Just a day after the Chancellor pledged to increase investment in building energy-efficiency programmes by £435m, the government has revealed it is to boost grants for householders planning to install insulation and micro-generation technologies.

The Department of Energy and Climate Change (DECC) said that grants distributed through the Warm Front scheme – which provides money for people qualifying for disability or income-related benefits with grants to install insulation or energy-efficient heating in their homes – will be increased while the list of technologies covered by the scheme will be extended.

As a result of the changes, households that are connected to the gas grid are now eligible for grants of up to £3,500, up from £2,700, while those in areas off the gas grid can apply for funding of up to £6,000, an increase of £2,000.

Energy and climate change minister Joan Ruddock said that the more generous grants should make it affordable for more people to improve the energy efficiency of their homes.

"The scheme has worked well, but rising costs of installing heating and insulation measures often resulted in grant levels being exceeded," she said. " We've listened, and we've acted. These increases will take effect immediately, benefitting all new customers, and will also apply to Warm Front clients who have received approval for funding but are still waiting for the work to start. "

There was also good news for providers of onsite renewable energy technologies, after DECC announced it would undertake a pilot programme that would see the scheme extended to cover the installation of onsite low-carbon heat and power technologies such as solar water heating and air source heat pumps.

The move is the second boost for renewable energy firms in as many days after the Budget yesterday confirmed that the government would provide an additional £45m for the Low Carbon Building Programme grant scheme.

The Renewable Energy Association (REA) had warned that with the scheme due to expire this summer and the government's feed-in tariff incentive scheme not expected until next year, a funding gap would force many providers of small-scale renewable energy technologies into administration.

The new funding was just part of the Chancellor's £435m green building package, which will also see an extra £100m provided for the Decent Homes energy-efficient social housing scheme, £100m in new loans made available through the Carbon Trust, £65m invested in improving the efficiency of public buildings and £100m distributed to local authorities for spending on green social housing projects.

John Alker of the UK Green Building Council said it would be "churlish" not to welcome the new funding, but warned that the sums involved were still insufficient given the crucial role energy efficiency should play in meeting the government's target of a 34 per cent cut in emissions by 2020.

"The question for businesses and householders is: has anything really changed in terms of their ability to undertake a green refurbishment? And the answer is, not really," he said. "The new money is welcome, but the government could have gone further."

He added that the government could provide a major boost to the green building sector without resorting to direct funding, by accelerating plans for a green home loan scheme that would allow people to pay back low-interest loans through the energy bill savings that result from green home improvements. "We don't think it's all about spending more and more taxpayer money," said Alker. "There are other things the government can do to stimulate the market."