Clean Heat Market Mechanism introduction put back to April 2025

The Government has announced plans to adjust the Clean Heat Market Mechanism launch from 1 April 2024 to 1 April 2025.

The controversial initiative will essentially fine gas and oil boiler manufacturers if they do not sell a percentage of heat pumps compared to their boiler sales. The idea is that this will increase the number of heat pumps installed in the UK and lower heat pump prices. However, some have argued that the CHMM is unfair on traditional boiler manufacturers and could lead to increases in boiler prices if fines are passed onto the installer and end user.

Under the Clean Heat Market Mechanism, a £3000 fine will be charged for every missed heat pump sale.

There has been a lot of speculation recently about the scheme, as the UK prepares for a General Election this year. Newspaper reports had claimed that the CHMM was in danger of being scrapped, as some boilers went up in price at the start of the year, in preparation for the launch of the initiative.

However, in early March, Lord Callanan from the Department for Energy Security and Net Zero confirmed that the CHMM would be going ahead, saying in the House of Lords: “Of course, there is no such thing as a boiler tax and therefore it’s impossible to scrap it – but if the noble Lord is asking me about the Clean Heat Market Mechanism, then we will be implementing it because it is an essential part of meeting that 600,000 [heat pump] target and also, of course, our carbon budgets.”

The Goverment is now inviting views on plans to adjust the date of introduction of the Clean Heat Market Mechanism scheme to 1 April 2025.

It does reiterate that: “The target levels for 2025/2026 (set at 6% of relevant boiler sales), and all other aspects of the scheme’s design and implementation, would remain as set out in the government’s November 2023 consultation response. Targets for further years will be subject to consultation.

“We intend to continue industry-government engagement to consider the joint actions needed to support this market growth, increasing investment and growing consumer confidence in heat pumps.”

Reaction

Mike Foster – CEO of the trade body Energy and Utilities Alliance (EUA) has been a vocal critic of the Clean Heat Market Mechanism. He said:

“We welcome the delay in the introduction of the boiler tax, as confirmed by the government. It ends weeks of speculation in the media. However, this decision is clearly political, not about heating policy. The government have set a trap for a future administration, which according to the polls is likely to be Labour, knowing the boiler tax from 2025 is likely to be around £200.

“But it is an obvious trap, so obvious it has warning lights and bells attached. It could be up to Labour Ministers to decide whether to go ahead with the boiler tax, but they have been warned, the public don’t like it; it hits the least well off the hardest and the whole policy needs to be revisited before it harms British companies and British workers.”

Spencer Clark, Head of Residential Business Unit – Daikin UK, said:

“The CHMM will place an obligation on the manufacturers of heating appliances to meet targets for the proportion of low-carbon heat pumps they sell each year, relative to fossil fuel boilers. With a £3,000 fine on manufacturers for every missed heat pump sale, the mechanism would help to incentivise the industry Only if these funds were available centrally for all Heat Pump manufacturers to access to contribute toward MCS registered installations for ALL manufacturers to, reduce prices, and rapidly increase the pace of deployment. These types of incentives have worked well historically in the car industry to support the rollout of EVs.

“However, there are several shortfalls in the current proposal for the CHMM, with both gas boilers and air-to-water heat pumps sold to new build properties not included in the calculation. Concerningly, there is also currently no airtight audit process confirmed. The plan is for sales volumes to be taken at the factory gate, which does not adequately ensure fossil fuel boiler companies accurately report sales figures and are not profiting from the mechanism. The audit trail needs to be transparent and cross-referenced with other industry figures (New Build Stats 2024).

“It’s also important that educating consumers on the energy and long-term cost savings of heat pumps comes alongside the mechanism and current Government funding, to help drive uptake. We urge DESNEZ to amend plans to incorporate a rigorous audit process for the CHMM. The department should also work with the industry to coordinate communications and deliver an effective UK-wide consumer education campaign on renewable forms of heating.”

Thomas Farquhar, co-founder of clean tech start up Heatio, added:

“The news today, that the Clean Heat Market Mechanism (CHMM) has been delayed for another year is disappointing. This was a proposal to increase competition and drive down prices for clean heat technologies such as heat pumps, making the move to clean energy more affordable and accessible for consumers.

“For years now, commitment to a low carbon future and energy security in UK homes has been a can, kicked further and further down the road. The rest of Europe is flying ahead with heat pump technology that is successfully and efficiently warming homes in cold climates. Instead, the UK is stalling. We are still installing 1.7million gas boilers and are handcuffing ourselves to high gas prices that spike – leaving more and more people in fuel poverty. There is a haze of misinformation about the efficiency and practicality of heat pumps and the decision to delay the CHMM adds to it.

“The changes to the Boiler Upgrade Scheme in today’s announcement however, that homeowners will have more choice in how they improve their home and will no longer have to install cavity wall or loft insulation to use the scheme, is definitely welcomed.

“Net Zero should be treated as a National Security issue. We need to remove the practical and financial barriers that consumers face when wanting to adopt green energy technology in their homes, not make it harder for them.”

David Cowdrey, Director of External Affairs at the MCS Foundation said:  “It is extremely disappointing to see that the Government has postponed one of the most important policies for getting the UK off fossil fuel heating.

“The Clean Heat Market Mechanism is crucial to the rollout of heat pumps, which are the only viable option to decarbonising at scale the 17% of UK emissions that are created by heating our homes.

“The Government needs to immediately set out plans for how it intends to fill the huge gap in heat pump plans that they have just created.  We need clear and consistent policy more than anything, and without that the UK’s target of installing 600,000 heat pumps a year by 2028 is in serious jeopardy.”