What the Carbon Budget & Growth Delivery Plan means for heat pumps
On 29th October the Government released a long-awaited update to the Carbon Budget & Growth Delivery Plan (CBGDP). This provided important additional sectoral detail on how the Government intends to achieve emissions reductions across the 4th – 6th Carbon Budget periods from 2023-2037. A further document ‘Unlocking the benefits of the clean energy economy’, published alongside the CBGDP, sets out the government’s overarching strategy to reduce emissions to enhance energy security, protect billpayers, create economic growth and good jobs and protect the environment. The CBGDP contains good news for manufacturers, installers and owners of heat pumps, and for those contemplating replacing existing fossil fuelled boilers.
Scale of ambition
The Government aims to increase from a position of some 0.5 million heat pumps installed as of 2025, to a cumulative number of 2.5 million by 2030 and 9.3 million by 2035. Even if the government hits their existing housebuilding targets, and every new home has a heat pump (71% currently do not) this will still require at least 700,000 retrofit heat pump installations annually over the coming decade, over 10x the current rate of installs so the targets are ambitious.
Unlocking market growth
The Government proposes to set out “positive interventions” in their forthcoming Warm Homes Plan to accelerate rapid growth in installations with a vision that over the next decade low-carbon solutions will become the natural choice for all households.
“The positive interventions that will be set out in the Warm Homes Plan will look to
- reduce the upfront and running costs of a heat pump
- support industry to invest in low-carbon heating deployment
- improve the consumer journey and ensure that a range of low-carbon technologies are available to consumers.
By the early 2030s, we expect that over one million existing homes will transition to low carbon heating solutions every year, as part of the normal cycle of replacing an existing heating appliance (such as a gas boiler) at the end of its life. By 2035, low-carbon heating will represent the vast majority of all heating system replacements. We will deliver this objective by ensuring that the switch to low-carbon heating makes sense for everyone and that all households are able to benefit from the lower lifetime costs that clean technologies can unlock compared to fossil fuel equivalents.”
Addressing running costs
Low heat pump running costs are dependent on two factors; system efficiency, and electricity costs. The first of these is requires careful design of the whole heating system by skilled installers like Xpert Energy to ensure the heat pump can operate optimally. Electricity costs however can be a significant barrier to heat pump uptake with electricity cost per unit typically 3-4 x the cost of gas when comparing standard tariffs. This requires heat pumps to be operating very efficiently and/or consumers mitigating import cost by using batteries and flexible tariffs, or self-supplying part of the electricity from solar PV.
The Committee for Climate Change (CCC), in their 2025 report to Government set out “[our]highest-priority recommendation is to remove policy costs from electricity prices. This will…. ensure the underlying lower running costs of heat pumps compared to fossil fuel boilers are reflected in household bills.”
The Government proposes to address this cost barrier by “…bringing down the cost of electricity bills, whilst at the same time protecting those households unable to make the switch away from gas just yet.
Implementing this policy will help incentivise consumers to choose low carbon technologies by tackling distortions in the price signal created by the relative price of electricity and gas. This will enable delivery of decarbonisation and electrification for example through increased uptake in heat pumps.
Over this Parliament, the government will be working relentlessly to translate the much cheaper wholesale costs of clean power into lower bills for consumers”.
The CCC estimates that removing policy costs from electricity prices “could reduce the ratio of domestic electricity to gas prices from around 4:1 currently to between 2:1 and 3:1. This would bring the UK price ratio into the range of other countries, such as Ireland and France, who are ahead on heat pump roll-out, and ensure that households installing a heat pump would see savings from its greater efficiency.”
Boiler Upgrade Scheme grant
The CBGDP confirms future funding of the BUS, the total value of which will increase annually to 2029. Beyond 2029, the Government’s proposals for rebalancing fuel costs will need to have been announced, implemented, and be effective, to provide adequate stimulus for significant deployment growth without further grant funding.
To improve ease of installation the Government proposes to remove the BUS grant eligibility requirement for a valid Energy Performance Certificate.
Planning permission
In May 2025, Permitted Development rights were relaxed for heat pumps in England to allow larger units, more flexible installation location, and for two heat pumps to be installed at detached homes. In the CBGDP, the Government commits to “continuing to explore how we can further streamline the planning process for the small minority of homes where planning permission might be needed” and “working with Ofgem, DNOs, manufacturers, installers and the wider industry to improve the connection process for heat pumps”.
Summary
Some very positive noises from Government in the CBGDP about their intention for growth in heating electrification and decarbonisation, and how this is to be achieved. We await further detail keenly. In the meantime, the direction of travel should give confidence to homeowners that owning a heat pump is a sound long term investment, and there is still time to access the BUS grant via MCS accredited installers like Xpert Energy.
[1] Carbon budget and growth delivery plan – GOV.UK
[2] Progress in reducing emissions – 2025 report to Parliament – Climate Change Committee