The £600 Gas Boiler “Tax” Coming Your Way
By Paul Homewood
I mentioned the Clean Heat Market Mechanism last week. This is the new government scheme which will fine UK gas and oil boiler manufacturers if they don’t hit targets for heat pump installations.
Worcester Bosch have produced this factsheet:
On 30th November 2023, the Government published their long-awaited response to the Clean Heat Market Mechanism (CHMM) which as of the 1st January 2024 will become effective with some minor amendments.
The CHMM is intended to increase the slow uptake progress of Heat Pumps by placing an obligation on boiler manufacturers to increase the consumer demand for heat pumps or hybrid systems.
Why has the Clean Heat Market Mechanism been introduced?
The CHMM was introduced to aid the UK in its commitment to achieving Net Zero CO2 emissions by 2050 and to reach this goal, the Government is targeting 600k heat pumps to be installed annually by 2028.
The CHMM has been developed to speed up the adoption of heat pumps in UK homes as the present installation rate for heat pumps is around 60,000 annually, whilst the installation rate for boilers is upwards of 1.5m.
To achieve the target of Net Zero it is necessary to use alternative technologies to heat our homes. Whilst there are several technologies being trialled and developed the most immediately available is electrically powered heat pumps or hybrid systems.
One of the highest contributors to CO2 is from home heating and hot water production which is estimated to account for 16% of the national total. Currently, natural gas-fired heating and hot water systems are presently installed in around 23m UK homes with a further 1.5m homes that are off the gas grid using Oil or LPG.
How this effects Worcester Bosch?
In year one of the scheme, manufacturers of boilers and heat pumps will have to match or substitute 4% of their boiler sales with heat pumps. This rises to 6% in year two and gradually increases year on year until around 25% of their boiler sales are matched or substituted with heat pumps or hybrid systems.
Manufacturers must submit their ‘factory gate’ boiler sales to the scheme managers so their target quota of heat pumps can be set. The quota can only be met by;
- An installed and registered heat pump via MCS, (Micro Certification Scheme).
- An installed and registered heat pump with MCS will qualify for one credit towards their target, a hybrid system qualifies for 0.5 credits.
- Heat pump sales into retrofit situations, (Heat pump installations into new build use cases are excluded).
For every heat pump or hybrid that the manufacturer is short of their target they will be fined £3,000 or alternatively they may have the opportunity to purchase a credit from a non-obligated heat pump manufacturer (that is a heat pump manufacturer who doesn’t sell boilers).
According to industry forecasts, the market for heat pumps for 2023 is likely to be around 65,000 units and central forecasts show the market increasing to around 80,000 appliances in 2024, with around half of these being installed into new build applications (and therefore not being counted towards a target quota within the CHMM).
This will result in a 2024 retrofit market of around 40,000 heat pumps for all manufacturers to compete for. Based on a boiler market of over 1,500,000, the CHMM is setting targets of around 60,000 into retrofit installations in year one (currently 50% above the forecast market size for this type of installation) and increasing to 90,000 in year two before rising to 450,000 in year four. In short, the heat pump market will not support the volume the CHMM requires, and penalties are therefore inevitable.
Achieving the Clean Heat Market Mechanism quota
We have been consulting with the Government over the past year on how the CHMM can be delivered.
The impact assessment for the CHMM was published in April 2023 and this has now changed given recent developments, namely the Prime Ministers statement in September 2023 which included the following changes:
- The deferment of the ban on Oil and LPG boilers from 2026 to 2035, (effectively reducing the market potential for heat pumps until that date by upwards of 60,000 heat pumps or hybrids annually).
- The announcement that around 20% of homes will be exempted from having a heat pump.
- The scrapping of a requirement for Landlords to raise the EPC rating of their properties to a Band Level C by 2028.
Clean Heat Market Mechanism implications to Worcester Bosch
The final CHMM scheme announced on 30th November 2023 does not exist at sufficient scale in the UK domestic market for manufacturers to satisfy the proposed CHMM quotas and will result in significant penalties for the gas boiler industry.
Whilst the government is stating that the scheme has been designed to not penalise manufacturers with fines, the targets that have been set are clearly unachievable within the timescales allowed. Therefore, it is inevitable that manufacturers will be fined heavily which puts many of them into either a non-profit situation or even loss making from as soon as years one or two of the scheme.
Consequently, to continue as a business we are regrettably forced to pass these fines on to the market in the form of a CHMM levy on every one of our gas & oil boilers. The increase is £120 per boiler in year one of the scheme, exactly equivalent to the CHMM requirement. Worcester Bosch will not benefit in anyway and interestingly, neither will market growth for heat pumps as the revenue raised from the fines will go to the Treasury and not be used to grow demand for heat pumps. This does, however, support the governments’ overall goal of closing the price gap between a gas boiler and heat pump installation.
We will continue to monitor and observe the scheme and will remove or reduce this “CHMM levy” in line with policy changes or exponential growth in heat pump demand though both currently seem unlikely to materialise in the near future.
https://www.worcester-bosch.co.uk/about/news/clean-heat-market-mechanism
As they note, next year they must hold credits representing qualifying heat pump installations equivalent to 4% of their sales of gas and oil boilers. This equates to a target of 60,000 heat pumps next year.
To complicate matters, there is a minimum threshold as the DESNZ explain:
If a manufacturer does not sell enough heat pumps, it must buy credits on the market, or pay the fine. According to Worcester Bosch, the UK market for heat pumps next year is likely to fall about 20,000 short of the 60,000 target, though individual manufacturers will be worse affected in relative terms if they don’t sell heat pumps. (Heat pump installations in new homes are excluded from the scheme).
But next year is just the tip of the iceberg, as the heat pump target is dramatically increased in the next few years. In 2025, the target will rise to 6%, but the Government plans to increase to raise it to 400,000 units by 2028, effectively around a quarter of all boiler sales:
This simply is not going to happen. If customers don’t want to buy them now, even with big government subsidies, they won’t want them in four years time either. The Government certainly won’t be able to afford to hand out subsidies at that level anyway.
If heat pump sales remain around 40,000 a year, that would leave a shortfall of 360,000. And at £3000 a time, that adds up to an industry fine of £1.08 billion in 2028, or about £600 per boiler.
In short, if you dare to defy the government and have a gas boiler fitted in five years time, you must pay a £600 fine.
FOOTNOTE
The Government’s Consultation Document considered the question of non-UK manufacturers:
In other words, they want to extend the Scheme to non-UK manufacturers. I suspect the chances of that happening are net zero!
Will a manufacturer in, say, Germany willingly pay millions in fines? Silly question really.
And there is nothing legally that the Government can do to enforce it. If it tries to punish that business in some other way, the EU would quickly react.
With UK manufacturers facing fines that could literally put them out of business, we will quickly see imports replacing UK manufacture and loss of jobs.
Comments are closed.
NOT A LOT OF PEOPLE KNOW THAT 
If heat pumps were better than gas or oil boilers, consumers would be falling over themselves to buy them. We live in a country where politicians and civil servants are the most stupid people in the country (either that or they are determined to reduce the country to third-world status).
Or both
The supposedly free market Tory party is now meddling with the market for both gas boilers and ICE cars, with manufacturers bring fined if they sell too many of either. This really is an outrageous interference with the free market and will kill off car and boiler manufacturering in the UK
All to appease the great God of climate change
Spot on. Tory = socialism these days (see its 5-year plans, akin to those of the USSR and CCP)
I see this is needed to achieve Net Zero. Could someone explain what proportion of the Net Zero ambition is heat pumps? Is it three per cent? Or forty three per cent? I’m joking of course. Nobody has the faintest idea what Net Zero means or what targets have been set for various activities or how they will be achieved. It’s a ludicrous scam. Sell Octopus Energy.
Spot on, nobody in authority can say what net zero means !!
Is it not time to attack the whole foolish proposition of CO2 caused climate change? After about 40 years of hype (and 28 COPs) there is no real evidence of anthropogenic influence on climate, or even the small temperature rise since the LIA. The much vaunted mathematical models of the climate are purely input-controlled models which cannot be validated (aka GIGO models). As noted by others here all this madness would achieve is to further reduce the already pathetic level of UK manufacture of small boilers. This is similar to when we used to import cars directly from the EU when they were cheaper than in the UK.
Yes, definitely, the whole scam should be called out as often as possible. Van Wijngaarden and Happer show conclusively that increasing CO2 will have almost no effect, certainly not worth destroying modern society for (and driving the poor and weak into an even worse condition).
https://co2coalition.org/publications/van-wijngaarden-and-happer-radiative-transfer-paper-for-five-greenhouse-gases-explained/
Where will the electricity come from to power these pumps which need to run constantly in the Autumn, Winter and Spring?
Mostly gas turbine generators that make lots of Co2.
Lunacy.
Even Royal Society spotted that it won’t come from unreliables, of course it is mad enough to think that stored hydrogen will solve the ‘dunkleflaute’ (anticyclonic gloom) issue.
The whole climate change fraud is nothing to do with the Climate but about destroying the economy of Western countries .
https://www.investors.com/politics/editorials/climate-change-scare-tool-to-destroy-capitalism/
And the net zero insanity cannot work as it was stated by a Government climate committee in 2016 that electric home heating was impossible as it would need a 400% increase in generation capacity in the UK .
But facts have never yet stopped the relentless propaganda from politicians who are in on the scam , [ or just stupid ,] and the media who say what they are told to .
Correct, this has nothing to do with Climate Change, it is all to do with with “Control” as is required by the WEF and UN Agendas.
The writing has been on the wall since Agenda 21 was first published.
I continue to believe we would get very little traction attacking the science – people are too convinced and too happy to accept Authority. But the costs are now becoming clear and becoming close. We are going to be a lot poorer and a lot colder. People are going to start to realise that.
I tend to agree with you that currently the global warming lunacy is far to embedded and driving a $2trillion industry. The lukewarmer stance of agreeing with their religion BUT putting forward mitigation schemes should any of the forecast outcomes actually arise. Bjorn Lomborg follows this path and I think Richard Tol as well. And we all know that NO prediction they have made has ever come true. The unreliables industry will slowly wither as has already started, and in time the religion will die away.
“and in time the religion will die away”
But it will be replaced. It is a communist tool. When the tool loses its edge, they will bring forth a new one. Communists are not going away just because they lose a battle.
“There is no finish line.” — Nike
I have seen reports, for example by Nir Shaviv, CO2 and temperature changes. There is one cause of temperature rise, that’s the Sun. And I have seen graphs that show CO2 levels follow solar activity and solar activity or inactivity affects global temperatures. High CO2 levels do not cause temperatures to rise, rather rising temperatures result in higher CO2 levels. And temperature changes result from what the sun is doing.
Surely they will be fitting at least 650 heat pumps in the homes of the idiots that thought this was a good idea? Ask your MP if they have heat pumps in all their homes!
‘….a manufacturer can purchase a credit….’ That’s a bit like saying, if you don’t make target we’ll send the boys round for protection money.
Government levied fines are a ‘market mechanism.’
And slavery is freedom; war is peace.
Spot on Gamecock. Orwell would be proud of the Government labelling something that is the opposite of a “market” a Market Measure. Controls, subsidies and fines DO NOT MAKE A MARKET. They destroy the market – a classic example of doublespeak. Rant over
Sorry, Paul, I can’t “LIKE” this article: – the subject that is.
It stinks! We’ve gone BACK to oil 2-3 years ago and wished we’d done it a Looooonngg time ago. Cheaper! Pshhht! Rayburn with Wicks – no electricity, More than just lo-grade background heating + Cooking & Hot water. + NO ashes to clear from Stove. What’s not to like: Whether heating a wee lammie or melting plastic for a project in the oven or simply good cooking from Toast to whatever. We have an Oil Boiler as standby ( so long as there’s power, or we’ll have to crank up a generator and turn on Air heaters whilst it’s running.
I’ve been given that book “How the Scots invented the modern world” … by the end of the first 25 pages( & I hate remembering things / quotes ) I can see parallels in our society – from before covid to current day. Aye to be happy, you must have a Hunger for Complying & Conforming. and that’s as Gramps says, we learnt to think for ourselves. That was then, “GetUp”
https://joannenova.com.au/2023/12/saturday-37/ Dennis said ” ….helped establish the US model here called GetUp activist organisation and Shorten was appointed to the GetUp Board of Directors. Obviously GetUp supports the Greens and Pale Green Teals masquerading as Independent candidates ignoring their Climate200 backer.”
‘One of the highest contributors to CO2 is from home heating and hot water production which is estimated to account for 16% of the national total.’
16% is one of the highest?
Lemme see . . . 16% of <0.04% = <0.0064%
That'll save duh planet! Who wouldn't spend thousands for that?
The 0.04 % is the percentage of CO2 in the atmosphere .
But about 97% of that is not from human production , and another 99% of that is not from the UK .
So the actual saving would be 0.000001 % if the UK went heat pumps .
Get real. I provided the maths.
My numbers speak for themselves. You confuse atmospheric content with generation.
It is a shame your maths do not include the real facts .
Of the 0.04% CO2 in the atmosphere , only about 3% of it comes from humans , [ even the IPCC admits it is less than 5% ,] .
And of all of the human produced CO2 in the world , only about 1% of it comes from the UK .
So the UK total is just 0.00001% of the atmosphere , and with just 16% of that from heating ,the real figure is 0.000001%
The £600 Gas Boiler “Tax” just think about that for a second….you can actually buy a good quality gas combi boiler for £600. Trust me, I have!
https://www.screwfix.com/p/ariston-e-combi-one-gas-lpg-combi-boiler-white/330rx
So why isn’t the main stream media shouting out loud “Government to double the cost of your heating”?
VERY well put , Ray.
Ariston, being Italian, will be exempt from the tax.
Yep exactly, so why would anyone buy a British manufactured model….oops.
Surely, if a manufacturer is to stay in business, one thing they will try to do is to reduce the price of their heat pumps. That will inevitably produce heat pumps that fail immediately they are out of warranty through being of low quality.
So government policy is going to produce widespread failure of installations across the country. People are always slow to react but this is going to cause a major political storm as people start to freeze.
But what are manufacturers supposed to do? They will all exit the market and attempt to divert into producing something else. And will they be persecuted for doing that?
the present installation rate for heat pumps is around 60,000 annually, whilst the installation rate for boilers is upwards of 1.5m
That’s > 25 boilers per 1 HP, despite hefty HP subsidy. The government is on a massive loser.
So let’s be very, very clear what this.
It is a fine on consumers for buying what they want rather than what the governments thinks you should buy.
It is a fine for a consumer who buys something legal.
It is a fine for consumers who don’t want to buy something more expensive and more costly to run that doesn’t work as well.
Let’s make sure everyone understands this.
But . . . but . . . if we call it a ‘market’ mechanism, no one will realize it’s totalitarian.
“We thought you Conservatives liked markets?”
Also interesting:
https://www.euractiv.com/section/energy-environment/news/european-heat-pump-sales-are-collapsing/?utm_source=website&utm_campaign=popular
From Democracy to Totalitarianism.
A system of government by the whole population or all the eligible members of a state, typically through elected representatives.
TO
A system of government that is centralized and dictatorial and requires complete subservience to the state.
Fining reputable companies for not persuading the general public to buy heat pumps (and battery cars in another mad scheme) is just unacceptable.
The basic economics of the plan is totally wrong, it will distort the supply/demand curve so much that a £800 gas boiler (screwfix price but installation will be extra £300) will cost £1700 but a heat pump will still cost £12000 plus radiator and pipework upgrades, less the governments £7500 subsidy which is at least £4500.
So a heat pump costs the taxpayers £7500 and a new boiler costs the customer an extra £600 and the heat pump costs £4500+
Everyone is worse off, to meet the mythical net zero plan, which is never going to make any difference to the temperature.
Plus the cost to rewire the grid and the local distribution street cabling plus the fact that electricity is 400% more expensive than gas, and the COP of the heat pump is only 2.6.
It is just not been thought through, there has to be an audit of the Climate Change Committee, they are driving this stupidity.
Geoff you may find this article regarding real world COP interesting.
Click to access p15-18_klein.pdf
thanks, it shows that operation around 3 or 4 degrees Centigrade, typical in UK winter is rather inefficient due to icing up needing heating by resistive or reverse running to clear the ice may knock up to 1 of the COP, while in Scandinavia with temperatures below 0 degrees centigrade they actually run more efficiently
Our MP is stupid and appears unwilling to listen to any argument that does not come from CCHQ.
Just how will the boiler mfgrs INCREASE demand for products with low-no demand? Time for some magic unicorns again, like they used on the wind mills.
They won’t. Remember:
You will be poor
You will be cold
You will be hungry
You may lose your job
You may lose your car
You may lose your home
Net zero – you will lose any kind of normal life, or indeed your life altogether.
I thought you were going to break into Talking Heads “Once in a lifetime”.
”
You will be poor
You will be cold
You will be hungry
You may lose your job
You may lose your car
You may lose your home
”
But you will believe !
You may not have enough energy to access the ‘water flowing underground’. ‘And you may say to yourself “My God! What have I done?”‘
Cut down all the forests for charcoal for indoor cooking fires in the case of much of Africa despite adequate hydrocarbon deposits (coal currently sold to Germany).
Forcing people to pay double for a heating device that works is bad enough but forcing short miserable lives on African women for lack of affordable energy and piped water is a great deal worse.
A Talking Heads fan; well stated. “Am I right, or Am I wrong?”
“You will own nothing and be happy”
YCNMIU department:
https://www.gov.uk/government/news/new-uk-levy-to-level-carbon-pricing
That includes steel and concrete. One source estimates 180,000 tonnes of steel are needed to build 1GW of offshore wind. Another reveals that blast furnace steel produces 2 tonnes of CO2 per tonne of steel, so that is 360,000 tCO2/GW. The border tax is supposed to equalise UKA costs. At the moment, UKA is way below target. The latest official forecast suggests around £100/tonne CO2e in 2023 money by 2027:
https://www.gov.uk/government/publications/traded-carbon-values-used-for-modelling-purposes-2023/traded-carbon-values-used-for-modelling-purposes-2023
So that is a tax of £36 million per GW on the steel. Bet that isn’t included in the bids firms have been making for CFDs.
The figure I have seen for the Rampion fixed offshore wind farm is that the steel tower for the 3.45 MW turbines uses 167 tonnes of steel which works out I think to 48K tonnes/installed GW, not 180K? Perhaps the 15MW turbines use more steel?
I also think that £36m tax per installed GW of steel is unlikely to be important when compared to the £2.3bn/installed GW for fixed offshore build costs (Triton Knoll) which are now even higher by at least 40% after the failure of AR5 to obtain any bids.
More important is the damage to the environment. Fixed offshore wind requires 1000 times more concrete and steel per unit of power than large scale nuclear (Hinkley Point C). As well as providing no energy security when the turbines are supplied by a state described by our security services as “hostile” and when they spread out over large areas of the North Sea with highly vulnerable undersea cabling. This is in addition of course to their inability to provide reliable dispatchable power without a very expensive parallel energy system for storage and generation, so expensive in fact that the 2023 NG ESO FES energy flow diagrams show no storage for either the decarbonisation date of 2035 or the net zero date of 2050. I’m glad I will not be around to experience energy rationing and rolling blackouts.
So unless this lunacy is stopped quickly, the boiler manufacturers in the UK will close and ensure that more real jobs are lost as part of the green plan.
Move your business to South Carolina while the best sites are still available!
https://www.sccommerce.com/buildings-sites
This problem calls for some imagination!
What’s to stop UK-based manufacturers relocating their head office out of the UK, for example to the Republic of Ireland? (As a bonus corporation tax rates in the RoI are much lower than in the UK)
Boilers could be manufactured in the UK under licence for export only. Perhaps they wouldn’t be subject to government penalties as stated?!
Once ‘exported to RoI they could be re-imported and ‘distributed’ in the UK under licence by ‘wholesalers’.
Manufacturers would be making for export-only and therefore not falling foul of UK-only laws, while the non-UK based importers would therefore be out of the reach of HMG, at least in principle.
I don’t have the legal knowledge to give a definitive legal route-map here but obviously corporate lawyers could do just that.
If it’s possible this will happen, because manufacturers will have no choice.
A possibility, Mr Red.
But the bigger question for corporations is, “Do we want to try to continue to operate in such a totalitarian state?” The answer will have them moving their capital off shore.
The games won’t last long.
Exactly. Government are playing stupid games, they should expect to win stupid prizes.
No wonder the Isle of Man seems so attractive to “foreign manufacturers”
https://www.dnb.com/business-directory/company-information.manufacturing.gb.na.isle_of_man.html
Fancy setting up a boiler manufacturer or EV manufacturer just on the outskirts of Douglas or Peel? I bet they wouldn’t turn us away!
I am being thick, if your company makes boilers and not heat pumps how can they fine you for not selling heat pumps?