provides support and advice to households.

With an election on the way, Labour has promised up to £6 billion in grants and loans for households to upgrade their energy efficiency, though it’s not known how much, if any, will be used to subsidise heat pumps.

However, as welcome as funding for subsidies is, it won’t be enough on its own to drive the switch away from boilers. The UK government still has a target of 600,000 heat pumps a year installed by 2028, though there is only enough funding to subsidise 10% of that total. If the UK is to meet that target it will need to find either more money or other ways to make low carbon heating affordable for everyone.

Phase out dates: new homes forward, old homes back

Another important 2023 policy change was the launch of a consultation on the Future Homes and Buildings Standard, which would effectively ban the installation of gas boilers in new homes and buildings in England from 2025 onwards. This would grow the market for low carbon heating immediately, given we typically build around 200,000 new homes each year.

But while things are moving forward on new homes, we’ve gone backwards on phasing out new boilers in existing homes. The UK government had previously suggested phasing out new oil and LPG boilers — widely used in places off the gas grid — from 2026, but pushed this back to 2035, in line with the phase out date for new gas boilers.

Meanwhile in Wales, the Welsh Government consulted on its draft heat strategy setting out a vision that homes will be ‘served in the main by heat pumps’. An action plan will follow next year, but householders and aspiring heat engineers in Wales now have a clear signal on the future of clean heat.

The Clean Heat Market Mechanism: an alternative to boiler phase outs?

The UK government has pressed ahead with a new policy called the Clean Heat Market Mechanism, which will come into force in April 2024. Boiler manufacturers will be required to sell a quota of heat pumps, starting with 4 for every 100 boilers they sell in the first year, rising to 6 for every 100 from 2025. If they can’t meet these quotas, they can buy credits from companies selling heat pumps, or pay a fine of £3,000 per missing heat pump.

With the government specifying the number of heat pumps it’s aiming for each year, it can adjust the policy to help gradually ramp up heat pump installations over time.

Planning: good progress, not much noise

The UK government has at last made progress on some of the crucial planning rules that are slowing down the roll out of low carbon heat. In the Autumn Statement, the Chancellor Jeremy Hunt announced that the government would aim to expand permitted development rights for installing heat pumps under the English planning system. A consultation on reforming planning rules is expected relatively soon.

The UK government has also been quietly making impressive progress on heat networks, a vital aspect of low carbon heating in cities and densely populated areas. The UK government’s latest policy proposals on heat network zoning in England, published last month, would enable local authorities to designate priority areas for heat networks, making it easier to coordinate investments in collective heating infrastructure.

Progress so far: good, but lacking the vital spark

Despite the Prime Minister seeming to rowback on home decarbonisation last September, the UK government is backing heat pumps, even though the politics drowns out the actual policies. It’s fair to say that the UK is on the way to having most elements of a decent heat decarbonisation policy in place. But despite this, the UK remains close to the bottom of the league on heat pump uptake, and there’s one factor that stands out: expensive electricity.

Prioritise Electricity Prices in 2024

The high relative price of electricity in the UK is a serious policy failure, and one the government is yet to fix.

Electricity remains significantly more expensive than gas, at a ratio that’s one of the highest in Europe. This means heat pumps often cost more to run than gas boilers, even though they use far less energy to generate the same amount of heat.

The key first step in solving this will be removing or rebalancing the levies that add much more to electricity bills than to gas bills. The UK government has been promising action on levies for years, but appears unlikely that anything will be done before the next election.

Rebalancing levies and making electricity cheaper should be a key priority for any colour of UK government. If that happens, the UK should have enough in place to get heat pumps and low carbon heating to take off in 2024.