Draft Boiler Upgrade Scheme (Amendment to the Energy Act 2008 etc.) Regulations 2026
(1 day, 14 hours ago)
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The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Martin McCluskey)
I beg to move,
That the Committee has considered the draft Boiler Upgrade Scheme (Amendment to the Energy Act 2008 etc.) Regulations 2026.
It is a pleasure to serve under your chairmanship, Mrs Hobhouse. The draft regulations were laid before the House on 13 July. The boiler upgrade scheme is the Government’s flagship scheme for supporting the decarbonisation of heating in homes and small non-domestic buildings across England and Wales. Through the scheme, households can receive grants towards the installation of eligible low-carbon heating technologies, primarily heat pumps, helping them to overcome the up-front costs of moving away from fossil fuel heating systems.
The draft regulations are an important enabling step towards the future inclusion of heat batteries within the scheme, helping to ensure that consumers can benefit from a wider range of low-carbon heating technologies. In 2025, the Government consulted on expanding the range of technologies supported through the boiler upgrade scheme, including the potential introduction of heat batteries. For members of the Committee who may be unaware, heat batteries are a type of thermal energy storage system that can use low-carbon electricity to generate and store heat for use when it is needed. Following the consideration of consultation responses, the Government confirmed our intention to support heat batteries through the scheme, once appropriate standards and consumer protections are in place.
The draft regulations amend section 100 of the Energy Act 2008, which provides powers for the Secretary of State to establish
“a scheme to facilitate and encourage renewable generation of heat”
in England and Wales. At present, those powers apply only in relation to specified technologies and energy sources. The draft regulations add thermal energy storage systems to that list, providing the necessary legislative foundation for thermal energy storage systems, including eligible heat batteries, to be supported through Government schemes made under those powers, such as the boiler upgrade scheme.
It is important to be clear that the draft regulations will not themselves introduce grants for heat batteries into the boiler upgrade scheme. Instead, subject to Parliament approving the regulations, the Government intend to introduce a further statutory instrument to amend the Boiler Upgrade Scheme (England and Wales) Regulations 2022 and enable support for eligible heat batteries through the scheme. The Government are supporting the future inclusion of heat batteries to increase consumer choice, recognising the potential to provide an alternative low-carbon heating solution in properties where heat pump installation may not be suitable.
The draft regulations also make a technical amendment to the 2022 regulations to clarify the powers available to the scheme administrator, Ofgem, where an installer has received an ineligible payment. The amendment will allow amounts owed to be recovered through a combination of repayment and offsetting against future grant payments, helping to strengthen scheme administration and safeguard public money.
In conclusion, the draft regulations ensure that the legislative framework underpinning the boiler upgrade scheme can accommodate thermal energy storage systems. They represent an important enabling step towards the future inclusion of heat batteries within the scheme, supporting greater consumer choice and helping more households across England and Wales to transition to low-carbon heating. I commend the draft regulations to the Committee.
Dr Luke Evans (Hinckley and Bosworth) (Con)
It is a pleasure to serve under your chairmanship, Mrs Hobhouse, in my first outing on an SI from a Department I spent 18 months in. Not only is it amazing how much things have changed; it is amazing how much they have not, given some of the arguments that have come forward.
As the Minister rightly set out, the draft regulations extend the BUS to thermal energy storage systems and make it a little easier for Ofgem to recover payments. However, it would be remiss of me not to point out the context of this debate, when we have heard in the media that this could be one of the schemes facing funding cuts.
We only have to look at paragraph 5.5 of the explanatory memorandum to see that it still refers to the £2.7 billion. We discussed this issue yesterday in Energy Security and Net Zero questions, when we asked whether every single penny of the warm homes plan—that £15 billion-worth of funding—would be kept. However, the Minister was unable to give an answer, so it will be interesting to see whether that will be the case today.
When we boil this SI down, the real question is whether this further extension of subsidy represents value for money. The Government’s wider ambition was to install 600,000 heat pumps a year by 2028, but deployment remains far below that level. Of course, this scheme was introduced by the Conservative Government, but we should judge policy by its results, and not defend it simply because we introduced it. The fundamental problem is that electricity remains too expensive. Rather than addressing the underlying problem, the Government continue to reach for subsidies. That risks having to ask taxpayers to compensate for an energy market that makes electric heating less attractive than it should be. There is also a question of fairness: households unable to afford a new heating system should not face additional costs to subsidise those who can.
Heat batteries may well have a role, particularly in homes unsuitable for heat pumps. We are not opposed to the technology; we are simply questioning the economics of subsidising it. The Government have announced a grant of £2,500 per installation, but they appear to have decided the level of subsidy before demonstrating publicly why that figure represents good value. In essence, Ministers have put the cart before the horse. A question still arises over whether the necessary standards have been established. If so, that is welcome, but standards tell us whether a system is safe and properly installed; they do not tell us whether it is worth subsidising. For example, a car can pass its MOT, but that does not mean the Government should give anyone £2,500 to buy it.
I therefore have three areas to explore. The first is the standards, which was also raised in the other place. Can the Minister confirm that all necessary product safety, design and installation standards are now in force? Will those standards assess real-world performance and not just safety? What redress will consumers have if properly installed systems fail to deliver the efficiency or savings they were promised?
The second area I would like to explore is the methodology. What evidence led Ministers to select heat batteries for taxpayer support? Heat batteries can store energy bought at cheaper times for use later. That may lower bills, but shifting electricity consumption is not the same as reducing it. The benefit depends on efficiency, household demand, electricity tariffs and the system’s operating life. Will the Minister publish the Department’s underlying analysis, including its assumptions about consumption, efficiency, running costs and lifetime carbon savings? How does that analysis compare heat batteries with other heating technologies? My question is not whether heat batteries work, but why the technology was selected for subsidy over other electric heating solutions. What criteria were applied and what alternatives were assessed? If another technology can deliver the same or greater carbon reduction at lower cost to the taxpayer, why should it not qualify?
That leads me to the final area: the costings. I simply ask the Minister how the Government arrived at £2,500. It would be helpful to understand what average purchase and installation costs were assumed. What annual running costs have been modelled, and what proportion of the total cost will taxpayers fund? Most importantly, what is the expected taxpayer cost per tonne of carbon saved, and how does that compare with the equivalent support for heat pumps? If the Government cannot answer those questions, how can this Committee judge whether £2,500 represents value for money?
Ministers may point to high satisfaction, as they did in the other place, among existing boiler upgrade scheme recipients, but satisfaction with one subsidised technology does not justify the price of subsidising another. They may also argue that the extension increases customer choice—the Minister mentioned that in his speech—but genuine choice requires clear information about installation costs, running costs and long-term performance, not simply the Government promising a grant. This is not an argument against innovation, but one for evidence-led policy and proper stewardship of taxpayer money.
We ask the Government to establish the standards, publish the methodology, and demonstrate the carbon savings and value for money, then determine the subsidy. Parliament should not be asked to approve an extension of subsidy without clear evidence that the Government have the economics right. The Minister would do well to explain not simply why heat batteries might work, but why the taxpayer should pay £2,500 toward them, and what measurable benefit we will see. Of course, this is all in the context of what will come in the Budget, so I am very interested to see if the Minister can answer those questions today.
Edward Morello (West Dorset) (LD)
It is a pleasure to serve with you in the Chair, Mrs Hobhouse. To be clear, the Liberal Democrats support this statutory instrument. We have long called for home energy policy to move beyond a fixation on heat pumps as the only solution. Heat pumps work well for many homes, but heat batteries offer another low-carbon option.
With energy bills rising because of the conflict in the middle east, the Government must do more to improve home energy efficiency and protect households from volatile energy prices. The Liberal Democrats are calling for an ambitious 10-year emergency home upgrade programme, starting with free installation for people on low incomes, alongside a commitment to zero-carbon new homes and decoupling from the marginal pricing system.
As I am chair of the all-party parliamentary group on ClimateTech, it would be remiss of me not to mention that we must make better use of data when delivering home upgrades such as heat pumps and batteries. Decisions based on factory estimates do not reflect how building upgrades actually perform. Verified performance data can help households to get better advice, improve the success of retrofit programmes, reduce costs and encourage private investment.
The Government should go further to help households to access these solutions and ensure that low-carbon heating is affordable and practical for more people.
Martin McCluskey
I welcome the hon. Member for Hinckley and Bosworth to his new role. I am sure this will be the first of many Committees in which we will face each other.
Turning to the hon. Member’s points, he obviously heard what I had to say yesterday about departmental budgets. What is in the explanatory memorandum is still dependent on future departmental budgets. They are obviously ultimately decisions for the Treasury, in Budgets and spending reviews, so they will be decisions for the Chancellor at the end of this month.
On the shadow Minister’s broader point about the cost of electricity versus the cost of gas, the previous Government and this Government have both prioritised the delinking of electricity and gas, which is important to encourage the uptake of these technologies. I gently say to him that his party had 14 years in Government in which to reduce the spark gap and did not make much progress.
Since we have been in Government, we have made sure that the reduction in levies has fallen heavily on the electricity bill rather than just on gas, and also adopted contracts for difference and encouraged companies on to CfDs so that there are fixed costs rather than the high costs linked to gas for certain generation. We have already taken significant action in the last couple of years on delinking, and we will take further action down the line.
On the question of standards, the Government have been clear that support for heat batteries will be introduced only once the appropriate product and installation standards are in place. They will need to be certified under the microgeneration certification scheme, just as heat pumps are now, and comply with the MCS design and installation standards. There is good reason to introduce this statutory instrument now, to make sure we are in a position to move quickly once those standards are in place.
The hon. Member may already know that the standard for air-to-air heat pumps, which have been in legislation for some time, is still being worked on by MCS and the accreditation bodies. Passing this legislation will enable us to get the technology in place, so that we are ready to support heat batteries as soon as possible once the standards are in place.
On the hon. Member’s questions about the methodology and why we are, in his words, supporting heat batteries ahead of other forms of electric heating, the responses to the consultation we ran in 2025 showed broad support for expanding the scheme to additional electric technologies. Heat batteries were the technology most frequently highlighted by respondents. In answer to the questions about value for money and minimising running costs, they pointed to the potential benefits associated with heat batteries, including the ability to take advantage of charging at off-peak times and to be installed as a like-for-like solution for many gas or electric boilers, unlike some other solutions. I am sure the shadow Minister has read the Government response to the consultation, which includes the many of the answers to the questions he has asked today. It was only after that deliberation that we decided to include heat batteries in the boiler upgrade scheme.
On his final question around the value of the £2,500 grant, we arrived at that number largely because it was judged to be the best amount, given the lower cost of heat batteries versus heat pumps. We think the £2,500 grant will bring the cost of installation of a heat battery to around £6,000, about the same level for heat pumps, once the £7,500 grant is taken into account. Part of the reasoning is to avoid distorting the market by creating an uneven playing field for heat batteries versus heat pumps.
I thank the hon. Member for West Dorset for his support for the SI. There is much common ground between our parties on these issues. He has talked about the ambition behind his party’s 10-year plan. I would say that the warm homes plan is indeed an ambitious programme for retrofitting homes across the country, with billions of pounds behind it.
I welcome and agree with what the hon. Member said about data. The Department is making moves around the comprehensive environmental data archive, using and enhancing smart meter vectors, to ensure that data is used to inform proper assessments of homes. That might in future take us beyond what is available through energy performance certificates, which is really valuable. There is work going on in that area, which I would be happy to discuss with the hon. Member, if that is useful.
The regulations are an enabling measure. They do not by themselves introduce support for heat batteries through the boiler upgrade scheme, but they do provide the necessary legislative foundation to do so through future secondary legislation. They also support the effective administration of the boiler upgrade scheme by clarifying Ofgem’s powers to recover ineligible payments, strengthening the protection of public money. These regulations are an important step forward in delivering the Government’s commitment to support heat batteries through the scheme.
Question put and agreed to.