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Insights on the Clean Heat Market Mechanism 2024 and Industry Impact

Authored by Marco on December 18, 2023

Industry responds to Clean Heat Market Mechanism 

Next year, boiler manufacturers will be mandated to sell heat pumps equal to 4% of boiler sales under the Clean Heat Market Mechanism, which aims to accelerate the heat pump market. 

The Department of Energy Security and Net Zero (DESNZ) first consulted on a market-based mechanism for low-carbon heating in 2021 and has just published the response to a second consultation along with its plan to implement the scheme in April 2024. 

Response from the industry has been mixed, with key stakeholders welcoming the new scheme, while emphasising the need for wider policy measures to support its success, for example, the need to rebalance the relative prices of gas and electricity and boost the number of qualified heat pump installers to support sustainable growth.

What is the Clean Heat Market Mechanism?

Key points: 

  • From April 2024, boiler manufacturers will be required to sell heat pumps equal to 4% of their UK boiler sales, rising to 6% from April 2025. 
  • Manufacturers will earn ‘credits’ for heat pump installations notified under MCS
  • Heat pump hybrid systems will earn half a credit
  • Those that miss the target will be fined £3,000 for every missing credit 
  • Only appliances installed in the UK will be counted
  • New-build installations are excluded for now, at least until the Future Homes Standard comes into effect
  • Manufacturers can ‘trade’ heat pump credits
  • A surplus of 10% heat pump credits can be carried over into next year’s figures 
  • Companies with sales of less than 20,000 gas boilers and 1,000 oil boilers are exempt
  • The scheme will be administered by the Environment Agency. 

Voices from the Industry:  Reactions to the Clean Heat Market Mechanism 

The CHMM has largely been supported by key industry organisations, however, concerns have been raised about how the government plans to support heat pump deployment on a wider scale. 

Griff Thomas, MD of GTEC, says:

“Implementing the CHMM is a huge step for the government, the likes of which we have never seen before. Alongside changes to the Building Regulations, the CHMM sets the bar for efficiency standards and renewables in law for the first time. It’s natural that there will be some pushback, but ultimately, this is an important step in pushing the low-carbon agenda forwards - providing a safety net for much needed investment in the heat pump supply chain and bringing down costs for the consumer.”

Charlotte Lee, CEO of the Heat Pump Association, says:

“We welcome the clarity provided by the publication of the Government’s response to the Clean Heat Market Mechanism and acknowledge the adjustments made to the scheme which include a reduced penalty payment, the ability to carry forward a larger percentage of unmet obligations, introducing a consistent approach in the new build sector and not introducing a multiplier to penalise unmet targets. 

“Whilst the sector remains concerned about the impact of the scheme on the market given the lack of supporting policy enablers- such as addressing the imbalance between levies on gas and electricity bills to reduce the price of electricity relative to gas, we are committed to working pro-actively with Government and the Environment Agency to support a smooth implementation of the scheme.”

Rebecca Dibb-Simkin, Chief Product & Marketing Officer at Octopus Energy Group, says:

“The Clean Heat Market Mechanism announced today will also give industry the certainty we need to grow heat pump manufacturing here in the UK – securing green British jobs for generations to come.”

Tamsin Lishman, CEO at Kensa Group, says:

I enthusiastically welcome the Government’s confirmation of the introduction of the Clean Heat Market Mechanism (CHMM) from next year. This is a hugely important tool for heat pump manufacturers like us, helping to provide certainty for the future growth of the heat pump market and providing us with the confidence to continue to invest in the UK.

To truly unlock the potential of green British manufacturing, the Clean Heat Market Mechanism must also be accompanied by supporting measures, including action to bring down electricity prices and changes to building regulations to make heat pumps the default option for new homes.”

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