Heat pump policy to proceed as energy secretary bows to ministerial pressure

Plans to impose targets for electric heat pump sales on gas boiler manufacturers could be confirmed as early as next week, after fierce debate within government and intense lobbying from industry to abandon the policy.

Sky News understands energy secretary Claire Coutinho had intended to ditch the policy, known as the Clean Heat Market Mechanism (CHMM), but will now proceed following objections from ministerial colleagues, who argued that it is crucial to decarbonising home heating and meeting wider net zero policy.

In a concession to the industry, fines for missing electric heat pump targets will be pushed back by 12 months to April 2025.

Ms Coutinho is also expected to refer several major gas boiler manufacturers to the Competition and Markets Authority for potentially colluding over price increases of up to £120 on gas boilers, imposed to cover potential fines that they described as a “boiler tax”.

The long-awaited announcement comes after weeks of tension in the Department for Energy Security and Net Zero (DESNZ).

Ms Coutinho’s intention to bow to gas industry pressure met opposition from ministers Lord Callanan, the minister for energy efficiency, and Graham Stuart, the minister for energy security and net zero, who were both reported to have considered resigning.

The tension surfaced in parliament on Wednesday, when Lord Callanan told peers the government would press ahead with the CHMM, in marked contrast to Ms Coutinho’s public position that no final decision had been made.

“Of course there is no such thing as a boiler tax and therefore it is impossible to scrap it; but if the noble Earl is asking about the clean heat market mechanism – which is not a boiler tax – we will be implementing it [the CHMM] because it is an essential part of meeting that 600,000 target [for heat pumps] and, of course, our carbon budgets,” he said.

After his comments, sources close to Ms Coutinho maintained that no decision had been made, and in a statement DESNZ did not repeat his commitment to introduce the CHMM.

A spokesman for DESNZ said: “We remain committed to our ambition of installing 600,000 heat pumps a year by 2028.

“We want to do this in a way that does not burden consumers, which is why we’ve increased our heat pump grants by 50 per cent to £7,500 – making it one of the most generous schemes in Europe.”

While the gas boiler and heating industry was confident the policy would be abandoned, it now faces the prospect of a CMA inquiry into the conduct of major manufacturers.

Under the CHMM, manufacturers will be required to ensure 4% of total sales are electric heat pumps, or face fines of £3,000 for every unit by which they miss the target.

In response manufacturers including Worcester Bosch and Vaillant announced that they would be adding up to £120 to the cost of gas boilers, saying they had no choice in order to offset potential fines.

The increases were imposed by several manufacturers in January, and the CMA will be asked to examine whether the action was co-ordinated.

“It is very difficult to prove collusion but if the moves were co-ordinated and a result of industry wide moves then that is potentially a breach of competition law,” said a Whitehall source.

The CHMM is considered a key part of the government’s net zero plans to accelerate the decarbonisation of home heating. Around 1.5 million gas boilers were installed in homes last year, compared to just 60,000 air source heat pumps.

Last year the government increased the grant to consumers replacing gas boilers with heat pumps from £5,000 to £7,500, prompting a spike in applications.

The aim is to reduce emissions from home heating and hot water, which accounts for 16% of national carbon emissions, and a similar market model has been introduced to the automotive sector to increase electric vehicle sales.

The renewables industry has been pressing for the government to go ahead with the CHMM, warning that any watering down of the policy would undermine momentum to decarbonise 23 million homes.