Report

Paying for heat pumps

This report from UK think tank Nesta explores the different options for paying for heat pumps.

One of the largest barriers to widespread heat pump adoption is the high upfront cost. Households often pay more for a heat pump than for a replacement boiler, even after the £7,500 grant from the Boiler Upgrade Scheme (BUS). The cost of installing a heat pump still needs to come down further to enable the mass adoption required for the UK to meet its pledge made in the Climate Change Act 2008. Installation costs should drop as economies of scale reduce the cost of manufacturing heat pumps, whilst further reductions can be realised from the adoption of tools to reduce the cost of design and labour.

Closing the spark gap is also a fundamental incentive for consumers, guaranteeing savings turns a heat pump into an investment and enables novel business model development. Even as running costs and installation costs come down, many consumers will still need to access finance to purchase a heat pump.

Using finance to purchase a boiler is increasingly becoming a social norm, much like 80% of new cars are purchased using finance.

It is very likely that finance for heat pumps will also become normalised; however, we need to ensure it is not only accessible to the able to pay market.