Energy secretary Claire Coutinho is under pressure to delay the introduction of fines on gas boiler manufacturers in order to preserve the government’s wider scheme to speed up the heat pump roll out.
Reports that Coutinho could scrap or delay the introduction of the Clean Heat Market Mechanism (CHMM) has sparked a “furious” backlash within the Department for Energy Security and Net Zero (DESNZ), it is understood.
Utility Week has learnt that long serving energy efficiency minster Lord Callanan threatened to resign over the mooted volte-face alongside energy security minister of state Graham Stuart, whose own threat to quit has been reported by The Times.
Coutinho has been reviewing the CHMM following concerns that boiler companies are hiking prices to cover the fines, which they may be liable for under the scheme, as first reported in the Sunday Times.
Utility Week understands that the review of the CHMM is being driven by concerns within No 10 Downing Street about added costs for consumers.
The CHMM, which is modelled on the zero emissions mandate being introduced in the car market, is designed to ensure manufacturers install a set number of heat pumps for every fossil fuel boiler that they sell.
Under the scheme, which is due to come into force this April, manufacturers will have to pay a £3,000 fine for each heat pump installation that they fail to deliver.
This ratio starts at one heat pump per 24 boilers sold from April, which becomes more stretching over coming years.
Officials within DESNZ are also understood to be concerned about the last-minute nature of the potential reversal of policy, which has already been vetted by other government departments through the cross-Whitehall “write round” process.
The late nature of the decision, which has already been extensively consulted on, also leaves the government potentially open to a High Court judicial review.
Bean Beanland, director for growth & external affairs at the Heat Pump Federation, said: “They will almost certainly have to go back out for consultation or run the risk of a judicial review.”
Grounds for a court challenge could include companies which have invested on the basis of the government’s response to its previous consultation and that scrapping the CHMM would make it even harder for the UK to reach its statutory emissions reduction targets.
Industry sources have told Utility Week that companies are “stuck in limbo” because they have developed heat pump business models based upon the CHMM.
The sector has presented a face-saving formula for DESNZ, under which the £3,000 fines would be scrapped during the first year of the scheme, which Utility Week understands officials are pressing the secretary of state to take up.
As well as delaying any payments until after the next election, which must take place by next January at the latest, this move would also give the Competition and Markets Authority time to conclude its recently announced investigation into whether boiler manufacturers have misled shoppers with confusing or inaccurate claims about the hydrogen-readiness of their products.
Officials are expected to announce an outcome on the future of the CHMM ‘soon’.
Dr Richard Lowes, senior associate at The Regulatory Assistance Project, added: “Without such a mechanism (CHMM), there is no driver to deliver heat pumps at the required scale, which calls into question whether the legally binding targets under the Climate Change Act would be met.”
A DESNZ spokesperson said: “No decision has yet been made and we remain committed to our ambition of installing 600,000 heat pumps a year by 2028.
“We want to do this in a way that does not burden consumers and we’ve increased our heat pump grants by 50% to £7,500 – making it one of the most generous schemes in Europe.
“This pragmatic approach is working, with a nearly 50% increase in people applying in December 2023 compared to the same month in 2022.”