Your guide to the Clean Heat Market Mechanism
Everything you need to know about the new government initiative designed to boost heat pump installations.
If you’re thinking about replacing your boiler, you might have heard of the Clean Heat Market Mechanism. Or you may have heard of it being referred to as a ‘boiler tax'. But what is the Clean Heat Market Mechanism, why has it been introduced and how could it impact your home and your heating?
In November 2023, the government confirmed that the Clean Heat Market Mechanism would launch on 1st January 2024, and it’s expected to come into effect from April 2024. It’s a new policy aimed at helping us reach our net zero targets by improving the energy efficiency of our homes. The policy hopes to achieve this by increasing the number of households choosing to heat their homes with air source heat pumps instead of heating systems fuelled by oil or gas.
How does the Clean Heat Market Mechanism work?
Under the Clean Heat Market Mechanism, each company that manufactures heat pumps as well as traditional boilers will need to meet targets for installing heat pumps. And they’ll be fined for each ‘missed sale’ of heat pumps if they fail to meet their targets. The Clean Heat Market Mechanism won’t impact boiler companies that don’t also manufacture heat pumps and won’t include new-build homes in its calculations.
In 2024, boiler manufacturers must match 4% of their gas boiler sales with heat pump sales and installations, and these targets will increase in subsequent years. If they don’t meet the target, they’ll be fined £3,000 for each heat pump sale they fall short by.
So, if a company sells 100 gas boilers, they' need to sell at least four heat pumps. If they only sell two, they’ll be penalised £6,000 because they are two heat pumps short of the target. Given that up to 1.7 million domestic-scale natural gas boilers are installed in the UK every year – the potential fines could be huge.
Why has the Clean Heat Market Mechanism been introduced?
The UK has committed to reaching net zero by 2050, which means taking action to reduce our carbon emissions and lower our climate impact. Heating our homes and businesses is one of the leading sources of the UK’s carbon emissions. The majority of the UK’s homes use gas or oil central heating, both of which are fossil fuels.
Switching to electric heating will help us to rely less on fossil fuels and so help us to decarbonise and achieve net zero. According to the 2021 census, only about 9% of UK households have electric-only heating.
The government wants to increase this share and has set a target of installing 600,000 heat pumps a year by 2028 – and it hopes that the Clean Heat Market Mechanism will help drive sales of heat pumps as an alternative to oil or gas boilers.
Will the Clean Heat Market Mechanism increase demand for heat pumps?
That’s the hope, and things are moving in the right direction. 2023 was a record year for heat pump installations with over 35,000 - taking the UK to over 200,000 in total since 2008.
The Boiler Upgrade Scheme was introduced in April 2022, and gave homeowners a grant to help with the cost of installing a heat pump. In October 2023, the government increased the grant to £7,500, which led to average demand for it soaring from 331 a week to 1,172.
What will the Clean Heat Market Mechanism mean for me?
If you’re planning on replacing your boiler, the Clean Heat Market Mechanism could impact your decision because it will increase the price of boilers. Boiler manufacturers say that the targets are unrealistic because of a lack of both demand and trained installers - so fines are inevitable. And that they will pass these costs on to customers. Brands including Worcester Bosch, Baxi, Ideal and Vaillant have already said that they will be increasing their boiler prices by £95-£120 as a direct result of the Clean Heat Market Mechanism.
They say that they will not profit from these price hikes because the money will go straight to the government. Installers and manufacturers also point out that any money the government receives as a result of the Clean Heat Market Mechanism won’t go back into the industry where it could be used to research low-carbon heating, train new heat pump installers or even fund heat pump installations.
Do I have to get a heat pump when my boiler needs replacing?
No, of course not. And here at British Gas, we’re here to help you with heating your home – whether that’s with an energy efficient new boiler or a low carbon heat pump.
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