22 November 2024

8 min read

Industry reacts to new Boiler Upgrade Scheme and Clean Heat Market Mechanism plans

After being hinted at in the Autum Budget, the government has this week revealed some of the much-anticipated detail on its various plans to deliver warmer homes and cleaner heating.

The announcement from Minister for Energy Consumers, Miatta Fahnbulleh, included some significant statements on funding, regulation and innovation. Industry leaders have been reacting to the plans, with responses generally welcoming the new measures, but also seeking clarity on other vital areas which haven’t been addressed as part of this announcement.

While there’s news on the Boiler Upgrade Scheme, the Clean Heat Market Mechanism, heat pump planning rules and minimum efficiency standards in rental properties, some omissions are apparent.

These include any updates on the Future Homes Standard, the price of electricity versus gas and the phasing out of gas boilers. In fact, one of the associated reports acknowledges that 10 million new boilers will be installed over the next decade, despite all the measures to grow the clean heat market.

Of course not everything can be addressed at once, so in this article, we’ll take a look at the latest developments and round-up some of the reactions we’ve received.

Extra funding for the Boiler Upgrade Scheme (BUS)

An additional £30m has been promised to the BUS this financial year, with the budget for the next financial year to be almost doubled to £295m. The scheme offers households a £7,500 grant towards the cost of heat pump installation and received its highest ever number of applications this October.

Changes to air source heat pump planning rules

The planning rule which requires heat pumps to be installed at least one metre from a property’s boundary is to be removed early next year. While rules will remain in place for listed buildings, this means more households will be able to install an air source heat pump without applying for planning permission.

£3.2 billion for warmer homes

Up to 300,000 social and lower income households are expected to be supported with funded energy efficiency upgrades including insulation and low-carbon heating through the Warm Homes: Social Housing Fund and Warm Homes: Local Grant in 2025-26.

Reformed Clean Heat Market Mechanism (CHMM)

The long-awaited and much-debated CHMM will be introduced on April 1, 2025, albeit with a few key changes to the proposals that were previously consulted on. It aims to ‘make heat pumps an even more attractive choice for households and boost sales without penalising those buying a new gas boiler’.

As part of the changes, the payment-in-lieu, or ‘fine’ that boiler manufacturers have to pay for missing heat pump installation targets (set as a percentage of boiler sales above 20,000 units), is to be reduced from £3,000 to £500.

Secondly, the period over which boiler sales are counted will be adjusted to give manufacturers more time to scale-up and prepare. This will now run from April 1, 2025 to March 31, 2026, rather than January 1 to December 31, 2025.

Energy efficiency standards

Energy efficiency standards in rental properties and the obligations of landlords in this respect have been talked about for several years. In this announcement, the government says it will consult on new plans to increase minimum standards for all rented homes by 2030. This, it says, will lift over one million households out of fuel poverty.

Boiler and heat pump efficiency standards

The government will also consult on plans to increase energy efficiency standards of boilers and heat pumps, which it says will save households £30 per year on the running costs of a new gas boiler.

In the absence of any mention of a boiler ban, the consultation estimates that there will still be 10 million new boiler installations over the next decade, despite government policies aimed at growing the clean heat market.

Backing British manufacturing

Over £5million has been invested in Ideal Heating as the first award from the new Heat Pump Investment Accelerator competition, designed to kickstart a homegrown heat pump industry. The government says it will also work with trade unions to ensure good jobs throughout the supply chain.

This latest announcement follows the publication of a report into how the government might achieve clean power by 2030.

Industry reactions

Ian Rippin, CEO at MCS

“The confirmation of the Clean Heat Market Mechanism is a positive step for the sector. The changes to support the scaling up of the industry address concerns previously expressed. We look forward to continuing our work with the scheme to ensure that heat pump installations are to industry-recognised standards and are accurately recorded and reported. This is crucial in giving everyone confidence in the technology.

“The announcement of changes to Permitted Development Rights are another welcome move that will support the deployment of heat pumps. We have worked to coordinate responses from industry as well as support with updates to tools and our standards, such as the MCS Planning Standard for Permitted Development Installations of Air Source Heat Pumps (MCS 020), to facilitate these changes.”

“The Boiler Upgrade Scheme has been a great success in supporting the uptake of low carbon heating and we welcome any additional funding to support continued growth.” 

Charlotte Lee, Chief Executive, Heat Pump Association

“The package of measures announced by the government today demonstrates their commitment to accelerating the decarbonisation of heat in the UK.

“We welcome the clarity on the long-anticipated Clean Heat Market Mechanism and the confirmation of additional funds for the BUS, both of which enable the sector to invest with confidence. The changes to the Permitted Development Rights will help to streamline the heat pump installation process for installers and consumers and support an accelerated deployment of heat pumps over the coming years.

“Whilst these are all very pleasing developments, the sector remains steadfast in its call for action to address the UK’s high electricity-to-gas price ratio. Changing such is vital to unlocking the widescale growth in electrified heat needed to meet UK carbon emission reduction targets and we hope to see a commitment to tackling this in the coming months.”

Daniel Särefjord, CEO, Aira UK

 “Today’s announcement will be a game-changer for heat pump adoption across the UK. It is a much needed and welcomed intervention from the government to ensure customers can save serious amounts of money on heating costs and enable our country to meet net zero targets. Clean heating solutions are essential for driving the UK’s transition to a lower-cost, lower-carbon, and more stable energy market, with heat pumps playing a central role in this evolution.

“This step highlights a strong commitment to tackling climate change while supporting the growth of the clean energy-tech sector and creating thousands of new jobs within the green skills workforce across the country.” 

Griff Thomas, MD for GTEC & Heatly, both part of the United Living Group

“It’s great to see DESNZ making positive moves to deliver the Warm Homes Plan, which promises to upgrade five million homes over the next five years, including a notable £1.29 billion towards social housing. The measures announced put the UK on track to achieving this target, while making heat pumps more affordable and accessible. I am particularly pleased to see the removal of the 1m rule, giving installers flexibility to deliver the best solution for each property and removing a major hurdle that might push homeowners away from heat pumps.

 “The Clean Heat Market Mechanism provides much-needed clarity for the industry, encouraging investment and supporting the scaling up of heat pump supply chains. This time around, it seems that manufacturers have broadly welcomed the proposals, demonstrating the benefits of a collaborative approach to developing practical policies that balance industry needs with the UK’s net zero goals.”

Paul Smith, MD, NIBE: 

“We applaud the ongoing expansion of the Warm Homes Plan and the government’s move to streamline heat pump installations by cutting red tape around permitted development.  

“However, to accelerate the transition to heat pumps, the installer network must also be expanded. We’re already driving this change through our industry-leading training programme, hands-on technical guidance and business support that extends far beyond the classroom. But we believe government-backed initiatives are essential to bolster these efforts and ensure a skilled workforce ready to meet the demands of the renewable heating market. 

“Also, we join the Heat Pump Association in urging policymakers to address the spark gap, which remains a significant barrier to the widespread adoption of heat pumps. 

“Finally, we also welcome the boosted budget for the Boiler Upgrade Scheme, which is a vitally important mechanism for retrofit homes. However, to truly unlock the potential of renewable heating, the scope of the scheme must be broadened to include a wider variety of heat pump solutions, such as Exhaust Air Heat Pumps, to further accelerate decarbonisation.”

Mark Krull, Director, LCL Awards & Logic4training

“I am pleased by the Warm Homes announcement today, which overall shows the government’s continued commitment to the drive to net zero and the electrification of heat. The additional funds put towards the Boiler Upgrade Scheme (BUS) in 25/26 will support market growth and changes to the Clean Heat Market Mechanism are pragmatic, allowing UK manufacturers to invest in heat pumps and ultimately bolster our economy. The move to a low carbon future has financial as well as environmental benefits.”

Tamsin Lishman, CEO, Kensa 

“Policy certainty and stability are critical for continued investment in the UK’s heat pump sector and its ability to support green growth. Kensa plans to increase its manufacturing output and installations twenty-fold in the next five years, but this is heavily reliant on the right government policies, at the right pace.

“Today’s announcements are major steps in the right direction. However, there are still important gaps in the framework. We don’t have a Future Homes Standard, a central policy for cutting our ties with gas and normalising heat pumps in UK homes. This, and a plan of action to reduce levies on electricity bills, are urgently needed to help make heat pumps both the environmental and economic choice.

“Introducing the Future Homes Standard without further delay is the single most important thing the government can do right now to support heat decarbonisation, heat pump deployment and ensure supply chains ramp up and costs come down.

“Each month without its introduction sees another 15,000 new homes needlessly fitted with gas boilers, creating another half a million tonnes of CO2 and £145 million in future costs to homeowners to convert later.”

Bean Beanland, CEO, Heat Pump Federation

“The incoming government has come flying out of the blocks on macro-energy policy, but has been more measured in its approach to the energy transition at domestic scale. This set of announcements by the Secretary of State marks, what we hope will be, a series of initiatives over coming months, designed to encourage the uptake of decarbonised heating solutions in homes across the UK.

“From the work undertaken by the Heat Pump Federation with community groups across the land, it’s clear that the appetite for genuine and robust information, and for a positive set of messaging, is strong. Measures such as those announced today, together with future changes that are already in consultation or discussion, will continue to build confidence with both consumers and with our sector’s supply chain, so that homeowners and landlords are assured that the transition away from fossil fuels can be taken as their existing boiler reach end-of-life.”

Jan Rijnen, Managing Director UK & Ireland, Baxi Heating

“This announcement of additional funding for the Boiler Upgrade Scheme is welcome, together with amending planning rules which will help simplify heat pump installations. We are committed to working with government to deploy practical and affordable solutions that help decarbonise homes, with the support of customers, industry, and manufacturers like Baxi. We will continue to work with government to further improve the Clean Heat Market Mechanism in the years ahead.”

Henrik Hansen, Managing Director, Vaillant Group UK

“The announcement represents a positive step forward addressing specific challenges felt by homeowners when considering the installation of a heat pump. By easing installation requirements, it addresses some of the barriers that have previously discouraged the adoption of this technology and shows what can be achieved by business and government working together.”

Jason Speedy, COO, Ideal Heating

“Across the heating industry we’re now seeing a significant transition from gas boilers to sustainable solutions, such as heat pumps. That aligns closely with the UK’s net zero targets.

“This funding is a vote of confidence in our business and our position at the forefront of the industry’s move to low carbon heating solutions. It will enable us to accelerate our plans for heat pump production and complements the broader programme of investment across our operations as we lead the industry to a greener, low carbon future.

Carl Arntzen, CEO, Worcester Bosch

“We welcome the announcements from DESNZ on the removal of some of the siting barriers for heat pumps and the extra funding being made available for the Boiler Upgrade Scheme. We are hopeful these measures will enable more homeowners to view heat pumps as a realistic heating alternative.

“We’re also 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.”

Mike Foster, Chief Executive, Energy and Utilities Alliance

“Minister Fahnbulleh has constructively engaged 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.”

Thomas Farquhar, co-founder, Heatio

“The announcement regarding the government’s roll-out of the Warm Homes Plan to 300,000 homes is excellent news for industry and will kickstart further growth from next year. It is a step forward in overcoming cost barriers and making energy savings accessible for all, especially those most affected by fuel poverty. 

“Heat pumps are the path to cleaner, more affordable energy. By providing this essential funding, paired with digital technology that shows in real-time the savings that can be made by installing heat pumps, consumers will start to see social proof that they are a reliable and cost-efficient way to heat their homes. The planning reform to remove the one-metre rule also removes an unnecessary barrier to adoption.

“The clean heat market mechanism will finally start driving the transition from the 1.7m fossil fuel boilers we still fit every year.”