Social housing tenants offered access to green heating fund

£3m fund for wood-fired boilers, solar-powered hot water systems and heat pumps expected to save money and cut emissions

Social housing tenants will be able to gain access to green forms of heating, such as wood-fired boilers, solar-powered hot water systems and heat pumps, under plans unveiled .

The heating should help to save households money and cut carbon dioxide emissions. It will be paid for from a £3m fund for social housing, ringfenced as part of the £860m renewable heat incentive.

Greg Barker, minister of state for energy and climate change, said: "Improving and greening Britain's homes must make strong financial sense if we are to provide a real sustainable alternative to expensive old heating systems. If people choose to go green, they want to see real savings – this will drive the take-up of new heating technologies in social housing and help slash their dependence on big energy companies and expensive tariffs."

The scheme aims to cut fuel poverty – where households spend 10% or more of their budget on heating – and to spur development of renewable heating technologies.

British households have been badly hit by recent rises in energy bills, of 18% or more in some cases. The "big six" energy companies have blamed rising wholesale energy costs, driven by international factors including threats to supply in the Middle East and increasing demand from emerging economies.

The government has called for increased investment in renewable energy, including forms of heating and electricity generation, as well as a new fleet of gas-fired power stations needed to fill the gap left by older power stations being taken out of service.

Registered providers of social housing will be asked to apply to the government-funded Energy Saving Trust, bidding for a share of the £3m pot. The money will be allocated in early October.

About half of the UK's carbon dioxide emissions come from heating buildings, but little has been done to date to cut these emissions. The renewable heat incentive is expected to save 4.4m tonnes of carbon a year – equivalent to the output of two gas-fired power stations.

Households will also be encouraged to take up insulation, to be offered at no upfront cost from late next year under the "green deal", in the form of loans that are paid back in instalments through additions to household energy bills.

However, green thinktanks have calculated that under the current rules, the "green deal" is unlikely to work, as the interest charged on the loans will be too high to deliver sufficient savings to attract people.

• This article was amended on 16 August 2011 because the original said companies supplying renewable heating technologies will be asked to apply to the government-funded Energy Saving Trust. This has been corrected.


Fiona Harvey, environment correspondent

The GuardianTramp

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