Heat Pump Sector Deal Expert Advisory Group: Scottish Government response

Recommendation 4

The Scottish Government should increase the funding available through loans and grants to support heat pump installation and provide multi-year certainty on the availability of this funding.

Scottish Government Response

We have committed to make available at least £1.8 billion for heat and energy efficiency deployment in Scotland during this Parliamentary Session to help kick-start growth in the market and support those least able to pay.

Currently, the Scottish Government's Home Energy Scotland (HES) Loan and Cashback scheme offers interest-free loans with cashback grant for renewable heating systems, including heat pumps. Loans of up to £10,000 are available, of which up £7,500 is available as non-repayable cashback grant. Within our Heat in Buildings Strategy and in our 2022 Programme for Government, we committed to replace the cashback grant element of the scheme with a standalone grant during this financial year. This will give households the option and flexibility of accessing a loan, grant or combination of both. The budget for the new scheme is around £42 million for 2022/23, double the level of that for 2021/22.

The Social Housing Net Zero Heat Fund is making £200 million available over the next four years to support social landlords across Scotland to install zero emissions heating systems, such as Heat Pumps across their existing stock.

Fully funded support is also available to eligible homeowners through our fuel poverty schemes – Warmer Homes Scotland and local authority Area Based Schemes.

Currently, the support available through HES is delivered directly to consumers, who are responsible for sourcing their own supplier. In order to achieve the scale of installations required to deliver upon the ambitions set out in our Heat in Buildings Strategy, a complementary approach to subsidising zero emissions heat and energy efficiency may be required, enabling organisations in the supply chain to develop attractive propositions for zero emissions heat and energy efficiency and offer these directly to property owners at a subsidised rate.

We believe this could help to sharpen the impact of our financial stimulus, drive supply chain development through economies of scale and also provide a vehicle to drive up quality standards alongside wider fair work, diversity and equality objectives. We have committed to exploring this proposal within our Heat in Buildings Supply Chains Delivery Plan.