Blog Post

Why is London falling behind on heat pump installations?

New stats show London is the region receiving the least funding for boiler upgrades. Jon Tabbush looks at why and the changes we need to decarbonise homes in the capital.

We desperately need to decarbonise and insulate our homes.

Carbon emissions from domestic buildings make up around 14% of the national total. For the UK to meet its legally binding targets, it now has to cut these emissions 6 times faster than it has for the last 30 years. So far this hasn’t happened.

We see this in efforts to upgrading fossil-fuel heating systems with low-carbon alternatives – often, replacing gas boilers with heath pumps. The Climate Change Committee’s ‘balanced pathway’ to net zero projected that we’d be installing 130,000 heat pumps in 2022, but we actually installed 69,000.

This is a national problem. But it’s also specifically a London problem. Newly released statistics show the capital is receiving less Boiler Upgrade Scheme funding per household than any other region: 1.6 households per every 10,000 in the capital have received money, compared to 10 per 10,000 in the South West.

Why? What’s behind London’s failure to move away from fossil fuel heating? It’s not just a problem with this scheme. It’s a combination of systemic issues, including less incentives to upgrade private rented accommodation.

We need to invest in skills to train heat pump fitters and invest in heat networks – where many homes are heated from a central source. We need to do more to decarbonise London’s homes.

What is The Boiler Upgrade Scheme?  

The Boiler Upgrade Scheme (BUS) part-funds homeowners in England and Wales to replace their fossil-fuel heating systems with low-carbon alternatives: it’s worth £450 million nationwide.

This programme sits alongside others, like the Energy Company Obligation (ECO) and the Home Upgrade Grant (HUG), and comes after the failed Green Homes Grant. But the first year of the BUS saw applications for just half of the total number of grants on offer across England and Wales.

As mentioned above, London is getting less BUS funding per household than any other region: 1.6 households per every 10,000 in the capital have received money, compared to 10 per 10,000 in the South West.

This isn’t because of any deliberate anti-London bias. Londoners are submitting fewer applications for BUS funding than residents of any other region by a long way – just 2.6 for every 10,000 households.

And data from MCS, the standards organisation for domestic renewable technology, shows that 6 of the 10 areas with the fewest domestic installations of heat pumps per household are in London and its surroundings, regardless of whether they received any government funding. The problem is systemic.

Heat pump installation is mostly in rural and remote areas

The vast majority of measures funded using the scheme are in rural areas. This is unsurprising, given that properties off the gas grid received almost half of payments from the Boiler Upgrade Scheme, despite making up just 15% of total homes.

These homes are disproportionately likely to be in rural areas where gas connections have never been installed, and their owners have been rapidly transitioning away from expensive, outdated oil heating systems in recent years, aided by subsidy programmes like the Renewable Heat Incentive.

The best performers for heat pump installations are still in remote, rural locations, such as the Orkney Islands, in which nearly 10% of households have installed a heat pump using an MCS installer. This trend towards rural areas explains why the South West dominates the map above of England and Wales.

And this has long-term consequences for the supply of trained labour: Cornwall has 30 MCS-certified contractors, the most of any area of the UK, despite a relatively small population. This allows households to take advantage of BUS funding.

This effect is also visible in the type of fuels that these heat pumps are replacing. Only around 3% of homes use oil as their only source of central heating, but they receive nearly a quarter of BUS redemptions, while just 1% of households have no central heating, but receive 17% of redemptions. Many systems running on oil, LPG, or coal, or without central heating, are old, expensive, and in need of urgent replacement. But it also illustrates the profile of where national policy is making an impact, and where it isn’t.

Why is London falling behind?

Why, then, is London failing to transition to fossil-free heating? It’s not a settled question.

There’s clearly need in the capital – London local authorities have some of the largest proportions of households unable to pay for their energy, mainly due to uniquely high housing costs.

And there should be both interest and capacity among higher-income residents. Londoners are some of the most climate conscious people in the country and many of them have enough disposable income and wealth to fund upgrades.

Older and denser housing stock complicate upgrades

One reason is likely to do with the capital’s housing stock. It’s the oldest, on average, of anywhere in the country. It’s the densest – London’s population density is 14 times higher than the average in England and Wales – and contains the most flats, often under fragmented ownership.

This makes individual retrofits (particularly deep retrofits, where an entire building is assessed and renovated at once) expensive and complicated from a planning and construction management perspective.

And a uniquely large proportion of England’s conservation areas, where new construction and demolition is restricted, are in London – nearly a third.

There’s less incentive to upgrade rental properties – and London has more of them

But it’s not all about the fabric of our homes. More Londoners rent privately than anywhere else in the UK – a third, according to the last Census (compared to 21% across England.)

Tenants generally pay their own energy bills, which doesn’t give landlords a strong incentive to spend thousands of pounds on expensive upgrades.

The fact that 43% of landlords in England own just one rental property (and 82% own 4 or fewer) also doesn’t help. Many are likely just not well-capitalised enough to fund these kinds of upgrades without receiving subsidies or selling up.

The government has proposed a ban on letting properties with an Energy Performance Certificate (EPC) under C by 2025. But Whitehall sources have recently suggested that the ban might be delayed, to avoid ‘overburden[ing] landlords’.

National barriers to decarbonising our homes

The biggest barriers to home decarbonisation affect the whole country:

  • We have a severe lack of trained installers to perform retrofits and fit heat pumps – Nesta estimated last year that we’d need a nine-fold increase in six years to meet the government’s targets.
  • Electricity is unusually expensive in the UK relative to gas – our ‘electricity-to-gas’ ratio needs to fall low enough for heat pumps to be a viable economic proposition for most householders. This will require government to move our current electricity tariffs off customers’ bills and onto general taxation.
  • And heat pumps are just too expensive upfront – prices are falling, but much too slowly.

Together, that’s why in the UK we’re 21st out of 21 of our neighbouring countries when it comes to installing heat pumps.

Ideas to help more Londoners decarbonise their home

Even if we fix those national problems, London is still likely to fall behind. Policy needs to adapt. 15% of UK residents live in the capital – more than in Scotland and Wales combined.

More than 1 in 10 Londoners live in fuel poverty and would benefit massively from insulation and other home upgrades. And there are many thousands of households interested in decarbonising their home heating in the city, waiting to help the UK meet its 2050 target.

Heat networks

Learning from the relative success of decarbonisation in the social housing sector, we need more funding for heat networks – where many homes are heated from a central source. Heat networks are proven to work well in dense, urban areas.

We need the planning system to encourage, rather than discourage, connecting existing buildings to heat networks.

Increased subsidy for higher labour costs

Given the increased cost of trained labour in London, there is an argument for scaling grants up in more expensive areas. But subsidies will have to be scaled according to homeowners’ ability to pay, to make sure they’re equitable.

And growing the number of trained installers will require long-term, guaranteed demand to make fitters confident there’ll be work for them after an expensive course – this calls for an expansion of the Social Housing Decarbonisation Fund, so that more social housing providers can immediately stimulate the development of the market with mass retrofit programs.

Making clear the status quo isn’t an option

We also need sticks, as well as carrots. Government has to maintain the 2025 ban on renting out homes below EPC C, even if it will require extra funding to deliver, and should confirm that new gas boilers can’t be sold after 2035.

Simplest of all, it needs to make clear that green hydrogen is not a viable option for home heating and that heat pumps and heat networks are the future for the vast majority of homes

A retrofit policy that works for London

At Centre for London, we’re planning a research project in this area to more fully answer the questions raised in this blog and to develop a retrofit policy framework that works for London.

We’re looking for research partners and sponsors – e-mail if you’re interested in getting involved.