Fines for missing new heat pump mandate cut by £2,000

The government has cut the fines boiler manufacturers will have to pay if they fail to meet targets for its new scheme to boost the production of heat pumps.

The change is one of a number of moves to ease requirements on manufacturers under the Clean Heat Market Mechanism (CHMM). The scheme, which resembles the Zero Emissions Mandate being introduced in the car market, will set steadily increasing targets for the ratio of their sales of heat pumps relative to fossil fuel boilers.

To demonstrate their compliance, manufacturers will be required to surrender credits that can be earned by installing qualifying heat pumps or bought from other parties. Those that fail to submit a sufficient number of credits to meet their yearly obligation will be required to make payments-in-lieu.

In a consultation earlier this year, the Department for Energy Security and Net Zero (DESNZ) initially proposed that the payment per missing credit should be set at £5,000. However, responding to the feedback it received, the department said it has now decided to reduce the payment to £3,000.

DESNZ said this should “ensure that unnecessarily severe financial penalties can be avoided, while still ensuring that the potential payment provides sufficient incentive to drive investment in developing the heat pump market.”

It has also relaxed the allowance for manufacturers to carry forward unmet obligations. Increasing this allowance, which enables shortfalls to be made up in the following year, from 25% to 35% will provide “greater flexibility” for obligated parties.

The department has additionally confirmed that the mandate will start off at a low level, with boiler manufacturers only being obliged to submit credits equivalent to 4% of their boilers sales when the scheme begins operating next year. This figure will then rise to six per cent in the second year.

“This approach provides more opportunity for the market to adjust to the scheme’s introduction, with the somewhat higher growth rates required in later scheme years supported by developments in wider policy and market conditions,” DESNZ explained. 

In addition, boilers installed in new build properties will not be included when calculating manufacturers’ targets on the grounds that heat pumps are not taken into account either.

Welcoming the government’s response, which means the CHMM has been given the green light, Energy UK chief executive Emma Pinchbeck said: “Alongside the Zero Emissions Mandate, the CHMM is expected to increase the availability of low carbon technologies and help to establish UK manufacturing in these rapidly developing sectors.”

She said the approval “marks a defining moment in the transition to net zero, with a clear direction of travel established for heat, increasing consumer confidence and investor certainty in the UK. The Clean Heat Market Mechanism is a critical measure to ensure efficiencies of scale are delivered at pace in the heat pump market, and that manufacturers transition to be fit for the future.”

The consultation response was published as DESNZ released figures showing that just 1,140 energy efficiency measures had been installed in 1,026 households by the end of October under the Great British Insultation Scheme (GBIS).

The GBIS, which was launched in March, aims to upgrade 300,000 homes over three years.

But the environmental think tank E3G estimated that at the current rate of delivery, it would take around 146 years to complete this many homes.

Juliet Phillips, senior policy advisor at E3G, said: “Upgrading Britain’s leaky homes is essential to lower bills and cut emissions. However, recent progress has been glacial. For months, installers and local authorities have warned of the severe delivery challenges faced by UK retrofit schemes.”

She said: “It’s shocking that the new Great British Insulation Scheme has supported just 1,026 homes in 6 months – a miniscule fraction of the 300,000 total properties the scheme seeks to upgrade by 2026.”