Scheme To Impose Quotas On Heat Pump Sales To Go Ahead In April

The so-called ‘boiler tax’, a government scheme that imposes quotas on heat pump sales for boiler manufacturers, is expected to go ahead, after some hemming and hawing from the Tories.

Under the Clean Heat Market Mechanism (CHMM) scheme, set to come into effect in April 2024, boiler and heat pump manufacturers will have to substitute 4% of their boiler sales for heat pumps, or be subject to a £3,000 fine for each heat pump they don’t sell.

The CHMM drew a lot of criticism from boiler manufacturers, who denounced the quotas for being unattainable, and warned that it would force them to increase the price of boilers to cover the cost of the fines.

Among them was manufacturer Worcester-Bosch, who announced they would be upping the price of their boilers by £120. This prompted the CHMM to be dubbed the ‘boiler tax’.

In response to this, energy secretary Claire Coutinho looked set to scrap the ‘boiler tax’ altogether, amid fears it would result in unfair price hikes for homeowners.

However, after pressure from ministers, the heat pump quota scheme looks set to be going ahead, according to Sky News.

Last Wednesday, Lord Callanan, the minister for energy efficiency, told peers that the CHMM would be launched, in contrast to Ms Coutinho’s previous assertion that nothing was yet set in stone.

Lord Callahan stated:

“Of course there is no such thing as a boiler tax and therefore it is impossible to scrap it; but if the noble Earl is asking about the clean heat market mechanism – which is not a boiler tax – we will be implementing it because it is an essential part of meeting that 600,000 target [for heat pumps].”

However, sources close to Ms Coutinho maintain that no final decision has been made on the CHMM.

One key change the government is reportedly considering is axing fines for manufacturers who miss targets in the first year of the scheme, likely in a bid to avoid boiler price increases.

The government’s Competition and Markets Authority (CMA), will also be asked to look into whether the boiler price hikes announced by several major manufacturers in response to the CHMM constitute a breach of competition law. This could be the case if several manufacturers coordinated on raising prices.

The CHMM is one of the few mechanisms the government has introduced to encourage heat pump uptake and hit its target of having 600,000 heat pump installations a year by 2028.

The current number of annual installations is around 40,000, and the CHMM will impose a target of 60,000 installations through quotas in the first year of its implementation, with the quotas increasing each year.

The Boiler Upgrade Scheme, which awards £7,500 to homeowners replacing their boiler with a heat pump, is another key tool the government has in place to increase uptake.

Applications to the Boiler Upgrade Scheme increased in January of this year, compared to last year, however the scheme only has enough funding to benefit around 60,000 out of the UK’s 28 million homes.