Energy UK response to the DESNZ Consultation on the Clean Heat Market Mechanism: proposal to change the scheme start date to 1 April 2025

Postponement of CHMM Implementation

It is deeply frustrating that implementation of the Clean Heat Market Mechanism (CHMM) has been postponed by one year, and that the decision-making process was progressed without industry engagement. The world is moving towards low-carbon and the UK has the potential to be a global leader, resulting in economic growth, job creation, and export potential. Energy UK agrees with the Government’s vision that heat pumps and heat networks are the primary technologies for decarbonising home heating in the coming decade. As such, the market for these technologies must be a core focus of government policy in the present, and Energy UK supports the CHMM as a critical part of delivery and welcomes the recommitment from the Government to delivering the mechanism, even if later than initially planned.

Industry accepts the Government’s decision and welcomes the recommitment to implementing the CHMM with the same targets and trajectory in 2025.

Had the decision to postpone the CHMM been consulted upon with adequate time ahead of the initial intended implementation in April 2024, Energy UK would have opposed delaying the mechanism. At present, the supply chain has been impacted by the lack of certainty given by the Government to the degree that there is no other option but to delay the mechanism until April 2025. In light of this delay, it is critical that:

• The Government implements the supporting statutory instrument for the CHMM as soon as possible to give the supply chain and consumers the confidence needed to invest toward the necessary increase in market share.
• The UK implement the CHMM in 2025 to deliver on its decarbonisation potential, as households represent around 17% of UK emissions.
• The approach to the CHMM and wider coordination of policy to establish sustained growth in demand for heat pumps be used to give much-needed clarity to the sector so that businesses can invest with confidence in the UK, creating new jobs and delivering sustainable growth in the market towards the 2028 annual installation target of 600,000.
• That government consults on the rebalancing of levies between electricity and gas at the earliest possible opportunity.

Energy UK is concerned by the tactics deployed by boiler manufacturers in recent months:

In the run-up to the original CHMM implementation date, several boiler manufacturers claimed that they would not be able to meet the obligations of the CHMM and were obliged to increase the cost of gas boilers to offset fines for non-compliance.

• Industry did not expect boiler manufacturers to experience a financial impact from the CHMM until at least 2026 under original targets. Before the CHMM was scheduled to begin in April 2024, heat pump sales were already in line with the 4% of UK sales mandated by the scheme, with the exception that recent market growth will continue.
• Despite evidence manufacturers were unlikely to face fines, some companies increased the cost of their gas boilers and stated that this was a direct result of the CHMM.
• Boiler manufacturers are yet to reduce their prices in light of the deferment of the implementation date, nor has there been any rebate on the costs already paid by consumers towards the ‘boiler tax’ applied by these manufacturers.

The Competition & Markets Authority (CMA) review of the market is thus a welcome and necessary step. In the future, Energy UK and its members hope that the Government will work with industry to ensure accurate and appropriate messaging and pricing practices are seen across the heat sector, including actions by boiler manufacturers but also in the accuracy of marketing for all heat technologies.

If you have questions about this response or would like to engage with Energy UK or its members further regarding the CHMM and clean heat policy, please contact us and we will gladly engage where most helpful.

Kind regards,

Oisín Joyce
Policy Manager
oisin.joyce@energy-uk.org.uk

Charles Wood
Deputy Director
Charles.wood@energy-uk.org.uk