Clean Heat Market Mechanism will go ahead in 2025

The Clean Heat Market Mechanism (CHMM) will go ahead in 2025 but with much reduced ‘fines’ for manufacturers that do not meet their targets for selling heat pumps.

The government has watered down the previous administration’s plans, following a consultation that ended in May 2024, making two big changes. It says: “The payment-in-lieu level that obligated parties will be required to make for each missing credit will be reduced from £3,000 to £500 for the first scheme year.”

The scheme is now due to start on 1 April 2025, not 1 January as originally planned, to give manufacturers more time to prepare.

The CHMM is an obligation on major manufacturers that they must sell a set number of heat pumps as a proportion of their boiler sales in the UK. The 2025/26 target is set at 6%. The mechanism was due to affect those manufacturers with sales of more than 20,000 gas boilers or 1,000 oil boilers a year.

Installation and notification of heat pumps via a certification scheme such as MCS will earn them credits and those that miss the targets will have to pay a ‘fine’ for each missing credit. Hybrid heat pump installations will earn half a credit.

The government said in its announcement: “Introducing the CHMM will help to provide market actors with the confidence and clarity to underpin investments and spur innovation in developing the UK’s heat pump market over the coming years.

“The government has introduced the scheme regulations to Parliament, and the Scheme Administrator will publish scheme guidance in due course.”

When the plans to launch CHMM in 2024 were originally set out, some boiler manufacturers moved to increase the cost of their boilers to offset the anticipated fines – only to reduce them when the government announced in March that it would delay its introduction “to allow industry more time to prepare”.

Responding to the latest update, many broadly welcomed the move and clarity.

The Energy and Utilities Alliance had campaigned against the CHMM and called for it to be scrapped. Its chief executive Mike Foster said: “The new minister, Miatta Fahnbulleh, has spent time understanding the implications of the scheme she inherited from the previous government.

“She has displayed an intellectual rigour to this that her predecessor could not. She has engaged constructively with industry and British manufacturers, who have warmly welcomed this new approach.

“By working in partnership, we have an outcome which no longer unfairly penalises business and consumers. That is a big win for households across the country.”

Worcester Bosch’s CEO Carl Arntzen added: “We’re happy the minister has recognised the need to revise the CHMM and that further policy changes are required to increase heat pump demand and adoption in the UK.”

Stew Horne, head of policy at the Energy Saving Trust, predicted that the CHMM will encourage competitive deals. “The Clean Heat Market Mechanism will play an important role in reducing the upfront cost of heat pumps, encouraging manufacturers to offer competitive deals. It also provides much needed certainty for industry and the supply chain to scale up to meet the UK government’s ambition,” he said.