Pippa Heylings

The Government has launched the ‘Warm and Fuzzy’ campaign to promote the Boiler Upgrade Scheme. The campaign seeks to build consumer awareness and understanding of heat pumps, as well as publicising the £7,500 government grant which is available to homeowners, including landlords.

The Government continues to provide advice and support for home upgrades, including the GOV.UK webpage ‘Find Ways to Save Energy in Your Home’ (https://www.gov.uk/improve-energy-efficiency) and the GOV.UK Heat Pump Suitability tool (https://www.gov.uk/check-heat-pump) which landlords can access.

All heat pump installations are expected to comply with Building Regulations. Heat Pumps installed under Government schemes are required to be installed by a Microgeneration Certification Scheme (MCS) certified installer.

As part of the Review of Electricity Market Arrangements or ‘REMA’ we are continuing to assess reforms for sending more efficient locational signals in the electricity market. This includes robustly assessing the costs and benefits of both locational (or zonal) pricing against improvements to locational signals in a reformed national pricing market. This will feed into the cost-benefit assessment of REMA reforms.

We have not made any decisions yet and aim to take a decision by around mid-2025.

The Department has been undertaking work to explore how the future role of local energy planning might support net zero, clean power 2030 and efficient network planning. This includes engaging with Ofgem on Regional Energy Strategic Plans, as well as working closely with Innovate UK and the Local Net Zero Hubs.

Additionally, Great British Energy will partner with, and provide funding and support to, local and combined authorities, as well as community energy groups, to roll out a pipeline of local renewable energy projects and develop up to 8GW of cleaner power.

Enforcement is a critical aspect of the policy and is something we are working to address. Government will be increasing our engagement with local authorities to understand the impact and burden of the proposed policy to enable us to take steps to mitigate the impact and support local authorities. The development of the PRS Database in England and Rent Smart Wales will also greatly increase availability and ease of access to information for local authorities.

The electricity market in GB operates on the principle of marginal pricing, whereby the price of electricity is set by the last technology needed to meet overall demand. In the current market, gas prices often set the wholesale electricity price because it is typically the last source of supply to meet demand.

Decarbonising the power system will increase energy security by reducing dependence on imported oil and gas, which will in turn reduce the exposure of consumer bills to volatile international prices. The ever-increasing participation of renewables in the wholesale market means that over time, cheaper electricity produced by renewable technologies will determine the price more often and gas will play a much more limited role in setting the wholesale market price.

Increasing the number of renewables on Contracts for Difference (CfDs) has already made a tangible difference. When wholesale electricity prices spiked in the winter of 2022/23, the CfD delivered the equivalent of an £18 saving on a typical annual household bill.

Expanding the CfD scheme to enable more renewables in the wholesale market will help to rapidly decouple electricity from gas prices without the need for more complex arrangements.

The Review of Electricity Market Arrangements (REMA) programme is considering what further steps can be taken to shield consumers from the impacts of potential price spikes.

The second REMA consultation sought views on some specific proposals, including retaining marginal pricing across the wholesale market alongside futureproofing the CfD scheme as the best tool to decouple gas and electricity prices.

Standing charges are a commercial matter for suppliers, and are regulated by Ofgem, but we know that too much of the burden of the bill is placed on them. The Government has worked constructively with the regulator on the issue of standing charges, and we are committed to lowering the cost of them.

Ofgem’s recently published update on reform of standing charges outlines how it will look to make standing charges fairer for consumers. Ofgem has also committed to consider whether these regional differences should remain or whether there is a different option that would better protect consumers overall.

The Review of Electricity Market Arrangements (REMA) is considering a range of reforms to unlock renewable investment and pass through the benefits of cheaper renewables to consumers. REMA’s Autumn Update, published on 13 December, detailed the progress of policy development in the assessment of options. The Government is aiming to conclude the policy development phase of the REMA programme by mid-2025, after which the final decisions and timetable for implementation will be announced.

The Government is committed to working with the pensions sector to transition to net zero. DESNZ collaborates with DWP and others in Government on this.

Pension schemes in scope of DWP’s requirements must produce an annual Taskforce on Climate-related Financial Disclosures report. In the manifesto, we committed to mandate listed companies, financial institutions and pension funds to develop and implement credible transition plans that align with the 1.5°C goal of the Paris Agreement. The Government will consult in the first half of this year on how best to take this forward.

The Government is also exploring ways to unlock the investment potential of the Local Government Pensions Scheme, through asset pooling for investment into climate-related projects.

The Government is committed to supporting the growth and scaling-up of green technologies, including through the creation of GB Energy, as part of its Clean Energy Superpower Mission. A combined total of £1.3 billion has been committed through the 2021-25 Net Zero Innovation Portfolio (NZIP) to accelerate the commercialisation of green technologies supporting around 5,500 jobs and leveraging £750 million in private investment. The Government will set out its full approach to seizing the growth opportunities from clean energy industries in the forthcoming Industrial Strategy.

The Government is committed to expanding the electricity network to support its Clean Energy Superpower mission and is working closely with Ofgem and industry to mobilise the required investment. Under the most recent price control for electricity distribution, covering 2023-2028, Ofgem has allowed £22.2bn for upfront network investment, of which £3.1bn is set aside for network upgrades to ready the grid for low carbon technologies.

The National Infrastructure Commission published recommendations on 21 February [1] on making the electricity distribution network fit for net zero. We will review the study with our key delivery partners and will publish a formal response this spring.

[1] https://nic.org.uk/app/uploads/Electricity-Distribution-Networks-report-21-Feb-2025.pdf

The National Infrastructure Commission published recommendations on 21 February¹ on making the electricity distribution network fit for net zero. Their modelling demonstrates that nationally, £37-50 billion of investment in the distribution network could be needed to meet net zero targets by 2050, taking into account expected increases in electricity demand. We are reviewing the study with our key delivery partners and will publish a formal response this spring.

1 https://nic.org.uk/app/uploads/Electricity-Distribution-Networks-report-21-Feb-2025.pdf

The Government will ensure that the protection of nature is embedded into the delivery of clean power and we will be driving for nature to not only be protected but restored through clean power infrastructure.

As part of our Clean Power Action Plan, we are considering how to use development to fund nature recovery unlocking a win-win outcome for the economy and for nature. We are working with nature delivery organisations, stakeholders and the sector to consider how we can better support the delivery of infrastructure whilst driving better environmental outcomes.

The Government is committed to delivering clean power by 2030, to accelerating to net zero and to restoring nature. New energy infrastructure should be built in a way that protects the natural environment and supports nature recovery, by following a “mitigation hierarchy” to avoid damage to marine protected areas, and minimising, restoring and delivering compensation when damage cannot be avoided. On 29 January 2025, the Government announced reforms in infrastructure consenting to unlock up to thirteen major offshore wind infrastructure projects while protecting the marine environment and the Government’s commitment to protect 30% of our seas for nature by 2030.

The Government is committed to delivering clean power by 2030, to accelerating to net zero and to restoring nature. The Government needs to ensure that the UK’s marine ecosystems are healthy and capturing and storing carbon too. This means that new energy infrastructure needs to be planned and developed in a way that protects the natural environment and supports nature recovery.

Assessment and mitigation of environmental impacts are a core part of the Government’s planning processes, and future spatial plans will support rebuilding the UK’s natural infrastructure at the same time as building the new energy infrastructure the UK needs for the twenty-first century.

Fuel switching from fossil fuels to electricity has the potential to significantly reduce annual industrial emissions, making a critical contribution to our carbon budget commitments contributing between 15% and 40% of the necessary carbon abatement in industry by 2050. The Government remains committed to supporting industrial electrification and addressing the barriers to investment that were highlighted in the 2023 call for evidence on enabling industrial electrification. This includes further development of policy options to address the high cost of electricity relative to natural gas, and the implementation of planning reforms to speed up infrastructure development and unblock issues on grid connection delays.

The Government has pledged to take action to stand with tenants and deliver the safety and security of warmer, cheaper homes. We are currently consulting on plans to reduce energy bills by increasing standards in the private rented sector in England and Wales.

As Government-funded trials have shown, Heat-as-a-Service is a potentially attractive way for consumers to finance the installation and operation of low carbon heating systems. We continue to explore how Government can enable these types of business models, while working to ensure consumers are protected.

The Government published the ‘Improving the energy performance of privately rented homes in England and Wales’ consultation on 7 February 2025. This consultation includes government responses to the 2020 consultation on ‘Improving the energy performance of privately rented homes’.

Responses to the 2019 and 2021 consultations on minimum energy efficiency standards in the non-domestic private rented sector are being reviewed to inform the policy design and ensure it remains fair and appropriate for landlords and tenants, with the aim to publish in the early part of 2025.

A summary of the research is available. We will consult on the merits of alignment with new EU regulations and will align where it makes sense to do so. GB may choose not to align if it is not in the interests of consumers, businesses, and our wider policy goals.

Home upgrades – including insulation – are one of the best tools to get bills down for good and we are committed to promoting properly installed loft, wall and roof insulation.

The Government is currently updating the Energy Efficient Home website as part of work to refresh our public campaigns. Additional pages will go live in the coming weeks, including a page on the benefits of cavity wall, roof and loft insulation, and one on wider energy saving tips.

The Government’s ‘Find Ways to Save Energy in your Home’ service (www.gov.uk/improve-energy-efficiency) provides tailored recommendations to increase household energy efficiency, including advice on insulation.

The Boiler Upgrade Scheme does not currently support hybrid heat pumps, as we want to direct the available funding towards the technologies that offer the greatest carbon savings, rather than those which would continue to involve the burning of fossil fuels for heating and hot water.

The Government is committed to incentivising moves to cleaner, more affordable heating, and will keep its position on alternative heating technologies (including multi-technology solutions) under review and make further assessments as the supporting evidence base develops.

As the first step towards the Warm Homes Plan, the Government has committed an initial £3.4 billion over the next 3 years towards heat decarbonisation and household energy efficiency, with £1 billion of this allocated to 2025/2026.

Further details on the Warm Homes Plan will be set out in due course. Future funding towards decarbonisation and to tackle fuel poverty will be considered as part of Phase 2 of the Spending Review, which will conclude in late Spring 2025.

The Great British Insulation Scheme (GBIS) is not a government funded grant scheme, but an obligation on larger energy suppliers to provide energy efficiency support to eligible households through the installation of one insulation measure per home.

GBIS is scheduled to run until March 2026 and is funded through consumer bills, under the price cap.

The Warm Homes Plan will help people find ways to save money on energy bills and transform our ageing building stock into comfortable, low-carbon homes that are fit for the future. Future funding towards decarbonisation and to tackle fuel poverty will be considered as part of Phase 2 of the Spending Review, which will conclude in late Spring 2025. The Warm Homes Plan will be published after the conclusion of the Spending Review, and further details will be set out in due course.

In January, the UK submitted its nationally determined contribution (NDC) to the United Nations Framework Convention on Climate Change (UNFCCC), providing additional information on our headline target, including how it will facilitate a just transition. The UK is dedicated to supporting workers, communities and businesses to transition to net zero. As part of the Clean Power Mission to reach clean power by 2030, the UK has established an Office for Clean Energy Jobs (“the Office”) to explore what is needed to ensure our workforce can deliver the dramatic pace of change needed to reach this goal.

The UK is committed to delivering climate finance to help vulnerable countries adapt to climate impacts and support a transition to low-carbon economies. In compliance with Article 9.5 of the Paris Agreement, the UK submitted its third Finance Biennial Communication to the UNFCCC in December 2024 which sets out our forward-looking action on the support components of the Paris Agreement. We have also reaffirmed the existing commitment to spend £11.6bn in International Climate Finance by 2025/2026, including at least £3bn on nature. Our next International Climate Finance commitment will be carefully considered and determined through the Spending Review this year. But we’re also clear that public finance alone is not going to fund the global transition, and are working closely with partners to mobilise more private capital for the climate transition.

The Government is supportive of electricity suppliers offering tariffs which enable consumers, including electric vehicle owners and those using solar panels, to consume energy at off peak times. This benefits all consumers by reducing the need for additional grid capacity.

More generally, we want to see the market offering new, innovative products and services that will help enable consumers to lower their bills, get a better service and support the transition to net zero. The setting of these tariffs is a commercial matter for suppliers.

The Government has made the decision to reduce the level of the payment-in-lieu for the Clean Heat Market Mechanism from the previously proposed £3000 per missing heat pump credit to £500 for the first baselining year, in order to provide industry with additional capacity to adjust to the scheme’s introduction. No decisions have been taken about this or other scheme parameters for future years. The Government will keep the effectiveness of the payment level under close review and will consult on whether and how it should evolve for future years.

The Government believes that the reduction to the payment-in-lieu for the Clean Heat Market Mechanism for the first baselining year will provide manufacturers with additional capacity to adapt to the scheme’s introduction, while still providing an incentive to invest in the transition. An impact assessment was published on 21 November 2024 alongside the draft statutory instrument. The adjustment to the payment-in-lieu for the introductory year has not changed the Department's assessment of expected carbon savings from heat pump installations over the scheme’s lifetime. The Government will keep the payment-in-lieu level, like all scheme parameters, under review for future years.

The Government believes that the reduction to the payment-in-lieu for the Clean Heat Market Mechanism for the first baselining year will provide manufacturers with additional capacity to adapt to the scheme’s introduction, while still providing an incentive to invest in the transition. An impact assessment was published on 21 November 2024 alongside the draft statutory instrument. The government is confident that the targeted retrofit heat pump installations for the first scheme year can be achieved but will keep the payment-in-lieu level, like all scheme parameters, under review for future years.

There are multiple targeted schemes in place to deliver energy efficiency measures to low income and fuel poor households. Current schemes include the Energy Company Obligation (ECO), the Great British Insulation Scheme (GBIS), the Social Housing Decarbonisation Fund (SHDF), and the Home Upgrade Grant (HUG).

For this winter, support is also available through the Warm Home Discount scheme which provides eligible low-income households across Great Britain with a £150 rebate off their winter energy bill.

We recently announced the next steps on our Warm Homes Plan, which will see 300,000 homes upgraded in the next year.

The government has committed an initial £3.4 billion over the next 3 years towards heat decarbonisation and household energy efficiency, through the Warm Homes Plan. With £1 billion of this allocated to next year.

Our ambitious Plan will upgrade five million homes by investing in insulation and other improvements such as solar panels, batteries and low carbon heating, helping to make them cheaper and cleaner to run.

The Government and industry have worked together to deliver a £500m Winter Support Commitment for customers, and we applaud suppliers stepping up on this matter. I also meet regularly with energy suppliers to outline the Government’s expectations of the standard of service that should be provided to their customers, including supporting vulnerable consumers and those struggling to pay their bills this winter.

Additional energy suppliers are delivering Government support this winter through the Warm Home Discount, providing an annual £150 rebate off energy bills for eligible low-income households.

As part of its Warm Homes Plan, the Government have committed an initial £3.4 billion over the next 3 years towards heat decarbonisation and household energy efficiency.

At the Autumn Budget 2024, my Rt Hon Friend the Chancellor of the Exchequer announced that an additional £1 billion, including Barnett impact, will be invested to extend the Household Support Fund (HSF) in England until 31 March 2026, and to maintain Discretionary Housing Payments in England and Wales. This builds on the previous commitment of £421 million in England to extend the HSF until 31 March 2025.