The Department for Energy Security and Net Zero (DESNZ) has confirmed that the Clean Heat Market Mechanism (CHMM) will be delayed by a year.
DESNZ announced the launch of the CHMM only a few months ago, in December 2023, a scheme that would require heat pump installations to make up 4% of boiler manufacturer sales in the first year, increasing to 6% in the mechanism’s second year. Manufacturers would earn tradable heat pump credits for each qualifying domestic heat pump installed, with each required to reach a certain point quota at the end of the trading period.
The scheme’s implementation was initially scheduled for April 2024, but fears that the CHMM could be scrapped arose when reports of increasing gas boiler prices caused by a phantom boiler tax – said to be caused by the CHMM – surfaced earlier this year.
These price hikes, however, are not a requirement of the CHMM but the independent choices made by UK boiler manufacturers.
Addressing the House of Lords last week, Lord Callanan, minister for energy efficiency and green finance, confirmed that the CHMM would indeed move forward but did not specify when it would be introduced.
“We will be implementing the Clean Heat Market Mechanism because it is an essential part of meeting the 600,000 heat pumps installed per year by 2028 target and our carbon budget,” said Lord Callanan.
A ‘pragmatic approach to net zero’
The delay in the CHMM’s implementation from April 2024 to April 2025 was announced by energy security secretary Claire Coutinho yesterday (14 March) in a move the UK government said “stands up against recent price rises by boiler manufacturers.”
Coutinho also called on the Competition and Markets Authority (CMA) to review the boiler industry, which is currently dominated by four companies that hold a 90% market majority.
“We’ve already supported families by making our Boiler Upgrade Scheme one of the most generous in Europe, and now we’re making heat pumps even cheaper and easier to install,” said the energy security secretary.
“This is all part of our wider plan to ensure we cut our emissions and make homes more energy efficient without burdening families with high costs.”
In the same statement, DESNZ confirmed that the mandatory requirement to install cavity wall or loft insulation to be able to use the Boiler Upgrade Scheme (BUS) – which offers a £7,500 grant for households looking to install ground and air source heat pumps – would be scrapped.
According to DESNZ, the move will remove insulation costs of roughly £2,500 and is said to form part of the government’s “pragmatic approach to net zero”.
The government also decided against mandating hydrogen-ready boilers, which Juliet Phillips, programme leader at think tank E3G, called a “confiding red herring technology, often promoted with false green claims.”
Phillips added: “Hydrogen heating would be at least double the cost of fossil gas and much less efficient than direct electrification with heat pumps. While green hydrogen will have an important role to play in decarbonising other sectors, it has been repeatedly shown that home heating isn’t one of these.
“Misleading “hydrogen ready” boilers should be removed from the market, and the government must clearly signal that hydrogen will be prioritised where it adds most value – for power decarbonisation and in industrial clusters.”
DESNZ ‘given in’ to big boiler manufacturers
The delay in the CHMM implementation was met with heavy criticism as part of a chain of “watered down” decarbonisation policies.
“The Secretary of State and no. 10 have clearly given in to ‘big boiler’ manufacturers, which Claire Coutinho herself accused of ‘price gouging’ just a few months ago, despite Ministers that are closer to the details reportedly threatening to quit if the scheme does not go ahead,” said Jess Ralston, energy analyst at the Energy and Climate Intelligence Unit (ECIU).
“It seems that only these few Ministers understand how important heat pumps are for energy independence, a lesson that the US and EU learned at the start of the gas crisis.”
Calling the move “another backwards step for the UK’s energy security,” Ralston noted that Citizens Advice had made it “clear” that scrapping the CHMM would leave households vulnerable to international gas markets, as they have been for the past two years.
Kit Dixon, head of policy and regulation at renewable energy services provider Good Energy, added: “The government claims it wants to provide certainty and confidence, but the sad reality is that it’s simply kicking the can further down the road.
“We should be moving further and faster in tackling climate change but, again, all we’re seeing is a steady stream of policies being watered down or delayed. The Government needs to wake up and recognise the urgency of the situation.”
Phillips added that the CHMM has been “quietly killed”, adding that E3G hopes to see the “scam ‘boiler tax'” now removed by manufacturers as they have “won this concession”.
Alethea Warrington, senior campaigner at the climate charity Possible, highlighted that the CHMM delay was a major blow for an industry that already has the lowest heat pump installation rate in Europe.
“Heat pumps are currently being installed at a rate of only around a ninth of what is needed to hit the government’s own targets. More ambition is needed to get on with the job of getting the UK off volatile, high emissions gas and onto secure, affordable renewable energy and clean heat,” said Warrington.
Renewed calls for political stability
“These stop-start policies are slowing progress and stoking division and doubt about net zero. It’s plain for all to see this is the big growth story of the UK and the rest of the world, yet every step backwards like this means the UK’s green businesses lose out,” said Will Walker, UK policy lead at clean energy charity Ashden.
“What we need is a government that provides long-term policy stability and clarity to installers and the energy and construction industries. This will provide investors with the confidence they need and ultimately lead to cheaper energy and installations for you and me – to say nothing of warmer homes, cleaner air and a stronger economy – all things that voters want,” Walker continued.
Ralston also expressed the urgent need for stability to secure investment in the UK’s clean energy sector: “Clear, stable and long-term policy is the number one thing that investors ask for from leaders. While the wider economy stagnated, the net zero economy grew 9% last year. Delaying this policy is another signal adding potential political risk for investment in the UK.”
