Clean heat market mechanism: proposal to change the scheme start date to 1 April 2025
Updated 21 November 2024
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Introduction
This is an addendum to the government response to the Clean Heat Market Mechanism consultation, which we published on 30 November 2023.
It invites views on a proposed adjustment to the announced date of introduction of the scheme.
The importance of scaling up the deployment of highly efficient heat pumps, powered increasingly by British renewable and nuclear power, remains as clear as ever. This will be vital both for achieving net zero and for strengthening the UK’s long-term energy security.
The government therefore remains fully focussed 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, the government has taken action on multiple fronts, with the aim of ensuring that low-carbon heating can be an increasingly accessible option for greater numbers of households.
In September 2023, the Prime Minister 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 and making it one of the most generous schemes of its kind in Europe. In December 2023, the government announced an allocation of £1.5 billion to the Boiler Upgrade Scheme over 2025-2028, a tripling of the scheme budget over the previous three years.
Further targeted financial support for heat pump installations is available from the Energy Company Obligation, the Home Upgrade Grant, and the Social Housing Decarbonisation Fund.
In the new-build sector, the Future Homes Standard from 2025 will see low-carbon heating technologies like heat pumps installed as the norm in new properties, avoiding the need for future retrofit.
Building capacity and skills in the supply chain are equally vital enablers, and measures the government has put in place to support this include the £30 million Heat Pump Investment Accelerator Competition, which aims to support manufacturers to invest in beginning or expanding UK heat pump production, the £5 million Heat Training Grant for heating installers, and there is a new Low-Carbon Heating Technician apprenticeship.
In this context, the Clean Heat Market Mechanism – introducing a rising market standard for heat pumps as a proportion of fossil fuel boiler sales – has been designed to provide the UK’s world-leading heating appliance industry with the policy certainty and confidence to invest in ways to make heat pumps an even more attractive and simpler choice for growing numbers of UK households, thereby supporting both heat pump deployment growth and the transition of the overall market from traditional high-carbon technologies to the low-carbon future.
Adjusted scheme launch
Many businesses are already seizing the opportunities that are presented by the transition towards a substantial future heat pump market in the UK. This includes investments and other actions taken by new entrants to the heating appliance market, specialist heat pump manufacturers, and manufacturers whose UK business has traditionally focussed on fossil fuel heating technologies.
We welcome these market developments, which are steps towards the innovative and vibrant heat pump market that will be needed to make the transition to low-carbon heating easy, accessible and attractive for the wide spectrum of UK households.
The government is delivering a comprehensive package of policy and support which together form a long-term plan for the UK’s heat pump sector. Alongside the extension and expansion of the Boiler Upgrade Scheme, the launch of the Heat Pump Investment Accelerator Competition and plans for the Future Homes Standard, the introduction of the Clean Heat Market Mechanism is a key part of giving industry the long-term certainty, confidence and incentive to scale up the market for heat pumps.
The response to the Boiler Upgrade Scheme grant increase has been especially positive - with a nearly 40 per cent increase in people applying in January 2024 compared to the same month in 2023.
However, it is of course right that the government continues to monitor market developments, and the timeline for the introduction of formal new measures, such as the Clean Heat Market Mechanism.
In line with the government’s proportionate and pragmatic approach to net zero, the government wants to provide industry with further time to prepare their businesses, and for more consumers to take up heat pumps, before introducing the CHMM scheme. As a result, the government now plans to adjust the launch of the scheme from 1 April 2024 to 1 April 2025.
The target levels for 2025/2026 (set at 6% of relevant boiler sales), and all other aspects of the scheme’s design and implementation, would remain as set out in the government’s November 2023 consultation response. Targets for further years will be subject to consultation.
We intend to continue industry-government engagement to consider the joint actions needed to support this market growth, increasing investment and growing consumer confidence in heat pumps.
Questions
1. Do you support postponing the launch of the CHMM scheme to 1 April 2025 to allow more time for the market to develop? Please provide reasoning to support your response.
2.In adjusting the start of the CHMM, are there any specific factors that government should take into account?
How to respond
Email your response to: [email protected] by 9 May 2024.
When responding, please state whether you are responding as an individual or representing the views of an organisation.
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