While it’s yet to be confirmed whether a U-turn will take place, the news has led to renewed debate from all sides of the table over the implementation of the scheme and the part it could play in the transition to low carbon energy.
“Making changes two months before implementation in the face of price rises on boilers is a very worrying position for the Government to get itself into, in my opinion,” the Heat Pump Federation’s director for growth and external affairs, Bean Beanland told Renewable Energy Installer.
“I have never been a big fan of this policy because it serves to create division between heat pump manufacturers and boiler manufacturers. We made it very clear when we submitted our response to the CHMM consultation that a supply side initiative such as this on its own was of no use. It needed to be a demand side initiative.
“Government would argue the Boiler Upgrade Scheme creates this demand, but this is only for 25,000 units, so it’s not enough.
“This isn’t a policy I would have chosen, but now they have chosen, they should just get on with it. Everyone is geared up for it and all sorts of work has taken place to accommodate it. The messaging to the consumer in all of this is terrible. It impacts confidence at all levels.”
What is the CHMM?
The Clean Heat Market Mechanism is one of a range of measures designed to reduce the UK’s final energy consumption from buildings and industry by 15% by 2030.
This will involve achieving some 600,000 heat pump installations every year by 2028 – there were 35,000 MCS-registered installs in 2023. In contrast, around 1.8 million boilers are installed each year.
The CHMM is intended to drive investment in the high-quality production and installation of heat pumps by way of obligating large-scale boiler manufacturers to meet annual targets for heat pump installations. Every qualifying install will generate a tradeable credit.
For the first year, due to start this April, manufacturers would be required to match, or substitute, 4% of their boiler sales above 20,000 units with heat pump sales for year one or face a £3,000 fine for every installation missed against the target. This rises to 6% in year two, based on around 60,000 qualifying heat pump installs in 2024/25 and 90,000 the following year. Targets for future years would be set to correspond with future installation predictions.
The plans were put out to public consultation in March last year, with the decided outcomes from Government published in November.
In that response, the Department for Energy Security & Net Zero, said: “While we acknowledge that some respondents have suggested the scheme’s launch be delayed by a number of years, we are clear that introducing the CHMM as planned in 2024 is important for providing market actors with the necessary certainty and confidence to invest in scaling up the UK heat pump market at the pace needed to improve national energy security, contribute to our decarbonisation objectives and keep pace with developments in other countries.”
It has now been reported in the Sunday Times that energy secretary Claire Coutinho is planning to scrap the CHMM, which has been branded a ‘boiler tax’, amid accusations of ‘price gouging’ by manufacturers who have already increased the price of boilers, citing CHMM as the reason.
Gas boiler price rises
After the consultation outcome was reported, a number of boiler manufacturers added statements to their websites to the effect that market demand was not sufficient to satisfy the quotas and that ‘significant penalties’ would therefore be inevitable.
The price of a gas boiler was increased as a result.
Baxi’s statement reads: “We firmly believe the targets set by the CHMM are simply unachievable in the time frame dictated by the Government and as a consequence, in the first year of the scheme, Baxi can expect to incur a hugely significant financial penalty.
“For this reason, and regrettably, we will be applying a “market mechanism surcharge” of £120 on all our residential gas boilers delivered from January 1, 2024. This surcharge is not a price increase, but a direct impact of the CHMM on our business, which we will use as payment to the Government for the penalty they award us for not meeting its 4% target.”
Worcester Bosch has a similar statement: “To continue as a business we are regrettably forced to pass these fines on to the market in the form of a CHMM levy on every one of our gas and oil boilers. The increase is £120 per boiler in year one of the scheme, exactly equivalent to the CHMM requirement.
“Worcester Bosch will not benefit in any way and interestingly, neither will market growth for heat pumps as the revenue raised from the fines will go to the Treasury and not be used to grow demand for heat pumps. This does, however, support the Government’s overall goal of closing the price gap between a gas boiler and heat pump installation.”
Vaillant announced a £95 rise and Ideal said it was charging £110 extra to cover the levy.
But boiler manufacturers are ‘not the enemy’, says Energy and Utilities Alliance CEO, Mike Foster. “The boiler manufacturers have been absolutely transparent with the Government and have shown the number of boilers they expect to sell and the number of heat pumps they expect to sell,” he told Renewable Energy Installer.
“Boiler manufacturers do sell heat pumps, but not as many as the target has suggested – and that is a reflection of public demand. A failure to reach the proposed targets is not the fault of the boiler manufacturers. It’s the demand that needs increasing, not the supply.
“Even the Government are recognising that demand is low. They’ve increased the individual subsidy level of the Boiler Upgrade Scheme but not the overall funding pot, so the actual number of heat pumps being subsidised is less.
“The way forward is recognising that boiler manufacturers are not the enemy; they are making heat pumps, making parts for heat networks and investing in making hydrogen-ready boilers. We need all those technologies – if we go forward with just one, the net zero agenda will fail.
“If speculation does turn out to be true about the CHMM being scrapped, that would be a relief for consumers who no longer will have to pay the ‘boiler tax’. It’s a difficult time for consumers and to get rid of that is absolutely the right move.”
‘Caving in to fossil fuel companies sends the wrong message’
Independent climate change thinktank E3G has been working closely with the Government on the CHMM policy which it says is vital in showing long-term commitment to net zero and clean tech, to bringing down the cost of heat pumps and to achieving legally binding climate targets.
Leo Vincent, E3G policy advisor, said: “The Clean Heat Market Mechanism is a vital policy in decarbonising British heat, futureproofing our manufacturing industry, safeguarding jobs, bolstering UK energy security, and lowering energy bills for good.
“The so-called “boiler tax” is a scam created by boiler manufacturers, something which the Government has recognised, prompting them to instruct the Competition and Markets Authority to investigate. The mechanism does not require manufacturers to raise the price of boilers. Caving into fossil fuel companies sends the wrong message to those with vested interests in blocking the net zero transition. Other companies could follow suit and try and blackmail the Government by hiking prices for consumers.”
The Association for Decentralised Energy said reports that the CHMM might be scrapped are ‘extremely concerning’.
Its senior policy manager, Chris Friedler, said: “If recent reports of the withdrawal of the Clean Heat Mechanism are true, this represents a big backwards step on the path to low carbon heating.
“While plans change and households must be protected from costs being passed on, this raises the big question of what the Plan B for getting Britain off gas really looks like. Extraordinary targets require extraordinary policies, and if the Clean Heat Mechanism isn’t it, a more acceptable backup plan is needed – fast.”
‘Any policies should be fabric first’
Bean Beanland believes policies need to focus more on making sure low carbon heat is the cheapest form of energy, citing the cost of electricity in comparison to gas as a persisting problem. He feels there could be potential in REMA – the Review of Electricity Market Arrangements – and electricity levy rebalancing.
We also spoke to Rob Berridge, of Rob Berridge Heating Design Consultants, who has worked in the industry for more than 40 years, earlier as a domestic and commercial gas engineer, then in heat loss software and now as a consultant and trainer in hydronics and heat loss calculations.
While he’d welcome a potential scrapping of the CHMM, he feels any low carbon initiatives must focus on ‘fabric first’.
“The CHMM was a disaster from the start and actually made me decide to retire from my heat loss software company because my views on it were so strong and I didn’t want to jeopardise the good name or work the company is doing promoting system and energy efficiency,” he said.
“I’ve spent a long time pushing for low temperature system design and renewable transition, but I’m passionate about being on the side of the consumer.
“There’s poor management of energy security and wastage. For example, there are currently 20 million boilers out there that don’t condense, and systems designed in the 1970s, and yet we have Government pushing transition to renewable energy without putting in place policies that improve the fabric of incredibly leaky buildings or the woeful training levels.
“It’s very clear; when you are burning stuff, you are only ever going to get 90% efficiency maximum. With a heat pump, the maximum is 500-600%, so it’s a complete no-brainer, but not if there’s no insulation, it’s poorly installed and you can’t get electric at the same price of gas.
“We’ve got to follow process and sort the fabric of buildings first. I prefer the ECO4 scheme – that makes so much more sense because you can get grants for everything needed to improve your home efficiency. A heat pump should be the last piece of the puzzle, not the first.”
- We contacted various boiler manufacturers for comment as part of this article.
- What do you think? Please let us know your views about the Clean Heat Market Mechanism and reports that it could be scrapped by emailing linda@renewableenergyinstaller.co.uk.