Warning of £300 'boiler tax' on new gas systems if heat pump quotas go ahead
A leading gas boiler supplier has claimed the government's initiative to drive heat pump uptake could cause a £300 rise in gas boiler costs — with another industry expert calling the government scheme a "boiler tax".
The £300 figure has been put forward by Worcester Bosch who stated that it would impossible for them to meet the government's proposed Clean Heat Market Mechanism quotas of 4% of their sales being air source heat pumps, or face fines.
This has led to concerns that the scheme will cause greater costs to consumers. We assess these claims and look at the likelihood of your bills rising because of the Clean Heat Market Mechanism.
What is the Clean Heat Market Mechanism?
The Clean Heat Market Mechanism (CHMM) is part of a broader policy framework aimed at promoting investment and innovation in the heating industry and to make heat pumps more appealing to consumers in the UK.
The CHMM, supported by the Energy Security Bill and Powering Up Britain policies, seeks to provide a clear and stable policy framework along with incentives for the heating industry and the broader market.
The scheme aims to do this by:
- Reducing the upfront costs of heat pumps and support households and building-owners with heat pump installations to kickstart the market;
- Reducing the running costs of heat pumps, including relative to fossil fuel boilers;
- Supporting an expansion of heat pump manufacturing in the UK;
- Growing the numbers of skilled heat pump installers, and maintain high standards in the quality of air source heat pump installations; and
- Supporting a range of other innovations to broaden the appeal, efficiency and ease of adoption of heat pumps.
In order to assist households in adopting heat pumps and to stimulate market growth by achieving cost efficiencies, the government has introduced a set of financial support measures. These include the Boiler Upgrade Scheme (BUS) and the Heat Training Grant.
Why is this seen as a 'boiler tax'?
In order to encourage the uptake of heat pumps the Clean Heat Market Mechanism scheme will force boiler manufacturers to sell a percentage of heat pumps or face fines.
In the first year of the programme (2024/25) manufacturers of fossil fuel heating appliances would be required to sell heat pumps equalling 4% of their UK gas boiler sales exceeding 20,000 units and 4% of their UK oil boiler sales exceeding 1,000 units. Sales outside the UK would not be counted in this calculation — only heat pumps installed within the UK.
In the second year of the programme (2025/26) the credit requirement would increase to 6% of relevant UK gas boiler sales exceeding 20,000 units and 6% of relevant UK oil boiler sales exceeding 1,000 units. Any manufacturer selling below 20,000 units would not be required to meet quota meaning only major distributors will be affected.
These fines have led to several suppliers stating these would have to be passed on to consumers, with Worcester Bosch putting the additional cost per new boiler unit at £300. Mike Foster of the Energy Utilities Alliance, a leading industry body, said the fines would end up feeling like a gas "boiler tax" for consumers.
"The industry knows either jobs will be lost, investment plans hit or the consumer will be asked to pay a boiler tax by stealth," he told The Times.
Boiler suppliers claim 'high risk' of going bust
One of the UK's leading boiler providers claims it will be forced to raise its boiler prices due to the government's Clean Heat Market Mechanism.
Carl Arntzen, the Chief Executive Officer of Worcester Bosch, claims: “The price of a boiler currently within the supply chain is anything from about £700 to £1,000. In some cases, for the top end of our models, we’re having to look at around a £300 price increase. There is a high level of risk that they will put us and three other boiler manufacturers out of business."
He added that the fines that Worcester Bosch would incur over a four-year period would be "close to turnover."
Worcester Bosch sold approximately half a million boilers last year, along with about 1,200 heat pumps. However, the company anticipates that it will sell equal numbers of both by 2030.
Worcester Bosch pointed out that the UK heat pump market had not yet reached a "sufficient scale". As a result, the company believed it was "inevitable" that it would face fines due to regulatory changes, which would ultimately be passed on to its customers.
The company claims that this decision was "not a commercial decision" but a response to changes in the law.
But government says fines are necessary
Government officials view the expansion of efficient electric heating systems, particularly when replacing fossil fuel heating, as a critical strategy to reduce carbon emissions.
Presently, around 86% of households depend on gas boilers, which significantly contributes to the country's greenhouse gas emissions and around 25% of all UK greenhouse gas emissions are associated with building heating.
The official documentation relating to the Clean Heat Market Mechanism underscores the urgency of expanding the heat pump market.
It states: "It is crucial that we rapidly increase the heat pump market to reach approximately 600,000 installations per year by 2028, positioning heat pumps as a mainstream consumer choice alongside gas boilers, of which about 1.8 million are currently installed annually."
In response to the concerns about rising boiler costs officials from the Department for Energy Security and Net Zero clarified: "No manufacturer will face penalties or need to raise the prices of gas boilers. The scheme aims to establish attainable targets, offering the industry flexible options to support our goal of making heat pumps an affordable, cleaner, and appealing option for households nationwide."
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