Failure to pass heat pump incentive could leave UK importing 20% more gas

If the government scraps its heat pump sales incentive scheme, the UK would be left importing 20% more foreign gas than it would have had the scheme gone ahead, new research from the Energy and Climate Intelligence Unit (ECIU) has found.

In late 2023, the government announced the Clean Heat Market Mechanism (CHMM) scheme, which is designed to incentivise heat pump sales by placing quotas and fines on manufacturers.

The CHMM is due to come into effect in April 2024, but there has been some doubts on whether the scheme will go ahead. The scheme prompted many manufacturers to announce price hikes on boilers, saying they would be unable to meet the government’s heat pump sale targets and inevitably face fines, which they would pass on to consumers.

In response, energy secretary Claire Coutinho suggested the CHMM might be scrapped to protect households from price rises.

This has created uncertainty among UK heat pump manufacturers, with Russell Dean, product director at Mitsubishi Electric, telling the Financial Times “Certainty [from the government] allows us to invest at the right speed . . . Every technology will say — please give us certainty and we will invest all the money that we can.”

The potential policy u-turn also drew condemnation from many environmental organisations, as well as members of the Tory party.

These included the ECIU, which recently published a report thay found that if the CHMM goes ahead, by 2035, the increase in heat pump uptake could save the UK from importing 260 terawatt hours of gas. That’s the equivalent of heating 22 million homes for one year with gas.

Jess Ralston, an energy analyst at the ECIU stated:

“Citizens Advice has said that scrapping the [CHMM] would ‘hurt’ consumers, and any U-turn would make us more dependent on foreign gas imports as the North Sea continues its inevitable decline. The question is, does the Government want to protect consumers and the UK’s energy security or give in to these boiler companies?”

The CHMM is a key tool for the government to reach its goal of having 600,000 heat pump installations a year by 2028, a more than tenfold increase from current numbers.

Decarbonising household heating, which accounts for around 14% of UK emissions, is an important step on the path to reaching net zero emissions.

The UK is falling behind in this area, with a recent report by the DNV finding the UK could miss its 2030 and 2050 net zero targets, if, among other actions, it doesn’t ramp up heat pump installations.

The cost of installing a heat pump is widely considered to be the main blocker to increasing uptake, with heat pumps being four times as expensive than boilers on average.

The government has tried to ease this burden with its Boiler Upgrade Scheme, which gives homeowners a £7,500 discount on heat pumps.

However, the scheme only has enough funding to help with 60,000 or so installations, despite the fact that over 80% of the UK’s 28 million households use gas as their main source of heating.