The Clean Heat Market Mechanism (CHMM)
With recent record highs in international gas prices and long-held UK targets to reduce emissions to net zero by 2050, the UK government has confirmed that it will be introducing the Clean Heat Market Mechanism (CHMM) on the 1st of January 2024.
As a part of wider policy measures, the scheme is designed to encourage the installation of more energy-efficient heating appliances, like heat pumps and hybrid boiler models.
To put it simply, the CHMM will disincentivise the manufacture and sale of traditional gas and oil boilers by applying a manufacturer penalty for every boiler sold (or, inversely, each heat pump not sold) above a certain threshold.
The CHMM will require UK boiler manufacturers to sell a proportion of heat pumps each year based on the sales of their gas and oil boilers to achieve a target ratio.
2024’s target is 4% of all fossil fuel boiler sales over 20 thousand units and is set to rise each year as the Government plans to grow the energy-efficient appliance market towards 600 thousand installations per year by 2028.
The mechanism also means that if a manufacturer fails to meet their required quota of heat pumps for the year, they will receive a £3,000 fine for each one they’re below.
Many manufacturers are already reporting that these targets will be unachievable.
To put these into perspective, the Government expects the 4% target to equate to roughly 60 thousand heat pumps for the first year of the scheme. But even with wider government policy reducing the cost of heat pumps and increasing the amount of qualified installers, less than 18 thousand heat pumps were installed in the first half of 2023, showing that significant growth is still needed to reach next year’s target.
Because of these challenges, it has now been confirmed that suppliers will be forced to pass on the cost of these fines to customers, leading to an industry-wide price increase on boilers from the start of next year.
Out of the LNPG partners, Worcester Bosch, Baxi and Ideal are the first to announce price increases in the form of a ‘boiler tax’ to help pay towards the fines. These increases will be in the region of £100 to £150 per boiler.
While we expect our remaining manufacturer partners to follow suit eventually, it is worth noting that with the 20 thousand unit threshold, smaller manufacturers may be able to offset or bypass this measure for a time – Intergas have confirmed that they plan on no increase for 2024 on the back of this plan as of yet.
And our final manufacturer, Alpha, have confirmed that they are waiting until the 1st of February, before they make decision in regards to price rises.
Find Worcester Bosch and Baxi’s full response to the implementation of the CHMM below:
Or for more information about the Clean Heat Market Mechanism: