At the end of November 2023, the UK Government confirmed the details of the Clean Heat Market Mechanism. This scheme, which comes into force on the 1st of January 2024, is part of the Government’s strategy to decarbonise heat and hot water in homes with the ultimate aim of helping the UK to reach its target of achieving Net Zero by 2050. The impact on our industry is significant and immediate. Here’s what we know so far.
What is the purpose of the Clean Heat Market Mechanism?
The key aim of Clean Heat Market Mechanism is to grow the number of heat pumps installed each year. The overall Government target is 600,000 heat pump installations each year by 2028 in order to reduce carbon emissions produced by our buildings. Installing heat pumps in our homes and buildings removes our current heavy reliance on the gas boiler and fossil fuel heating.
The Clean Heat Market Mechanism will act as an incentive for gas and oil boiler manufacturers to grow their heat pump business through investment and innovation. At the same time, the Government hopes that encouraging existing boiler manufacturers to manufacture and sell more heat pumps will result in lower heat pump prices for homeowners. In turn, the intention is that reducing heat pump prices will increase the currently low homeowner appetite to move away from gas boilers and towards heat pumps.
The intended overall impact of the Clean Heat Market Mechanism is to provide certainty for the low carbon heating industry in the UK in order to secure investment, encourage product development and create long-term jobs. This last point – jobs – is a crucial one. It is essential that the current heating engineer workforce sees long-term value and certainty in making the move to heat pump installations. We need many more trained skilled heat pump installers in order to service Government heat pump targets and maintain high quality standards in heat pump installations.
How will the Clean Heat Market Mechanism work in practice?
It is a controversial initiative that will see gas and oil boiler manufacturers fined if they do not sell enough heat pumps as compared to their gas and oil boiler sales. The scheme will set heat pump targets each year for boiler manufacturers. The fines are substantial, at £3,000 for every heat pump the manufacturer fails to sell below the mandated target.
For 2024/2025, manufacturers of fossil fuel heating appliances will need to hold low-carbon heat pump credits corresponding to:
- 4% of their relevant gas boiler sales above 20,000 units; and
- 4% of their relevant oil boiler sales above 1,000 units.
The targets are strict: gas boilers and Air Source Heat Pumps sold to new build properties are excluded from the scheme. The Government’s focus is on replacing existing gas and oil boilers in homes with heat pumps. Furthermore, the heat pump sale will only count if it has also been installed under the Microgeneration Certification Scheme (MCS).
It is expected that this target will increase to 6% for 2025/2026 and gradually increase annually thereafter.
What is MCS?
The Microgeneration Certification Scheme (MCS) is a recognised mark of quality that certifies low-carbon products and installations used to produce electricity and heat from renewable sources. An MCS registered heat pump installer adheres to industry standards and competently completes high-quality installations. The Government Clean Heat Market Mechanism mandates MCS registered heat pump installations in order to encourage confidence among homeowners in trusting the benefits of this new and emerging low-carbon heating market.
How are boiler manufacturers responding?
Whilst most in the industry welcome the intention behind the scheme and the long-term goal of growing the heat pump market in the UK, the timeframe is challenging for many manufacturers. Aside from the current limited homeowner demand for heat pumps, there aren’t sufficient MCS registered heat pump installers in order to meet the Government targets in 2024. Manufacturers are therefore, understandably, concerned that they will not meet their heat pump targets next year and the Clean Heat Market Mechanism will result in significant penalties.
To mitigate the anticipated penalties, boiler manufacturers are passing on the levy through the supply chain by increasing the prices of all boilers delivered on or after the 1st of January 2024.
As a merchant we, regrettably, have no alternative but to increase our boiler prices in line with each manufacturer’s levy amount. The numbers vary per manufacturer and those that have confirmed their 2024 levy are detailed below:
| Manufacturer | Levy (£)* |
|---|---|
| Worcester Bosch | £120 per boiler |
| Ideal Heating | £110 per boiler |
| Vaillant/Glowworm | £95 per boiler |
| Viessman | To be confirmed |
| Alpha | To be confirmed |
| Vokera | To be confirmed |
| Baxi/Main | £120 per boiler |
| Intergas | To be confirmed |
| Grant Engineering | No levy as quota targets will be met |
| *Please note that these levies are subject to change at the sole discretion of the manufacturer. |
We will update this list as manufacturers confirm their 2024 levy value.
PLEASE NOTE: All orders placed with Richmonds from the 1st of January 2024 will be subject to the corresponding manufacturer’s levy.
What next?
We will keep the position under review and will react as and when the manufacturers are able to amend or remove their CHMM levies. In the meantime, it is important to remember that the aim behind this scheme is to accelerate the decarbonisation of the heating industry. Whilst Richmonds will continue to stock and sell gas boilers, we have invested heavily in our heat pump offering and will continue to do so.
Should you want to learn more about heat pump installation and the transition away from gas boilers we are here to help. Our Sustainable Home Centre partnership with Daikin offers system design, product training and stock of Air to Water, Hybrid and Air to Air heat pumps. If you wish to discuss Daikin products or have an enquiry about an upcoming project, please contact Roy Burgoyne or Chris Morris on 0141 429 7441 or shcglasgow@rphm.co.uk.
All enquiries for other brands of heat pumps can be handled by your local Richmonds Branch. Please do not hesitate to contact our Branches for further information.
Thank you for your understanding in relation to this significant and impactful industry news. We look forward to working together towards a more sustainable and environmentally friendly future for our industry.