Is the Clean Heat Market Mechanism set to be scrapped?

The controversial Clean Heat Market Mechanism (CHMM) is in danger of being scrapped, according to national newspaper reports.

The Times broke the story that Claire Coutinho – Secretary of State for Energy Security and Net Zero – was considering stepping away from the plans over concerns that it was driving up boiler prices, and costs would come down if the CHMM went away.

The Clean Heat Market Mechanism was confirmed at the back end of 2023, with the aim of “incentivising the UK’s heating industry to invest in making heat pumps an increasingly attractive and affordable choice for families and businesses.”

Essentially the initiative would fine gas and oil boiler manufacturers if they do not sell a percentage of heat pumps compared to their boiler sales, which is due to come in in April.

Although the decision is yet to be announced on the future of the CHMM, it’s already creating plenty of debate in the industry. Some claim it’s unfair on boiler manufacturers, with many brands announcing that prices would have to increase in response to the initiative, which would be passed onto installers and eventually customers.

However, some have accused the market of playing politics over the price rises, claiming that due to how the CHMM is framed, any fines put on manufacturers would be small if any.

Responding to the news about a potential Clean Heat Market Mechanism u-turn, heating engineer Andy Gibbs said:

“They say a week is a long time in politics. It’s an even longer time in the heating industry.

“The ink on my last article, about large manufacturers buying up installation companies to beat the Boiler Tax (that will be coming soon), had only just dried, when everything changed, again.

The Times published an article on Saturday claiming, and it looks very likely, that the whole Clean Heat Market Mechanism, as we know it, is set to be scrapped.

“Which is brilliant news. Boilers will all drop by £95 to £120 overnight and we can all carry on as usual. This raises a couple of points. Firstly, how did the Government actually think the manufacturers would shoulder these huge fines? Did they really think manufacturers would pay millions in fines out of their profits? They must be dafter than they look. It was always going to be the case that they would pop £100 on the cost of each boiler which in turn would end up being paid by the homeowner.

“Secondly, how are we as installers getting our money back? Using very simple numbers, a manufacturer selling 30k units in January, which is about right for the big four, has charged £100 on average and now has three million quid of ours in their bank account. If you fitted 10 boilers in January, they’ve made an extra grand from you.

“It’s very early days yet on all of this, and the CHMM is currently still in place, as is the current Government, but that’s all about to change.”

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

“While the Government allows the CHMM policy to be demonised as the ‘boiler tax’ it is important to understand that it adds far less to the price of an average boiler installation than all the boiler manufacturers themselves have increased prices by over the last three years.

“We wholeheartedly support the CHMM and urge the Energy Secretary, Clare Coutinho, not to scrap it. It is a vital lever in helping the nation’s manufacturers of heating appliances to meet targets for the proportion of low-carbon heat pumps they sell each year, relative to fossil fuel boilers. It is also a fantastic opportunity to collect monies to increase subsidies to help homeowners install low-carbon options.

“At a time when we should be building up the availability and efficacy of low carbon heating, the cancellation of the CHMM would signal that the Government has given up on its commitments, with a target of up to 600,000 heat pumps being installed a year by 2028 in peril. This will undermine confidence in the sector and foreign investments, and will have a significant impact on the growth in green jobs.

“The Energy Secretary and the wider Department for Energy Security and Net Zero (DESNEZ) need to place more emphasis, not less, on these large-scale mechanisms, and work with the industry to coordinate communications and deliver an effective UK-wide consumer education campaign on renewable forms of heating.”