The government reported that the four biggest gas boiler manufacturers face a competition inquiry after imposing price hikes of around £100 on customers to offset potential fines for lacking clean energy goals.
As Sky News first reported last week, Claire Coutinho, the Energy Secretary, has asked the Competition and Markets Authority (CMA) to look into the home heating market.
Experts are worried about how Worcester Bosch, Vaillant, Ideal, and Baxi, which together control 90% of the market, will react to government plans to meet sales goals for electric heat pumps or face fines.
A “boiler tax” caused by the government’s actions led companies to raise the new gas boiler price
by about £100 in January.
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These goals have been pushed back one year, to April 2025. This is the result of a compromise reached after a heated argument between officials in the Department of Energy and Net Zero.
The Clean Heat Market Mechanism (CHMM) was supposed to start next month, and it does. Under this system, boiler makers have to sell a certain number of electric heat pumps, starting at 4% and going up to 25% by 2028. They will be fined £3,000 for every boiler that they don’t meet the goal.
Ms Coutinho was minded to scrap the policy altogether, apparently persuaded by the industry’s argument that the air source heat pump market is not big enough for them to hit the targets.
It is thought that junior ministers Graham Stuart and Lord Callanan and the Treasury, which has set aside fines to cover the £7,500 cost of installation funds, were against her.
After months of uncertainty, the department has committed to the policy, starting 12 months late with fines levied on sales below the second-year goal of 6%. Its application will now fall to the next government.
In a written report to the Commons, Ms Coutinho said the policy has been “scrapped for a year.”
Lord Callanan has not made a similar statement to the Lords as a sign of the continuing tension. He is understood to think the language is misleading as the policy has been delayed, not scrapped.
Last year 1.5 million gas boilers were added, compared to just 60,000 heat pumps. To meet the goal, gas boiler manufacturers must sell 60,000 electric pumps, a rate they say they cannot meet as new-build installations do not count towards the totals.
The Government goal is for the installation of 600,000 air source heat pumps a year by 2028.
While the ministerial compromise saves face and avoids the prospect of resignations at a sensitive time for the government, the delay has angered all sides of the home heating business due to the high rise in the boiler price.
The MCS Foundation, which oversees the certification of low-carbon home heating, said: “It is extremely disappointing to see that the government has postponed one of the most important measures for getting the UK off fossil fuel heating.
“The Clean Heat Market Mechanism is crucial to the rollout of heat pumps, which are the only viable option to decarbonising at scale the 17% of UK emissions that are created by heating our homes.”
Mike Foster, chief executive of the Energy and Utilities Alliance, which originated the term “boiler tax,” said gas boiler makers were now considering how to reimburse users who had been charged more to cover fines they will not have to pay.
This choice is clearly political, not about heating policy. According to the polls, the government has set a trap for a future administration, which is likely to be Labour, knowing the boiler tax from 2025 will likely be around £200.
“But it is an obvious trap, so obvious it has warning lights and bells attached. It could be up to Labour Ministers to decide whether to go ahead with the boiler tax, but they have been warned the public doesn’t like it; it hits the least well off the hardest, and the whole policy needs to be revisited before it harms British companies and British workers.”
Conditions for homeowners to meet certain insulation standards before being qualified for a £7,500 grant towards the cost of replacing gas boilers with an air source heat pump have also been eliminated.
