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New Energy World magazine logo
New Energy World magazine logo
ISSN 2753-7757 (Online)

Year’s delay proposed for UK’s clean heat market mechanism


Engineer fixing a heat pump Photo: Adobe Stock
The UK government has a target of 600,000 heat pump installations by 2028 and up to 1.6 million heat pumps being installed annually by 2035 – targets that a recent report from the National Audit Office suggests are ‘optimistic’

Photo: Adobe Stock

The UK government recently announced plans to delay the introduction of the clean heat market mechanism (CHMM) scheme until 1 April 2025, in a move decried by environmental groups.

The proposal is an addendum to the government response to the CHMM consultation, published on 30 November 2023. Views are being sought on the new implementation date, with a closing date of 9 May 2024.  


The CHMM is based on a rising market standard for heat pumps as a proportion of fossil fuel boiler sales. It aims to provide the UK’s heating appliance industry with the policy certainty and confidence to invest in ways to make heat pumps a more attractive and simpler choice for UK households, supporting heat pump deployment growth and the transition from traditional high-carbon technologies, primarily using natural gas, to the low-carbon future.


According to the UK government, the need to scale-up the deployment of highly efficient heat pumps, powered increasingly by home-grown renewable and nuclear power, ‘remains as clear as ever’ and is ‘vital both for achieving net zero and for strengthening the UK’s long-term energy security’.


With home heating representing 18% of UK greenhouse gas emissions, the government says it ‘remains fully focused’ on supporting the development of a heat pump market of 600,000 installations per year by 2028, ensuring that heat pumps become a mainstream consumer solution alongside gas boilers, of which approximately 1.8 million are currently installed each year.


Towards that goal, in September 2023 Prime Minister Rishi Sunak announced a 50% uplift to the heat pump installation grant available under the boiler upgrade scheme in England and Wales – taking the grant level to £7,500. In December 2023, the government further announced an allocation of £1.5bn to the scheme over 2025–2028.


In other changes, homeowners will no longer have to install cavity wall or loft insulation to use the scheme, a move that the government says could reduce the costs associated with installing a heat pump on a semi-detached property by around £2,500.


Further targeted financial support for heat pump installations is available from a number of other grant and funding schemes, while in the newbuild sector, low-carbon heating technologies like heat pumps will have to be installed as standard from 2025.


The government is now proposing a new implementation date of 1 April 2025 for the CHMM – a year later than originally planned – in order to ‘provide industry with further time to prepare their businesses, and for more consumers to take up heat pumps’.


The target levels for 2025/2026 (set at 6% of relevant boiler sales) would remain as set out in the government’s November 2023 consultation response.  


Mixed responses

Some industry observers welcomed the government’s announcement, with Charles Wood, Deputy Director for Policy at Energy UK, calling for the coming year to be used to ‘kick-start the conversation with the public about all the options available to homes and businesses when it comes to low-carbon technologies like heat pumps’. He added: ‘The CHMM will give much-needed clarity to the sector so that businesses can invest with confidence in the UK.’


Meanwhile, the Association for Decentralised Energy’s (ADE) Policy Manager, Chris Friedler, expressed ‘relief’ that the CHMM would be going ahead, ‘as it is a key plank for plans to decarbonise buildings, and without it new measures would have to be drawn up drastically quickly’.  


However, environmental campaigners and others decried the proposed delay. Greenpeace called it a ‘step backwards on climate’, saying it would put the country’s net zero targets ‘in jeopardy’ and leaving it ‘paying more for its energy’.


Meanwhile, Jess Ralston, Energy Analyst at the Energy and Climate Intelligence Unit (ECIU) said: ‘By pushing to delay the scheme, the boiler companies imposing their “boiler tax” claim to be on the side of consumers, but Citizen’s Advice is clear that scrapping the scheme would hurt households, leaving them vulnerable to volatile international gas prices. Will the boiler companies now give back their boiler tax they have already imposed despite the scheme not having started and now being delayed?’


According to Ralston, previous ECIU analysis found that scrapping the CHMM could result in the UK’s gas demand in 2035 being more than 70 TWh higher than it could have been, which could result in the UK needing to import around a fifth (19%) more gas.  


ECIU analysis also found that the top four gas boiler manufacturers in the UK could be set to make more than £100mn by increasing their prices by an average of £110 per boiler.


In response to recent price rises by boiler manufacturers, Energy Security Secretary Claire Coutinho recently called on the Competition and Markets Authority (CMA) to review the industry – which has four companies dominating 90% of the market – ‘to consider whether it is working as well as it should and delivering the best outcomes for customers’.


Slowing progress on decarbonising home heating

Meanwhile, although the UK government claims that the response to the heat pump installation grant increase has been ‘especially positive’, with a nearly 40% increase in people applying in January 2024 compared to the same month in 2023, a new report from the National Audit Office (NAO) suggests that a lower than expected uptake is ‘slowing progress on decarbonising home heating’ and that the January uptick requires ‘more data… to determine whether the change is sustained’.


According to the NAO, government expectations of seeing an 11-fold increase in heat pump installations by 2028 and up to 1.6 million heat pumps being installed annually by 2035 are based on ‘optimistic assumptions’.


It found that the number of heat pump installations by December 2023 was ‘less than half of planned projections’, and the report recommends steps for the Department for Energy Security and Net Zero (DESNZ) to improve heat pump rollout.  


A key issue behind lower-than-expected heat pump uptake is their cost to install and use, the report found, also warning that DESNZ has ‘no overarching long-term plan to address the low levels of awareness among households about the steps required to decarbonise home heating’.  


In addition, the report calls for ‘earlier clarity over the role of hydrogen in home heating’ as ‘uncertainty has hampered investment and effective planning’. DESNZ has so far indicated that hydrogen will have a limited role, but it will formally take a decision in 2026.


Calling the NAO report ‘a timely reminder of the challenges that remain in improving the energy performance of our homes’, the Chair of the UK Parliament’s Environmental Audit Committee said: ‘While the government is making progress towards decarbonising homes through insulation schemes, more remains to be done. Decarbonising older and less efficient homes will be more difficult, but it is an unavoidable part of the net zero transition.’  


Meanwhile, noting that the NAO report highlighted the value of local area energy plans (LAEP) as an approach to strategically coordinate the decarbonisation of heating, Katrina Young, Practice Manager (Heat Policy & Local Energy) at Energy Systems Catapult, added: ‘The next step is to make sure that these plans don’t sit on a shelf, and to enable local government to take projects forward.’ She also pointed to ‘an urgent need to increase the number of tradespeople with the skills to deliver high quality low-carbon heating options, through re-training or upskilling existing heating engineers, as well as attracting new entrants and tackling the diversity problem’.