Unlocking sustainable warmth competition funding with heat pumps

The UK has committed to bring all greenhouse gas emissions to net zero by 2050, and housing will play a key part in making that viable. 

Gas boilers are set to be banned in new homes from 2025 – and there’s a need to retrofit the country’s existing housing stock with sustainable heating solutions at the same time.

The role heat pumps have to play in decarbonising the UK’s housing stock is widely acknowledged, and the government’s target is for 600,000 to be installed per year by 2028.

These new deadlines and targets mean that for local authorities in particular, creative ways are needed to deliver green homes, critically, that don’t add to the acute financial pressures they’re already under.

Supporting ambitious targets

While there is substantial government funding available to local authorities to make housing improvements, the landscape is fast-moving, with various schemes, funds and grants launching and closing all the time.

In July 2020, the government launched the Local Authority Delivery (LAD) Scheme, with up to £500m of support for English Local Authorities to use when improving the energy efficiency of homes occupied by those on low incomes.

Phases 1a, 1b and 2 of the LAD Scheme have been completed, with all projects allocated funding due to be finished by December 2021. And in mid-June of this year, the government announced a change of plan re Phase 3. 

£200 million from Phase 3 of the LAD Scheme has now been combined with £150 million from the Home Upgrade Grant (HUG), to create a new £350 million fund called the Sustainable Warmth Competition.

Local Authorities and the social housing providers they are associated with can apply for funding, with applications subject to a minimum bid of £250,000.

The new fund is split into two elements:

1. The LAD Scheme Phase 3 

This element is to deliver upgrades to low-income households in the most energy-inefficient homes in England – that are on the gas grid. This is in addition to the £500 million already awarded via the earlier phases of the LAD scheme.

The main criteria for on-gas grid properties will remain the same as those in the first two phases of LAD, including the cost caps for owner occupier and private or social landlord rented properties. For owner occupier properties, the maximum average subsidy is £10,000, with no contribution towards the cost of the upgrade required. For rented properties, the maximum is £5,000 and the landlord must fund at least one third of the total cost.

2. The HUG Phase 1

This element focuses on off-gas grid properties. The cost of upgrading energy performance of an off-gas grid property tends to be higher, and funding is needed to support the installation of multiple measures per home.

The time to apply is now 

Applications for funding from the Sustainable Warmth Competition are open until 4th August. The ambition is for the funding to be allocated this Autumn, with work to get underway in January 2022. 

The government is asking that all local authorities submit rigorously thought-out applications that they are confident can be delivered in full by 31st March 2023.

Local authorities must show that their applications meet various key eligibility criteria for funding, including showing that properties identified for upgrades have an EPC rating of band D, E, F and G. Funding must also be targeted at low-income groups with a combined household income of no more than £30,000 – and a robust methodology will be needed to demonstrate how these households will be identified and verified.

Previously, funding though the LAD Scheme was guaranteed for each and every local authority through regional Energy Hubs across the country. But with this new competition format, funding is not guaranteed for all, and local authorities must go up against each other with their bids.

Help is on hand

There’s no doubt that the funding application process can be complex and time-consuming – but local authorities don’t have to go it alone. 

By teaming up with a partner like Daikin, housing providers can access free support to develop their proposals – across the planning, application and delivery process. Our team consists of dedicated experts, experienced in securing funding from similar schemes, grants and competitions.

We can help carry out stock analysis and feasibility studies, setting out which properties are best suited to heat pumps and most likely to be approved for funding. This includes helping local authorities meet the competition’s criteria and highlight how the proposed funding will help those most in need, by effectively assessing the EPC ratings of their properties and identifying households living in fuel poverty.

We can also support through overseeing consultations with local residents, bringing them on board through regular communications, easy-to-read quides, YouTube videos and even mobile showrooms where they can familiarise themselves with heat pump technology and understand how it will benefit them.

We’re also on hand to advise and provide training to local plumbing and heating businesses and supply chains, to maximise the opportunities for the local economy to grow and feed off the work created by funding.

The right technology for the job

Heat pumps are a leading technology for the decarbonisation of UK homes and deliver a wide range of benefits compared with other options in the mix.

Heat pump technology can deliver substantial carbon savings of approximately 2600kg of CO2 per year, which is far beyond many of the alternative solutions on the market – and it’s well-established enough to be rolled out at scale. 

Heat pumps are also a great solution for projects with tight timescales, as they’re readily available, can easily be installed in a couple of days and don’t require planning permission.

We’re working hard to support housing providers, installers and residents when it comes to commissioning, operating and fully understanding these low-carbon heating systems – to ensure all parties reap maximum benefits from heat pumps, as together we build clean, green, happy communities, fit for the future.

Nick Huston, Future Energy Business Manager, Daikin UK

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