The UK's Warm Homes Plan: options for public loan schemes

Decarbonising domestic heating is one of the most challenging elements of the UK’s net zero transition. The largest single challenge is to replace around 23 million gas boilers with low-carbon heating technologies – i.e. those that use electricity generated from renewable sources rather than gas. Heat pumps are the primary tool for low-carbon heating and are central to the sector’s electrification. Although well-established internationally, the proportion of households in the UK with a heat pump is among the lowest in Europe. This policy insight reviews different potential loan models for households purchasing heat pumps, in the context of the UK Government having allocated £5 billion of ‘financial transactions’ to the Warm Homes Plan, exploiting the flexibility offered by its new balance sheet fiscal target.