Clean heat market mechanism

In April 2023, Department for Energy Security & Net Zero (DESNZ) issued a consultation on its proposed heat market mechanism. Its purpose is to support the development of the UK market for heat pumps, and the plans directly impact on boiler manufacturers.

Scottish Heat in Buildings strategy

The idea is to force boiler manufacturers to make heat pumps or pay other manufacturers to do so on their behalf. This is achieved by making the manufacturers obtain tradeable credits – for the heat pumps they make or those made on their behalf – as a proportion of their total boiler production. The scheme is scheduled to begin in 2024/25 and that year a manufacturer would need credits equalling 4% of their total boiler production. In 2025/26, that would rise to 6%, and the requirement is expected to increase further in future years.

The plan applies to all types of fossil fuel boilers and to all manufacturers that make more than 1,000 appliances each year. Hybrid systems are also included, and a heat pump/fossil fuel boiler hybrid system would be worth half a credit.

The scheme is controversial but shows the Government is doubling down on its efforts to boost the heat pump market. It claims that the proposed mechanism will create a market incentive to grow the numbers of heat pumps installed in existing premises each year, providing industry with a clear, long-term policy framework for investment and innovation. The manufacturers argue that they will be forced to make or obtain credits for heat pumps whether there is a market for them or not, and that the scheme could make boilers more expensive.