What is the Clean Heat Market Mechanism? (CHMM)

A new government policy, known as the Clean Heat Market Mechanism, has seen many boiler manufacturers increase their prices from 1st January 2024. You might have heard this price increase being referred to as a new ‘boiler tax’ or ‘boiler levy’.

The price increase is as a result of the government setting targets to increase the number of ground and air source heat pumps installations, and manufacturers who fail to meet these targets will be fined. To combat the anticipated fines, some manufacturers have increased their prices for customers from January 2024. However, following initial industry response, there has been speculation around whether the policy will go ahead from April, but no formal announcement has been made by the government.

What is the Clean Heat Market Mechanism? (CHMM)

The Clean Heat Market Mechanism (CHMM) is a government policy that aims to improve energy efficiency in the home to meet carbon emission targets. The focus of the policy is to increase the installation of ground and air source heat pumps as an alternative to gas and oil heating systems. 

How does the Clean Heat Market Mechanism work?

The Clean Heat Market Mechanism (CHMM) is due to start in April 2024. Manufacturers such as Worcester Bosch will earn ‘credits’ for heat pump installations and have a minimum number of ‘credits’ that they need to achieve or face fines. Each manufacturer’s target will vary as it will be relative to the number of gas and oil boilers they sell, and if the target is not met, then the manufacturer will be fined £3,000 per missing credit by the government. 

What is the Clean Heat Market Mechanism levy?

Many manufacturers, including Worcester Bosch, Baxi and Vaillant, have confirmed that, as a result of potential impending fines as a result of this policy, from 1st January 2024 there has been price increases across their boiler ranges - in some cases by as much as £120 per boiler. This is widely being referred to as a Clean Heat Market Mechanism levy (CHMM levy), or "boiler tax". 

Leading manufacturers have commented that these price increases are based on demand in the UK heat pump market not yet being at a sufficient scale to meet the government's proposed targets, meaning it's inevitable that manufacturers will face fines.

What does the Clean Heat Market Mechanism mean for UK households?

Despite the policy being designed to place more accountability on boiler manufacturers to increase sales of heat pumps, it is also impacting UK households who are looking to upgrade their heating system. 

Mel Butler, Founder of BOXT, said: “Whilst the move to cleaner heating in the UK is something we are absolutely supportive of, the people who are ultimately paying with this policy is homeowners. In particular, lower income households looking to upgrade their old boiler to a new, more energy efficient one to help save on energy bills, are now facing as much as a 10% price increase on entry level models. This creates a substantial financial barrier that could result in customers opting for a less efficient or reliable boiler with a shorter warranty to help reduce the initial outlay, but is likely to ultimately cost them more in the long run in maintenance, repairs, and potentially having to replace it again sooner."

Why was the Clean Heat Market Mechanism introduced?

The Clean Heat Market Mechanism (CHMM) has been introduced as around half of the UK’s natural gas usage comes from heating homes and commercial buildings. Policymakers hope this reduction will lower the UK's carbon emissions and positively impact on climate change to meet global targets.

Reducing the use of fossil fuels such as gas and oil to heat the home is seen as an important step to help reach the government's Net Zero 2050 commitment. In order to meet this, the government has set a target of 600,000 heat pumps to be installed each year by 2028. However, in 2022 there were only 72,000 heat pumps installed in the UK, and despite grant funding of up to £7,500 now being provided, there were only 28,000 installations in the first 9 months of 2023. The level of demand for heat pumps vs their targets is adding to the pressure on the government to reach the number of installations they need, in the next 5 years.

The introduction of the Clean Heat Market Mechanism means that the government is asking manufacturers of heating appliances to meet government targets for the number of heat pumps the manufacturers sell, relative to the number of gas or oil boilers they also sell, with fines if manufacturers fall short of these heat pump targets. 

The government’s focus on ground and air source heat pumps is now supported by grants of up to £7,500 via the Boiler Upgrade Scheme (BUS) since October 2023. However, whilst the CHMM counts the installation of hybrid heat pumps towards its targets, the BUS grants available don’t yet cover hybrid heat pump systems in England and Wales, financial support is only available for hybrid heat pumps in Scotland.

Should I get a new boiler or a heat pump? 

There is a lot of noise in the press and from the government about the most cost efficient and energy efficient way to upgrade your heating system. Ultimately, it’s about getting the best product for your home at the best price. 

Should I get a new heat pump? 

Ground or air source pumps are definitely more pocket friendly than they used to be, due to the government funding (BUS) however, they are not suitable for every home in the UK. They work differently to a traditional gas/oil boiler system in heating the home with lower operating temperatures and are at their most energy and cost efficient in well insulated or ‘new build’ type homes that have large radiators, solar panels or underfloor heating. Most of the older homes in the UK are not as well suited to the wider heating system it requires and drafts and poor or old insulation might result in an inefficient heating output. 

What is a hybrid heat pump?

Another great option for those that are looking at heat pumps but live in less insulated, older homes that might not get the most efficient output, should look at a hybrid heat pump. This heating system uses a highly efficient combination of a hybrid heat pump and a boiler to power the heating system that connects into the home's existing gas pipes. Daikin’s hybrid heat pump intuitively switches between heat pump only, heat pump and gas combined or gas only depending on which is the most cost effective at the time, to keep efficiency high and costs low. 

Should I get a new boiler?

When it comes to a new boiler, for those homes that aren’t well insulated or a non-new build, upgrading your old boiler to a new boiler could be the most cost-effective option, and by upgrading your old boiler it could still help to save over £550 a year on energy bills through improved efficiency.  

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