The Government announced the grants as it confirmed a target for all new heating system installations to be low carbon by 2035, but insisted families are not going to be forced to remove their existing fossil fuel boilers.
Switching to low carbon heating in the coming years will cut emissions, and reduce the UK’s dependency on fossil fuels and exposure to global price spikes in gas, ministers said.
It will also support up to 240,000 jobs across the UK by 2035, they said.
The moves form part of the heat and buildings strategy being published on Tuesday, along with the Government’s wider plans to cut UK climate emissions to net zero by 2050.
Ending the sale of new fossil fuel boilers was welcomed as sending an important signal to the world in the run-up to key UN Cop26 climate talks hosted by the UK, but experts and campaigners warned the pot of funding for heat pumps was not enough.
The grants to install low carbon heating systems such as heat pumps, which run on electricity and work like a fridge in reverse to extract energy from the air or ground, will be provided through a £450 million boiler upgrade scheme.
The scheme forms part of more than £3.9 billion to cut carbon from heating and buildings, including making social housing more energy efficient and cosier and reducing emissions from public buildings, over the next three years.
The £5,000 grants will be available from next April, and will mean people installing a heat pump will pay a similar amount to the installation of traditional gas boilers, according to the plans.
The grants for heat pumps will be available for households in England and Wales, as part of the UK-wide heat and buildings strategy.
There is also a £60 million innovation fund to make clean heat systems smaller and easier to install and cheaper to run.
The Government said its plans would help people install low-carbon heating systems in a simple, fair and cheap way as they come to replace their old boilers over the next decade.
And it said it would work with industry to make heat pumps the same cost to buy and run as fossil fuel units by 2030.
Big cost reductions of between a quarter and a half are expected by 2025, as the market expands and technology develops, officials said.
Heat pumps currently cost an average £10,000 to install and do not necessarily deliver savings on running costs despite being much more efficient than gas, because green levies are higher on electricity than on gas.
Cleaning up emissions from buildings, which accounted for 17% of the UK’s greenhouse gases in 2019, mostly from heating, will require a mix of low-carbon solutions, including heat networks, and potentially also the use of hydrogen boilers where hydrogen can be produced cleanly.
Prime Minister Boris Johnson said: “As we clean up the way we heat our homes over the next decade, we are backing our brilliant innovators to make clean technology like heat pumps as cheap to buy and run as gas boilers – supporting thousands of green jobs.
“Our new grants will help homeowners make the switch sooner, without costing them extra, so that going green is the better choice when their boiler needs an upgrade.”
Business and Energy Secretary Kwasi Kwarteng added: “Recent volatile global gas prices have highlighted the need to double down on our efforts to reduce Britain’s reliance on fossil fuels and move away from gas boilers over the coming decade to protect consumers in long term.
“As the technology improves and costs plummet over the next decade, we expect low carbon heating systems will become the obvious, affordable choice for consumers.”
Jan Rosenow, Europe director at the Regulatory Assistance Project – which aims to accelerate the shift to clean, reliable and efficient energy, said there were many positive elements to the strategy.
He added: “The UK would be the first country in the world banning the installation of new fossil heating systems which will set an example to others. This is an important signal in the run-up to Cop26 in Glasgow.
“Providing grants for installing heat pumps is essential as they are more expensive than gas boilers, but the level of funding is too low.”
He said the funding would only allow 30,000 homes to benefit from the grant – just enough to support current installation levels – and not enough to meet the Government’s target to install 600,000 heat pumps a year by 2028.
Environmental campaigners at Greenpeace and Friends of the Earth also criticised the level of funding for heat pumps and energy efficiency measures in homes.
Ed Miliband shadow business secretary, said: “As millions of families face an energy and cost-of-living crisis, this is a meagre, unambitious and wholly inadequate response.
“Families up and down the country desperately needed Labour’s 10-year plan investing £6 billion a year for home insulation and zero carbon heating to cut bills by £400 per year, improve our energy security, create jobs and reduce carbon emissions.”
But Greg Jackson, chief executive and founder of Octopus Energy, said that when the grant scheme launches, the company will install heat pumps at about the same cost as gas boilers and had begun training 1,000 engineers a year.
He said it would help kickstart a cheap, clean heating revolution, and scaling up the technology and supply chain in Britain would mean companies such as Octopus would soon be able to install heat pumps without Government support.
“Electric heat pumps are more efficient, safer and cleaner than gas boilers and can help make homes more comfortable with less energy.
“Today we’ve crossed a massive milestone in our fight against climate change and to reduce Britain’s reliance on expensive, dirty gas,” he said.