The government's launched on 1 April. It's designed to help homeowners make the switch to low-carbon heating, in a bid to clean up our domestic energy, and will pay up to £6,000 towards the installation of a heat pump.
The should be good news for homeowners looking to improve their energy efficiency. What's not so welcome, though, is that because of the way Energy Performance Certificates (EPCs) are calculated, you could see the switch to a heat pump actually make your home's energy rating worse.
Read on to find out how exactly this could affect you, and whether it should put you off.
The energy efficiency of our homes is a hot topic right now.
Rocketing bills mean we're all looking for ways to cut down on gas and electricity use while maintaining comfortable living conditions.
Many of us are also trying to live more sustainably, and switching away from polluting gas boilers and towards more environmentally friendly heating systems can greatly reduce household carbon emissions.
The government's previous incentive scheme - the renewable heat incentive, or RHI - closed to new applications on 31 March 2022. It was a generous offering, but the cash was paid out in instalments over seven years following installation, which is no good if you don't have the upfront cash to pay for a heat pump in the first place.
Heat pumps installed after 1 April 2022 are eligible, although the voucher application scheme doesn't open until 23 May, so it may be best to wait until you can be certain of receiving the grant before going ahead with a project.
Still, it's good news if you have an elderly boiler that needs replacing and you're keen to choose a low-carbon alternative.
An A-rated property (the most efficient) will use much less energy overall than a draughty, poorly insulated G-rated property (the least efficient).
The calculations behind the EPC rating are not, however, based purely on efficiency: they're based on the cost of heating and powering your home. That means the cheaper the fuel, the better the rating.
For many years, the price per unit of gas has been considerably lower than the price of electricity, which means EPCs favour gas heating. They will typically recommend installation of a new gas boiler, rather than a low-carbon heat pump. In fact, a government minister recently confirmed that no EPC survey in the previous two years had recommended installing a heat pump.
Now, however, increases in the have brought gas and electricity prices closer together. On 1 April 2022, the cap for a unit of gas rose by 75%, from £0.04/kWh to £0.07/kWh, while electricity went up by 33% from £0.21/kWh to £0.28/kWh.
This means that heat pump running costs for many homes may now be similar to gas boiler running costs, but that won't be reflected in an EPC.
The government has published an action plan to improve the way EPCs are calculated but, until that happens, replacing a gas boiler with a heat pump could reduce your EPC score.
How much your EPC rating matters will depend on what you expect to do in the next few years.
If you're a landlord renting out a property, or if you plan to rent out your home in future, the EPC rating is very important.
Unless it has an exemption, it's illegal to rent out a domestic property with an EPC rating lower than E (ie, F or G-rated). The regulations are expected to be tightened from 2025, requiring rental properties to achieve EPC rating C or better. If your property doesn't meet the requirements, you won't be able to rent it out.
And if you're considering moving house in future, you may find your home commands a higher valuation, and has more interested buyers, if you have a higher EPC rating.
Many lenders now offer 'green mortgages', with better rates offered for more energy efficient properties, and this also applies to remortgages.
The government wants all homes to be rated at C or above by 2035, and some experts have suggested this should be brought forward to 2028.
Either way, potential buyers thinking ahead will surely consider the cost of the work needed to bring a property with a low EPC rating up to the required standard.
However, if you have no plans to sell, remortgage or rent out your home, then your EPC rating may be of little concern.
While your EPC rating is expressed as a band, from A to G, the full scoring system runs from 100 (the best) to 1 (the worst) SAP points (SAP stands for Standard Assessment Procedure).
The bands are as follows:
If your rating is currently near the bottom of a rating band, then losing just a couple of points could mean you drop into a lower rating band.
For example, if a C-rated home has an SAP score of 70, then losing just two points would result in it dropping down into band D.
If a heat pump is right for your home, then losing a few points on your EPC score shouldn't put you off.
In most cases, there are no immediate downsides to a lower rating, unless you're about to sell, remortgage, or rent out your property.
If you're considering installing a heat pump, it's worth having a home energy audit done for your home, to make sure a heat pump is a good fit for your property. At the same time, your domestic energy assessor will be able to carry out a calculation to check what your new SAP score will be and whether it will affect your EPC rating.
They will also recommend measures you should install alongside your heat pump to make sure it works as efficiently as possible, and to restore or bump up your EPC rating, if necessary.