Heat Pump Grants

When planning how you buy your heat pump there are different funding offers to consider.

Green Homes Grant

To help cover the initial cost of installing a heat pump, most households can apply for the Green Homes Grant from the government. The grant will cover 2/3 of the cost of installation up to £5,000, and for households on low income this can rise to 100% up to £10,000. The grant is given in the form of vouchers to be spent with qualifying suppliers and covers materials, installation and VAT. Check whether you’re eligible here.

You must redeem the vouchers and ensure improvements are completed by 31 March 2022.

The RHI Scheme

If you have installed a heat pump in your home, you could be eligible to receive payments from the government through the RHI scheme. Both air and ground heat pumps are eligible for this scheme, but only those which are air-to-water as opposed to those which are air-to-air. Below are some key parts of the scheme:

  • To incentivise households to produce renewable heat the government will make quarterly payments to the household based on the amount of heat generated, for a 7 year period. If you have taken a Green Homes Grant this will be deducted from your quarterly payments.

  • To aid with the upfront cost of installing a heat pump The Department for Business, Energy & Industrial Strategy have introduced the 'Assignment of Rights'.  This works by an investor footing some of the upfront cost and the subsequent RHI payments going to the investor rather than the owner. This can be combined with a Green Homes Grant, although clearly this will limit the amount on offer from the Investor as the Green Homes Grant will still be deducted from RHI payments.

  • If you have already installed a heat pump you have 12 months from the commissioning date (when your installer tests and signs off the system) to apply for the RHI scheme.

  • The scheme now requires you to have at least one electrical meter to 'meter for performance', allowing the differentiation of electric input to run your heat pump and electric input to run other heating measures. In some cases where your renewable technology is likely to be generating less heat than specified on the Energy Performance Certificate (EPC) for your heating system, you will be required to 'meter for payment'. See full details on metering here. You will be required to submit the appropriate meter readings on a quarterly basis. This responsibility remains with you even if you have undertaken 'Assignment of Rights'.  

  • You will be required to complete annual declarations for all 7 years that you are receiving payment from the Domestic RHI scheme. This responsibility remains with you even if you have undertaken 'Assignment of Rights'.  

These are the top-level parts of the scheme. Before investing in a heat pump or applying for the scheme we recommend you read Ofgem's Essential Guide for Applicants.

Combining the schemes

In the below calculations numbers will differ for each unique situation. The following assumptions have been made for an Air Pump for a semi-detached three-bedroom house:

  • We have assumed that you will pay £10,000 for your heat pump (materials, labour and VAT). Cost will vary considerably with the system purchased and installation charge so do get a full quotation.

  • We have assumed you will receive £5,000 from the Green Homes Grant.

  • We have assumed a total return of £6,860 over 7 years in RHI payments. This is a conservative estimate and you can work out a more accurate estimate for your specific house using your EPC certificate here, and input this into the calculations below for a more accurate idea.

  • We have assumed an investor will seek a 154% overall return on any upfront funding. Most investors will provide a calculator that you can use to verify this amount.

The Green Homes Grants + RHI – combining these two schemes means that you will receive the upfront funding of £5,000 which would then be taken off your RHI payments. For example:

  • Air-source heat pump installation = £10,000 - £5,000 (Green Homes Grant)

  • You pay £5,000 upfront

  • Over the next 7 years you receive £1,860 in quarterly payments from the RHI scheme.  

  • Total you paid will be £3140, but bills will be cheaper and it could increase the value of your property, eventually offsetting this price.

The Green Homes Grant + RHI + Assignment of Rights – combining these means you can receive £5,000 from The Green Homes Grant and upfront cost help from the Assignment of Rights. The £5,000 Green Homes Grant will be taken off your RHI payments and the remaining money from the RHI scheme will go to your investor. For example:

  • Air-source heat pump installation = £10,000 - £5,000 (Green Homes Grant)

  • An investor provides you £1,208 upfront based on you assigning RHI rights to them.

  • You pay £3,792 upfront

  • The £1,860 from the RHI scheme will be paid back to the investor quarterly over 7 years, meaning they get a return of 154% overall.

  • Your upfront cost will be £3,792 but bills will be cheaper and it could increase the value of your property, eventually offsetting this price.

Assignment of Rights + RHI – your investor will foot some of your upfront cost and then your RHI payments will go to them. For example:

  • Air-source heat pump installation = £10,000 - £4455 (from investor).

  • RHI payments of £6,860 will be paid to your investor in quarterly payments over 7 years. This assumes a 154% return overall.

  • You will pay a total of £5,545 upfront but bills will be cheaper and it could increase the value of your property, eventually offsetting this price.

RHI scheme – you pay the price of the heat pump upfront and receive all of the RHI payments over the next seven years. For example:

  • Air-source heat pump installation = £10,000 (paid by you upfront)

  • £6,860 paid to you quarterly over 7 years through the RHI scheme.

  • Total cost of £3140 paid, but bills will be cheaper and it could increase the value of your property, eventually offsetting this price.

Green Homes Grant – the grant helps you with the initial cost.

  • Air-source heat pump installation = £10,000 - £5,000 (Green Homes Grant)

  • You pay £5,000 upfront but bills will be cheaper and it could increase the value of your property, eventually offsetting this price.

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