Following hints in the Autumn Budget, the Government has now revealed some of the much-anticipated detail of its plans to deliver warmer homes and cleaner heating.
The announcement from Minister for Energy Consumers, Miatta Fahnbulleh, included significant statements on funding, regulation and innovation. In reactions to the announcement, industry leaders have generally welcomed the new measures, but also highlighted vital areas which haven’t been addressed.
While there’s news on the Boiler Upgrade Scheme, the Clean Heat Market Mechanism, heat pump planning rules and minimum efficiency standards in rental properties, some omissions are apparent.
These include any updates on the Future Homes Standard, the price of electricity versus gas and the phasing out of boilers. In fact, one of the associated reports acknowledges that 10 million new boilers will be installed over the next decade, despite all the measures to grow the clean heat market.
Here, we take a look at the latest developments and round-up some of the reactions.
Reformed Clean Heat Market Mechanism (CHMM)
The long-awaited and much-debated CHMM will be introduced on April 1, 2025, albeit with a few key changes to the proposals that were previously consulted on. It aims to ‘make heat pumps an even more attractive choice for households and boost sales without penalising those buying a new gas boiler’.
As part of the changes, the payment-in-lieu, or ‘fine’ that boiler manufacturers have to pay for missing heat pump installation targets (set as a percentage of boiler sales above 20,000 units), is to be reduced from £3,000 to £500.
Secondly, the period over which boiler sales are counted will be adjusted to give manufacturers more time to scale-up and prepare. This will now run from April 1, 2025 to March 31, 2026, rather than January 1 to December 31, 2025.
Extra funding for the Boiler Upgrade Scheme (BUS)
An additional £30m has been promised to the BUS this financial year, with the budget for the next financial year to be almost doubled to £295m. The scheme offers households a £7,500 grant towards the cost of heat pump installation and received its highest ever number of applications this October.
Changes to air source heat pump planning rules
The planning rule which requires heat pumps to be installed at least one metre from a property’s boundary is to be removed early next year. This means more households will be able to install an air source heat pump without applying for planning permission.
£3.2 billion for warmer homes
Up to 300,000 social and lower income households are expected to be supported with funded energy efficiency upgrades including insulation and low-carbon heating through the Warm Homes: Social Housing Fund and Warm Homes: Local Grant in 2025-26.
Energy efficiency standards
Energy efficiency standards in rental properties and the obligations of landlords in this respect have been talked about for several years. In this announcement, the government says it will consult on new plans to increase minimum standards for all rented homes by 2030. This, it says, will lift over one million households out of fuel poverty.
Boiler and heat pump efficiency standards
The Government will also consult on plans to increase energy efficiency standards of boilers and heat pumps, which it says will save households £30 per year on the running costs of a new gas boiler.
Backing British manufacturing
Over £5million has been invested in Ideal Heating as the first award from the new Heat Pump Investment Accelerator competition, designed to kickstart a homegrown heat pump industry. The Government says it will also work with trade unions to ensure good jobs throughout the supply chain.
This latest announcement follows the publication of a report into how the Government might achieve clean power by 2030.
Industry responses
Kensa CEO, Tamsin Lishman commented: “Policy certainty and stability are critical for continued investment in the UK’s heat pump sector and its ability to support green growth. Kensa plans to increase its manufacturing output and installations twenty-fold in the next five years, but this is heavily reliant on the right government policies, at the right pace.
“Today’s announcements are major steps in the right direction. Much-needed clarity on the Clean Heat Market Mechanism, early details on the Warm Homes Plan and funding commitments for clean heat schemes all help provide that certainty that businesses need to make investment decisions.
“However, there are still important gaps in the framework. We don’t have a Future Homes Standard, a central policy for cutting our ties with gas and normalising heat pumps in UK homes. This, and a plan of action to reduce levies on electricity bills, are urgently needed to help make heat pumps both the environmental and economic choice.”
On the Clean Heat Market Mechanism:
“We strongly welcome today’s confirmation of the introduction of the Clean Heat Market Mechanism next April,” Tamsin said. “This policy is critical to the expansion of the UK heat pump market, driving up installation numbers and giving the industry confidence to invest and scale up.
“Just like the Zero Emissions Mandate in the automotive sector, we expect this scheme will help drive down heat pump prices and increase installations. Reducing the initial level of penalties levied on boiler manufacturers strikes a sensible balance between getting the policy in place quickly and addressing concerns about possible market disruption. We urge the government to keep the scheme under scrutiny and make adjustments as necessary to ensure the scheme delivers on its intended objectives.”
Another welcoming the clarity is Griff Thomas, MD for GTEC & Heatly, both of which are part of the United Living Group who said: “The Clean Heat Market Mechanism provides much-needed clarity for the industry, encouraging investment and supporting the scaling up of heat pump supply chains.
“This time around, it seems that manufacturers have broadly welcomed the proposals, demonstrating the benefits of a collaborative approach to developing practical policies that balance industry needs with the UK’s net zero goals.
On the lack of a Future Homes Standard:
Tamsin highlighted concerns over the lack of a published Future Homes Standard, exhorting the Government to “quickly implement the Future Homes Standard and accelerate the transition to sustainable, affordable heat benefitting both the environment and household finances.”
“Introducing the Future Homes Standard without further delay is the single most important thing the Government can do right now to support heat decarbonisation, heat pump deployment and ensure supply chains ramp up and costs come down,” she continued. “It’s therefore disappointing the Government didn’t use today’s announcement to clearly set out plans and timelines for its introduction, which would have provided a strong signal to the market to prepare and invest.”
Omissions
Paul Smith, MD for NIBE shared NIBE’s enthusiasm for “the ongoing expansion of the Warm Homes Plan and the Government’s move to streamline heat pump installations by cutting red tape around permitted development” but highlighted concerns over installer numbers and the price of electricity compared with gas.
“However, to accelerate the transition to heat pumps, the installer network must also be expanded. We’re already driving this change through our industry-leading training programme, hands-on technical guidance and business support that extends far beyond the classroom. But we believe government-backed initiatives are essential to bolster these efforts and ensure a skilled workforce ready to meet the demands of the renewable heating market.
“Also, we join the Heat Pump Association in urging policymakers to address the spark gap, which remains a significant barrier to the widespread adoption of heat pumps.”
Highlighting the benefits
Mark Krull, Director for LCL Awards & Logic4training was largely positive: “I am pleased by the Warm Homes announcement today, which overall shows the Government’s continued commitment to the drive to Net Zero and the Electrification of Heat.
“The additional funds put towards the Boiler Upgrade Scheme (BUS) in 25/26 will support market growth and changes to the Clean Heat Market Mechanism are pragmatic, allowing UK manufacturers to invest in heat pumps and ultimately bolster our economy. The move to a low carbon future has financial as well as environmental benefits.”
Image supplied by GTEC