The subsidy for people wishing to switch from a gas boiler is also expected to cover a greater variety of heat pumps, giving consumers more choice of green heating options.
But experts have called for more clarity on how the money will be spent amid warnings it could end up being squandered as previous green funding packages have been.
Before the spending review completed by the Treasury this month, however, the Energy Secretary was at loggerheads with the Chancellor, Rachel Reeves, over whether the funding would be committed in full.
The spending review said the funding was intended to “cut bills, tackle fuel poverty and accelerate to net zero”, adding: “This investment will be allocated across schemes that support the rollout of heat pumps, alongside energy efficiency measures and other low-carbon technologies, such as solar and batteries.”
Companies which sell and install heat pumps had previously urged the Government to guarantee the future of the grants, which can cut the cost of installing an electric heating system by half or more.
Heat pumps, which use electricity to draw heat from the air or the ground and circulate it around a home, typically cost more to install than a boiler despite the £7,500 Government subsidy available for each one.
Of the overall £13.2bn in funding handed to Miliband’s department, £5bn will be delivered in the form of “financial transactions” – meaning it is money which is effectively borrowed from the Treasury and will in due course be paid back.
It is currently unclear how the cash will be allocated: options include underwriting loans for home upgrades such as insulation, which are offered by banks, issuing the loans directly, or stepping in to support energy providers in their obligations to help poorer customers improve their homes.
“Bad policy design meant the previous government only spent a little more than one in every three pounds they allocated to energy efficiency investment. Therefore, it’s important we see a set of coherent policies designed on time to ensure the plan lowers bills and reduces planet-heating emissions.”
“The Government is investing to renew Britain and make working people better off. As part of that, we’re investing £13.2bn in the warm homes plan to upgrade five million homes over this Parliament, cutting energy bills for good and lifting one million families out of fuel poverty. And with the British people showing record demand for heat pumps, which enable families to save around £100 a year by using a smart tariff, we will fund the boiler upgrade scheme until at least 2030.”
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